zamano PLC

("zamano" or "the Group")

Interim Results 

zamano PLC (AIM:ZMNO, IEX:ZAZ), a leading provider of interactive applications and services to mobile devices, today announces its interim results for the 6 months ended 30 June 2009.

Mike Watson, Chairman of zamano, commented: "I am pleased to have been appointed Chairman during this exciting time of change and growth in the industry. zamano has all the fundamentals in place to take the business forward, including a strong management team, innovative technology and industry expertise. The short term trading environment is challenging, and a process has been initiated to identify investment opportunities to accelerate the Group's growth plans and to capitalise on its strengths." 

John O'Shea, CEO of zamano, added: "Management is making progress on the key actions identified in March 2009 including rigorous evaluation of all operations, tight cost control, cash management and measured investment in growth initiatives. During the period the Group improved gross margins and EBITDA margins, maintained adjusted EPS at 2.3 cents and generated €2.1 million of operating cashflow. Revenue declined in the period due to the planned shift to lower volume, higher margin revenue as well as the impact of regulatory change and a weak consumer environment. The Group has identified some areas for future revenue growth, which amongst other initiatives will include smartphone applications."  

Highlights:

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  CEO's statement 

I am pleased to welcome Mike Watson as our new Chairman. Mike's knowledge of the industry is a significant benefit to the Group and we are excited about his vision for zamano. I look forward to working with him to identify opportunities to accelerate the Group's growth plans.

Revenue declined in the UK and Ireland due to the planned shift to lower volume, higher margin revenue and the impact of external factors such as the new regulations in the UK and Ireland, declining effectiveness of print advertising and low levels of consumer confidence being more severe than expected. In the three months since the period end the Irish revenue has stabilised while the decline in UK revenue has slowed.

The Group delivered good performances in the key geographic markets which have been targeted for growth. Its share of the US market grew, with revenue increasing by 44% to €1.9 million. Additionally, the Group entered the Spanish market in January 2009 and has quickly established annualised revenues of €600,000. In July 2009, the Group entered the South African market and has already established a profitable market position.  

There has been a continued shift in the Group's routes to market, with advertising spend on print and television substantially reduced while online and mobile portal advertising spend increased. Total advertising spend is down due to lack of suitable mobile portal advertising inventory. Availability is expected to grow in line with mobile internet usage which is forecasted to grow substantially over the next number of years. This increase is being driven by the adoption of new handsets and the reduction in mobile data charges. The cost of accessing mobile data continues to decline and as it does the Group's customer levels are expected to increase. This was evidenced by Vodafone's free mobile internet day in August, when the Group's customer levels on mobile portals increased four fold. 

A new smartphone application team has been put in place to develop both mobile entertainment and corporate applications. The Group is developing and testing new billing mechanisms to take advantage of the convergence between the mobile and fixed line internet. Furthermore, these new devices and billing methodologies break down the traditional model of mobile network operator billing, and thereby allow the Group to target customers globally, as evidenced by zamano's first iPhone application selling 30,000 copies in 45 countries.

The Group is continually realigning resources and skillsets towards developing new revenue streams. While strict cost control measures are in place, the Group has increased its headcount in research and development during 2009 to help ensure it has the skills and products to take advantage of growth opportunities.  

Market Review

The overall market for the provision of interactive applications and services to the mobile is expected to grow over the next three years. This growth is being driven by a number of factors including new mobile billing methodologies, increased adoption of smartphone handsets and reduced data charges. zamano has diverted resources towards supplying this emerging element of the market. 

The market for the Group's traditional billing model of Premium Rate SMS declined in Ireland and the UK in H1 2009 due to regulatory change and declines in consumer confidence. In the UK, zamano's market position slipped from number five to number seven as a result of a shift to higher margin business model and the reduced effectiveness of the Group's traditional routes to market such as print advertising. In Ireland, zamano increased its market share driven by a number of new customer wins as the Group continues to build on its strong leadership position.  

The type of content that the Group delivers has changed dramatically over the last 12 months. Mobile ringtones and wallpapers are being replaced by interactive mobile applications, games, competitions and corporate solutions which allow the Group to take advantage of the increasing capabilities of mobile devices.  

Financial Review

Revenue was down by €10.4 million from H1 2008 to €13.3 million due to declines in the traditional markets: €8.8 million in the UK, €1.7 million in Ireland and €0.6 million in Australia. These declines were partly offset by growth in the US and Spain.  

The Group's gross margin increased to 32%, which is up 5 percentage points on the same period in 2008 reflecting the increased focus on higher margin revenue and strict metrics for measuring advertising effectiveness.

The Group's EBITDA declined by 7% to €2.3 million, on a constant currency basis the decline was only 3%. EBITDA margin increased to 17%, up 7 percentage points on same period in 2008 reflecting the effect of higher gross margin and reduced operating costs. 

Cost management remains strong as evidenced by the fact that administrative expense were reduced by 47% to €2.1 million; reflecting strong controls and the benefit of research and development credits. Management continues to maintain its focus on cost reduction, with a number of initiatives underway such as a platform virtualisation project which will reduce platform management costs by 65% in 2010. 

Cash generation in the Group continues to be strong, with €2.1 million of positive cash-flow from operating activities in the first 6 months of the year.  At 30 June the Group had cash of €6.0 million and €11.8 million of debt, which is a net debt of €5.8 million. The Group paid down €1.2 million of debt in the six month period. 

Outlook

Despite the short term challenges, the Board has confidence in the medium and long term prospects of the industry, and is excited about the high growth areas and the opportunities that they present. The broader industry is growing, and we look forward to refining our strategy and building on our fundamental strengths to capitalise on the expected significant growth in the industry. 

John O'Shea

Chief Executive Officer

22 September 2009

  Unaudited condensed consolidated income statement

for the half-year ended 30 June 2009

  Unaudited condensed consolidated balance sheet

at 30 June 2009

¹  Amounts at 31 December 2008 are derived from the 31 December 2008 audited financial statements.

  zamano plc and subsidiaries 

Unaudited condensed consolidated cash flow statement

for the half-year ended 30 June 2009

  Notes to the half-yearly condensed consolidated financial statements (unaudited)  

1      Reporting entity

zamano plc is a limited company incorporated and domiciled in Ireland whose shares are publicly traded on the Alternative Investment Market (AIM) in London and the Irish Enterprise Exchange (IEX) in Dublin.

The half-yearly condensed consolidated financial statements of zamano plc as at and for the six months ended 30 June 2009 consist of the results and financial position of the company and its subsidiaries together referred to as "the group." The principal activities of the group are the provision of mobile data services and technology.

2      Statement of compliance

These half-yearly condensed consolidated financial statements (the "half-yearly financial statements") have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 "Interim Financial Reporting", as adopted by the EU. They do not include all of the information required for full annual financial statements and should be read in conjunction with the most recent published financial statements of the group. The comparative figures included for the year ended 31 December 2008 do not constitute statutory financial statements of the group within the meaning of the European Communities (Companies: Group Accounts) Regulations 1992. The consolidated financial statements for the year ended 31 December 2008 are available at www.zamano.com. The auditor's report on those financial statements was unqualified.

These condensed consolidated financial statements were approved by the Board on 22 September 2009 and are available at www.zamano.com.

3.     Estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting polices and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these half-yearly condensed financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as disclosed in note 4 to the most recent published annual consolidated financial statements.

4.    Segment information

zamano facilitates communication and interaction between companies and consumers on mobile phones through a range of value-added mobile applications (B2B). zamano also develops, promotes and distributes mobile content and interactive services directly to consumers (D2C). 

       The group's operations are not significantly impacted by seasonal fluctuations.

5.    Income tax credit/expense

6.    Earnings per share

    Basic earnings per share amounts are calculated by dividing net profit for the half-year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The following reflects the income and share data used in the basic and diluted earnings per share computations:

7    Adjusted earnings per share

      The following reflects earnings per share based on adjusted net income: