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MOBILE TORNADO GROUP PLC Earnings Release 2021
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Earnings Release
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RNS Number : 6730G
Mobile Tornado Group PLC
31 March 2022
31 March 2022
Mobile Tornado Group plc
("Mobile Tornado", the "Company" or the "Group")
2021 Final results
Mobile Tornado Group plc, a leading provider of resource management mobile solutions to the enterprise market, announces its audited results for the year ended 31 December 2021.
Financial Highlights
| 2021 | 2020 | ||
| £'000 | £'000 | ||
| Recurring revenue | 2,112 | 2,042 | |
| Non-recurring revenue* | 479 | 490 | |
| Total revenue | 2,591 | 2,532 | |
| Gross profit | 2,491 | 2,351 | |
| Administrative expenses | (2,525) | (2,722) | |
| Adjusted EBITDA** | (34) | (371) | |
| Group operating loss | (253) | (784) | |
| Loss before tax | (861) | (1,390) |
· Total revenue increased by 2% to £2.59m (2020: £2.53m)
o Recurring revenues increased by 3% to £2.11m (2020: £2.04m)
o Non-recurring revenues* decreased by 2% to £0.48m (2020: £0.49m)
· Gross profit increased by 6% to £2.49m (2020: £2.35m)
· Operating expenses before depreciation, amortisation, exceptional items and exchange differences decreased by 7% to £2.53m (2020: £2.72m)
· Adjusted EBITDA** loss of £0.03m (2020: loss of £0.37m)
· Group operating loss for the year decreased to £0.25m (2020: £0.78m)
· Loss after tax of £0.63m (2020: loss of £1.14m)
· Basic loss per share of 0.17p (2020: loss of 0.30p)
· Cash at bank of £0.07m (2020: £0.19m) with net debt of £9.73m (2020: £9.10m)
* Non-recurring revenues comprise installation fees, hardware, professional services and capex license fees
**Earnings before interest, tax, depreciation, amortisation, exceptional items and excluding exchange rate differences
Operating highlights
· Revenues remained stable despite the highly uncertain global economic environment, demonstrating strength of business model
· Further operational efficiencies delivered a reduction in operating expenses before depreciation, amortisation, exceptional items and exchange differences from £2.72m to £2.53m
· Resource Management Platform developed during the period, combining workforce management functionality with existing Push to Talk ('PTT') proposition
Jeremy Fenn, Chairman of Mobile Tornado, said: "It has been an extremely difficult two years for the business. The principal markets we operate in have been badly hit by the pandemic, dramatically constraining our business development activities. We have managed to maintain our revenue levels through this period, and executed significant improvements to our operational efficiency, such that we have reduced our operating expense from £3.16m in 2019 to £2.53m in 2021. This has allowed the business to trade through the period with modest losses, funded by a small working capital facility provided by our principal shareholder, and no further recourse to shareholders.
"We are now focused on growth, and I am pleased to report that business activity during the first quarter of 2022 has been promising. The new Resource Management Platform has been showcased to all our partners, and trials are running across numerous customer sites in key markets. This provides us with incremental and potentially more lucrative recurring revenue streams, given the higher value proposition that we are now able to offer customers.
"I would like to thank the whole of our team for their incredible efforts across the last 24 months. It's been a challenge, but we emerge leaner, and with a much more compelling proposition to take to market. There is still much to be done, but we are encouraged by the early signs in 2022. I look forward to updating shareholders as the year develops."
Enquiries:
| Mobile Tornado Group plc | www.mobiletornado.com | ||
| Jeremy Fenn, Chairman | +44 (0)7734 475 888 | ||
| Allenby Capital Limited (Nominated Adviser & Broker) | +44 (0)20 3328 5656 | ||
| James Reeve (Corporate Finance) | |||
| David Johnson (Sales and Corporate Broking) | |||
| Walbrook PR Ltd Paul Vann / Nick Rome |
+44(0)207933 8780 or [email protected] | ||
Financial results and key performance indicators
Total revenue for the year ended 31 December 2021 increased by 2% to £2.59m (2020: £2.53m). Recurring revenues increased by 3% to £2.11m (2020: £2.04m). Non-recurring revenues, comprising installation fees, hardware, professional services and capex license fees remained largely unchanged at £0.48m (2020: £0.49m). As a result, gross profit increased by 6% to £2.49m (2020: £2.35m).
Operating expenses before depreciation, amortisation, exceptional items and exchange differences in the year decreased by 7% to £2.53m (2020: £2.72m), reflecting the continued positive impact that further investment in the development and operating efficiencies of our enhanced technical platform have delivered.
Due to the annual retranslation of certain financial liabilities on the balance sheet, the Group reported a translation gain of £0.08m (2020: loss of £0.07m) arising from the appreciation of Sterling relative to the Euro as at 31 December 2021 versus the previous year end. The Group recorded a net income tax credit of £0.23m (2020: £0.25m).
The loss after tax for the year decreased to £0.63m (2020: loss of £1.14m) equating to a reduced basic loss per share of 0.17p (2020: 0.30p).
The net cash used in operations increased to £0.25m (2020: £0.10m). At 31 December 2021, the Group had £0.07m cash at bank (2020: £0.19m) and net debt of £9.73m (31 December 2020: £9.10m).
The balance sheet continues to reflect the cumulative loss position of the Group, and those net liabilities that have resulted from this. We continue to hold levels of debt in the Group which have funded these historical losses.
Results and dividends
The Directors do not recommend the payment of a dividend in respect of the year ended 31 December 2021 (year ended 31 December 2020: nil). The Company currently intends to reinvest future earnings to finance the growth of the business over the near term.
Review of operations
Despite the continuing impact of COVID-19 across all the Group's main markets during 2021, I'm pleased to report that the Group has delivered a reduced EBITDA loss of £0.03m, a material improvement on the £0.37m loss recorded in 2020. At a difficult time, it was pleasing to see our recurring revenues hold steady at £2.11m, with the benefits of our business model and recurring revenue base delivering again. Full year performance also benefited from our relentless focus on the cost base and delivery of operating efficiencies. As the robustness of our technical platform steadily improves, we have been able to continue the transition of more R&D activities to our lower cost facility in India to drive additional efficiencies.
When we reported a year ago, I had hoped that the worst of the pandemic was behind us, but sadly, the key markets that we operate across, namely South America and Africa, continued to be impacted through 2021. Many of the opportunities we were developing when the pandemic emerged in March 2020, were in South America and South Africa, and normal sales cycles were severely disrupted. These problems continued through 2021. Government budgets were also constrained leading to spending freezes on numerous projects that we had engaged on with Government departments, agencies and utilities.
Notwithstanding this difficulty, we maintained a close dialogue with our partners through the period, and I'm encouraged that engagement levels have intensified during the first quarter of this financial year. I'm cautiously optimistic that we will finally see some of these larger opportunities convert into real deals.
We continued to develop our presence in South America and have improved the dedicated technical platforms located in Mexico and Colombia. This will benefit our partners and customers, and in due course we believe, will enable us to move into other key territories in the region, namely Brazil, Chile and Peru.
Activity levels with our partner in Israel were maintained, and we developed several new opportunities and successfully renewed deals with certain important Government utilities and agencies. We made solid progress with our partners in Ireland, UK and the Caribbean, and hope to see the results of this work begin to emerge in 2022.
Despite the business development challenges during the year, we ensured that our commitment to R&D remained robust and made a significant commitment to the development of our comprehensive Resource Management Platform ('RMP'). This combines the current PTT application with workforce management functionality ('WFM') and mobile device management ('MDM'). We believe that this represents a unique proposition, providing businesses that operate remote workforces the opportunity to consolidate their applications onto one platform.
The Board is pleased to report that the RMP has been launched to our partner network and a number of customers and the feedback received to date has been very positive. The Company's website has been relaunched to better capture the broader service offering and the Board look forward to making further advances with new partners and customers during the 2022 financial year.
We were clearly disappointed to lose our key customer in Canada towards the end of 2021. This mobile operator had been using our platform for more than 7 years and decided during the year that they would no longer provide PTT services to their customers directly. The loss of this contract has inevitably created a shortfall as the Company moved into the new financial year and we have been focused on closing this gap quickly, through further operational efficiencies, and increased deal flow across all of the Group's key markets.
Funding
Despite the challenging business environment, I am pleased to report that we have been able to trade through the last 12 months within our existing cash resources. We increased our £0.3m revolving loan facility to £0.5m on 24 March 2022 with our principal shareholder, Intechnology plc, and extended the term for a further 12 months. I can confirm that as at today's date the balance drawn down is £370,000. (31 December 2020: £nil)
Principal risks and uncertainties
The management of the business and the nature of the Group's strategy are subject to a number of risks.
The Directors have set out below the principal risks facing the business. The Directors are of the opinion that a thorough risk management process is adopted, which involves the formal review of all the risks identified below. Where possible, processes are in place to monitor and mitigate such risks.
Product obsolescence
Due to the nature of the market in which the Group operates, products are subject to technological advances and as a result, obsolescence. The Directors are committed to the Group's current research and development strategy and are confident that the Group is able to react effectively to developments within the market.
Indirect route to market
As described above, one of the Group's primary channels to market are MNOs reselling our services to their enterprise customers. Whilst MNOs are ideally positioned to forward sell our services and are likely to possess material resources for doing so, there remains an inherent uncertainty arising from the Group's inability to exert full control over the sales and marketing strategies of these customers.
Going concern
The Financial Statements are prepared on a going concern basis.
When determining the adoption of this approach, the Directors have considered a wide range of information relating to present and future conditions, including the current state of the Balance Sheet, together with that continued support offered by our principal shareholder, Intechnology plc, who, as in previous years, has agreed not to call on existing loans and borrowings and to extend and increase our working capital facility (as announced on 24 March 2022). Further consideration has been given to future projections, cash flow forecasts, access to funding, ability to successfully secure additional investment, available mitigating actions and the medium-term strategy of the business.
In common with many businesses at this stage of development, the Group is dependent on its ability to meet its cash flow forecasts. Within those forecasts the Group has included a number of significant payments and receipts based on its best estimate but, as with all forecasts, there does exist some uncertainty as to the timing and size of those payments and receipts. In particular, the forecasts assume the ongoing deferral and phased payment of some of the Group's creditors (as disclosed in note 14 to the financial statements), and the continuation at the current level of recurring revenue and a significant increase in the level of non-recurring revenues. In the event that some or all of these receipts are delayed, deferred or reduced, or payments not deferred, management has considered the actions that it would need to take to conserve cash. These actions would include significant cost savings (principally payroll based) and/or seeking additional funding from its shareholders, for which there is currently no shareholder commitment requested. These conditions, together with the other matters explained in note 1 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.
The Directors, whilst noting the existence of a material uncertainty and having considered the possible management actions as noted above, are of the view that the Group is a going concern and will be able to meet its debts as and when they fall due for a period of at least 12 months from the date of signing these accounts.
Section 172 statement - our stakeholders
The Board recognises its duty to consider the needs and concerns of the Group's key stakeholders during its discussions and decision-making. The Board has had regard to the importance of fostering relationships with its stakeholders as set out below, and also detailed in the Corporate Governance section of this Annual Report.
Colleagues
We have an experienced, and dedicated workforce which we recognise as the key asset of our business. It is vital to the success of the Group to continue to create the right environment to encourage and create opportunities for individuals and teams to realise their full potential. The Board and management team pay close attention to employee feedback and seek to respond constructively to any suggestions or concerns raised.
Regular colleague briefing sessions are held with the Chief Executive Officer to enable colleagues to ask questions and raise issues and for colleagues to be provided with updates on the business. Key performance information such as trading updates and financial results are always promptly communicated to colleagues. The Group has in place a share option scheme to enable colleagues to become personally invested as shareholders of the Group.
Customers
Regular communication is with the Group's core customers to discuss operational updates, product roadmap developments and gain key customer feedback. This enables increased engagement with customers at a strategic level and a greater understanding of both customer pain points and future requirements from strategic to end-user level.
Strategy
The Group continues to invest in an R&D strategy, current details of which are provided in paragraph six of the review of operations.
Suppliers
The Board is committed to building trusted partnerships with the Group's suppliers. Through these partnerships, we deliver value and quality to our other stakeholders.
Shareholders
The Chief Executive Officer and Executive Chairman hold analyst and investor roadshow meetings during the year, particularly following the release of the Group's interim and full year results and feedback from those meetings is shared with the Board. The AGM is a key opportunity for engagement between the Board and shareholders, particularly private shareholders. The Group's annual report and accounts is made available to all shareholders both online and in hard copy where requested. All presentations and announcements and other key shareholder information is available on the investor section of the Group's website.
Outlook
It has been an extremely difficult two years for the business. The principal markets we operate in have been badly hit by the pandemic, dramatically constraining our business development activities. We have managed to maintain our revenue levels through this period, and executed significant improvements to our operational efficiency, such that we have reduced our operating expense from £3.16m in 2019 to £2.53m in 2021. This has allowed the business to trade through the period with modest losses, funded by a small working capital facility provided by our principal shareholder, and no further recourse to shareholders.
We are now focused on growth, and I am pleased to report that business activity during the first quarter of 2022 has been promising. The new Resource Management Platform has been showcased to all our partners, and trials are running across numerous customer sites in key markets. This provides us with incremental and potentially more lucrative recurring revenue streams, given the higher value proposition that we are now able to offer customers.
I would like to thank the whole of our team for their incredible efforts across the last 24 months. It's been a challenge, but we emerge leaner, and with a much more compelling proposition to take to market. There is still much to be done, but we are encouraged by the early signs in 2022. I look forward to updating shareholders as the year develops.
Approved by the Board of Directors and signed on behalf of the Board
Jeremy Fenn
Chairman
31 March 2022
Consolidated income statement
For the year ended 31 December 2021
| 2021 | 2020 | ||
| £'000 | £'000 | ||
| Continuing operations | |||
| Revenue | 2,591 | 2,532 | |
| Cost of sales | (100) | (181) | |
| Gross profit | 2,491 | 2,351 | |
| Operating expenses | |||
| Administrative expenses | (2,525) | (2,722) | |
| Exchange differences | 78 | (69) | |
| Depreciation and amortisation expense | (297) | (344) | |
| Total operating expenses | (2,744) | (3,135) | |
| Group operating loss before exchange differences, | |||
| exceptional items & depreciation and amortisation expense | (34) | (371) | |
| Group operating loss | (253) | (784) | |
| Finance costs | (608) | (606) | |
| Loss before tax | (861) | (1,390) | |
| Income tax credit | 231 | 248 | |
| Loss for the year | (630) | (1,142) | |
| Loss per share (pence) | |||
| Basic and diluted | (0.17) | (0.30) |
Consolidated statement of comprehensive income
For the year ended 31 December 2021
| 2021 | 2020 | |||
| £'000 | £'000 | |||
| Loss for the year | (630) | (1,142) | ||
| Other comprehensive gain/(loss) | ||||
| Item that will subsequently be reclassified | ||||
| to profit or loss: | ||||
| Exchange differences on translation | ||||
| of foreign operations | (5) | 16 | ||
| Total comprehensive loss for the year | (635) | (1,126) | ||
| Attributable to: | ||||
| Equity holders of the parent | (635) | (1,126) |
Consolidated statement of financial position
As at 31 December 2021
| 2021 | 2020 | |||
| £'000 | £'000 | |||
| Assets | ||||
| Non-current assets | ||||
| Property, plant and equipment | 122 | 148 | ||
| Intangible assets | - | 12 | ||
| Right-of-use assets | 83 | 316 | ||
| 205 | 476 | |||
| Current assets | ||||
| Trade and other receivables | 1,632 | 1,906 | ||
| Inventories | 67 | 56 | ||
| Cash and cash equivalents | 65 | 187 | ||
| 1,764 | 2,149 | |||
| Liabilities | ||||
| Current liabilities | ||||
| Trade and other payables | (4,661) | (4,968) | ||
| Borrowings | (9,662) | (8,902) | ||
| Lease liabilities | (91) | (252) | ||
| Net current liabilities | (12,650) | (11,973) | ||
| Non-current liabilities | ||||
| Trade and other payables | (1,213) | (1,451) | ||
| Borrowings | (37) | (46) | ||
| Lease liabilities | - | (83) | ||
| (1,250) | (1,580) | |||
| Net liabilities | (13,695) | (13,077) | ||
| Equity attributable to the owners of the parent | ||||
| Share capital | 7,595 | 7,595 | ||
| Share premium | 15,797 | 15,797 | ||
| Reverse acquisition reserve | (7,620) | (7,620) | ||
| Merger reserve | 10,938 | 10,938 | ||
| Foreign currency translation reserve | (2,209) | (2,204) | ||
| Accumulated losses | (38,196) | (37,583) | ||
| Total equity | (13,695) | (13,077) |
Consolidated statement of changes in equity
For the year ended 31 December 2021
| Share | Share | Reverse acquisition | Merger | Foreign currency translation | Accumulated | Total | |
| capital | premium | reserve | reserve | reserve | Losses | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2020 | 7,595 | 15,797 | (7,620) | 10,938 | (2,220) | (36,466) | (11,976) |
| Loss for the year | - | - | - | - | - | (1,142) | (1,142) |
| Exchange differences on translation | |||||||
| of foreign operations | - | - | - | - | 16 | - | 16 |
| Total comprehensive loss for the year | - | - | - | - | 16 | (1,142) | (1,126) |
| Equity settled share-based payments | - | - | - | - | - | 25 | 25 |
| Balance at 31 December 2020 | 7,595 | 15,797 | (7,620) | 10,938 | (2,204) | (37,583) | (13,077) |
| Share | Share | Reverse acquisition | Merger | Foreign currency translation | Accumulated | Total | |
| capital | premium | reserve | reserve | reserve | Losses | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2021 | 7,595 | 15,797 | (7,620) | 10,938 | (2,204) | (37,583) | (13,077) |
| Loss for the year | - | - | - | - | - | (630) | (630) |
| Exchange differences on translation | |||||||
| of foreign operations | - | - | - | - | (5) | - | (5) |
| Total comprehensive loss for the year | - | - | - | - | (5) | (630) | (635) |
| Equity settled share-based payments | - | - | - | - | - | 17 | 17 |
| Balance at 31 December 2021 | 7,595 | 15,797 | (7,620) | 10,938 | (2,209) | (38,196) | (13,695) |
Consolidated statement of cash flows
For the year ended 31 December 2021
| 2021 | 2020 | ||
| £'000 | £'000 | ||
| Operating activities | |||
| Cash used in operations | (247) | (101) | |
| Tax received | 238 | 238 | |
| Interest paid | - | - | |
| Net cash (used in)/from operating activities | (9) | 137 | |
| Investing activities | |||
| Purchase of property, plant & equipment | (19) | (3) | |
| Disposal of property, plant & equipment | 7 | - | |
| Purchase of right-of-use assets | - | - | |
| Net cash used in investing activities | (12) | (3) | |
| Financing activities | |||
| Issue of ordinary share capital | - | - | |
| Share issue costs | - | - | |
| Increase in borrowings | 147 | 50 | |
| IFRS 16 leases | (248) | (259) | |
| Net cash used in financing activities | (101) | (209) | |
| Effects of exchange rates on cash | |||
| and cash equivalents | - | (2) | |
| Net decrease in cash and | |||
| cash equivalents in the year | (122) | (77) | |
| Cash and cash equivalents at beginning of year | 187 | 264 | |
| Cash and cash equivalents at end of year | 65 | 187 |
Notes to the financial statements
1 Financial information
The financial information set out in this final results announcement does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2021 will be made available to shareholders for approval at the next Annual General Meeting. 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 statutory accounts for the year ended 31 December 2020 which have been delivered to the Registrar of Companies, contained an unqualified audit report and did not include a statement under s498(2) or s498(3) of the Companies Act 2006.
2 Segmental analysis
The Group presents its results in accordance with internal management reporting information to the chief operating decision maker (Board of Directors). At 31 December 2021 the Board continued to monitor operating results by category of revenue within a single operating segment, the provision of instant communication solutions. Under IFRS 8 the Group has only one operating segment.
Revenue by category
| 2021 | 2020 | ||||
| £'000 | £'000 | ||||
| License fees | 2,003 | 1,843 | |||
| Hardware & software | 164 | 267 | |||
| Professional services | 201 | 218 | |||
| Support & Maintenance | 223 | 204 | |||
| Total | 2,591 | 2,532 | |||
| 2021 | 2020 | ||||
| £'000 | £'000 | ||||
| Recurring | 2,112 | 2,042 | |||
| Non-recurring | 479 | 490 | |||
| Total | 2,591 | 2,532 |
Revenue is reported by geographical location of customers. Non-current assets are reported by geographical location of assets.
| 2021 | 2021 | 2020 | 2020 | ||
| Non-current | Non-current | ||||
| Revenue | assets | Revenue | assets | ||
| £'000 | £'000 | £'000 | £'000 | ||
| UK | 19 | 23 | 24 | - | |
| Europe | 188 | - | 213 | - | |
| North America | 581 | - | 755 | - | |
| South America | 1,118 | - | 805 | - | |
| Israel | 329 | 182 | 365 | 476 | |
| Africa | 348 | - | 367 | - | |
| Asia/Pacific | 8 | - | 3 | - | |
| Total | 2,591 | 205 | 2,532 | 476 |
Of the total revenue of the Group, four customers each represented revenue greater than 10% of this total - these being 20% or £518,000 (2020: 27% or £684,000), 22% or £567,000 (2020: 16% or £414,000), 13% or £348,000 (2020: 15% or £367,000) and 21% or £551,000 (2020: 15% or £391,000) respectively.
3 Loss per share
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of £630,000 (2020: £1,142,000) by the weighted average number of ordinary shares in issue during the year of 379,744,923 (2020: 379,744,923).
| 2021 | 2020 | ||||
| Basic and diluted | Basic and diluted | ||||
| Loss | Loss | Loss | Loss | ||
| per share | per share | ||||
| £'000 | pence | £'000 | pence | ||
| Loss attributable to | |||||
| ordinary shareholders | (630) | (0.17) | (1,142) | (0.30) |
The loss attributable to ordinary shareholders and the weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share. This is because the exercise of share options are anti-dilutive under the terms of IAS 33.
4 Annual General Meeting
The Annual General Meeting of the Company will be announced separately in due course. The audited results for the year ended 31 December 2021 will be made available to shareholders shortly and will be available on the Company's website at www.mobiletornado.com at the same time.
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