TIDMESG
RNS Number : 9332B
eServGlobal Limited
28 February 2011
28 February 2011
eServGlobal Limited
FY2011 First Half Results
SUCCESSFULLY COMPLETED SALE OF USP ASSETS TO ORACLE CORPORATION
FOR A$107M
THE NEW ESERVGLOBAL: FOCUSED ON MOBILE MONEY AND VALUE-ADDED
SERVICES
HOMESEND REACHES 50 MILLION SUBSCRIBERS WORLDWIDE
PROVIDING MOBILE MONEY SOLUTIONS FOR 250 MILLION SUBSCRIBERS
eServGlobal Limited (LSE: ESG & ASX: ESV), a global telecoms
software vendor specializing in Mobile Money and Value-Added
Services (VAS), today announced its results for the six months
ending 31 December 2010.
Successful completion of USP Asset Sale to Oracle
eServGlobal is now repositioned in the high growth markets of
Mobile Money and VAS.
o Completed sale of USP Assets and Business to Oracle for A$107M
on 4 August 2010
o Announced sale on 26 May 2010; sale price represented
approximately 124% of eServGlobal's total market capitalisation at
announcement for the assets of one division
o Sale of USP assets implies a revenue multiple of over 2.6x
o A$24M of proceeds relating to the sale remain in escrow and
are expected to be released in equal proportions on the first and
second anniversary of the transaction
o Capital return of A$65M (A$0.33 (GBP0.20) per share) approved
by Board and shareholders on 25 November 2010, pending approval of
Australian Taxation Office (ATO). Further to the company's
announcement of 25 November 2010, the required class and private
rulings have not yet been received from the ATO. Further
information requested has been provided to the ATO but the company
has no update as to likely timing of receiving the ATO's
determination.
Financial Highlights
Solid performance, EBITDA positive and a strong cash
balance:
o Sales revenue for the period of A$22.5M (H1 2010 sales,
including the USP portion: A$43.8M)
o EBITDA of A$67.0M before non-recurring restructuring charges
and foreign exchange losses (H1 2010: Loss of A$5.7M).
o Net cash increase during the period of A$74.0M (excluding USP
asset proceeds held in escrow)
o A$5.8M in loan and unsecured bank overdraft facilities
repaid
o On track to complete restructuring by end of financial
year
o Earnings per share for the first half were A$0.27 (H1 2010:
Loss per share of A$0.06).
o Net cash reserves at 31 December 2010 of A$70.4M excluding
A$24M held in escrow, which positions eServGlobal strongly for both
reinvesting in its future and for the anticipated capital return to
shareholders
Operational Highlights:
The new eServGlobal is focused on the high growth areas of
Mobile Money and Value Added Services:
o We provide real-time recharge and mobile money services, as
well as value-added services such as promotions and messaging
o We provide the patent-pending HomeSend International
Remittance hub platform
o We deliver these services to over 60 customers operating in
45+ countries around the world today
Mobile Money Services are being delivered in over thirty
deployments at twenty-three customers worldwide, and are gaining
global market access via partners like Nokia Siemens Networks
(NSN)
o PayMobile has been enhanced to offer operators a unified
mobile money solution for voucher based recharge, electronic
recharge, and mobile money; in these six months we have already won
five projects for PayMobile's unified mobile money suite
o New wins with global partner NSN, who serve 600+ operators
worldwide today
o First two upgrades in partnership with Ericsson
o PayMobile reached 250 million subscriber milestone: poised for
growth in the rapidly expanding prepaid market
Value-Added Services are being provided to over forty operators
who use eServGlobal's messaging, promotions, and content delivery
services
o PromoMax is now delivering over 40 targeted, personalised, and
real time promotions per second to millions of subscribers
o Growing market presence of PromoMax based on the proven
revenue benefits of eServGlobal's promotions programs: 32% increase
in voice revenues at one operator
o Fifteen operators to date have taken advantage of our
SaaS-based FlexiContent services to deliver direct-to-consumer
services in emerging markets around the world
HomeSend, the world's leading mobile to mobile multilateral
remittance hub, is building momentum
o HomeSend quadrupled its corridor-level coverage in H1 2011,
and now provides service to the United Kingdom, Belgium, Morocco
and the Philippines.
o Covering 50 million subscribers around the world as of
December, 2010 (+43% vs. H2 2010)
o Strategic partnerships signed with EastNets and with MFIC, two
international financial institutions with a global presence in 90+
countries
o We are starting to see some interest around the HomeSend
platform with several major operator groups testing the platform;
MTN Ghana was the first of these groups to sign up in February
2011.
Outlook
We confirm our revenue guidance for FY2011 for revenues between
A$38M and A$45M (GBP22M to GBP26M).
We ended the first half with EBITDA (before non-recurring
restructuring charges and foreign exchange differences) of A$67.0M.
This EBITDA profit includes the profit on sale of the USP business
to Oracle. With the bulk of the transition period now over, we
expect to show positive EBITDA for the remaining business for the
second half of FY2011. The second half will also see us complete
the restructuring of our business.
We continue to monitor the situation in the Middle East and
North Africa with our customers based there. We have encountered
on-site project delays in Egypt and Tunisia due to political events
but we do not at this stage anticipate that this situation will
require us to alter the above guidance.
Condensed consolidated statement of comprehensive income
for the half-year ended 31 December 2010
Consolidated
Half-Year Ended Half-Year Ended
31 December 31 December
2010 2009
$'000 $'000
----------------------- --------------------
Revenue 22,471 43,763
Cost of sales (13,944) (23,556)
----------------------- --------------------
Gross profit 8,527 20,207
Gain on disposal of business 72,088 -
Interest income 1,839 59
Research and development
expenses (3,135) (4,840)
Sales and marketing expenses (4,854) (6,432)
Administration expenses (10,964) (16,740)
Earnings / (loss) before
interest expense, tax,
depreciation and
amortisation 63,501 (7,746)
Amortisation expense (3,193) (3,505)
Depreciation expense (816) (1,486)
Earnings / (loss) before
interest expense and tax 59,492 (12,737)
Finance costs (69) (83)
Profit / (loss) before tax 59,423 (12,820)
Income tax benefit / (expense) (6,234) 980
----------------------- --------------------
Profit / (loss) for the period 53,189 (11,840)
======================= ====================
Other comprehensive income
(loss)
Exchange differences arising
on the translation of foreign
operations (1,443) (1,525)
----------------------- --------------------
Total comprehensive income
(loss) for the period 51,746 (13,365)
======================= ====================
Profit (loss) attributable to:
Equity holders of the parent 53,040 (11,926)
Non controlling interest 149 86
----------------------- --------------------
53,189 (11,840)
======================= ====================
Total comprehensive income
(loss) attributable to:
Equity holders of the parent 51,597 (13,451)
Non controlling interest 149 86
----------------------- --------------------
51,746 (13,365)
======================= ====================
Earnings (loss) per share:
Basic (cents per share) 26.9 (6.1)
Diluted (cents per share) 26.9 (6.1)
Condensed consolidated statement of financial position
as at 31 December 2010
Consolidated
----------------------------
31 December
2010 30 June 2010
$'000 $'000
-------------- ----------------
Current Assets
Cash and cash equivalents 70,447 2,225
Trade and other receivables 33,572 31,143
Inventories 385 853
Current tax assets 1,986 4,897
-------------- ----------------
106,390 39,118
Assets classified as held for sale - 27,528
-------------- ----------------
Total Current Assets 106,390 66,646
-------------- ----------------
Non-Current Assets
Property, plant and equipment 2,265 3,071
Deferred tax assets 1,196 1,907
Goodwill 6,295 6,820
Other receivables 11,984 -
Other intangible assets 9,285 12,727
-------------- ----------------
Total Non-Current Assets 31,025 24,525
-------------- ----------------
Total Assets 137,415 91,171
-------------- ----------------
Current Liabilities
Trade and other payables 13,568 13,349
Borrowings - 5,794
Current tax payables 6,857 535
Provisions 1,973 4,123
Other 4,465 5,268
-------------- ----------------
26,863 29,069
Liabilities directly associated
with assets classified as held
for sale - 750
-------------- ----------------
Total Current Liabilities 26,863 29,819
-------------- ----------------
Non-Current Liabilities
Deferred tax liabilities 1,591 4,083
Provisions 461 505
-------------- ----------------
Total Non-Current Liabilities 2,052 4,588
-------------- ----------------
Total Liabilities 28,915 34,407
-------------- ----------------
Net Assets 108,500 56,764
============== ================
Equity
Issued capital 123,946 123,946
Reserves (3,019) (1,566)
Accumulated Losses (12,741) (65,781)
-------------- ----------------
Parent entity interest 108,186 56,599
Non controlling interest 314 165
Total Equity 108,500 56,764
============== ================
Condensed consolidated statement of cash flows
for the half-year ended 31 December 2010
Consolidated
Half-Year Half-Year
Ended Ended
31 December 31 December
2010 2009
$'000 $'000
------------- -------------
Cash Flows from Operating Activities
Receipts from customers 30,490 64,518
Payments to suppliers and employees (38,139) (71,320)
Interest and other costs of finance
paid (69) (83)
Income tax refunded / (paid) 1,217 (206)
Net cash used in operating activities (6,501) (7,091)
------------- -------------
Cash Flows From Investing Activities
Proceeds from disposal of assets 79,439 -
Interest received 1,839 59
Payment for property, plant and equipment - (2,255)
Software development costs (749) (1,289)
Net cash from/ (used in) investing
activities 80,529 (3,485)
------------- -------------
Net increase/(decrease) In Cash and
Cash Equivalents 74,028 (10,576)
Cash At The Beginning Of The Period (3,569) 14,135
Effects of exchange rate changes on
the balance of cash held in foreign
currencies (12) (139)
------------- -------------
Cash and Cash Equivalents At The End
Of The Period 70,447 3,420
============= =============
eServGlobal Solutions and Services
Today eServGlobal specialises in Mobile Money solutions and
Value-Added Services (VAS), enabling Telco Service Providers to
increase their revenue, gain new customers, and enter new
markets.
We invest heavily in product development and use carrier-grade,
next-generation technology to align with the requirements of more
than 60 customers in over 45 countries. For 24 years, mobile,
fixed, Internet and multiplay Telco providers have used our
capabilities to lead and innovate in their local markets,
leveraging their core assets and their trusted agent and subscriber
relationships.
We have been providing carrier-grade mobile money services to
telecom operators for the last twelve years, and we have extended
these capacities to provide full "end-to-end" and "any account to
any account" Mobile Financial Services and International Money
Transfers. Our HomeSend solution is the only mobile-centric
international remittance hub to gain endorsement from the GSM
Association and is recognised as the leading mobile-centric
remittance hub in the world.
Our Value-Added Services in promotions, loyalty, and messaging
enable service providers to engage with their subscribers in a
personalised and dynamic manner to drive revenue, decrease churn,
and provide new end-user services.
Strategic Transformation
As the landscape around us has reshaped and evolved, we have
worked to position ourselves to rapidly respond to demand and to
create value for our customers in both current and emerging
markets. The first half of the 2011 financial year was thereby a
time of transition in which we successfully managed to complete a
large asset sale and refocus eServGlobal on higher potential
markets. As part of this work, we launched a new corporate brand
and put in significant effort to strengthen our existing
relationships with partners like Nokia Siemens Networks.
In five short months, the business has successfully transitioned
from the Intelligent Network (IN) market, which is dominated by
large multinational telecommunications companies (such as Ericsson,
Huawei, Alcatel-Lucent and NSN), to the Mobile Money and
Value-Added Services markets for which there is presently no clear
market leader. We made this move based on our clients' interest and
the industry's high growth potential (Mobile Money is expected to
enjoy 93% compound annual growth according to Greenwich
Consulting).
The success of this transition has been pleasing. A year ago, at
the end of H1 2010, eServGlobal announced a A$5.7M loss, cash
reserves of A$3.4M, and declining revenues. Today, the company is
pleased to announce an EBITDA profit of A$67.0M before
restructuring and foreign exchange losses, cash reserves of A$70.4M
(excluding A$24M held in escrow), and a stable revenue base in a
high growth area. On an operational level, eServGlobal has and
continues to undertake cost rationalisation exercises. There were
significant sales wins with both Nokia Siemens Networks and with
Ericsson and the strategy of upgrading our significant PayMobile
customer base to integrated voucher management, recharge, and
mobile money is yielding returns. The PromoMax product set has
expanded based on our first win last financial year. These
implementations are strong references for new potential customers
and have cemented our place in the market.
Investing in Growth
In the last six months, we have invested heavily in
eServGlobal's technologies and sales presence, and thereby secured
our place as an industry leader in our fields of Mobile Money and
Value-Added Services:
o Completed the integration of PayMobile in order to ensure a
seamless upgrade process from voucher to electronic recharge as
well as mobile wallets and international remittance
o Achieved an aggressive roadmap to ensure the technological
pre-eminence of HomeSend, which has increased the global reach of
the solution to Money Transfer Operators, Banks, Mobile Operators,
and eWallet Providers around the world. As a result of this push,
the HomeSend remittance platform is now the world's leading mobile
to mobile multilateral remittance hub
o Modernised to a Java-based multi-tier architecture to increase
flexibility and speed-to-market
o Benchmarked PromoMax for over 50 million subscribers per
operator
o Extended capabilities of the SaaS platform, which has now been
generalised to all products and services
o Extended FlexiContent's capabilities to act as a central
gateway for subscribers to purchase premium content using their
airtime accounts
o Developed new iPhone applications for PromoMax, PayMobile and
HomeSend
o Increased sales presence in target markets in Africa and in
Asia Pacific
One of the biggest investments that eServGlobal has made in
technology is the creation of a next generation PRIME framework,
which comes with a full set of pre-developed, ready-to-configure
services, ranging from standalone pre-packaged solutions to
customised multiplay offerings. This new multi-tier architecture
allows operators to turn on and off applications and features while
taking advantage of existing points of network integration, driving
improved time to market and higher-margin cross sell
opportunities.
HomeSend builds momentum
The HomeSend platform has built significant momentum in the
first half of FY2011. In the last six months there have been two
new go-lives, which effectively quadrupled the hub's corridors, and
increased coverage to 50 million subscribers worldwide. There have
also been significant partnerships signed with MFIC and with
EastNets which pave the way for an extended geographic footprint.
In February 2011 MTN Ghana joined the hub; MTN Group, who has over
100 million subscribers worldwide and is a pioneer in mobile money,
will follow the launch closely with a view to bringing it to MTN's
other operations later.
New SaaS division launched
SaaS delivery model continues success
o Following early success with the African Cup of Nations, our
FlexiContent platform was adopted by more than a dozen operators
during the 2010 football world cup in South Africa
o These operators saw significant gains in subscriber revenues
from the launch of these direct-to-consumer services, which enable
mobile operators to take a share of the burgeoning mobile content
industry
New SaaS offerings launched
o PromoMax is now live in a SaaS model
o PayMobile's mobile money services now available in a SaaS
model
Efficiency Improvements
Significant cost-cutting took place in H1 2010 in order to
prepare the business for the push into the mobile money space and
continued cost realignment is underway. We began FY2011 with a
headcount of 534. Following the sale of to Oracle and after
completing the restructuring underway, we anticipate starting
FY2012 with approximately 40-45% of that number of staff. Moreover,
as part of the ongoing cost realignment, the management structure
was flattened considerably.
New Opportunities
We plan to drive revenue growth both organically and from new
contracts through global partners like NSN. As the global telecoms
market returns to growth, we expect to see increases in subscriber
levels on our existing install base as well as increased interest
from operators in purchasing new premium software and services. We
are also pursuing smaller operators in emerging markets via our new
Software as a Service platform and offering them a smooth migration
path to deploy additional services.
Financial Review
The consolidated entity achieved sales revenue for the period of
A$22.5M and gross profits of A$8.5M. EBITDA for the period was a
profit of A$67.0M before non-recurring restructuring charges and
foreign exchange losses (H1 2010 EBITDA loss: A$5.7M).
As part of our ongoing cost cutting plans, we incurred A$1.5M in
non-recurring restructuring charges in the period. We have also
felt the effects of the stronger Australian dollar, and recorded a
A$2.0M foreign exchange loss for the half year.
The net result of the consolidated entity for the half year
ended 31 December 2010 was a profit after tax and minority interest
for the period of A$53.0M (H1 2010: A$11.9M loss after tax).
Earnings per share were A$0.27 (H1 2010: loss per share
A$0.06).
During the period, the cash flow for the period was a net inflow
of A$74.0M primarily resulting from proceeds received of A$79.4M
following the disposal of the USP business and assets. Cash at 31
December 2010 was A$70.4M after repaying A$5.8M in loans and
unsecured bank overdraft facilities.
Development expenditure incurred during the period of A$0.7M was
capitalised in the Statement of Financial Position in accordance
with the group's accounting policies. The expenditure related to
internally generated software comprising the HomeSend platform.
Craig Halliday, Chief Executive Officer, eServGlobal, said:
"Looking ahead, I believe there is huge potential, both within
our company and our industry. This year we have laid the
foundations for an eServGlobal that is stronger, flatter and better
equipped for the journey ahead. We will continue to invest in our
products and in our people and we will continue to lead and
innovate in our markets.
We are seeing positive momentum in all of our new product lines,
and strategies put in place during FY2010 are beginning to bear
fruit. It is an exciting time to be a part of the mobile money
ecosystem and we are looking forward to continuing to execute on
our strategy over the next six months."
Richard Mathews, Chairman, eServGlobal, said:
"In the year ahead, we expect our market to undergo a lot of
changes, and I am particularly enthused to see several validating
points for our strategy. At the Mobile World Congress in Barcelona
it was clear that telecom operators and the industry are gearing up
for a new phase of growth: there were a record number of attendees
this year, and operators are looking for premium services that will
help them stimulate revenue growth, engender subscriber loyalty,
and drive new direct-to-consumer services to market.
We expect the next twelve months to be transformational for
HomeSend as we pursue relationships with major operators around the
world, and consensus is growing that mobile money will be the next
big move to shake the industry. As new players come into this
industry every day, the key will be to maintain our unique
positioning as enabling the world's billion unbanked people to take
part in the coming mobile revolution."
About eServGlobal
eServGlobal is listed on the Australian Securities Exchange
(ESV) and the London Stock Exchange AIM (ESG).
Contacts:
eServGlobal Limited Tel: +33 (0) 1 4612 5885
Craig Halliday info@eservglobal.com
Chief Executive Officer
Altium (AIM) Tel: +44 (0)20 7484 4040
Nominated adviser, Paul Lines
Corporate Broking, Chloe Ponsonby
This information is provided by RNS
The company news service from the London Stock Exchange
END
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