MOPOWERED GROUP PLC

("MoPowered" or "the Group")

Interim Results and Proposed Placing

MoPowered (AIM: MPOW), the mobile commerce specialist, today announces its half yearly results for the six months ended 30 June 2014

Key Highlights

Financial

·    Revenue increased by 39% to £753,204 (2013: £543,762) of which 55% (2013:53%) was license fees, transactions and  recurring revenues

-       Gross margin of 60% (unchanged from 2013)

-       Continued growth during the period underpinned by new business wins and an increased level of repeat projects with existing customers

·    Adjusted loss before interest, tax, depreciation, amortisation and share-based payments of £1.53m (2013: £0.94m), reflecting planned levels of investment to support growth*

·    Proposed placing to raise  £3.5 million

·      Funds will enable the Group to continue to exploit the attractive organic sales growth opportunities available

·      This is the first period for which the Group is producing results. 'Merger accounting has been applied within these Interim Results to treat the group headed by MoPowered plc as if it had existed in comparative periods**

*    See note 8 for further details

**  See note 1 for further details

Strategic Update

·      Re-focused Group strategy  based on experience learnt from the first half of the year

o  Sales efforts directed towards more profitable mid-sized retailers

o  Recruited new in-house telesales team to better drive new business generation

·      Actions undertaken to reduce the cost base of the Group by around £100,000 per month so cash break-even point is brought forward to the end of 2015, based on more modest forecasts

·      42 new clients won during the period under review

·      Recently launched products continue to gain traction

o   MoPowered Professional the upgraded mid-market proposition

o   MoPowered 3DS mobile payment authentication

·      Establishment of reseller partnerships to expand MoPowered's routes-to-market

o   IPC Media in the UK

o   2-Increase in the Netherlands

·      Small proposed acquisition announced of technology assets to improve MoPowered's app proposition

o  Headline terms agreed with vendor

·      The process for appointing a new Financial Director is ongoing. Since mid-July an experienced interim Finance Director has been within the business

Commenting on the outlook, Dominic Keen, Chief Executive, said:

"As retailers increasingly focus on mobile shoppers, the need for mobile commerce compatibility is constantly increasing.  MoPowered is capitalising on this opportunity and has continued to grow revenues during the first six months of the year, winning 42 new clients.

The business continues to exploit its rapidly evolving trading environment and the new strategy represents a reaction to the challenges that were faced in the first half of the year which resulted in an adjustment of the board's expectations in early July.

Having shifted our focus to mid-tier retailers, and with our direct sales efforts now fully in-house and building reseller channels, we are making good progress and MoPowered is now seeing an acceleration of the rate of new mid-tier business being won.  We are well placed to benefit from the significant mobile commerce opportunities and plan to start generating monthly positive cash-flow before the end of 2015, which will underpin subsequent profitable growth over future years."

Business Review

Overview

MoPowered specialises in enabling online businesses to take advantage of mobile commerce.  MoPowered has achieved continued growth across its business during the first six months of 2014.  This reflects the on-going drive by online retailers to establish specific mobile commerce systems in order to increase the amount of online trade from their customers shopping on their smartphones and tablets.

The Group won 42 new clients during H1 2014.  Wins this year to-date include a number of notable new names including Jewson, The Works and Western Union.  As previously announced, this number was lower than original management expectations as it was not possible to ramp up the rate of selling as fast as the board had previously thought possible.  Nevertheless MoPowered is now seeing an acceleration of the rate of new mid-tier business being won.  To ensure that client acquisition continues to increase in line with our planned strategic growth, during recent months MoPowered has established a more effective sales and marketing function to enable better control of the sales pipeline going forward.  In particular, telesales resource has now been brought in-house and has already had a beneficial impact with an up-tick in mid-tier lead generation.

The business made continued progress in operating more efficiently, bringing down on-boarding times of standard new clients by in excess of 30% in the period and, for the time-being, has shifted commercial focus away from smaller clients towards mid-tier clients which allows for a more profitable unit model.   The benefit of this improvement in efficiency should improve the gross margin in future periods.

It is has been harder than anticipated to commercialise successfully smaller online retailers than those in the mid-tier market and the Group's strategy has been evolved to maximise this optimum target client size.  The Group is developing a new proposition to enable it to revisit the smaller retailers in future periods.  It is likely that this new low-end proposition will have a lower price-point and different routes-to-market.

MoPowered's competitive advantage lies in its underlying technology. In the first half of the year the Group improved further its systems so that new clients can offer higher quality mobile shopping experiences for their end-customers.  Two important new products, MoPowered Professional and MoPowered 3DS, were launched during the period which will enable the Group to monetise further its technology base.   MoPowered Professional, the Group's renewed offering for the mid-tier market, is now at the heart of the Group's revised strategy.   The first commercial user of MoPowered 3DS, a technology which allows for better payment conversion on mobile devices, is in the initial stages of using the product.  Additionally MoPowered has also agreed to purchase software assets known as Cortana to improve the cost-efficiency of the mobile commerce apps that it already provides for iOS and Android devices.  Further details are provided later in this statement.

Important progress has been made in establishing new routes to market, both by forming reseller partnerships so that external salesforces can sell MoPowered products and also by expanding the lead referral programmes with complementary organisations.  In particular, the Group was pleased to announce its appointment of Time Inc UK as a reseller in the UK in September 2014.  Additionally, the Group has made the first steps to expand its activity in overseas markets by establishing a reseller relationship in the Dutch market.

MoPowered remains a front-runner in the fast-growing mobile commerce enablement market and has a clear strategy to exploit its strengths in order to generate value for its shareholders over forthcoming years.

Financial Review 

MoPowered's overall revenues increased to £753,204 in the period, 39% higher than the same period in the previous year for the MoPowered Limited group.  This growth was driven primarily by increasing licences, transaction fees and recurring revenues worth £412,532 (55% of the total) as well as higher than expected upsold project fees from existing clients, particularly to Next plc.  Licence fees from MoPowered's largest customer represent approximately 13% of the total and are expected to repeat in the second half of 2014. The build-up of the rate of new client acquisition was softer than expected in the second quarter of 2014 which led to the board's adjustment of whole-year expectations in early July.  Consequently configuration fees from new clients were significantly lower than had been originally anticipated at £45,874. 

Gross margin was put under pressure by longer-than-expected project deliveries in the first half of the year, leading to a lack of improvement on the same period in 2013.  MoPowered expects an improved performance with regard to gross margins in the second half of the year underpinned by the strengthening operating model with reduced on-boarding times.

Overall general and administrative costs less share based payments in the Group increased, as originally expected, by 49% year-on-year to £2.2 million in order to support the continued growth.  However, reductions in the cost base have subsequently been made as the business looks to become cash generative as rapidly as possible.  Actions have already been taken to reduce the cost base by around £100,000 each month.

As originally expected, the loss widened in the first half of 2014 as the Group expanded its activities to increase the sales rate and operate at greater scale.  Adjusted loss before interest, tax, depreciation, amortisation and share-based payments was £1.53m (2013: £0.94m).  The Group had cash reserves at the end of the half-year of £647,797. 

 As announced on 1 July, the rate of new client acquisition has not grown at the pace the board anticipated at the time of IPO.  Consequently the Group must ensure that it has adequate capital resources to maximise the opportunities that exist for the business as a going concern and to complete its growth plan.  Therefore MoPowered is proposing to raise approximately £3.5 million through a placing of ordinary shares which shall be subject to shareholder approval.

The Group anticipates that, following the receipt of funds from the placing, it will have sufficient working capital to continue its operations until it achieves monthly positive cash flow, which will underpin subsequent profitable growth over future years.  After making enquiries, and despite uncertainties, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. 

Operating Review

As mentioned above, MoPowered has now refined its strategy as the Group has struggled to achieve sufficiently rapid payback from smaller online retailers which trade less than a million pounds a year online.  Instead, MoPowered has chosen for the time being to concentrate on mid-tier businesses that have a larger online turnover.

In response to weaker than expected forward-looking cash-flows due to slower new client acquisition, the pricing model was adapted in August of 2014 to ensure that all contracts contribute cash from the outset.  The consequence of this change should be that the overall predictability of the financial performance of the Group is improved.

The Group's proposition remains attractive across the spectrum of eCommerce categories.  In particular, MoPowered has achieved traction within the fashion & apparel and the building supplies & DIY retail segments due to specific characteristics within these categories which make them ideally suited to mobile shopping.  MoPowered continues to build out tailored product features which will give it competitive advantages in these segments such a product selection filters for fashion shopping.

The Group  has reaped benefits from its ongoing investments in its product offer in the first half of 2014 with new features added having reduced on-boarding times and improved underlying end-user conversion metrics, leading in turn to higher transactional revenues from customers.  An exciting upgrade to MoPowered's shop user interface, improving usability and speed, is expected in the autumn which should also represent a significant opportunity to boost selling activities.

Although there were delays in on-boarding in the first half of the year, the MoPowered operations team has become better at delivering new client implementation projects with an overall reduction in delivery times of 30% through the period for standard customers.  New on-boarding processes are being rolled out to continue to improve on-boarding times, which correspondingly will lead to more profitable client contracts in the future.

The MoPowered team continues to be a talented pool of mobile commerce specialists who are motivated to build a leading company in its field.  Reductions in management and staffing levels have been made recently in non-core areas to make MoPowered more fit-for-purpose to move towards profit-making.  Furthermore non-sales staffing costs have been reduced by about 17% going into the second half of the year to support improved monthly cash flows.

Acquisition of Technology Assets

The Group proposes to purchase, as a standalone asset, the software assets of an app-building technology known as Cortana from Roundedlabs Limited for a total consideration of £200,000 paid partly in cash with the majority settled in deferred-issue shares.  Terms have been agreed and it is expected that this acquisition will be accounted for in the results for the second half of the year.  All the transitional services and support will be rolled-up into this overall fee.

Cortana is modular technology allowing for the rapid construction of mobile commerce apps.  Using Cortana under licence, MoPowered has been able to reduce the time and cost of building mobile commerce apps to 40% of previous approaches, leading to substantially improved margins.  These price advantages should add to MoPowered's further competitive advantages in its market.

Replacement of Finance Director

Following the resignation in July 2014 of Ben Carswell, a search is underway for a replacement Finance Director and the Group expects to provide a further announcement in due course.  Since mid-July an experienced interim Finance Director has been within the business.  He will stay in place until a permanent replacement has been appointed.  This is expected in the final quarter of 2014.

Current Trading and Outlook

The market outlook for mobile commerce systems remains encouraging as consumers continue to embrace mobile shopping.  MoPowered remains one of the larger and better-known suppliers in this area and has an opportunity to become an international market leader over forthcoming years.  The board is focused on executing its plan to realise this opportunity which it believes will generate substantial returns for shareholders.

The business continues to learn more about its rapidly evolving trading environment and the new strategy represents a reaction to the challenges that were faced in the second quarter of the year which resulted in an adjustment of the board's expectations in early July. Following the redefined strategy, MoPowered is now seeing an acceleration of the rate of new mid-tier business being won. Actions have been undertaken to reduce the cost base of the Group by around £100,000 per month. Based on the revised plan, The Group anticipates that it will start to generate monthly positive cash-flow by the end of 2015, which will underpin subsequent profitable growth over future years. 

Introduction

We have been engaged by the company to review the financial information in the half-yearly financial report for the six months ended 30 June 2014 which comprises the Consolidated interim statement of total comprehensive income, the Consolidated interim statement of financial position, the Consolidated interim statement of changes in equity, the Consolidated interim statement of cash flows and the related explanatory notes that have been reviewed. We have read the other information contained in the half yearly financial report which comprises only the Key Highlights and Business Review and considered whether it contains any apparent misstatements or material inconsistencies with the information in the set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.

The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in Note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in Note 1.

Our responsibility

Our responsibility is to express a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects,  in accordance with the basis of accounting described in Note 1.

Emphasis of Matter
In forming our opinion on the financial information, which is not modified, we have considered the adequacy of the disclosure made in Note 1 to the financial information concerning the group's ability to continue as a going concern. The group incurred a net loss of £2.3m during the six month period ended 30 June 2014. As explained in Note 1, the directors are in the process of a fund raising exercise to provide further working capital but have yet to secure a commitment. These conditions, along with the other matters explained in Note 1 to the financial information, 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 information does not include the adjustments that would result if the group was unable to continue as a going concern.

GRANT THORNTON UK LLP
AUDITOR

London
19 September

Consolidated interim statement of total comprehensive income for

the period ended 30 June 2014

Consolidated interim statement of financial position as at 30 June 2014

Consolidated interim statement of changes in equity for the
period ended 30 June 2014

Consolidated interim statement of cash flows for the period ended 30 June 2014

Notes to the consolidated interim financial statements

1   Basis of preparation

MoPowered Group plc was incorporated on 18 September 2013 and on 18 December 2013 acquired 100% of

the share capital of MoPowered Limited. The consolidated MoPowered Limited accounts for the period ending 31 December 2013 have been prepared and published. They are available on the company website. MoPowered Group plc's first full year accounts will be prepared for the period ending 31 December 2014.

As this transaction is outside the scope of IFRS 3 Business Combination and in the absence of any relevant guidance under International Financial Reporting Standards, the acquisition was accounted for as a Group reconstruction as the accounting policy was created on the basis of UK Financial Reporting Standards. Under merger accounting the acquisition has been accounted for as though the Group, as currently constituted, has been in place for the whole of the period covered by these financial statements. In the group financial statements, merged subsidiary undertakings are treated as if they had always been a member of the group. The results of such a subsidiary are included for the whole period in the year it joins the group. The corresponding figures for the previous year include its results for that period, the assets and liabilities at the previous balance sheet date and the shares issued by the company in consideration as if they had always been in issue. Any difference between the nominal value of the shares acquired by the company and those issued by the company to acquire them is taken to reserves. In order to assist readers of this report understand the trading performance of the Group, the assets, liabilities and losses of the underlying business have been consolidated to present the combined results and balances that would have been shown had the Group been under the control of a single common parent legal entity for the entire review period.

These interim condensed consolidated financial statements are the unaudited Consolidated Financial Statements of MoPowered Group plc, for the six months ended 30 June 2014.This non-statutory interim statement has been prepared on a basis consistent with that used in the preparation of the annual accounts, which are prepared under International Financial Reporting Standards as adopted by the EU ("IFRS"). They do not include all of the information required in annual financial statements in accordance with IFRS.

These interim financial statements were approved by the Board on 19 September 2014. The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

These financial statements have been prepared under the historical cost convention and the consolidated financial statements incorporate the financial statements of the Company and its subsidiary companies.

The financial information for the six months ended 30 June 2014 and 30 June 2013 and the 12 months ended 31 December 2013 is unaudited.

Going Concern

As described in the operating review, as a result of the initial investment period spent building the business, the company has reported an operating loss for the period. The directors consider that the outlook remains positive.

The market outlook for mobile commerce systems remains encouraging as consumers continue to embrace mobile shopping. MoPowered remains one of the larger and better-known suppliers in this area and has an opportunity to become an international market leader over forthcoming years.  The board is focused on executing its plan to realise this opportunity which it believes will generate substantial returns for shareholders.

The Group believes that it is executing a plan that will take it to a position of generating monthly positive cash flow, hence underpinning subsequent profitable growth over future years.  Current trading indicates that the Group is on track with the refocused Group strategy. In the meantime, the group is in the process of raising further funds through a placing of ordinary shares to raise £3.5 million, which will be subject to approval by its shareholders at the general meeting. The Group anticipates that, following the receipt of funds from the placing of shares, it will have sufficient working capital to continue operations until it generates monthly positive cash flow expected to be by the end of 2015. After making enquiries, and despite the material uncertainties described above, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors have adopted the going concern basis of accounting in preparation of the financial statements.

2   Significant accounting policies

The principal accounting policies and presentation followed in the preparation of this interim report have been consistently applied to all periods in these financial statements and are the same as those applied by MoPowered Limited in the annual accounts for the year ended 31 December 2013, with the exception of the basis of preparation as included at Note 1, and the creation of a merger reserve as a result of the group re-organisation. The accounts for MoPowered Limited can be obtained from the company's website.

3   Critical accounting judgements and key estimation of uncertainty

The preparation of financial statements in conforming with adopted IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience and other factors considered reasonable at the time, but actual results may differ from those estimates. Revisions to these estimates are made in the period in which they are recognised. The critical accounting judgements made in preparing this interim report are the same as those in preparing the annual accounts for MoPowered Limited for the year ended 31 December 2013 which can be obtained from the company's website.

4     Business segments

         The MoPowered Group plc's operations are centred on providing a software as service and supporting services. Management therefore considers there to be one reporting segment covering the entire Group.

    A supplementary analysis of revenue is as follows:    

5     Staff numbers

The average number of persons employed by the MoPowered Group during the period including executive directors is analysed below:

6     Loss per share

Deemed average ordinary shares are used due to the application of merger accounting.

7     Provision for doubtful debts

Trade receivables have been reviewed for impairment at the statement of financial position date and an impairment charge of £92,120 (2013:£151,755) has been recognised.  

8     Adjusted EBITDA loss