For Immediate Release

Billing Services Group Limited

("BSG" or the "Company")

Audited results for the year ended December 31, 2015

DEBT FREE BALANCE SHEET ALLOWS RENEWED FOCUS

 ON GROWTH STRATEGIES 

TRADING IN LINE WITH EXPECTATIONS

(March 31, 2016) San Antonio, Texas, USA and Aldermaston, United Kingdom -- BSG, a leading provider of telecommunications clearing and financial settlement products, Wi-Fi data solutions and verification services, today announces its audited results for the year ended December 31, 2015.

Financial Highlights  

(All amounts in US$)                       

⁽¹⁾   EBITDA (a non-GAAP measure) is computed as earnings before interest, income taxes, depreciation, amortization and other non-cash and nonrecurring expenses

·    Generated $6.4 million of EBITDA (2014:  $8.8 million)

·    Recorded net income of $0.03 per share (2014: $0.01 per share)

·    Improved gross margin by 3.0 percentage points (51.0% in 2015

vs. 48.0% in 2014)

·    Repaid $6.3 million of debt, resulting in zero debt at year end

(December 31, 2014 balance:  $6.3 million)

BSG Wireless Operational Highlights

·    Extended the 'Find & Connect' feature set to include product usage and user notification capabilities

·    Delivered branded versions of our extended hotspot finder and connection product suite to channel partner Deutsche Telekom, as a key component of their recently launched 'Business Wi-Fi' product line

·    Extended penetration of the North American Multiple System Operator ("MSO") market by deploying the latest release of our hotspot finder product for iOS and Android at four Tier 1 cable MSOs in North America

·    Delivered our new Analytics product to our first customer, a Tier 1 operator, in conjunction with technology partner Tutela Technologies

·    Deployed a white label reporting portal for the largest telecommunications provider in the UK.  This solution allows us to sell the same white label capabilities to other customers

Current Trading

·    Current trading remains in line with the Board's expectations and consistent with the recent trading conditions experienced by the Company

·    The Company expects that revenues and EBITDA in 2016 will continue to be affected by the secular decline in the volume of billable long distance and operator service calls initiated on landline phones, partially offset by higher revenues and EBITDA from services to the wireless sector

·    For the year ending December 31, 2016, the Company expects revenues to be within a range of $32.0 million to $34.0 million and EBITDA to be within a range of $5.5 million to $6.0 million

Commenting on the results, Pat Heneghan, Non-Executive Chairman, said: 

"2015 was another year of success.  The repayment of all debt and ongoing resolution of certain litigation-related liabilities has allowed us to focus more attention on operations and strategy as we accelerate our revenue stream diversification from a niche service provider for the U.S. landline sector to an international service provider for wireless market applications."

INQUIRIES: 

Billing Services Group Limited                     +1 210 949 7000

Norman M. Phipps

finnCap Limited                                             +44 (0) 20 7220 0500

Stuart Andrews/Scott Mathieson

BSG Media Relations                                   +1 210 326 8992

Leslie Komet Ausburn                                     

About BSG:

BSG has locations in San Antonio, Texas, USA and Aldermaston, United Kingdom.  The Company is traded on the London Stock Exchange (AIM:  BILL).  For more information on BSG, visit (www.bsgclearing.com).

Chief Executive's Statement

2015 was a year of progress for BSG.  We generated $6.4 million of EBITDA and, aided by a favorable recalibration of liabilities related to class action litigation, recorded $8.7 million of net income ($0.03 per share). 

Our operational results, however, were largely eclipsed by other events.  We succeeded in making significant strides in connection with two issues which have required considerable time and attention by management over the past several years.  

·    Elimination of all debt.  Our debt, which had peaked at $265 million in 2006, was fully retired in September 2015.  Repayment of debt has been one of our highest priorities over the past 10 years.

·    Class action litigation.  The claims administration process related to the previously described class action litigation against two of the largest LECs continues to wind down, and we expect it to conclude in 2016.  As required under the terms of our contracts with the LECs, we have indemnified them for consumer refunds, claims administration expenses, legal fees and other costs which they have paid in connection with the litigation.  The window for further consumer claims has closed, and accordingly, the related expenses should end this year.  Reserves in place at December 31, 2015 are deemed adequate to cover our remaining indemnification obligations. 

As previously announced, we have been managing litigation with the Federal Trade Commission.  Further updates will be made as additional information becomes available.

Financial Results

Revenues of $36.4 million and EBITDA of $6.4 million are lower when compared to 2014 results.  These reductions are largely due to the ongoing decline in transaction volume for landline-based services. Those readers familiar with our history will recall the effects on our business, over the past several years, from the secular decline in the volume of billable calls initiated on landline phones and a regulatory environment which abruptly eliminated a meaningful portion of our revenue base.     

Our core billing and clearing business for landline phone transactions continues to generate EBITDA and realize attractive gross margins, even as the secular decline in landline phone usage extends into its second decade.  Over time, we have adjusted overhead and other costs to ensure that continuity.  To mitigate the decline in revenue from landline-based services, our business plan is focused on strategies to increase revenue from wireless-based services sold by our subsidiary, BSG Wireless. 

Our $8.7 million of net income in 2015 included $5.5 million of net nonrecurring income arising from charges to existing and former customers for indemnification obligations incurred in connection with the class action litigation noted above. 

Current Trading

·    Current trading remains in line with the Board's expectations and consistent with the recent trading conditions experienced by the Company

·    The Company expects that revenues and EBITDA in 2016 will continue to be affected by the secular decline in the volume of billable long distance and operator service calls initiated on landline phones, partially offset by higher revenues and EBITDA from services to the wireless sector

·    For the year ending December 31, 2016, the Company expects revenues to be within a range of $32.0 million to $34.0 million and EBITDA to be within a range of $5.5 million to $6.0 million

Looking Ahead

The elimination of debt and ongoing resolution of litigation frees us from distraction and allows us to focus intently on the growth, profitability and expansion of our businesses. 

Our greatest challenge is to diversify our revenue stream so that it is less dependent upon the landline phone industry.  It is for that reason that we have focused more attention on services needed by the wireless space.  Revenues from services to wireless markets have grown impressively, though the gains to date have been insufficient to offset fully the revenue decline in the landline sector. 

Management and the Board of Directors regularly review capital structure and the allocation of cash resources.  As of this writing, parties owning more than 55 percent of the Company's outstanding shares have direct representation on the Board, which remains intently focused on maximizing shareholder value and generating returns for all shareholders. We are fortunate to have a highly engaged and talented group of Directors to counsel us on these matters. 

Recognition of Employees

Our employees have done a remarkable job in taking the initiative for improvements, minimizing expenses and keeping operations running smoothly.  They have continued to strengthen our foundation as we implement our business plan. 

Norman M. Phipps

Chief Executive Officer

FINANCIAL REVIEW

Financial Review of the Year Ended December 31, 2015

The Company's audited results for the year ended December 31, 2015 are compared against the year ended December 31, 2014 in the accompanying financial statements.  BSG's consolidated financial statements are prepared in conformity with United States generally accepted accounting principles ("GAAP").

Certain Terms

Revenues.   Revenues are derived primarily from fees charged to wireline and wireless service providers for data clearing, financial settlement, information management, payment and financial risk management, third-party verification and customer service functions.

Cost of Services and Gross Profit.  Cost of services arises primarily in the Company's clearinghouse business.  Cost of services in the clearinghouse business includes fees charged by local exchange carriers ("LECs") for billing and collection services.  Such fees are assessed for each record submitted and for each bill rendered to end-user customers.  BSG charges its customers a negotiated fee for LEC services.  Accordingly, gross profit is generally dependent upon transaction volume, processing fees charged per transaction and any differential between the LEC fees charged to customers by BSG and the related fees charged to BSG by LECs.

Cash Operating Expenses.  Cash operating expenses include all selling, marketing, customer service, facilities and administrative costs (including payroll and related expenses) incurred in support of operations and settled through the payment of cash.

Depreciation and Amortization.  Depreciation expense applies to software, furniture and fixtures, telecommunications and computer equipment.  Amortization expense relates to definite-lived intangible assets that are amortized in accordance with Accounting Standards Codification ("ASC") 350, Intangibles - Goodwill and Other.  These assets consist of contracts with customers and LECs.  Assets are depreciated or amortized, as applicable, over their respective useful lives.  Deferred finance costs are amortized over the term of the related loans.

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA").  Earnings before interest, income taxes, depreciation and amortization, a non-GAAP metric, is a measurement of profitability often used by investors and lenders.  The computation of EBITDA also excludes other non-cash and nonrecurring items as additions or deductions to earnings.

Third-Party Payables.  Third-party payables include amounts owed to customers in the ordinary course of clearinghouse activities and additional amounts maintained as reserves for retrospective charges from LECs.  In its clearinghouse business, the Company aggregates call records submitted by its customers and submits them to LECs for billing to end-user customers.  The Company collects funds from LECs each day and, approximately ten days later, distributes to customers the collected cash, net of withholdings, under weekly settlement protocols.  The Company withholds a portion of the funds received from the LECs to pay certain billing and collection fees of LECs, to pay the Company's processing fees and to serve as a reserve against retrospective charges from LECs.  Depending upon the timing of receipts, weekly settlements and reserve releases, both cash and third-party payables can fluctuate materially from day-to-day.

When LECs make payments to the Company, they withhold funds to cover a variety of expenses and potential retrospective charges.  As noted above, the Company similarly withholds funds from its clients to cover expenses and retrospective charges.  The third-party payable balance is computed as the net excess of funds owed to clients, if any (recorded as a liability) over reserves withheld by LECs (recorded as an asset).

Comparison of Results for the Year Ended December 31, 2015 to the Year Ended December 31, 2014

Total Revenues.  Total revenues of $36.4 million in 2015 were $6.0 million, or 14.3%, lower than the $42.4 million of revenues recorded during 2014.  The $6.0 million decrease reflects lower transaction volumes across all clearing, settlement and customer service activities provided for landline service providers, partially offset by higher managed service fees from BSG Wireless' offerings.   

Cost of Services and Gross Profit.  Cost of services in 2015 was $17.8 million, compared to $22.0 million in 2014.  The $4.2 million, or 19.0%, decrease in cost of services largely reflects lower LEC fees for billing and collection services related to the lower level of transaction volumes.  The Company generated $18.5 million of gross profit in 2015, compared to $20.4 million in 2014.  The gross margin of 51.0% in 2015 is 3.0 percentage points higher than the 48.0% margin achieved in 2014.  The improved gross margin in 2015 results from a favorable mix of services from the landline business and a larger percentage of revenue from the wireless business, which operates at a higher gross margin level than the landline business. 

Cash Operating Expenses.  Cash operating expenses were $12.1 million in 2015, compared to $11.6 million in 2014.  The $0.5 million, or 5.1%, increase largely reflects increases in compensation expense within BSG Wireless. 

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA").  The Company generated $6.4 million of EBITDA during 2015, compared to $8.8 million during 2014.  A reconciliation of net income and EBITDA in each period is as follows:

Depreciation and Amortization Expense.  Depreciation and amortization expense totalled $2.5 million in 2015, compared to $3.2 million in 2014.  The $0.7 million decline reflects cessation of depreciation and amortization charges on several categories of capitalized software development costs and intangible assets for which accumulated depreciation and amortization reserves reached the assets' respective gross carrying values.

Impairment Charge.  In 2015, the Company recorded a $0.2 million non-cash impairment charge against intangible assets.  The charge reflected a write-off of the unamortized carrying value of a wireless product offering that was discontinued in 2015.

Stock-based Compensation Expense.  The Company recognized $0.1 million of non-cash compensation expense during each of 2015 and 2014.  Stock-based compensation expense, all of which is non-cash and related to stock options, was not included as a deduction to earnings for purposes of calculating EBITDA.

Interest Expense.  Interest expense was $0.1 million during 2015, compared to $0.4 million during 2014.  Interest expense includes cash payments of interest on borrowed money.  The $0.3 million of lower interest expense during 2015 primarily reflected a reduced level of outstanding debt.  During 2015, the average debt outstanding was $2.7 million, compared to an average of $12.2 million in 2014.  At December 31, 2015, the Company had no outstanding debt. 

Other Income and Expense.  During 2015, the Company recognized $5.5 million of net other income, compared to $2.2 million of net other expense in 2014.  The $5.5 million of net other income recognized in 2015 was largely attributable to $11.1 million of net nonrecurring other income resulting from indemnification charges to former and current clients for their respective shares of direct end-user refunds and allocable expenses related to the class action litigation against two LECs, coupled with write-offs of certain balances owed by former clients, offset by $5.7 million of litigation-related accruals.

The $2.2 million of net other expense incurred in 2014 arose largely from a write-off of $2.4 million of uncollectible retrospective LEC charges owed to the Company primarily from former enhanced service customers, offset by $0.3 million of income arising from the settlement of former customers' accounts payable balances.  Other income and expense arises from miscellaneous items typically of a nonrecurring nature.  Accordingly, other income and expense items were not included as earnings or as a deduction to earnings for purposes of computing EBITDA.

Change in Cash.  BSG's cash balance at December 31, 2015 was $7.4 million, compared to $9.0 million at December 31, 2014.   The $1.6 million decrease in cash during 2015 is attributable to $6.3 million in principal payments on long-term debt and $1.5 million of capital expenditures, offset by a $5.0 million reduction in restricted cash and $1.2 million in cash provided by operating activities.

Change in Restricted Cash.  In the ordinary course of business, LECs withhold funds from their payments to the Company in order to create a reserve securing potential future obligations of the Company to the LEC.  Through December 31, 2014, pursuant to a 2012 agreement with one LEC, the LEC released a net of $14.3 million of cash reserves.  The cash was transferred into a restricted Company bank account to be used for funding the Company's indemnification obligation under pending class action litigation against the LEC.  During 2015, a net amount of $5.0 million was transferred from the restricted cash account to satisfy indemnification obligations, reducing restricted cash to $9.3 million. 

Change in Third-Party Payables.  Third-party payables at December 31, 2015, inclusive of long-term liabilities, were $9.6 million, compared to $19.8 million at December 31, 2014.  The $10.2 million decrease in third-party payables during 2015 resulted largely from $5.7 million of adjustments related to class action liability expenses, a $4.6 million net reduction associated with ordinary course settlement activities and a $0.2 million decrease arising from net collections of purchased receivables. 

When the Company purchases receivables from a customer, the Company typically advances approximately 50% of the gross receivable amount to the customer.  The remaining 50% is classified as a third-party payable until the Company completes settlement activities related to the purchased receivable.  During 2015, the Company decreased purchased receivables by $0.2 million, which resulted in a $0.1 million decrease in third-party payables. 

Change in Accrued Liabilities.  Accrued liabilities at December 31, 2015 were $24.2 million, compared to $26.3 million at December 31, 2014.  The $2.1 million decrease in accrued liabilities resulted largely from $5.0 million of payments for indemnification liabilities to LECs under class action litigation (see "Change in Restricted Cash" above) and a $2.6 million reduction related to adjustments to indemnification reserves under class action litigation, offset by a $5.7 million increase in reserves for other accrued liabilities.  It is anticipated that at least $9.3 million of accrued liabilities will be paid from restricted cash.  

Capital Expenditures.  During 2015, the Company invested $1.5 million in capital expenditures, primarily for capitalized software development costs. In 2014, capital expenditures totalled $0.9 million.

Cash Flows for the Year Ended December 31, 2015

Cash flow provided by operating activities.  Net cash provided by operating activities was $1.2 million during 2015.  Net cash provided was principally attributable to $8.7 million of net income, $2.6 million of depreciation and amortization, a $1.3 million reduction in trade accounts receivable, a $0.5 million reduction in income tax receivable and a $0.5 million increase in trade accounts payable, offset by a $10.2 million decrease in third-party payables and a $2.1 million reduction in accrued liabilities.

Cash flow used in investing activities.  Net cash used in investing activities was $1.2 million, reflecting $1.5 million of capital expenditures, offset by $0.2 million of net receipts on purchased receivables and $0.1 million of translation adjustments to the carrying value of intangible assets. 

Cash flow used in financing activities.  Cash used in financing activities was $1.3 million, reflecting $6.3 million of principal payments on debt offset by a $5.0 million reduction of restricted cash. 

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A copy of this statement is available on the Company's website (www.bsgclearing.com), and copies are available from BSG's Nominated Advisor at the address below:

Billing Services Group Limited

c/o finnCap Limited

60 New Broad Street

London EC2M 1JJ

United Kingdom

Forward Looking Statements           

This report contains certain "forward‑looking" statements and information relating to the plans, objectives, expectations and intentions of the Company that are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this report, the words "anticipate," "believe," "estimate," "expect," "intend," "projects," "could," "should," "will" and words or phrases of similar meaning, are intended to identify forward‑looking statements. Forward-looking statements reflect the Company's current views with respect to future events and financial performance.  Such statements, including certain information set forth herein under "Financial Review" that is not historical fact or statement of current condition,  reflect management's assessment of the current risks, uncertainties and assumptions related to certain factors including, without limitation, the competitive environment, general economic conditions, customer relations, relationships with local exchange carriers and other vendors, availability of credit, borrowing terms, interest rates, foreign exchange rates, litigation, governmental regulation and supervision, capital expenditures, product development, product acceptance, technological change and disruption, changes in industry practices, one-time events and other factors described herein.  Based upon changing conditions or circumstances arising from  any one or more of these risks or uncertainties, or should any underlying assumptions prove incorrect, actual results may vary materially from historical or anticipated results as  described herein.

Readers are cautioned not to place undue reliance on forward-looking statements.  The Company does not intend to update or revise these forward‑looking statements, whether as a result of new information, future events or otherwise.

Billing Services Group Limited audited financial statements are available here:

http://www.rns-pdf.londonstockexchange.com/rns/4633T_-2016-3-29.pdf