- Dublin based Public Company zamano – listed on the Irish and London stock markets – which provides mobile marketing, messaging and payments, today announced significant increase in sales for H1 2014 of just over 24% on the previous six months.
- zamano strengthens its balance sheet to end June with cash balances of €3 million
- CEO Ross Conlon says the Group remains focused on acquisitions and Joint Ventures to grow the business and increase shareholder value.
- Company employs over 25 people in Dublin and operates in Ireland, UK, Australia and Eastern Europe
Chief Executive Officer’s Statement
Introduction
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 €1.420M) which is 2.5% ahead of H2 2013 outcome of €1.188M. 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.
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.
zamano plc and subsidiaries
Chief Executive Officer’s Statement (continued)
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
In the first half of 2014, sales in other territories were €0.548M, below the H1 2013 outturn of €0.613M. 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 to a considerable extent.
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 through the issuing 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 €203,000 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)
Positively, 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 18 September 2014
Chief Executive Officer
Full statement available at www.zamano.com