zamano plc , a leading European provider of interactive applications and services to mobile devices, has been informed that the mobile network operators (“MNOs”) who process the Company’s revenues in the United Kingdom have updated their existing Payforit mandates. As a result, zamano will no longer be able to avail of previous exemptions with regard to its UK revenues and with effect for zamano on 1 November 2016.
Payforit is a joint initiative of MNOs in the UK to further regulate mobile payments and represents a significant regulatory change in the operating environment in the UK. As previously announced, the Company has planned for the implementation of Payforit, but its impact on the Company, and the industry in general, would only be known once the initiative has been fully implemented.
UK sales in the half year to 30 June 2016 were €16.987M, a 105% increase on the €8.285M recorded during H1 2015. These sales translated into an actual gross profit contribution of €1.985M which was 2.5% above H1 2015 (€1.937M). However, the contribution of third party revenues together with increased advertising spend resulted in a decrease in the UK gross margin percentage during H1 2016 (11.7%) compared to H1 2015 (23.4%).
At the time of the Company’s interim results on 25 August 2016, the Company reported that it anticipated an improvement in operating performance during the second half of the year as a result of advertising spend in the first half and continuing strong UK sales performance. Whilst performance in the second half of the year has been encouraging to date, it is now expected that changes introduced by MNOs will significantly impact the Company’s and its B2B customers’ ability to acquire new subscribers on the Payforit platform in the UK with effect from 1 November 2016. Consequently the anticipated improvement in operating performance in H2 2016 referred to in our previous announcement will not be achieved. Furthermore these changes will, it is anticipated, have a material adverse impact on the Company’s revenues in the UK going forward.
In view of the anticipated impact of these changes in the UK operating environment, the Company continues to focus on M&A activity and pursue higher value-added business which will open additional avenues for growth. As previously announced, a small number of potential acquisition targets have been identified and the Company is currently actively evaluating these acquisition opportunities. Zamano continues to operate existing business lines as efficiently as possible to maximise shareholder value.