Professional Documents
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Velti plc
Financial Highlights
Six months
Six months
ended % Change
ended
30 June
30 June 2007
2008
(unaudited)
(unaudited)
€’000
€’000
Profit after tax and adjusted profit after tax are attributable to the equity
shareholders of the Company (after minority rights). Adjusted figures stated
before cost of share based payments.
Operational Highlights
• Strong revenue growth especially from mobile marketing and advertising
activities
• Positive operating cash flows of €3.4m (2007: €1.05m)
• Entry into new geographies and increased contribution into the revenue
mix from brand awareness and loyalty campaigns for mobile operators
• Won key mobile marketing contracts with Wrigley’s, MasterCard, TMP
Worldwide, Pepsi, Coca Cola, Pernod Ricard, Clinique and Hewlett-Packard
• Won key operator contract with Mobile TeleSystems (MTS) in Russia
• Renewed key operator contracts with WIND, Vodafone, Cosmote,
Cosmofon, MTEL, Vivatel, SingTel and Orange
• Velti and IPG joint venture, Ansible, extended its client roster with wins
from Intel, Bayer, General Motors and Verizon
• Extended the Asian footprint by acquiring a stake of up to 50% in CASEE,
China’s largest mobile advertising exchange
• Opened new offices in Shanghai, San Francisco, Boston, Munich, Moscow
and Paris
Product Development
• Expanded global capabilities in terms of operator connectivity and ability
to execute campaigns. Velti now has connectivity with more than 70
mobile operators across Europe, North-America, the Middle East and Asia,
and has an estimated reach of over 1.4 billion consumers
• Focused on automating new activities in mobile marketing that have
significant demand from Ansible and other marketing agencies
• Increased offering in mobile social network applications and brand loyalty
applications that expand operator’s advertising capabilities
David Mann, Chairman of Velti, commented: “The Board is delighted with another
period of growth, in what is traditionally the Company’s quieter half of the trading
year. In the second half of the year Velti is maintaining good progress in winning
new customers and growing business with existing ones. This gives us a high
level of confidence in meeting expectations for the full year and having a sound
foundation for significant further growth next year.”
Alexandros Moukas, Chief Executive, added: “We are very pleased to have
experienced another period of expansion and profitability. Year-on-year we set
ambitious targets for Velti and we’re on track to meet our goals. This success is
based on renewed contracts with key global operators, as well as new in-roads
into the Russian market with MTS. Velti has also strengthened its position in
China with the acquisition of up to 50% of CASEE, China’s biggest mobile ad
exchange, and several new offices in Asia, the US and Europe.”
Chairman and Chief Executive’s Statement
During the six months ended 30 June 2008, Velti achieved strong organic growth
in revenues and profits, whilst continuing to expand its global footprint in
anticipation of substantial and rapid development in the mobile marketing and
advertising market over the next few years.
The group more than doubled revenues to €15.9 million compared to the same
period in 2007 and it increased profit before tax to €1.6 million from €1.2 million,
whilst increasing operating cash flow to €3.4 million from €1.1 million.
Growth in the first half of 2008 has been driven by mobile marketing and
advertising which increased revenues by 164% to €10.0 million. The European
market was particularly strong and there were also mobile operator, advertising
agency and brand engagements in the US and Asia. Velti has expanded its
services and customer base in Europe by renewing contracts with WIND,
Vodafone, Cosmote, Cosmofon, MTEL, Vivatel, SingTel and Orange. Following the
launch of its new Mobile Marketing and Advertising platform (MMP) version 4.0 in
February, Velti is also executing mobile marketing projects for brands such as
Verizon, Intel, Bayer and General Motors through Ansible in its New York office,
and has won new customers such as Wrigley’s, MasterCard and TMP Worldwide in
Europe.
Velti’s platforms and services segments also performed well with sales to
enterprises increasing 48% to €3.3 million and sales to operators expanding by
88% to €2.6 million. The first segment focuses on enterprises in the public sector
and financial institutions including NBG, ATE Bank, Eurobank EFG and Bank of
Piraeus. The second of these segments focuses on the provision of software
platforms, systems integration and managed services for mobile operators,
including some of those referenced above.
Ansible, Velti’s joint venture with the Interpublic Group (IPG), made excellent
progress in developing relationships with agencies in the IPG network, educating
its clients about the full potential of the mobile channel and developing new
business opportunities. The implementation of contracts through Ansible has been
slower than originally expected. However, the Board is pleased with progress in
the third quarter and sees very good prospects for the last quarter of 2008 and
for next year.
An important step in expanding Velti’s global footprint was the agreement in April
to acquire up to 50 per cent of CASEE, China’s largest mobile advertising
exchange, for an investment of up to US $6 million. CASEE was serving 500
million adverts per month to mobile phones in China early this year; that figure
currently stands at more than 750 million, an increase of 50 per cent. The Board
is very encouraged by progress to date, which includes opening offices in
Shanghai and Guangzhou, as it continues to expand the team in the region.
CASEE is also planning to increase its presence across China during the remainder
of 2008.
These activities have reinforced the Board’s view that global brands are beginning
to see the mobile channel as an integral part of their marketing and advertising
strategies, to which they are allocating substantial budgets on an increasingly
global basis.
The following four driving factors are behind the growth of the company, resulting
in significantly stronger sales, but slightly lower gross and operating margins:
The Board is very pleased with Velti’s performance in the first half. The company
has achieved considerable momentum and the Directors believe this will be
maintained during the traditionally stronger second half. The outlook for earnings
in the current year is in line with current expectations and there is a high degree
of confidence in meeting these. At the same time the rapid development of the
new streams of business is expected to give revenues well ahead of current
expectations.
Market Development
One of the latest analyst forecasts for the mobile advertising industry is that of
more than 100% growth. Strategy Analytics is predicting that advertisers
worldwide will spend US $2.4 billion on mobile in 2009, up from US $1 billion this
year. As operators, agencies and brands further embrace the mobile channel to
drive these projected increases in market spend, the opportunities are clear for
Velti to increase activity with existing customers and secure new business across
all sectors.
Geographically the BRIC group of countries constitute the next great growth
curve for mobile telecommunications. BRIC encompasses over 40% of the world’s
population and it has a new, emerging middle class that is beginning to have a
profound effect on mobile phone usage and the businesses associated with it.
Ansible moves into its second year having acquired new clients including Intel,
Bayer, General Motors and Verizon. Ansible has developed key relationships with
IPG companies to leverage its agency network and client portfolio over the
remainder of 2008 and into 2009.
The opportunity IPG presents is a bold one; it is one of the world's leading groups
of advertising agencies and marketing services companies with offices in over 100
countries. The group now employs approximately 43,000 marketing professionals
and in 2007 had revenues of $6.55 billion.
Customer growth
While Velti is keen to explore new markets and customer opportunities, the
Company especially values the relationships it already has. The first half of the
year was significant for contracts that were renewed with key mobile operators in
the form of WIND, Vodafone, Cosmote, Cosmofon, MTEL, Vivatel, SingTel and
Orange. On top of successes in the first half, the second half of the trading year is
traditionally stronger for mobile operator solutions.
Version 4.0 of the MMP has generated great results in terms of faster time-to-
market, a superior quality of activity and campaign execution and the ability to
meet many new customer requirements. The south eastern and eastern European
markets were particularly strong for Velti in the first half of the year, with the
MTS deal in Russia being highlighted as the biggest of its type in the country.
There were also notable successes with mobile operators, advertising agencies
and brands in the US and Asia. Companies such as Wrigley’s, MasterCard and
TMP Worldwide have all delivered campaigns using Velti technology during the
first half of 2008.
Alongside strong Velti sales during the first half of 2008, Ansible is looking to
build on the sales to brands including Intel, Bayer and General Motors and
capitalise on the relationships it is fostering, with particular emphasis on the last
quarter of 2008 and 2009.
Geographic development
The global mobile market presents several interesting areas of growth and with it
opportunities to deliver marketing and advertising campaigns to new and evolving
audiences. The BRIC countries make up one of these key growth areas, and as
such, it is an area that Velti is building presence. During the year Velti’s first
office in Moscow was opened and in July the Company announced its largest deal
in Russia, a multi-million Euro deal with MTS.
Another BRIC country that Velti has moved into is China with the acquisition of up
to 50% of CASEE, China’s largest mobile advertising exchange. CASEE grew the
number of ads it is serving from 500 million to more than 750 million since the
beginning of the year; with all of the company’s revenue being generated from
advertisers, including brands such as Kodak and General Motors.
On top of the activity in the BRIC countries, Velti has expanded in more
established markets with new offices in San Francisco, Boston, Munich and Paris.
For operators the trend has been towards major mobile marketing loyalty
projects, with the objective of reducing churn and creating opt-in communities
that fuel advertising potential. In most of these projects Velti is acting as an on-
going partner for the operator rather than as a platform license vendor.
There is strong demand from advertising agencies for fully integrated solutions, in
terms of capabilities and geographical reach. The major brands embracing mobile
are placing emphasis on a combination of advertising placement on multiple
channels with capabilities varying from text, to interactive outdoor digital
environments that interact with mobile phones. One common theme linking
brands and advertising agencies is the requirement to execute both advertising
and marketing activities globally, with some brands looking to launch campaigns
simultaneously in multiple major markets.
Velti’s sales geographies are highly fragmented markets, which suits the
Company’s business model and approach. Velti’s geographical reach is expanding
both in terms of what the MMP can offer cross-borders, as well as having a
physical presence in an increasing number of countries to meet customers’ sales
support requirements, and deliver uncompromised customer service, to world
class mobile operators, advertising agencies and brands.
Financial Review
In the first half of 2008 Velti delivered a robust financial performance that is
reflected in strong revenue growth, resilient profit margins, positive operating
cash flows and reduced working capital requirements. The Company continued
investing in development and infrastructure projects in support of revenue growth
and geographical expansion. Through its investment programme, the Company
has put in place data centre infrastructure that offers industry leading 99.99 per
cent service-level agreements while the development of the MMP offers the ability
to create more than 1,000 integrated mobile campaigns.
In the six month period ended 30 June 2008 revenue reached an amount of
€15.9 million posting a growth rate of 115 per cent compared to the respective
period in 2007 (€7.4 million). The increase in revenue stemmed both from mobile
marketing and advertising activities and the traditional platforms and services
segments. Moreover, there was significant positive contribution from the first
time consolidation of the 100 per cent Russian subsidiary Velti MMT, as of 3 April
2008 while repeat business with existing clients remained strong.
The gross profit increased by 76 per cent to €7.23 million (€4.10 million during
the first half of 2007) delivering a margin of 45 per cent (55 per cent in 2007).
The drop in the gross margin figure reflects the entry into new geographies and
the increased contribution into the revenue mix of brand awareness and loyalty
mobile campaigns run for mobile phone operators. These projects are integrated
across multiple media channels having text messaging, mobile internet, web-
interactive and TV components.
For these types of project, Velti charges a competitive fixed set-up fee to
originate and launch the campaign and then it shares the resulting revenues
based on mobile subscriber interactions. These projects deliver lower profit
margins, however, revenues ramp up and get converted into cash significantly
faster and costs – which include partner costs, prizes and promotional activities –
are easily estimated. The recent contract win with Russia’s Mobile Telesystems
(MTS) is a great example of this model and how it delivers mutually beneficial
results for Velti and the operator.
It is becoming evident that such mobile phone operator contracts currently play a
significant role in the current state of the mobile marketing and advertising
market and are expected to be a significant contributor of revenue during the
next eighteen months.
Operating profit, after the recognition of share based payments of €0.59 million,
increased by 65 per cent to €2.01 million (€1.22 million during the first half of
2007) delivering a margin of 13 per cent (16 per cent in 2007). The share based
costs include an extra cost of €0.33 million that resulted from the vesting of the
share awards that were granted in 2006. Adjusted operating profit, before the
recognition of share based payments, increased by 86 per cent to €2.60 million
(€1.40 million during the first half of 2007). The ratio of administrative expenses
to revenue dropped to 12 per cent (19 per cent in 2007). The gross capital
expenditure reached €7.0 million reflecting the continuation of significant product
development and infrastructure projects while net capital expenditure reached
€5.2 million. The investment programme of the Company remains focused on
international expansion and the continuous development of its market leading
MMP. During the second half of the year, planned net capital expenditure is
expected to slowdown and to be lower in absolute terms compared to the first
half.
Profit after tax and after minorities reached an amount of €1.24 million, posting
an increase of 30 per cent over the respective period of 2007 (€0.95 million). On
an adjusted basis, profit after tax and after minorities increased by 61 per cent to
€1.82 million (€1.13 million during the first half of 2007). The taxation charge of
the period was calculated at a tax rate of 23 per cent, which represents the
estimated effective tax rate for the whole year. Adjusted basic earnings per share
grew by 41 per cent to 5.5 eurocents (3.9 eurocents in 2007). This was achieved
notwithstanding the dilutive effect of shares issued in the secondary offering at
the end of 2007 and the vesting of awards granted in 2006.
Significant profitability coupled with balanced working capital requirements
resulted in an operating cash inflow of €3.38 million compared to an inflow of
€1.10 million in 2007. The improvement in the working capital balance resulted
from the significant drop in the ratio of accounts receivable and prepayments over
revenue. As at 30 June 2008, the respective ratio based on 12 months trailing
revenue stands at 69 per cent (80 per cent as at 31 December 2007).
Velti’s balance sheet, as at 30 June 2008, reflects a strong net asset position of
€31.88 million and a net cash position of €4.26 million.
CONSOLIDATED INCOME STATEMENT
Other operating
-
income 50 -
Administrative
(2,723)
expenses (1,880) (1,430)
Share of loss of
associates (221) 27 (178)
Attributable to:
Equity shareholders of
3,661
the parent 1,236 952
Minority Interest (13) (109) (94)
1,223 843 3,567
SHAREHOLDERS’ EQUITY
Share capital 2,432 2,125 2,388
Share premium account 21,788 11,610 21,788
Share-based payment
910 248 398
reserve
Merger reserve 1,071 1,071 1,071
Currency translation reserve (312) - (251)
Accumulated profit /(losses) 5,638 1,693 4,402
Total shareholders’ equity 31,527 16,747 29,796
Minority interest 353 893 326
Total Equity 31,880 17,640 30,122
LIABILITIES
Non-current liabilities
Borrowings 3,315 42 -
Retirement benefit
obligations 165 120 143
Deferred tax liabilities 1,076 583 1,055
Other liability - 562 22
4,556 1,307 1,220
Current liabilities
Trade and other payables 11,221 5,265 8,034
Current income tax liabilities 428 - 102
Borrowings 2,445 2,288 1,714
14,094 7,553 9,850
Total liabilities 18,650 8,860 11,070
TOTAL EQUITY & 50,530 26,500 41,192
LIABILITIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
Share
Based Currency Accumulated Total
Share Share Payment Merger Translation Profits shareholders’ Minority
Capital Premium Reserve Reserve reserve /(Losses) equity Interests Total
€’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000
Balance at
1 January 2007
(audited) 2,125 11,613 66 1,071 - 741 15,616 663 16,279
Minority interest - - - - - - - 339 339
Cost of share issue - (3) - - - - 182 - (3)
Issue of share awards - - 182 - - - (3) - 182
Profit/(loss) for the period - - - - - 952 952 (109) 843
Balance at
30 June 2007
(unaudited) 2,125 11,610 248 1,071 - 1,693 16,747 893 17,640
Share capital issued, net
of expenses 263 10,178 - - - - 10,441 - 10,441
Minority interest - - - - - - - (582) (582)
Translation reserve - - - - (251) - (251) - (251)
Issue of shares awards - - 150 - - - 150 - 150
Profit for
the period - - - - - 2,709 2,709 15 2,724
Balance at
31 December 2007
(audited) 2,388 21,788 398 1,071 (251) 4,402 29,796 326 30,122
Share capital issued 44 - - - - 44 - 44
Minority interest - - - - - - - 27 27
Issue of share awards - - 512 - - - 512 - 512
Translation reserve - - - - (61) - (61) - (61)
Profit for the period - - - - - 1,236 1,236 - 1,236
Balance at
30 June 2008
(unaudited) 2,432 21,788 910 1,071 (312) 5,638 31,527 353 31,880
CONSOLIDATED CASH FLOW STATEMENT
2. Segment information
31 December
30 June 2008 30 June 2007 2007
(unaudited) (unaudited) (audited)
€’000 €’000 €’000
Current
Current portion of long-
term debt (within 1 year) - 510 195
Non – current
Long-term portion of long-
term debt - 42 -
3,315 42 -
During 2008, the Company entered into two long term loan agreements of a total
value of €3,300,000. The first has a nominal value €3,000,000 with a tenure of
four years. It is both a revolving and term credit facility, payable in eight
installments of €375,000 each. The first payment is due on January 2009. The
interest is calculated based on three month Euribor plus a spread of two hundred
basis points.
The second facility is bullet loan with a nominal value of €300,000 and a tenure of
five years. The interest on the loan is calculated based on six month Euribor,
plus a spread of two hundred basis points.
4. Deferred shares award plan
The Company adopted a share incentive plan on 26 April 2006. Under this Plan,
any employed director or any employee of the Company is eligible to receive
awards under the plan. The deferred shares award (DSA) entitles the participant
to acquire shares when the DSA vests by paying an amount of no less than the
nominal value per share. The vesting period is two years. Deferred shares are
forfeited if the participant leaves the Company before the DSA vests.
Details of the awards outstanding at the end of the period are as follows:
In the period ended 30 June 2008, the Company recognized a total expense of
€512,000. The expense for the period ended 30 June 2007 was €182,000.
Subsidiaries are consolidated from the date on which control is transferred to the
Company. They are de-consolidated from the date that control ceases. Goodwill
arising upon acquisition of subsidiaries and associates during the period
amounted to €2.89 million.
During the period ended 30 June 2008, Velti Plc utilized €1.94 million in respect
of the acquisition in China.
In April 2008, Velti Plc acquired 19% of share capital of CASEE (Cellphone Ads
Serving E-Exchange) a company incorporated in China. The Company has the
ability to acquire up to 31 December 2008, an additional percentage of share
capital in order to increase its ownership to 50%. This has been treated as an
associate and accounted for using the equity method.
CONTACTS
Velti:
Alexandros Moukas, Chief Executive Officer +44 (0) 20 7633 5000
Pantelis Papageorgiou, Director of Finance
About Velti
Velti’s market-leading mobile marketing technology platform, coupled with its experience
in the mobile advertising industry, enables clients around the world to deliver an extensive
range of highly targeted marketing campaigns. With operations in 18 countries, and a
mobile marketing joint venture with the Interpublic group, a top global holding group of
advertising agencies, Velti has the ability to reach through its platform an estimated 1.4
billion consumers. Velti’s unique Mobile Marketing and Advertising Platform (version 4.0)
manages the full cycle of planning, execution and monitoring of multiple campaigns across
differing mobile formats and channels, offering customers more than 70 mobile marketing
and advertising templates, which can be managed from one user interface. For more
information, visit www.velti.com.