TIDMPHRM
RNS Number : 7922P
Phorm Corporation Limited
22 August 2014
22 August 2014
Phorm Corporation Limited
("Phorm" or the "Company")
Interim Results for the six months ended 30 June 2014
Phorm (AIM: PHRM), a leading internet personalisation technology
company, today announces its unaudited interim results for the six
months ended 30 June 2014.
Highlights:
-- Gross revenue $0.5m (2013: $0.03m)
-- Operating Losses $22.8m (2013: $24.3m)
-- Losses after taxation $23.0m (2013: $24.8m)
-- Loss per share was $0.04 (2013: $0.18)
-- During the first 6 months of the year, average monthly cash
burn excluding financing activity was $3.6m (2013: $2.6m)
For further information please contact:
Phorm Corporation Limited
Andy Croxson (analysts and investors) +44 (0) 203 397 6001
UK Investors
Mirabaud Securities LLP (Broker) +44 20 7321 2508
Jason Woollard
Peter Krens
Strand Hanson Limited (Nominated Adviser) +44 20 7409 3494
James Harris
Matthew Chandler
James Dance
US Investors
Lippert/Heilshorn and Associates (Investor Relations) +1 212 838 3777
John Heilshorn
Chairman and Chief Executive Officer's Statement
I am pleased to present the group's unaudited interim results
for the six month period to 30 June 2014. The unaudited
consolidated results show that the group's financial loss narrowed
in the six months ended 30 June 2014 compared to the equivalent
period in 2013. This reflects the fact that Phorm is now entering
the revenue growth phase of its business.
Phorm is now in the fortunate position of having set the
foundations for achieving substantial growth. As set out in the
Company's previous financial statements, revenue growth is a
function of the interaction between deployed internet service
provider ("ISP") users, partnerships which bring us inventory in
the form of advertising requests, and advertising campaigns sold
and successfully delivered. Accordingly, users, advertising
requests and advertising campaigns are the fundamental drivers of
revenue.
Users
The Company's technology is currently deployed with 10 ISPs
worldwide, compared to only 1 ISP a year ago. We therefore have a
substantially greater number of users than this point last year. In
late June 2014, we announced that peak daily unique users had grown
from approximately 0.8m to 37.8m and this figure is currently in
excess of 40m.
Advertising requests
The access to inventory, which we currently enjoy, grew from
22.3bn requests in H2 2013 to 67.3bn by the end of H1 2014 and this
growth trend is continuing as more publishers join Phorm's
network.
Advertising campaigns
The number of advertising impressions served has similarly
increased, from approximately 0.8bn impressions in H2 2013 to 2.6bn
by the end of H1 2014. Our advertising campaign pipeline is
continuing to strengthen and the total value of the opportunity
pipeline (defined as specific campaign opportunities that are
currently being discussed with advertising and agency partners) has
grown to over $2m, which demonstrates advertiser confidence in our
proposition and the performance of our system.
As we continue to bring these campaigns online, the imperative
is to ensure that the performance, that we are able to secure for
advertisers, matches or exceeds the groundbreaking performance
levels which we achieved in Turkey as announced to the market in
late September 2013. Achieving sufficient user numbers, to run
multiple, large-scale commercial campaigns, remains an important
goal in Turkey and it is expected that this situation will improve
over time.
Our system is extremely powerful, yet complicated. In order to
operate it successfully in China, which is substantially larger in
scale than Turkey, we need to deliver rapidly on a number of fronts
including: recruitment, sales management, advertising operations,
performance management and data science.
In terms of recruitment, a key challenge in China is recruiting
and training world class staff who can acquire the operational
experience necessary in a very short period of time. This includes
staff in advertising sales, advertising operations, technical ISP
sales, network deployment and senior local management.
Sales staff need to be trained up to explain the benefits of a
product which we believe is truly different from anything which the
industry has so far encountered. They then need to go through the
process of meeting with and educating clients on our proposition
and taking them through to the order stage. We are seeing
encouraging responses so far as manifested by the significant sales
pipeline, which has developed in a short space of time.
Similarly, the range of options available for utilising the
power of the system to reach the client's desired audience to an
unprecedented degree also means that the appropriate level of staff
in advertising operations needs to be recruited and trained
accordingly. In addition, we have been focusing on developing a
management model, which allows us to supervise operations from our
operations centre and thereby upscale significantly, efficiently
and effectively.
The scale at which we are now operating in China makes it
critical that we measure performance in real time and optimise our
performance across numerous campaigns, time zones and language
barriers. We are now running both test campaigns with new customers
and full commercial campaigns with advertisers, who have rebooked
following positive results. As the test campaigns with new
customers come to their conclusion, the extent to which we have
managed their performance will dictate the propensity of
advertisers to renew their custom and increase scale, making this
function critical. Performance management is now a dominant focus
within the group.
Looking ahead, we are developing a number of statistical
techniques and software technologies, which will allow us to
automate much of the performance management process. We expect some
of these efforts to bear fruit within the coming months. We
currently anticipate this to replace manual performance management
as the most critical resource allocation within the business.
In summary, growth rates achieved so far have been very
significant and we expect them to accelerate. Comparing H1 2013 to
H1 2014, we have seen a 44 fold increase in peak daily unique
users, a 42 fold increase in advertising requests and a 18 fold
increase in revenues. Simply extrapolating those growth rates
moving forward would lead us to highly respectable large scale
revenues. However, we believe that, based upon what we currently
have in hand and in our pipeline, rates of growth should in fact
accelerate further, particularly as current test campaigns convert
into full-scale commercial campaigns.
We have made good progress in the first half of 2014 and the
group is now well positioned for the remainder of the year as we
seek to build on our achievements to date.
Kent Ertugrul
Chairman & Chief Executive Officer
22 August 2014
Unaudited consolidated income statement
For the six months ended 30 June 2014
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Unaudited Unaudited Audited
$ $ $
Continuing operations
Revenue 528,750 28,545 279,750
Cost of sales (3,955,967) (541,464) (4,066,477)
Gross loss (3,427,217) (512,919) (3,786,727)
Research and development
* (3,585,842) (4,120,384) (8,415,244)
Sales and administrative
expenses ** (15,780,920) (19,662,461) (33,659,482)
Operating loss (22,793,979) (24,295,764) (45,861,453)
Investment revenues 5,356 4,190 5,795
Finance costs (162,964) (538,814) (748,008)
Loss before taxation (22,951,587) (24,830,388) (46,603,666)
Tax on loss on ordinary - - -
activities
Loss for the year attributable
to equity shareholders (22,951,587) (24,830,388) (46,603,666)
Basic and diluted loss per
share (0.04) (0.18) (0.16)
* Research and development includes a charge for share-based
payment expense of $0.3m (6 months ended 30 June 2013: $0.9m, year
ended 31 December 2013: $1.5m)
** Sales and administrative expenses includes a charge for
share-based payment expense of $2.2m (6 months ended 30 June 2013:
$6.5m, year ended 31 December 2013: $9.2m)
Unaudited consolidated statement of comprehensive income
For the six months ended 30 June 2014
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Unaudited Unaudited Audited
$ $ $
Loss for the year attributable
to equity shareholders (22,951,587) (24,830,388) (46,603,666)
Exchange loss on translation
of foreign operations (26,114) (309,168) (317,902)
Total comprehensive loss
for the period (22,977,701) (25,139,556) (46,921,568)
Attributable to equity holders
of the parent (22,977,701) (25,139,556) (46,921,568)
Unaudited consolidated statement of changes in equity
Six months ended 30 June 2014 (Unaudited)
Translation Accumulated
Share Warrants reserve deficit Total
capital
$ $ $ $
1 January
2014 277,744,986 869,430 (13,507,218) (256,663,090) 8,444,108
Total comprehensive
loss for
the period - - (26,114) (22,951,587) (22,977,701)
Share-based
payments
charge - - - 2,587,124 2,587,124
Issue of
warrants - 25,268 - - 25,268
Issue of
new stock 15,793,683 - - - 15,793,683
Exercise
of warrants 271,208 (271,208) - - -
30 June 2014 293,809,877 623,490 (13,533,332) (277,027,553) 3,872,482
Six months ended 30 June 2013 (Unaudited)
Translation Accumulated
Share Warrants reserve deficit Total
capital
$ $ $ $
1 January
2013 239,507,089 659,766 (13,189,316) (220,607,981) 6,369,558
Total comprehensive
loss for
the period - - (309,168) (24,830,388) (25,139,556)
Share-based
payments
charge - - - 7,383,193 7,383,193
Issue of
warrants - 87,313 - - 87,313
Issue of
new stock 7,650,824 - - - 7,650,824
30 June 2013 247,157,913 747,079 (13,498,484) (238,055,176) (3,648,668)
Unaudited consolidated statement of changes in equity
Year ended 31 December 2013 (Audited)
Share Translation Accumulated
capital Warrants reserve deficit Total
$ $ $ $ $
1 January
2013 239,507,089 659,766 (13,189,316) (220,607,981) 6,369,558
Total comprehensive
loss for
the year - - (317,902) (46,603,666) (46,921,568)
Share-based
payments
charge - - - 10,713,421 10,713,421
Issue of
new stock 38,237,897 122,351 - - 38,360,248
Charge for
Warrants - 87,313 - - 87,313
Provision
for unsettled
equity - - - (164,864) (164,864)
31 December
2013 277,744,986 869,430 (13,507,218) (256,663,090) 8,444,108
Unaudited consolidated statement of financial position
as at 30 June 2014
30 June 30 June 31 December
2014 2013 2013
Unaudited Unaudited Audited
$ $ $
Non-current assets
Property, plant and equipment 1,248,769 484,537 1,211,291
Total non-current assets 1,248,769 484,537 1,211,291
Current assets
Other receivables 4,791,392 2,693,416 6,181,141
Cash and cash equivalents 5,858,814 419,782 9,662,828
Total current assets 10,650,206 3,113,198 15,843,969
Total assets 11,898,975 3,597,735 17,055,260
Current liabilities
Trade payables (2,555,224) (2,010,340) (2,916,160)
Other payables (1,770,437) (2,101,993) (2,269,319)
Secured convertible loan
notes (3,700,832) (3,134,070) -
Total current liabilities (8,026,493) (7,246,403) (5,185,479)
Non-current liabilities
Secured convertible loan
notes - - (3,425,673)
Total liabilities (8,026,493) (7,246,403) (8,611,152)
Net assets/(liabilities) 3,872,482 (3,648,668) 8,444,108
Equity
Share capital 293,809,877 247,157,913 277,744,986
Own shares - - -
Warrants 623,490 747,079 869,430
Translation reserve (13,533,332) (13,498,484) (13,507,218)
Accumulated deficit (277,027,553) (238,055,176) (256,663,090)
Stockholders' equity/(deficit) 3,872,482 (3,648,668) 8,444,108
Unaudited consolidated statement of cash flows
for the six months ended 30 June 2014
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Unaudited Unaudited Audited
$ $ $
Net cash used in operating
activities
Net cash used in operations (21,573,240) (15,599,211) (33,111,197)
Income tax paid - - -
Net cash used in operating
activities (21,573,240) (15,599,211) (33,111,197)
Cash flows from / (used in)
investing activities
Interest received 5,356 4,190 5,795
Repayment on settlement of - - -
warrants
Proceeds on disposal of property, - - -
plant and equipment
Purchase of property, plant
and equipment (438,582) (90,504) (1,598,054)
Net cash used in investing
activities (433,226) (86,314) (1,592,259)
Cash flows from financing
activities
Interest paid - - -
Redemption of warrants 247 - -
Proceeds from issue of ordinary
shares 18,286,753 7,812,202 35,878,102
Proceeds from issue of secured
convertible loan notes - 5,265,105 5,263,605
Secured convertible loan note
interest paid - (466,500) -
Repayment of secured convertible
loan - (2,332,500) (2,799,000)
Net cash from financing activities 18,287,000 10,278,307 38,342,707
Net increase/(decrease) in
cash and cash equivalents (3,719,466) (5,407,218) 3,639,251
Cash and cash equivalents
brought forward 9,662,828 5,877,075 5,877,075
Effect of foreign exchange
rates (84,548) (50,074) 146,502
Cash and cash equivalents
carried forward 5,858,814 419,783 9,662,828
Represented by:
Positive cash balances 5,858,814 419,783 9,662,828
Notes to the interim financial statements (unaudited)
for the six months ended 30 June 2014
1. Basis of preparation
The annual consolidated financial statements of the Company are
prepared in accordance with the recognition and measurement
criteria of International Financial Reporting Standards ("IFRS") as
adopted by the European Union.
These interim financial statements include the income statement,
statement of comprehensive income, the statement of financial
position, the statement of cash flows and the statement of changes
in equity of Phorm Corporation Ltd (the "Company") and its
subsidiaries (together, "the Group") as at and for the six months
ended 30 June 2014. The same accounting policies, presentation and
methods of computation are followed in the interim financial
statements as are applied in the Group's latest annual audited
financial statements.
The AIM Rules for Companies do not require the interim financial
statements to be prepared in compliance with IAS 34 "Interim
Financial Reporting" and these interim financial statements have
not been prepared under that standard.
These interim financial statements have not been audited or
reviewed.
The information for the year ended 31 December 2013 does not
constitute a complete set of financial statements. A copy of the
financial statements for that year are available on the Phorm
web-site, http://www.phorm.com. The auditor's report on those
statements was not qualified, but did include reference to
uncertainties which may cast significant doubt about the Group's
ability to continue as a going concern, to which the auditors drew
attention by way of an emphasis of matter without qualifying their
opinion.
The financial statements have been prepared in US dollars.
Going concern
In accordance with their responsibilities, the directors have
considered the appropriateness of the going concern basis, which
has been used in the preparation of these financial statements.
In March 2014, the Company announced that it had successfully
completed a placing of GBP10.0m (gross) in shares. The placing
included participation by several US investors, as previously
announced and has allowed the business to make substantial progress
towards the generation of large-scale revenue. However, the Company
has experienced some delays that have necessitated raising further
funds.
The Company has recently agreed the terms of a further share
subscription, which is being announced separately today. It is also
in advanced discussions with certain strategic investors for a
further round of fund raising, which is expected to close in the
next few months.
The business plan approved by the Directors forecasts the need
for this further funding and access to sufficient working capital
to allow the operating businesses to reach their full commercial
scale. This is the principal risk to the business at the current
time.
At the date of approval of these financial statements, the Group
has secured some, but not all, of the additional funding
requirements set out in the business plan and is, therefore, not
fully-funded at the current time. However, given the success of the
recent fund raising activities and the operational progress that
has been achieved, the Directors are confident that this further
funding will be achieved as required. As at 30 June 2014, the Group
held cash and cash equivalents of $5.9m.
In preparing these financial statements, the Directors have
assumed that sufficient further funding will be made available to
the Group to enable it to execute its business plan and realise the
forecast inflows from operations globally.
In common with similar businesses at this stage of their
development, and in light of the Group's dependence on further
financing being made available to it from its shareholders or other
providers of finance, the Directors consider the combination of
these circumstances represent a material uncertainty that may cast
significant doubt upon the Group's ability to continue as a going
concern and, therefore, that it may be unable to realise its assets
and discharge its liabilities in the normal course of business.
Nevertheless, after making enquiries, and considering the
uncertainties described above, the directors have a reasonable
expectation that the Group will have access to adequate resources
to continue in operational existence for the foreseeable future.
For these reasons, they continue to adopt the going concern basis
in preparing the financial statements.
2. Loss per share
The calculation of the basic earnings per share and diluted
earnings per share is based on the loss attributable to equity
shareholders of $22,951,587 (30 June 2013: $24,830,388; 31 December
2013: $46,603,666) divided by the weighted average number of shares
in issue during the period.
The weighted average number of shares used in the calculations
is set out below:
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
Number Number Number
of of of
shares shares shares
568,151,060 139,166,908 288,113,854
3. Reconciliation of operating loss to net cash used in operating activities
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
$ $ $
Operating loss (22,793,979) (24,295,764) (45,861,453)
Depreciation and amortisation 602,566 337,982 1,157,272
(Profit)/Loss on disposal
of property, plant and equipment - (1,498) 2,453
Impairment of plant and equipment - - -
Share-based payment expense 2,587,124 7,383,193 10,713,421
(Increase)/decrease in other
receivables (1,078,052) (481,337) (1,483,015)
(Decrease)/increase in trade
payables and other payables (890,899) 1,458,213 2,360,125
Net cash used in operating
activities (21,573,240) (15,599,211) (33,111,197)
4. Share-based payments
The Group issues equity-settled share-based payments to certain
employees and consultants.
The cost of share-based compensation awards is recognised as an
expense. Equity-settled share-based payments are measured at fair
value, excluding the impact of non-market vesting conditions at the
date of grant. The fair value determined at the date of grant is
expensed on a straight-line basis over the vesting period, based on
the Group's estimate of shares that will eventually vest and
adjusted for the effect of non-market based vesting conditions.
For equity-settled share-based payments with market-based
vesting conditions, the fair value is determined at the date of
grant, having regard to the expected achievement of such
performance conditions. Once determined, the expected achievement
is not adjusted, even where the market-based vesting conditions are
not subsequently met.
The charges arising under IFRS 2 included in the income
statement are:
6 months 6 months Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
$ $ $
Share-based payment expense (2,587,124) (7,383,193) (10,713,421)
5. Dividend
The Directors do not propose to pay an interim dividend.
6. Other information
Copies of this statement will be posted on Phorm's website
www.phorm.comand will be available from the Company's UK principal
office at 84-86 Great Portland Street, London, W1W 7JN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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