REG - Fonix Mobile PLC - Final Results
21/09/2023 07:00
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RNS Number : 1108N Fonix Mobile PLC 21 September 2023
21 September 2023
Fonix Mobile plc
("Fonix" or the "Company")
Final Results for the year ended 30 June 2023 (the "Year")
Strong trading momentum continues with significant organic growth in
international markets
Financial Highlights
2023 2022 Change
TPV £268.1m £258.6m +3.7%
Revenue £64,916k £53,649k +21.0%
Gross profit £15,075k £13,232k +13.9%
Adjusted EBITDA(1) £11,567k £10,265k +12.7%
Adjusted PBT(2) £10,979k £9,671k +13.5%
Adjusted EPS(3) 8.9p 8.1p +9.9%
Proposed Final DPS 4.89p 4.50p +8.7%
Underlying cash(4) £9,446k £7,786k +21.3%
Operational Highlights
· Strong growth in gross profits of 13.9%, which management considers
to be the business' most important performance metric, driven by international
expansion and strong H2 growth in the UK.
· Total payment volume ("TPV") of mobile payments was £268.1m (FY22:
£258.6m) in the Year, with double digit percentage growth in TPV from
commercial clients offset by a reduction in charity related TPV, which is less
correlated to gross profit performance.
· Fonix's key business segments of payments and messaging have each
grown profitability by at least 15% in the Year, in line with expectations and
significant wins in the second half of the Year underpin growth expectations
for the year ahead.
· Launch into Republic of Ireland - a third tier 1 media client has
recently launched services with Fonix in Ireland, on a multi-year contract,
making Fonix the leading provider of Interactive Services to media customers
in the country.
· Active customer count at 122 customers at the Year end with
additional newly transacting customers, including C4, RTÉ and Wireless
Ireland offset by the loss of some small bulk messaging and charity clients.
23 new customer contracts signed in the Year, many of which will start
transacting in the year ahead.(5)
· Robust, scalable platform with 18.9m unique mobile users making
844m interactions with Fonix's services in the Year, with 100% platform uptime
as in previous years.(6)
· Significant investment in new product features in the Year
including real-time campaign data filters, automated bundle offers and a new
subscription management product.
· Fonix continues to maintain high client retention, with over 99% of
income of a repeating nature.
· Increased dividend in line with progressive dividend policy.
The Board expects to publish its Annual Report for the year ending 30 June
2023 on the Company's website on Friday 20 October 2023. The Annual General
Meeting is scheduled to take place on Tuesday 14 November 2023.
The Company announces that its nominated adviser and broker finnCap Ltd, has
changed its name to Cavendish Capital Markets Limited, following a merger.
Outlook
· Strong start to FY24, with trading in line with the Board's
expectations
· With high levels of repeating revenue, a strong run-rate entering
the new financial year, and recent tier 1 client wins in the UK and Ireland,
the Board continues to be confident in the business' growth potential and
increasing profitability
Notes
(1) Adjusted EBITDA excludes share-based payment charges along with
depreciation, amortisation, interest and tax from the measure of profit.
(2) Adjusted PBT is profit before tax excluding share-based payment charges.
(3) Adjusted EPS is earnings per share excluding share-based payment charges.
(4) Underlying cash is actual cash excluding cash held on behalf of customers.
(5) Active customers are those generating more than £500 in gross profit in
the previous 12-months.
(6) Unique users are calculated as the number of unique Mobile Station
International Subscriber Directory Numbers (MSISDNs) processed through Fonix
services.
Rob Weisz, CEO, commented:
"We have continued to make great progress on our strategic goals this year,
seizing an initial client-led opportunity in Ireland to become the leading
provider of interactive services for media customers in a second geographical
market. New client wins from ITV, RTÉ, Channel 4 and Wireless Radio Ireland
significantly underpin our growth expectations in the year ahead whilst at the
same time creating high barriers to entry to prospective competitors.
This year we have added more depth to our team and products, with an eye on
further international growth and broadening the services we can offer to
clients in the future. Our serviceable market has expanded significantly in
the last 12 months through direct network connectivity in Ireland, and we will
continue to consider establishing further direct connectivity in other
territories in FY24 and beyond.
The first few months of the new financial year have started strongly, with a
robust run-rate of consumer activity with our key customers. We continue to
make great progress on our strategic goals and recognise that by delivering on
these objectives and nurturing recent client wins we have a great opportunity
to exceed expectations."
Enquiries
Fonix Mobile plc
Tel: +44 20 8114 7000
Robert Weisz, CEO
Michael Foulkes, CFO
Cavendish (Nomad and
Broker)
Tel: +44 20 7220 0500
Jonny Franklin-Adams / Seamus Fricker (Corporate Finance)
Sunila de Silva (ECM)
About Fonix
Founded in 2006, Fonix provides mobile payments and messaging services for
clients across media, telecoms, entertainment, enterprise and commerce.
When consumers make payments, they are charged to their mobile phone bill.
This service can be used for ticketing, content, cash deposits and donations.
Fonix's service works by charging digital payments to the mobile phone bill,
either via carrier billing or SMS billing. Fonix also offers messaging
solutions.
Based in London, Fonix is a fast growth business used by blue chip clients
such as ITV, Bauer Media, BT, Global Media, Comic Relief and Children in Need
to name a few.
Chair's Review
I am pleased to update shareholders on another strong year of double-digit
growth in profitability and cash generation. Once again Fonix has achieved
record levels of profitability and underlying cash, whilst delivering on all
its strategic goals laid out in the previous year. As well as a successful
overseas expansion, the business has continued to win significant new
contracts in the UK which will underpin its growth in the years ahead as the
business looks to nurture those new customer relationships to their full
potential.
The Fonix management team has continued to deliver another period of strong
organic growth, with gross profits and adjusted EBITDA both increasing by over
12% year on year. At the same time, the business remains highly cash
generative, with underlying cash increasing 12% over the same period. Given
the strong trading performance and cash generation of the business, along with
the confidence with which we consider the prospects for Fonix, I am pleased to
announce that we will once again be increasing our final dividend for the
year, in line with our progressive dividend policy to pay out at least 75% of
adjusted earnings. The board has resolved to propose a final dividend of
4.89p, giving a total dividend for the year of 7.25p (FY22: 6.50p), an
increase of 11.5% year on year.
The business' expansion into international markets has proven to be a huge
success, with international transactions accounting for over 10% of gross
profits in the year. Fonix is a market leader for interactive services in both
the UK and Republic of Ireland, a feat achieved in Ireland within 12 months of
launching there. As well as generating immediate financial returns for the
business, the launch in Ireland has provided the team with a blueprint for
further geographical expansion, which the board will update shareholders on as
and when new regions are making a meaningful contribution to the business'
growth.
Growth in the UK was strong in the second half of the year, with Fonix's
larger media customers making up ground after the death of Her Majesty The
Queen led to a slight decline year on year in H1 gross profits whilst services
were suspended for several weeks as a mark of respect.
Financial results
Gross profit, which the board considers to be the business' most important
financial metric, increased 13.9% to £15.1m (FY22: £13.2m) in the year. As
was the case in the previous financial year, due to the seasonal nature of
certain media clients, gross profit in the first half of the year was higher
than the second. Adjusted EBITDA increased 12.7% to £11.6m (FY22: £10.3m),
reflecting the business' high operating leverage and the management team's
continued ability to control operating costs without compromising on top-line
growth.
The company closed the year with £9.4m in underlying free cash (FY22:
£7.8m). Actual cash, which includes money held on behalf of customers, closed
the year at £20.6m (FY22: £17.0m).
The board recommends that the company pays a final dividend of 4.89p per share
in November, bringing the total dividend for the year to 81% of adjusted
earnings per share. If approved, the total distribution of dividends for the
year ended 30 June 2023 will be £7.24m (FY22: £6.50m).
Product
As well as onboarding and integrating services for several large new customers
in the UK and Ireland, the business has continued to invest in new product
innovations, including developing a new subscription engine for charity
clients to be launched this autumn and intelligent dynamic filtering for users
of our Campaign Manager product. At the same time, our dedicated in-house
development team has continued to ensure platform resilience, scalability and
cyber security remain fundamental to everything we do. Looking ahead, the
business is in the early stages of broadening the suite of payment options
integrated with its Campaign Manager and Checkout products, creating even
greater growth opportunities with its key clients and new prospective
customers.
ESG
Throughout the period, the business has continued to maintain a strong focus
on environmental, social and governance (ESG) excellence, building on our
existing foundation of responsible business and industry practice. ESG
considerations are put at the forefront of all the business' key decision
making processes. During the year, Fonix's entire senior leadership team
undertook Carbon Literacy Training and have committed to make meaningful
changes to both their personal and working practices with the aim of further
limiting the business' impact on the environment.
In recognising the feedback from some shareholders for greater independent
representation on the board and its committees, William Neale resigned from
both the remuneration and audit committees during the year and the board has
committed to consider appointing a third non-executive director, providing the
candidate can add meaningful strategic or commercial value, as well as fulfil
governance functions.
Finally, I would like to say a thank you to all Fonix's staff, customers,
partners, suppliers and shareholders for their continued support throughout
the year. I look forward to achieving further successes together in the
future.
Conclusion
Fonix has entered the new financial year with an encouraging run-rate from its
key clients and with the opportunity to nurture several recent client wins
into top 5 customers. Fonix's highly operationally leveraged business model
has proven to have solid resilience against a squeeze on consumer spending and
rising interest rates, with only clients in the charity sector experiencing a
drop-off in consumer activity. The business remains highly cash generative,
with no debt and will continue to reward shareholders with a progressive
dividend policy this year and beyond. With a growing customer base,
significant new customer wins, extended market reach and increased dominance
in the markets it operates, the board looks to the future with much
confidence.
Edward Spurrier, Non-Executive Chairman
CEO's Statement
This has been another fantastic year for Fonix, in line with management
expectations. The business' strong performance was driven by significant
overseas growth, key client wins in the UK and continued growth from our
existing client base. As well as double-digit growth in commercial TPV, gross
profits, and adjusted EBITDA, this year saw Fonix further strengthen its
market lead in the UK and establish a similar position of dominance in the
Republic of Ireland.
Commercially, Fonix's share of a transaction ('take-rate') in Ireland is
broadly consistent with the UK, however the gross profit percentage reported
is considerably lower due to a much higher take-rate commanded by mobile
network operators in Ireland, which is reflected in the company reporting
higher revenue and cost of sales under IFRS 15.
Throughout the year we've stayed true to our mantra of only working with high
quality clients with the potential for enterprise scale revenues in our core
sectors, a strategy that often means we only focus on a handful of sales
opportunities at a time and invest as much time in optimising existing client
relationships as we do in winning new ones. Through this approach, Fonix has
never lost a significant customer to a competitor and is able to invest in
developing sector specific product features that create substantial tangible
value for our clients.
Market opportunity
The majority of Fonix's growth this year has come from growth in international
markets, which has seen us launch new services with Bauer Ireland, RTÉ
(Ireland's National Television and Radio Broadcaster) and Wireless Radio
Ireland, along with several smaller new clients in the Republic of Ireland.
All have been delivered with minimal customisation of our cloud platform,
which was connected to five new international mobile network operators and
transacted with 16% of the adult population in Ireland during the year.
The success in Ireland has clearly demonstrated the business's ability to
scale internationally, with minimal incremental cost. Beyond Ireland, we have
already started to build relationships in other international markets with
similar characteristics, which we believe present good opportunities for
further international growth in the years ahead.
Along with opportunities in new geographical markets, this year has seen us
win notable new contracts in the UK to run interactive services for the
leading TV broadcasters ITV Plc and Channel 4. Both accounts represent
significant growth opportunities in FY24 and beyond. In addition, we continue
to identify other UK broadcasters currently not harnessing the power of
interactive services, which we hope to win as customers in the years ahead.
The market for frictionless mobile payments remains significant and continues
to grow year-on-year despite the expansion in alternative payment options such
as Apple Pay and Google Pay. For the majority of our customers, adding carrier
billing as a payment option is largely shown to reduce checkout abandonment
and increase sales, rather than cannibalising existing transactions with
alternative payment methods.
Delivering against our growth strategy
Fonix continues to take a balanced approach to sustainable growth, looking to
achieve a material percentage growth in gross profits and shareholder income
year-on-year. There are five clear elements to our growth strategy set out
below, which continue to guide our decision making and how we invest:
1. Grow & deepen existing client relationships
Our ability to nurture and scale clients' accounts in ways unmatched by our
competitors is one of the key drivers behind Fonix's high client retention
rate and reasons we have been able to continuously increase our market share
in our core sectors and markets. Our existing clients have continued to grow
strongly in the year, despite a temporary suspension of services in the first
half of the year following the death of HM The Queen, narrowing the growth
below what we would normally expect to see.
As it can often take years for clients to reach their peak transacting level,
we continue to see significant growth opportunities from our existing customer
base through optimisation of campaigns, new interactive products which will
drive more participation and possibly increased tariffs in the future. In
particular, we recognise that our relatively new Irish customer base and
recent media customer wins in the UK are still in the process of maximising
what they can do with Fonix.
2. Take a disciplined sector focus
We continue to take a disciplined sector focused approach to growth, targeting
large enterprise clients and key partnerships across our core markets and
geographies. Media continues to be our biggest sector, representing over 75%
of gross profits in the year, with strong growth in both the UK and Ireland,
including launching new services with ITV, Channel 4, RTÉ and Wireless Radio
Ireland as well as some smaller regional radio stations. Our Campaign Manager
product continues to advance significantly beyond the capabilities of any
other providers in the market and we continue to see broadcasters seeking to
diversify revenue away from a purely advertising funded business model. Media
has been our entry sector in expanding services in Ireland, but we also see
plenty of opportunity to win deals across our other target sectors in Ireland
over time.
FY23 provided a challenging time for charities, with consumer donations down
around 30% year on year. There were also fewer charitable campaigns in the
year due to a change in the timing of some annual telethons, resulting in a
reduction in managed service fees in the year. Coming into FY24 we expect a
return to growth in the charity sector, with new campaigns such as the
Game4Ukraine event broadcast on Sky in August, alongside a normalised schedule
of activity from existing customers. In addition, Fonix is close to launching
a new subscription product for our charity clients, allowing them to engage
and collect donations from consumers throughout the year.
3. Create sustainable, long-term profitability for
shareholders
The company's underlying cash balances have continued to grow strongly, as the
company has continued to deliver on its strategy of achieving sustainable,
long-term growth in profitability with limited incremental capital and
operational investment. With only a modest expansion in commercial resources,
Fonix has been able to win significant new customer relationships in both the
UK and overseas during the year. This is a testament to the company's
reputation for having the best talent in the industry along with an exemplary
track record of compliance and reliability.
Fonix's highly operationally leveraged business model has translated
seamlessly into operations in Ireland and we see no reason why Fonix will not
continue to see further economies of scale as it expands into other markets as
well.
4. Be client led with international expansion
Our approach to international expansion continues to be client led, through
our network of tier 1 multinational clients. Following our initial launch into
Ireland through a referral from a UK customer, we have since added several new
customers in Ireland and are now the master aggregator for all third-party
aggregators looking to provide services to Virgin Media Ireland mobile
consumers.
Outside of Ireland, further international growth remains a priority for the
business, although it still forms a relatively small part of our short term
forecasts. We are already making good progress in exploring other potential
international markets and will discuss the specifics of new territories with
shareholders once they are making a meaningful contribution to the business'
growth.
5. Widen our technological and operational advantage
Targeting a limited number of sectors with large underlying markets has
enabled Fonix to focus on building new innovative product features which
create real tangible value for our clients and significant barriers to entry
for any prospective competition.
During the year, the company made enhancements to our technical infrastructure
to double the peak load capacity of our core products, allowing us to support
significantly more and larger client campaigns in parallel.
Campaign Manager continues to be a market leading hybrid CPaaS and payments
product, allowing our clients to optimise and increase the monetisation of
their audience, to an extent unmatched by our competitors or alternative
payment providers. This year we have added dynamic filtering of large data
sets, new third-party integrations, international IVR votes and competition
entries, and a subscription engine for key charity clients to fundraise all
year round.
We have now migrated the vast majority of our customers to our new Checkout
product, in preparation for introducing support for additional alternative
payments in the year ahead. We strongly believe combining our phone-paid
billing solutions with more traditional alternative payment methods, along
with our sector specific intelligent payment routing will provide us with a
unique value proposition when entering new markets that will enable us to
displace even the most long standing incumbent providers.
We are confident these technological advantages will not only ensure retention
of our existing customers, but also help us win significant new business from
our competitors and allow us to target greenfield opportunities in new
emerging sectors and markets.
We have now mirrored the trusted relationship we hold with both regulators and
mobile operators in the UK with the equivalent stakeholder counterparts in
Ireland, as demonstrated by our appointment in the year as master aggregator
for Virgin Media Ireland. These key partnerships have not only proven
invaluable when winning new customers, but have also been fundamental in
discussing new direct connectivity with mobile operators in markets where
there have been no new connections authorised in decades. In addition, we find
these relationships have further reinforced the barriers to entry against
other providers looking to form direct network operator connectivity in our
core markets.
People
Fonix prides itself on being a great place to work and having a culture where
our team can thrive. Our average headcount grew over 13% to 43 employees over
the year. Whilst inflation has remained persistently high throughout the
period, leading to above average pay rises in January, I am pleased to say
that we have been able to keep cost growth within our existing plans and
offset any unplanned increases with savings elsewhere. Looking ahead, Fonix's
highly operationally leveraged business model means we expect to be able to
manage the wider inflationary pressures within our existing growth projections
and there is no immediate need to significantly change the size of the team in
order to hit our growth targets.
Product
We continued to make good progress on our product roadmap with our dedicated
in-house development team focusing on platform scalability, resilience,
security and customer usability, coupled with releasing several new features
as mentioned in the 'Widen our technological and operational advantage'
section above.
Outlook
We have continued to make great progress on our strategic goals this year,
seizing an initial client-led opportunity in Ireland to become the leading
provider of interactive services for media customers in a second geographical
market. New client wins from ITV, RTÉ, Channel 4 and Wireless Radio Ireland
significantly underpin our growth expectations in the year ahead whilst at the
same time creating high barriers to entry to prospective competitors.
This year we have added more depth to our team and products, with an eye on
further international growth and broadening the services we can offer to
clients in the future. Our serviceable market has expanded significantly in
the last 12 months through direct network connectivity in Ireland, and we will
continue to consider establishing further direct connectivity in other
territories in FY24 and beyond.
The first few months of the new financial year have started strongly, with a
robust run-rate of consumer activity with our key customers. We continue to
make great progress on our strategic goals and recognise that by delivering on
these objectives and nurturing recent client wins we have a great opportunity
to exceed expectations.
Robert Weisz, Chief Executive Officer
Financial Review
Key performance indicators
Financial 2023 2022 Change
Gross profit £15,075k £13,232k 13.9%
Adjusted EBITDA(1) £11,567k £10,265k 12.7%
Adjusted PBT(2) £10,979k £9,671k 13.5%
Underlying cash(3) £9,446k £7,786k 21.3%
Adjusted EPS(4) 8.9p 8.1p 9.9%
Adjusted ROCE(5) 111.50% 120.95%
Non-financial 2023 2022 Change
Total payments value (TPV) £268.1m £258.6m 3.7%
Active customer count(6) 122 123 -0.8%
( )
( )
(1) Adjusted EBITDA excludes share-based payment charges along with
depreciation, amortisation, interest and tax from the measure of profit.
(2) Adjusted PBT is profit after tax excluding share-based payment charges
(3) Underlying cash is actual cash excluding cash held on behalf of customers.
(4) Adjusted EPS is earnings per share excluding share-based payment charges
(5) Adjusted ROCE is return on capital employed calculated as adjusted EBIT
(being earnings before interest and tax excluding share-based payment charges)
divided by capital employed (total assets less total current liabilities).
(6) Active customers are those that generated more than £500 in gross margin
in the previous 12-months
Financial Results
Total payments volume (TPV)
TPV represents the cash payments processed by Fonix on behalf of customers.
TPV grew 3.5% to £268m (2022: £259m) in the year, with particularly strong
growth in the value of SMS billing transactions, offset by a 30% decline in
charity related TPV.
Revenue and other income
Company revenues for the year increased to £64.9m (2022: £53.6m), driven by
strong growth in the mobile payments and messaging service lines. Revenues
recognised for mobile payments relate to the total commission charged to
customers, including the mobile network operator (MNO) share of a transaction,
with the MNO commission also recognised within cost of sales. The directors
therefore monitor results and performance of the company based upon the gross
profit generated, which is considered the more meaningful measure of
performance.
Gross profit
Gross profit is the business' most important financial indicator as this
represents the company's share of revenue for processing mobile payments and
SMS messages.
Gross profit for the year increased to £15.1m (2022: £13.2m) growing 14% on
the previous year, with mobile payments growing 16% (2022: 14%), mobile
messaging growing 20% (2022: 30%) and managed services declining 18% (2022:
growing 28%). The decline in managed service fees, which makes up a relatively
small amount of gross profit was attributable to a reduction in the number and
size of charity campaigns in the period. As was the case in FY22, growth was
skewed slightly to the first half of the year due to the seasonality in the
trade of media related clients.
Blended gross profit margins declined slightly to 23.2% (2022: 24.7%)
attributable to falls in charity related managed services fees as well as
changes in the product and client mix affecting the mobile payments and mobile
messaging gross margin percentage. In particular, mobile payments in the
Republic of Ireland are at a significantly lower margin percentage than those
in the UK, due to the higher revenue share taken by mobile carriers in the
Irish market.
Adjusted operating expenses
Operating costs continue to have been kept firmly under control, with costs
generally only increasing where the business has invested more in future
growth. Adjusted operating costs increased 16% in the year to £3.5m (2022:
£3.0m). The majority of the increase related to additional staff costs and
incentives as the business has continued to invest more in growth, along with
an increased spend on IT infrastructure costs.
Staff related costs and incentives increased to £3.5m (2022: £3.0m) in the
year reflecting an increase in commercial and engineering headcount, as well
as above average inflationary pay increases, offset by some efficiency
savings. Average headcount for the year was 43 (2022: 38).
IT hosting costs increased to £205k (2022: £175k) in the year as the company
upgraded its platform infrastructure.
Software development costs of £804k (2022: £608k) were capitalised in the
year, representing 62% (2022: 60%) of development costs in the year. The
increase reflects increases in the size of the development team and additional
investment in the Fonix platform. The capitalisation of current year
development spend was offset by an amortisation charge of £560k (2022:
£462k). Development costs are amortised on a straight-line basis over
3-years.
Adjusted EBITDA
The growth in gross profit and continued control of costs have resulted in a
significant increase in adjusted EBITDA which is up 13% at £11.6m (2022:
£10.3m) for the year. To provide a better guide to the underlying business
performance, adjusted EBITDA excludes share-based payment charges along with
depreciation, amortisation, interest and tax from the measure of profit.
Finance income and expenses
Finance expense, which relates to the unwinding of the discounted lease
liability, decreased marginally to £4k (2022: £10k) as the company's current
office lease expires in November 2023. Management expects to renew the lease
in the next financial year.
Interest on bank deposits increased to £341k (2022: £8k) due to the increase
in bank interest rates.
EPS and dividends
Given the company's strong performance, cash resources and distributable
reserves, as well as the confidence in the company's prospects, the board
recommends to pay out 81% of adjusted EPS to shareholders in the form of an
ordinary dividend, which is in line with the company's progressive dividend
policy to pay out at least 75% of adjusted earnings per share each year.. The
board therefore intends to recommend a final dividend of 4.89p (2022: 4.50p)
per share to be approved at the AGM in November.
Statement of Financial Position
The company had net assets of £9.4m (2022: £7.8m) at the year-end, including
capitalised software development costs with a carrying value of £1.2m (2022:
£1.0m). The movement in net assets reflects profits after tax less dividend
payments and share buy-backs.
Current assets increased to £57m (2022: £49m) as the company was owed more
trade receivables and held greater cash balances at the year end, due to the
increase in trade year on year. Current liabilities similarly increased to
£48m (2022: £42m) as the company owed more trade payables at the year end,
due to the increase in trade year on year. Non-current liabilities decreased
to £0.1m (2022: £0.2m) as the business is now in the final year of its
3-year office lease agreement signed November 2020.
Cash and underlying cash
The board distinguishes between actual cash, which includes cash held on
behalf of customers, and underlying cash, which excludes cash held on behalf
of customers.
Underlying cash far better represents the free cash flow available to the
business. Underlying cash increased to £9.4m (2022: £7.8m) due to additional
retained earnings less cash used in share buy-backs.
Actual cash, which includes cash held on behalf of customers, can vary
substantially from period to period and is particularly sensitive to the
timing of passthrough outpayments for customer charity campaigns. Actual cash
held increased to £20.6m (2022: £17.0m) in the year. The increase beyond the
increase in underlying cash is purely timing related and attributable to a
mobile network operator settling a trade receivable invoice a few days earlier
than the previous year.
Michael Foulkes, Chief Finance Officer
Audited results for the year ended 30 June 2023
Statement of Comprehensive Income
For the year ended 30 June 2023
2023 2022
Note £'000 £'000
Continuing operations
Revenue 4 64,916 53,649
Cost of sales (49,841) (40,417)
Gross profit 3 15,075 13,232
Other income - 51
Adjusted operating expenses(1) (3,508) (3,018)
Profit before interest, tax, depreciation, amortisation, share-based payment 11,567 10,265
charge and exceptional costs
Share-based payment charge (125) (100)
Depreciation and amortisation (924) (592)
Operating profit 10,518 9,573
Finance income 341 8
Finance expense (5) (10)
Profit before taxation 10,854 9,571
Taxation (2,057) (1,545)
Total comprehensive profit for the financial year 8,797 8,026
(1) Adjusted operating expenses excludes share-based payment charge,
depreciation and amortisation
Earnings per share 2023 2022
Basic earnings per share 8.8p 8.0p
Diluted earnings per share 8.7p 8.0p
Adjusted basic earnings per share 8.9p 8.1p
Statement of Financial Position
As at 30 June 2023
2023 2022
£'000 £'000
Non-current assets
Intangible asset 1,239 995
Right of use asset 42 155
Tangible assets 28 25
1,309 1,175
Current assets
Trade and other receivables 36,058 31,975
Cash and cash equivalent 20,648 16,992
56,706 48,967
Total assets 58,015 50,142
Equity and liabilities
Equity
Share capital 100 100
Share premium account 679 679
Treasury shares (495) -
Share option reserves 297 172
Retained earnings 8,807 6,870
9,388 7,821
Liabilities
Non-current liabilities
Deferred tax liabilities 157 160
Lease liabilities - 17
157 177
Current liabilities
Trade and other payables 48,453 42,028
Lease liabilities 17 116
48,470 42,144
Total liabilities 48,627 42,321
Total equity and liabilities 58,015 50,142
Statement of Changes in Equity
For the year ended 30 June 2023
Share capital Share premium Share option reserve Treasury shares Retained earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2021 100 679 72 - 4,374 5,225
Profit for the financial year - - - - 8,026 8,026
- - - - 8,026 8,026
Transactions with shareholders
Dividends - - - - (5,530) (5,530)
Share-based payment charge - - 100 - - 100
Capital issued - - - - - -
- - 100 - (5,530) (5,430)
Balance at 30 June 2022 100 679 172 - 6,870 7,821
Profit for the financial year - - - - 8,797 8,797
- - - - 8,797 8,797
Transactions with shareholders
Dividends - - - - (6,860) (6,860)
Share-based payment charge - - 125 - - 125
Purchase of own shares - - - (495) - (495)
Capital issued - - - - - -
- - 125 (495) (6,860) (7,230)
Balance at 30 June 2023 100 679 297 (495) 8,807 9,388
Statement of Cash Flows
For the year ended 30 June 2023
2023 2022
£'000 £'000
Cash flows from operating activities
Profit before taxation 10,854 9,571
Adjustments for
Depreciation 16 15
Amortisation 908 575
Share-based payment charge 125 100
Finance income (341) (8)
Finance expense 5 10
(Increase)/decrease in trade and other receivables (4,083) (7,095)
Increase/(decrease) in trade and other payables 6,115 4,121
Income tax paid (1,750) (1,365)
Net cash flows from operating activities 11,849 5,924
Cash flows from investing activities
Interest received 341 8
Payments to acquire tangible assets (19) (17)
Payments to acquire intangible assets (1,040) (608)
Net cash flows from investing activities (718) (617)
Cash flows from financing activities
Dividends paid (6,860) (5,530)
Purchase of own shares (495) -
Capital payments in respect of leases (116) (111)
Interest paid in respect of leases (4) (10)
Net cash flows from financing activities (7,475) (5,651)
Net (decrease)/increase in cash and cash equivalents for the period 3,656 (344)
Cash and cash equivalents at beginning of period 16,992 17,336
Cash and cash equivalents at end of period 20,648 16,992
Statement of Underlying Free Cash Flows
For the year ended 30 June 2023
The company's mobile payments segment involves collecting cash on behalf of
clients which is then paid to clients net of the company's share of revenues
or fees associated with collecting the cash. The company's cash balance
therefore fluctuates depending on the timing of "pass through" cash received
and paid.
The analysis below shows the movements in the company's free underlying cash
flow excluding the monies held on behalf of customers. The underlying cash is
derived from actual cash by adjusting for customer related trade and other
receivables less customer related trade and other payables and customer
related VAT liabilities.
2023 2022
£'000 £'000
Underlying free cash flows from operating activities
Profit before taxation 10,854 9,571
Adjustments for
Depreciation 16 15
Amortisation 908 575
Share-based payment charge 125 100
Finance income (341) (8)
Finance expense 5 10
(Increase)/decrease in trade and other receivables 11 (31)
Increase/(decrease) in trade and other payables 24 139
Income tax paid (1,750) (1,365)
Net underlying free cash flows from operating activities 9,852 9,006
Underlying free cash flows from investing activities
Interest received 341 8
Payments to acquire tangible assets (19) (17)
Payments to acquire intangible assets (1,039) (608)
Net underlying free cash flows from investing activities (717) (617)
Underlying free cash flows from financing activities
Dividends paid (6,860) (5,530)
Purchase of own shares (495) -
Capital payments in respect of leases (116) (111)
Interest paid in respect of leases (4) (10)
Net underlying free cash flows from financing activities (7,475) (5,651)
Net (decrease)/increase in underlying free cash for the period 1,660 2,738
Underlying free cash at beginning of period 7,786 5,048
Underlying free cash equivalents at end of period 9,446 7,786
Notes to the preliminary financial information
1. Basis of preparation
The financial information set out herein does not constitute statutory
accounts as defined in Section 434 of the Companies Act 2006. The financial
information for the Year ended 30 June 2023 has been extracted from the
Company's audited financial statements which were approved by the Board of
Directors on 20 September 2023 and which, if adopted by the members at the
Annual General Meeting, will be delivered to the Registrar of Companies for
England and Wales.
The financial information for the Year ended 30 June 2022 has been extracted
from the Company's audited financial statements which were approved by the
Board of Directors on 21 September 2022 and which have been delivered to the
Registrar of Companies for England and Wales.
The reports of the auditor on both these financial statements were
unqualified, did not include any references to any matters to which the
auditors drew attention by way of emphasis without qualifying their report and
did not contain a statement under Section 498(2) or Section 498(3) of the
Companies Act 2006.
The information included in this preliminary announcement has been prepared on
a going concern basis under the historical cost convention, and in accordance
with International Accounting Standards in conformity with the requirements of
the Companies Act 2006 and the International Financial Reporting
Interpretations Committee (IFRIC) interpretations issued by the International
Accounting Standards Board ("IASB") that are effective as at the date of these
financial statements.
The Company is a public limited company incorporated and domiciled in England
& Wales and whose shares are quoted on AIM, a market operated by The
London Stock Exchange.
2. Going concern
At the time of approving the financial statements, the directors have a
reasonable expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. Fonix Mobile is not
externally funded and accordingly is not affected by borrowing covenants. In
addition, the cost of capital represents the dividend distributions - which
are discretionary.
At 30 June 2023 the company had Cash and Cash Equivalents of £20.6 million
(2022: £17.0 million) and Net Current Assets of £8.2 million (2022: £6.8
million). The business model of Fonix Mobile is cash generative - with
increased sales impacting positively on the working capital cycle and profits
from trading activities being rapidly reflected in cash at bank.
The Directors maintain sufficient net assets in the company by moderating or
increasing dividend distributions as necessary.
The Directors have prepared detailed cash flow forecasts for the next 18
months that indicate the existing activities of the Company do not require
additional funding during that period. The forecasts are challenged by various
downside scenarios to stress test the estimated future cash and net current
asset position. The directors are pleased to note that the stress tests did
not have a significant impact on the funding requirement. In addition, current
trading is in line with the forecast.
Accordingly, the Directors continue to adopt the going concern basis of
accounting in preparing these financial statements.
3. Segmental reporting
Management currently identifies one operating segment in the Company under
IFRS 8 - being the facilitating of mobile payments and messaging. However, the
Directors monitor results and performance based upon the Gross Profit
generated from the Service lines as follows:
2023 2022
Gross profit £'000 £'000
Mobile payments 12,689 10,951
Mobile messaging 1,626 1,355
Managed services 760 926
15,075 13,232
Differences between the way in which the single operating segment is reported
in the financial statements and the internal reporting to the Board for
monitoring and strategic decisions, relates to the recording of revenue in
line with IFRS 15. The IFRS adjustments do not impact on the calculation or
reporting of Gross Profit.
Gross profits can be attributed to the following geographical locations, based
on the end user and the associated mobile network operators' location:
2023 2022
Gross profit by geography £'000 £'000
United Kingdom 13,534 13,212
Rest of Europe 1,541 20
15,075 13,232
4. Revenue
The Company disaggregates revenue between the different streams outlined as
this is intended to show its nature and amount.
The total revenue of the Company has been derived from its principal activity
undertaken wholly in the United Kingdom and EU.
Revenue is recognised at the point in time of each transaction when the
economic benefit is received. The total revenue of the Company by Service Line
is as follows:
2023 2022
Revenue by service line £'000 £'000
Mobile payments 47,607 40,129
Mobile messaging 15,513 11,673
Managed services 1,796 1,847
64,916 53,649
Revenues can be attributed to the following geographical locations, based on
the end user and the associated mobile network operators' location:
2023 2022
Revenue by geography £'000 £'000
United Kingdom 55,352 53,442
Rest of Europe 9,564 207
64,916 53,649
The number of customers representing more than 10% of revenue in year were 3
(2022: 2)
5. Earnings per share
The calculations of earnings per share are based on the following profits and
number of shares:
2023 2022
£'000 £'000
Retained profit for the financial year 8,797 8,026
2023 2022
Number of shares Number Number
Weighted average number of shares outstanding 99,970,504 100,000,000
Share options 760,799 510,056
100,731,303 100,510,056
Earnings per ordinary share
Basic 8.8p 8.0p
Diluted 8.7p 8.0p
The calculations of adjusted earnings per share are based on the following
adjusted profits and number of shares listed above:
2023 2022
Adjusted earnings per share £'000 £'000
Retained profit for the financial year 8,797 8,026
Adjustments
Share-based payment charge 125 100
Net adjustments 125 100
Adjusted earnings 8,922 8,126
Adjusted basic earnings per ordinary share 8.9p 8.1p
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