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MMX Minds + Machines Group Limited

8.70
0.00 (0.00%)
26 Apr 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Minds + Machines Group Limited LSE:MMX London Ordinary Share VGG614091012 ORD NPV (DI)
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 8.70 8.50 9.50 0.00 01:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Minds + Machines Group Limited Half-year Report (7736R)

26/09/2017 7:01am

UK Regulatory


Minds + Machines (LSE:MMX)
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TIDMMMX

RNS Number : 7736R

Minds + Machines Group Limited

26 September 2017

Strictly Embargoed until 07.00: 26 September 2017

Minds + Machines Group Limited

("MMX", the "Company" or "Group")

Unaudited Interim Results for the six month period ended 30 June 2017

Minds + Machines Group Limited (AIM:MMX), the top-level domain registry company, today announces the Group's unaudited interim results for the six month period ended 30 June 2017 (the "period").

Toby Hall, CEO of MMX, commented:

"The first half of 2017 has been a period of consolidating the transformational progress of 2016 with the business on course to deliver its maiden year of profitability as an operating business this financial year.

"Importantly, the quality of earnings in H1 2017 have dramatically improved. Renewal billings have nearly tripled to $3.1million in the period from $1.1million last year with renewal revenue more than doubling to $2.4million accounting for 45% of H1 revenue compared to 15% in H1 2016.

"The Company has likewise continued to work hard to manage down costs with fixed operating costs reduced by 30% to $2.6million in H1 2017 when compared to those of the continuing operations of H1 2016 ($3.8million) and by 45% when compared to the Group's full operating costs in H1 2016. This has allowed the business to achieve one of its central KPI's of renewal billings being greater than fixed OPEX for the first time in the period allowing new sales to increasingly drop to the bottom line.

"As a result of the completed restructuring, off comparatively lower H1 billings of $5.6m due to the decision to hold back key new inventory releases to H2 - the business has transformed a H1 2016 billings based group loss of $0.5million to a H1 2017 $0.2million profit. And with the current momentum of Q3 sales, where sales of approximately $6million have already been achieved to date, the business is well on course to deliver its first year of profitability. The Directors therefore look forward with confidence, the strategic review process remaining ongoing as the Company and its advisors look to an outcome that can best enable an acceleration of what we increasingly consider to be a de-risked, proven business model that is delivering a balanced mix of revenues across the regions."

Financial highlights from period

-- H1 top-line billings of $5.6million (revenues $5.3million), a strong performance given key 2017 inventory releases held back to H2 - H1 2016 $8.1million billings ($7.4million revenue) driven by .vip launch;

-- Domains under management increased 34% from 31 December 2016 to 1.1million registrations at 30 June 2017*;

-- H1 billing based profit of $0.2million for the period compared to a loss of $0.5million for H1 2016;H1 2017 billings primarily driven by the above industry renewal rates across each of the regions and the organic sales of standard registrations - domains under management up 58% since year-end;

-- Quality of earnings significantly improved, renewal revenues increased more than two-fold to $2.4million (45% of H1 2017 gross revenue), compared to $1.1million H1 2016 (15% of gross revenue);

-- Central KPI target of renewal billings to be greater than fixed OPEX achieved for first time in period:

   -       H1 renewal billings nearly tripled to $3.1million; 

- Fixed OPEX reduced 45% to $2.6million when compared to the Group's full operating costs in H1 2016 (30% when compared to 2016 ongoing operations);

-- H1 Operating EBITDA of $0.2million (H1 2016: $1.1 million) generated in spite of $2.1million lower revenue in period;

   --      Net cash contribution of $0.2million generated from operations, $80k ahead of H1 2016; 

-- Cash and cash equivalents of $14.2 million at period end (H2 2016: $15.3 million), the decrease primarily due to payment of provisioned liabilities;

-- H1 2016 group losses of $1.9million reduced to $0.5million group loss H1 2017 - H1 2016 loss per share of 0.24cents** reduced to 0.08cents H1 2017.

*excludes approximately 200,000 committed registrations outside of China

**combined loss per share from 2016 continuing and discontinuing operations

Post Period End

   --      $6.0million of sales generated in Q3-to-date bringing sales year-to-date in-line with 2016; 

-- Cash and cash equivalents increased to $15.3million as of 30 August 2017 primarily through collection of aged receivables;

-- An additional $2.4million of cash due as a result of the private auctions for .llc and .inc in which the Company withdrew its applications - of which $2.0million will be used towards repaying provisioned liabilities resulting from contracts restructured in 2016;

   --      Business on course to deliver first year of profitability. 

The unaudited interim accounts for the six months ended 30 June 2017 are available at www.mmx.co.

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

-ends-

For further information:

 
Minds + Machines Group Limited 
Toby Hall, CEO                            Tel: +44 (0) 
                                           7713 341072 
Michael Salazar, COO/CFO                  Tel: +1 (310) 
                                           740 7499 
 
finnCap Ltd                               Tel: 020 7220 
                                           0500 
Corporate finance - Stuart Andrews/Carl 
 Holmes/Simon Hicks 
 Corporate broking - Tim Redfern/Camille 
 Gochez 
 
Belvedere Communications Limited          Tel: +44 (0) 
                                           20 3567 0510 
John West 
 Kim van Beeck 
 
 

About MMX

Minds + Machines Group Limited (LSE: MMX) is the owner and operator of a world class portfolio of top-level domain assets (gTLDs). As a sales and marketing-led registry business, we are focused on commercializing our portfolio in partnership with our expanding global network of distribution partners.

The MMX portfolio is currently focused around geographic domains (e.g. .london, .boston, .miami, .bayern), professional occupations (e.g. .law, .abogado, and .dds), consumer interests (e.g. .fashion, .wedding, .vip), lifestyle (e.g. .fit, .surf, .yoga), outdoor activities (e.g..fishing, .garden, .horse) and generic names such as .work and .casa. As a business, we work through our expanding international network of registrars and distribution partners to bring the benefits of affinity based domain addresses to B2B and consumer audiences. For more information on MMX, please visit www.mmx.co

Executives' Summary

The first half of 2017 has been a period of consolidating the transformational progress of 2016 and establishing a solid platform for the business to deliver its maiden year of profitability as an operating business in the current year.

In the period under review:

-- Domains under management increased 34% from 31 December 2016 to 1.1million registrations at 30 June 2017*;

-- H1 top-line billings of $5.6million (revenues $5.3million), a strong performance given key 2017 inventory releases held back to H2 - H1 2016 $8.1million billings ($7.4million revenue) driven by .vip launch;

-- Quality of earnings significantly improved, renewal revenues increased more than two-fold to $2.4million (45% of H1 2017 gross revenue), compared to $1.1million H1 2016 (15% of gross revenue);

-- H1 renewal billings nearly tripled to $3.1million and fixed OPEX reduced 30% to $2.6million (H1 2016 $3.8million for ongoing operations) allowing the Company to achieve a central KPI of renewal billings being greater than fixed OPEX for the first time;

   --      Billing based profit of $0.2million delivered versus $0.5million group loss in H1 2016; 

-- H1 Operating EBITDA of $0.2million (H1 2016: $1.1 million) delivered in spite of $2.1million lower revenue in period;

   --      Net cash contribution of $0.2million generated from operations, $80k ahead of H1 2016; 

-- H1 2016 group losses of $1.9million reduced to $0.5million group loss H1 2017 - H1 2016 loss per share of 0.24cents** reduced to 0.08cents H1 2017; and

-- Cash and cash equivalents at 30 June 2017 of $14.2million (H2 2016: $15.3 million), the decrease primarily due to payment of provisioned liabilities in period.

Post period:

   --      $6.0million of sales generated in Q3-to-date bringing sales year-to-date in-line with 2016; 

-- Cash and cash equivalents increased to $15.3million as of 30 August 2017 primarily through collection of aged receivables; and

-- An additional $2.4million of cash due as a result of the private auctions for .llc and .inc in which the Company withdrew its applications - of which $2.0million has been used towards repaying provisioned liabilities resulting from contracts restructured in 2016.

   --      Business on course to deliver first year of profitability. 

*excludes approximately 200,000 committed registrations outside of China

**combined loss per share from 2016 continuing and discontinuing operations

Financial Overview

H1 2016 was a transformational period for the Company with the major restructuring of the Group commenced and the successful launch into China undertaken through .vip. As previously announced to the market, in the absence of a TLD launch in the H1 2017, and management's decision to hold back the release of the 2017 China premium inventory allocation to Q3 2017, top-line billings were expected to be impacted. Due however to the exceptional renewal rates seen across each of the regions and growth of standard registrations in the period (see highlighted KPIs), top-line billings of $5.6million and revenues of $5.3million were achieved (H1 2016 $8.1million billings and $7.4million revenue respectively). For reference, billings in H1 2015 were $2.0million.

As a result, the Company successfully delivered a billing based profit of $0.2million for the period compared to a Group loss of $0.5million for H1 2016 due to the restructuring expenditures and ongoing costs of the discontinued operations at that time totaling over $1.8million.

As a consequence of the renewals performance during the period under review, the quality of earnings also dramatically improved, with renewal revenue more than doubling to $2.4million in H1 2017 from $1.1million last year. In percentage terms, H1 renewal revenues accounted for 45% of revenues compared to 15% of revenues in H1 2016. From a billings perspective, H1 2017 renewal billings were $3.1million (55% of H1 2017 billings) compared to $1.1million in H1 2016.

The Company likewise continued to work hard to manage down costs: fixed operating costs reduced 30% to $2.6million in H1 2017 when compared to those of the continuing operations of H1 2016 ($3.8million), and reduced by 45% when compared to the Group's full operating costs in H1 2016, given the associated ongoing costs of the operations being discontinued at that time.

As a result, the Group has achieved one of its central KPI's in the period - that of recurring renewal billings being greater than fixed overheads - a trend that is continuing into H2 2017. Consequently, new sales can increasingly drop to the bottom-line after cost of sales and partner payments have been deducted.

In the context of the full year, steady progress has also been made in H1 to ensure that the Company achieves its maiden year of profitability as an operating company, $0.2million of operating EBITDA generated in the period. For reference, operating EBITDA in H1 2016 was $0.9million higher at $1.1million for the ongoing operations but from $2.1million greater revenue.

Indeed, this year's H1 operating EBITDA contribution was achieved in spite of an increase in Costs of Goods due in part to certain one-off annual marketing costs impacting in H1 (H1 2017 - $1.4million; H1 2016 $1.1million). Management therefore expects COGs to reduce as a percentage of gross billings in H2 so that they are broadly in-line with management's previously stated KPI of tracking to 20% of gross billings for the full-year.

H2 2017 outlook

As previously indicated to the market, MMX is historically a significantly H2 weighted Company. This year that weighting has been accentuated due to the necessary timings of certain activities in Asia, Europe and US which have already resulted in a substantial increase in Q3 sales of approximately $6.0million in Q3 to date, compared to $3.7million for the same period last year. Year-to-date sales are in-line with that of last year at $11.6million.

Highlights from Q3 2017 sales to date include:

-- Contracts over $1.0million of .london premium inventory following the introduction of the new premium pricing policy for this domain (of which $0.5million will be accounted for in 2017), which management believes is a significant development as is the first indication of meaningful investor interest in its European portfolio;

-- Contracts totaling $4.2million in China, heavily driven by the release of the 2017 allotted premium China inventory, of which approximately 80% has now been sold.

Management likewise has good visibility over its Q4 2017 revenue both in terms of renewals, as this is when the core US and European renewal revenues occur, and sales pipe-line. As a result, management remains confident about the full-year outlook for the Group. This, coupled with the Q3 sales performance and ongoing containment of operating costs and costs of sale, gives the Directors confidence about the Company's ability to deliver bottom-line profitability for the full year for the first time in the Company's history. In 2015 and 2016, the Group's losses were $9.4million and $4.5million respectively.

Cash position

During H1, operations contributed a net $0.2million to cash while monies spent to pay-down liabilities, including contract restructuring and the strategic review, during the period amounted to $1.3million. As a result, cash decreased by $1.1million to $14.2million from cash balances of $15.3million at the end of H2 2016, a positon which has already been reversed, cash balances having increased to GBP15.2million as of 31 August 2017. The increase is primarily attributed to the collection of aged receivables.

Subsequent to 31 August 2017, the Company completed private auctions for .llc and .inc where the Company did not win the TLDs but will receive proceeds for withdrawing their applications with ICANN of $2.4million, of which $2.0million will be used towards repaying provisioned liabilities resulting from contracts restructured in 2016.

In summary, significant progress has been achieved in transitioning MMX into a strong, long-term, annuity based business, built on a solid bedrock of growing recurring revenues supported by a steady annual inflow of new sales as underlined by the Q3 performance.

Highlighted KPIs

Growth of domains under management ("DUMs")

New registrations are a key measure for the Company as they drive the potential renewal revenue of future years. In H1, DUMs increased from 821,000 at the end 2016 to approximately 1.1million as of 30 June 2017, with another 200,000+ of committed registrations from outside of China which are not reflected in H1 billings. The 34% growth of registrations in the period, which is primarily driven by interest in standard registrations, is particularly encouraging as Europe, US and Asia regions outside of China are now starting to contribute meaningfully to this growth. In the period, the Company processed 318,000 new registrations compared to 452,000 in H1 2016.

Indeed, as result of the initiatives put in place during the year, seven domains in the portfolio are now showing registrations in excess of their end of year-one highs and the remainder are broadly in line with their end of year-one registrations. At the beginning of 2016, all of the Company's TLDs were effectively below their year one highs.

Gross billings

Whilst in H1 billings were off the H1 2016 high that resulted from the launch of .vip, year-to-date 2017 billings are in line with 2016, which demonstrates both the underlying strength of the portfolio and the China premium inventory release strategy given it is widely recognized in the industry that year 2 billings are typically significantly lower than year one for a newly launched TLD.

There are a number of factors currently driving new billings growth across MMX's portfolio:

-- In China, the uptake and usage of .vip by SME's, some 50% of .vip bought names now being used either within or outside of China;

-- Digital entrepreneurs developing projects of potential scale where new gTLD names effectively form part of their infrastructure;

-- SME's increasing awareness in Europe of the alternative choices outside of their respective country code and .com endings; and

-- Investors outside of China recognizing the potential of new gTLDs as a potential asset to trade.

Indeed, we are seeing the ongoing balancing out of billings across the regions in the current year, with China, whilst still growing, on track to represent no more than 50% of total billings in the year compared to 62% in 2016.

Growth of renewals

The ongoing growth of the Company's renewal revenue is central to the vision of developing MMX into a business with significant annuity revenue.

Management is therefore greatly encouraged that renewal billings in the period have nearly tripled from $1.1million in H1 2016 to $3.1million in H1 2017, increasing from 13% of H1 2016 billings to 55% in H1 2017. From a revenue perspective, renewal revenue accounted for 15% of revenue in H1 2016 and 45% in the current period.

Over the last three periods, renewal billings have progressed as follows: H1 2016, $1.1million; H2 2016, $2.7million; H1 2017, $3.1million.

The significant increase in renewal billings recorded in H1 2017 flows from the above industry average renewal rates achieved across each of our geographic regions.

As reported in late July, first year renewal rates of 75% were achieved in China on the 400,000+ name registered in the first four weeks of .vip's launch in 2016, effectively setting the bar at a new level for the industry in this region. Indeed, much of the renewals success was a direct result of the premium pricing policy introduced for that extension.

In Europe, the rates are currently higher at over 80%; and in the US, they are tracking at 67% when .work and .casa are discounted given the aggressive sales models historically deployed with each.

Looking forward, the Company's emphasis will, however, be to increasingly prioritize renewal revenue growth over DUM's renewal rates. To illustrate this point, whilst the US might have the lowest renewal rates on a registration perspective, it is currently on track to contribute over 50% of this financial year's renewals.

Operating Expenditure

Following on from the restructuring of 2016, management has continued to manage down fixed OPEX, H1 fixed OPEX of $2.6million being 30% lower than that of the ongoing operations in H1 2016, and healthily within the $6million annual cap. It should be noted that the H1 2017 figure takes into account a number of senior hires made at the beginning of 2017 to strengthen business development activities.

OPEX a percentage of renewal billings

As highlighted earlier, we have now completed the first period where fixed OPEX has been less than renewal billings ($2.6million to $3.1million) a trend we expect to continue into H2 2017 and beyond. This is a major milestone for the business as we continue developing towards our goal of being a significant annuity based company.

Gross margin

One of our key KPI's set out in 2016 was for annual gross margins to be not less than 80%. As a result of certain annual marketing contract payment timings and the lower level of billings in the period, gross margin has dropped to 67% for the period (H1 2016, 84%). We expect this to be closer to our gross margin KPI goal by the end of 2017.

Ongoing growth

Launching new TLDs, expanding registrations in launched TLDs in existing regions through new initiatives, as well as taking them into new regions, drives our growth. In the near term, this objective is being supported by the forthcoming launch of .boston in October and the ongoing business development/marketing initiatives in each of the regions across the portfolio. In the mid-term, the Company looks forward to further TLD releases both internationally and in China in 2018. The release schedule will be released at a later date as it is in part dependent on China's MIIT approval process for up to eight of the Company's properties in China.

Strategic review

On 25 May 2017, MMX announced the appointment of Headwaters, a West Coast based US investment banking firm, to conduct a strategic review to look at all options open to the Group. The Company and Headwaters have held conversations with a number of strategic parties in the US, Europe and Asia and continue to explore a range of options to determine the best path forward, which may or may not result in an offer being made for the Company as a whole. A further update on progress will be provided when there are material developments.

Conclusion

H1 2017 has been a defining period where for the first time we have been able to see both the benefits of a portfolio approach operating across regions and how one-off premium sales can support the development of a long-term annuity based business as well as provide stimulus for significant standard registration growth. Registrations across the portfolio are up by 34% from 31 December 2016 at the half year.

As we look forward to the completion of the strategic review, our goal is to achieve an outcome that therefore allows an acceleration of what we increasingly consider to be a de-risked, proven business model for monetizing top-level domains and creating a significant annuity based business.

In terms of the current year, our billings profitability, net cash contribution of operations, and improved quality of earnings in H1 2017, combined with the trading since the half year, means we are more confident than ever about the prospects for the business and delivering its maiden year of profitability as an operating registry in the current year.

Executives' Summary

Toby Hall, CEO

Michael Salazar, COO/CFO

Consolidated Statement of Total Comprehensive Income

for the period ended 30 June 2017

 
                           Notes   Period Ended   Period Ended    Year Ended 
                                   30 June 2017   30 June 2016   31 Dec 2016 
                                    (unaudited)    (unaudited)     (audited) 
                                        $ 000's        $ 000's       $ 000's 
=========================  =====  =============  =============  ============ 
Billings                                  5,611          8,050        15,800 
-------------------------  -----  -------------  -------------  ------------ 
 
Continuing Operations: 
=========================  =====  =============  =============  ============ 
Of which: 
=========================  =====  =============  =============  ============ 
Revenue                                   5,277          7,384        15,001 
=========================  =====  =============  =============  ============ 
Less: Partner payments       2          (1,008)          (544)       (1,520) 
=========================  =====  =============  =============  ============ 
Revenue less partner 
 payments                                 4,269          6,840        13,481 
=========================  =====  =============  =============  ============ 
Cost of sales                3          (1,401)        (1,104)       (2,541) 
=========================  =====  =============  =============  ============ 
Gross Profit                              2,868          5,736        10,940 
=========================  =====  =============  =============  ============ 
Gross Profit Margin 
 %                                          67%            84%           81% 
=========================  =====  =============  =============  ============ 
 
Loss on withdrawal 
 of gTLD applications                         -              -         (148) 
=========================  =====  =============  =============  ============ 
Operating expenses 
 - ongoing                              (2,630)        (3,525)       (6,536) 
=========================  =====  =============  =============  ============ 
Operating expenses 
 - forfeited                                  -          (238)         (646) 
=========================  =====  =============  =============  ============ 
Operating earnings 
 before interest, 
 taxation, depreciation 
 and amortisation 
 (Operating EBITDA) 
 before restructuring 
 costs                                      238          1,973         3,610 
=========================  =====  =============  =============  ============ 
Restructuring costs 
 - operating                                  -          (875)       (1,166) 
=========================  =====  =============  =============  ============ 
Restructuring costs 
 - contracts                                  -              -       (3,748) 
=========================  =====  =============  =============  ============ 
Operating earnings 
 before interest, 
 taxation, depreciation 
 and amortisation 
 (Operating EBITDA)                         238          1,098       (1,304) 
=========================  =====  =============  =============  ============ 
Strategic review 
 costs                       4            (143)              -             - 
=========================  =====  =============  =============  ============ 
Foreign exchange 
 (loss) / gain                             (21)          (604)           251 
=========================  =====  =============  =============  ============ 
Profit on disposal 
 of fixed assets                              3              -          (18) 
=========================  =====  =============  =============  ============ 
Share based payments         5            (505)          (397)         (745) 
=========================  =====  =============  =============  ============ 
Share of results 
 of joint venture                             4           (15)          (25) 
=========================  =====  =============  =============  ============ 
(Loss) / earnings 
 before interest, 
 taxation, depreciation, 
 and amortisation 
 (EBITDA)                                 (424)             82       (1,841) 
=========================  =====  =============  =============  ============ 
Depreciation and 
 amortisation charge                       (92)           (50)         (286) 
=========================  =====  =============  =============  ============ 
Finance revenue                              11             24            39 
=========================  =====  =============  =============  ============ 
Loss on disposal 
 of joint ventures                            -              -         (276) 
=========================  =====  =============  =============  ============ 
(Loss) / profit 
 before taxation                          (505)             56       (2,364) 
=========================  =====  =============  =============  ============ 
 
Income tax                                 (21)              -           195 
=========================  =====  =============  =============  ============ 
(Loss) / profit 
 from the period 
 from continuing 
 operations                               (526)             56       (2,169) 
=========================  =====  =============  =============  ============ 
Loss from discontinued 
 operations                                   -        (1,963)       (2,332) 
=========================  =====  =============  =============  ============ 
Retained loss for 
 the period                               (526)        (1,907)       (4,501) 
=========================  =====  =============  =============  ============ 
 
 
                             Notes              Period        Period Ended        Year Ended 
                                                 Ended 
                                               30 June             30 June       31 December 
                                      2017 (unaudited)    2016 (unaudited)    2016 (audited) 
                                               $ 000's             $ 000's           $ 000's 
===========================  =====  ==================  ==================  ================ 
Other comprehensive 
 income 
===========================  =====  ==================  ==================  ================ 
Items that may be 
 reclassified subsequently 
 to profit or loss: 
===========================  =====  ==================  ==================  ================ 
Foreign exchange 
 hedge                                               -             (1,729)                 - 
===========================  =====  ==================  ==================  ================ 
Currency translation 
 differences                                       281                 534             (648) 
===========================  =====  ==================  ==================  ================ 
Other comprehensive 
 income / (loss) for 
 the period net of 
 taxation                                          281             (1,195)             (648) 
===========================  =====  ==================  ==================  ================ 
Total comprehensive 
 loss for the period                             (245)             (3,102)           (5,148) 
===========================  =====  ==================  ==================  ================ 
 
Retained (loss) / 
 profit for the period 
 attributable to: 
===========================  =====  ==================  ==================  ================ 
Equity holders of 
 the parent                                      (528)             (1,804)           (4,508) 
===========================  =====  ==================  ==================  ================ 
Non-controlling interests                            2               (103)                 7 
===========================  =====  ==================  ==================  ================ 
                                                 (526)             (1,907)           (4,501) 
===========================  =====  ==================  ==================  ================ 
 
Total comprehensive 
 (loss) / profit for 
 the period attributable 
 to: 
===========================  =====  ==================  ==================  ================ 
Equity holders of 
 the parent                                      (224)             (3,006)           (5,169) 
===========================  =====  ==================  ==================  ================ 
Non-controlling interests                         (21)                (96)                20 
===========================  =====  ==================  ==================  ================ 
                                                 (245)             (3,102)           (5,149) 
===========================  =====  ==================  ==================  ================ 
 
  (Loss) / earnings 
  per share (cents) 
===========================  =====  ==================  ==================  ================ 
From continuing operations 
===========================  =====  ==================  ==================  ================ 
Basic                          6                (0.08)                0.02            (0.29) 
===========================  =====  ==================  ==================  ================ 
Diluted                        6                (0.08)                0.02            (0.29) 
===========================  =====  ==================  ==================  ================ 
 
From discontinued 
 operations 
===========================  =====  ==================  ==================  ================ 
Basic                                              N/A              (0.26)            (0.31) 
===========================  =====  ==================  ==================  ================ 
Diluted                                            N/A              (0.26)            (0.31) 
===========================  =====  ==================  ==================  ================ 
 

Condensed Consolidated Statement of Financial Position

as at 30 June 2017

 
                      Notes  30 June 2017  31 Dec 2016  30 June 2016 
                              (unaudited)    (audited)   (unaudited) 
                                  $'000's      $'000's       $'000's 
====================  =====  ============  ===========  ============ 
ASSETS 
====================  =====  ============  ===========  ============ 
Non-current 
 assets 
====================  =====  ============  ===========  ============ 
Goodwill                            2,828        2,828         2,828 
====================  =====  ============  ===========  ============ 
Intangible 
 assets                 7          45,940       45,603        40,273 
====================  =====  ============  ===========  ============ 
Tangible assets                        73           89           131 
====================  =====  ============  ===========  ============ 
Interest in 
 join ventures                        422          385           820 
====================  =====  ============  ===========  ============ 
Other long-term 
 assets                 8           3,327        3,327         3,298 
====================  =====  ============  ===========  ============ 
Total non-current 
 assets                            52,590       52,232        47,350 
====================  =====  ============  ===========  ============ 
 
Current assets 
====================  =====  ============  ===========  ============ 
Cash and cash 
 equivalents                       14,228       15,275        29,051 
====================  =====  ============  ===========  ============ 
Trade and 
 other receivables     10           6,330        7,953         5,145 
====================  =====  ============  ===========  ============ 
Total current 
 assets                            20,558       23,228        34,196 
====================  =====  ============  ===========  ============ 
 
TOTAL ASSETS                       73,148       75,460        81,546 
====================  =====  ============  ===========  ============ 
 
  LIABILITIES 
====================  =====  ============  ===========  ============ 
Current liabilities 
====================  =====  ============  ===========  ============ 
Trade and 
 other payables        11        (12,426)     (14,984)       (6,989) 
====================  =====  ============  ===========  ============ 
Total current 
 liabilities                     (12,426)     (14,984)       (6,989) 
====================  =====  ============  ===========  ============ 
 
NET ASSETS                         60,722       60,476        74,557 
====================  =====  ============  ===========  ============ 
 
EQUITY 
====================  =====  ============  ===========  ============ 
Share capital                           -            -             - 
====================  =====  ============  ===========  ============ 
Share premium          12          60,060       60,060        72,732 
====================  =====  ============  ===========  ============ 
Other reserves                          -            -       (1,729) 
====================  =====  ============  ===========  ============ 
Foreign exchange 
 reserve                            1,046          742         1,930 
====================  =====  ============  ===========  ============ 
Retained earnings                    (33)            4         2,052 
====================  =====  ============  ===========  ============ 
TOTAL EQUITY                       61,073       60,806        74,985 
====================  =====  ============  ===========  ============ 
Non-controlling 
 interests                          (351)        (330)         (428) 
====================  =====  ============  ===========  ============ 
Total Equity                       60,722       60,476        74,557 
====================  =====  ============  ===========  ============ 
 

Condensed Consolidated Statement of Cash Flows

for the period ended 30 June 2017

 
                             Notes   Period ended  Period ended     Year ended 
                                          30 June       30 June    31 December 
                                             2017          2016           2016 
                                      (unaudited)   (unaudited)      (audited) 
                                          $ 000's       $ 000's        $ 000's 
===========================  ======  ============  ============  ============= 
Cash flows from operations 
===========================  ======  ============  ============  ============= 
Operating EBITDA                              238         1,973          3,610 
===================================  ============  ============  ============= 
Adjustments for: 
===========================  ======  ============  ============  ============= 
Loss from discontinued 
 operations                                     -         (937)        (1,312) 
===================================  ============  ============  ============= 
Restructuirng costs                             -         (875)        (1,166) 
===================================  ============  ============  ============= 
Decrease / (increase) 
 in trade and other 
 receivables including 
 long term receivables                      1,623       (1,851)        (1,926) 
===================================  ============  ============  ============= 
(Decrease) / increase 
 in trade and other 
 payables                                 (2,559)         (529)          (350) 
===================================  ============  ============  ============= 
Loss on withdrawal 
 of gTLD applications                           -             -            148 
===================================  ============  ============  ============= 
Foreign exchange 
 (gain) / loss                               (87)         (240)            367 
===================================  ============  ============  ============= 
Net cash outflows 
 from operations                            (785)       (2,459)          (629) 
===================================  ============  ============  ============= 
 
Cash flows from investing 
 activities 
===========================  ======  ============  ============  ============= 
Interest received                              11            24             39 
===================================  ============  ============  ============= 
Amounts transferred 
 from restricted cash                           -           150           (64) 
===================================  ============  ============  ============= 
Payments to acquire 
 intangible assets                          (116)             -        (3,796) 
===================================  ============  ============  ============= 
Receipts from the 
 disposal of intangible 
 assets                                         -            25              - 
===================================  ============  ============  ============= 
Payments to acquire 
 fixtures & equipment                         (3)          (14)           (28) 
===================================  ============  ============  ============= 
Receipts from the 
 disposal of tangible 
 assets                                         3             -             90 
===================================  ============  ============  ============= 
Net cash flow from 
 investing activities                       (105)           185        (3,759) 
===================================  ============  ============  ============= 
 
Cash flows from financing 
 activities 
===========================  ======  ============  ============  ============= 
Issue of ordinary 
 shares                                         -            96          6,811 
===================================  ============  ============  ============= 
Share issue costs                               -             -          (300) 
===================================  ============  ============  ============= 
Strategic review 
 costs                                      (143)             -              - 
===================================  ============  ============  ============= 
Purchase of own shares                          -       (1,179)       (20,267) 
===================================  ============  ============  ============= 
Repurchase of vested 
 equity instruments                          (14)         (681)        (1,220) 
===================================  ============  ============  ============= 
Net cash flow from 
 financing activities                       (157)       (1,764)       (14,976) 
===================================  ============  ============  ============= 
 
Net decrease in cash 
 and cash equivalents                     (1,047)       (4,038)       (19,364) 
===================================  ============  ============  ============= 
Cash and cash equivalents 
 at beginning of period                    15,275        34,651         34,651 
===================================  ============  ============  ============= 
Exchange loss on 
 cash and cash equivalents                      -       (1,562)           (12) 
===================================  ============  ============  ============= 
Cash and cash equivalents 
 at end of period                          14,228        29,051         15,275 
===================================  ============  ============  ============= 
 

Condensed Consolidated Statement of Changes in Equity

For the period ended 30 June 2017

 
                           Share     Share      Other       Foreign   Retained    Total  Non-controlling    Total 
                         Capital   premium   Reserves      currency   earnings                  interest   equity 
                                   reserve              translation 
                                                            reserve 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
                         $ 000's   $ 000's    $ 000's       $ 000's    $ 000's  $ 000's          $ 000's  $ 000's 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
 
At 1 January 
 2016                          -    73,816          -         1,403      4,140   79,359            (332)   79,027 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Loss for the 
 period                        -         -          -             -    (1,804)  (1,804)            (103)  (1,907) 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Other comprehensive 
 income                        -         -    (1,729)           527          -  (1,202)                7  (1,195) 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Total comprehensive 
 (loss) / income               -         -    (1,729)           527    (1,804)  (3,006)             (96)  (3,102) 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Share capital 
 issued                        -        95          -             -          -       95                -       95 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Acquisition 
 of own shares                 -   (1,179)          -             -          -  (1,179)                -  (1,179) 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Credit to equity 
 for equity-settled 
 share based 
 payments                      -         -          -             -        359      359                -      359 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Share based 
 payments (repurchase 
 of vested equity 
 instruments)                  -         -          -             -      (643)    (643)                -    (643) 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
As at 30 June 
 2016                          -    72,732    (1,729)         1,930      2,052   74,985            (428)   74,557 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
 
As at 1 January 
 2017                          -    60,060          -           742          4   60,806            (330)   60,476 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
 
Loss for the 
 period                        -         -          -                    (528)    (528)                2    (526) 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Currency translation 
 differences                   -         -          -           304          -      304             (23)      281 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Total comprehensive 
 (loss) / income               -         -          -           304      (528)    (224)             (21)    (245) 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Credit to equity 
 for equity-settled 
 share based 
 payments                      -         -          -             -        505      505                -      505 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
Share based 
 payments (repurchase 
 of vested equity 
 instruments)                  -         -          -             -       (14)     (14)                -     (14) 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
As at 30 June 
 2017                          -    60,060          -         1,046       (33)   61,073            (351)   60,722 
======================  ========  ========  =========  ============  =========  =======  ===============  ======= 
 

Notes to Financial Statements

for the period ended 30 June 2017

1. Basis of preparation

The condensed financial statements have been prepared under the historical cost convention.

The same accounting policies, methods of computation and presentation have been followed in these condensed financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 December 2016.

The adoption of Standards and Interpretations in 2017 has not affected the Group's accounting policies.

Basis of consolidation

The condensed consolidated financial information incorporates the results of the Company and its subsidiaries.

Approval

The Board of Directors approved this Interim Financial Report on 25 September 2017.

2. Partner Payments

 
                     H1 2017    H1 2016 
                     $'000's    $'000's 
=================  =========  ========= 
Partner Payments       1,008        544 
=================  =========  ========= 
 

Partner payments represent the expense relating to certain TLDs where royalty and similar payments are required to be made.

3. Cost of Sales

 
                     H1 2017    H1 2016 
                     $'000's    $'000's 
=================  =========  ========= 
Third Party Fees         371        276 
=================  =========  ========= 
ICANN Fees               428        283 
=================  =========  ========= 
Other                    602        545 
=================  =========  ========= 
                       1,401      1,104 
=================  =========  ========= 
 

4. Strategic Review Costs

Following the successful restructuring of the business in 2016, the Group has incurred $143k (H1 2016:Nil) in strategic review costs as part of reviewing various strategic options open to it.

5 Share based payments

 
                                  H1 2017    H1 2016 
                                  $'000's    $'000's 
==============================  =========  ========= 
Equity settled share based 
 payments                             505        359 
==============================  =========  ========= 
Expense as a result of 
 modification of equity 
 settled share based payments           -         38 
==============================  =========  ========= 
                                      505        397 
==============================  =========  ========= 
 

Equity settled share based payments relate to directors and employees share options and restricted stock option plans.

6. Earnings/(loss) per share

 
                                                                   H1 2017    H1 2016 
                                                                   $'000's    $'000's 
===============================================================  =========  ========= 
Earnings for the purpose of basic and diluted earnings 
 per share 
===============================================================  =========  ========= 
Earnings from continuing operations                                  (528)        159 
===============================================================  =========  ========= 
Earnings from discontinued operations                                    -    (1,963) 
===============================================================  =========  ========= 
Total earnings for the period                                        (528)    (1,804) 
===============================================================  =========  ========= 
 
Number of shares 
===============================================================  =========  ========= 
Weighted average number of ordinary shares used in calculating 
 basic loss per share (millions)                                    699.86     748.72 
===============================================================  =========  ========= 
Effect of dilutive potential ordinary shares - share options 
 and warrants (millions)                                             28.26      30.42 
===============================================================  =========  ========= 
Weighted average number of ordinary shares for the purpose 
 of diluted earnings per share (millions)                           728.12     779.14 
===============================================================  =========  ========= 
 
Earnings/(loss) per share from continuing operations 
===============================================================  =========  ========= 
Basic (cents)                                                       (0.08)       0.02 
===============================================================  =========  ========= 
Diluted (cents)                                                     (0.08)       0.02 
===============================================================  =========  ========= 
 
Earnings/(loss) per share from discontinued operations 
===============================================================  =========  ========= 
Basic (cents)                                                          N/A     (0.26) 
===============================================================  =========  ========= 
Diluted (cents)                                                        N/A     (0.26) 
===============================================================  =========  ========= 
 

In H1 2017, for the purpose of calculating loss per share from continuing operations, and in H1 2016 for the purpose of calculating loss per share from discontinued operations, all potential shares were anti-dilutive due to the losses reported.

7. Intangible Assets

 
                          Generic top  Software & development           Contract     Other     Total 
                        level domains                   costs   based intangible   $ 000's   $ 000's 
                              $ 000's                 $ 000's             assets 
                                                                         $ 000's 
=====================  ==============  ======================  =================  ========  ======== 
Cost 
=====================  ==============  ======================  =================  ========  ======== 
At 1 January 
 2016                          40,078                   2,070                  -       171    42,319 
=====================  ==============  ======================  =================  ========  ======== 
Additions                       1,500                     261              3,815         -     5,576 
=====================  ==============  ======================  =================  ========  ======== 
Exchange differences             (17)                    (34)                  -       (1)      (52) 
=====================  ==============  ======================  =================  ========  ======== 
At 31 Decemeber 
 2016                          41,561                   2,297              3,815       170    47,843 
=====================  ==============  ======================  =================  ========  ======== 
 
Additions                           -                     116                  -         -       116 
=====================  ==============  ======================  =================  ========  ======== 
Exchange differences               41                      80                228         -       349 
=====================  ==============  ======================  =================  ========  ======== 
At 30 June 
 2017                          41,602                   2,493              4,043       170    48,308 
=====================  ==============  ======================  =================  ========  ======== 
 
Accumulated 
 Amortization 
=====================  ==============  ======================  =================  ========  ======== 
At 1 January 
 2016                               -                   (857)                  -     (171)   (1,028) 
=====================  ==============  ======================  =================  ========  ======== 
Charge for 
 the year                           -                 (1,171)                  -         -   (1,171) 
=====================  ==============  ======================  =================  ========  ======== 
Exchange differences                -                    (42)                  -         1      (41) 
=====================  ==============  ======================  =================  ========  ======== 
At 31 December 
 2016                               -                 (2,070)                  -     (170)   (2,240) 
=====================  ==============  ======================  =================  ========  ======== 
 
Charge for 
 the period                         -                    (63)                  -         -      (63) 
=====================  ==============  ======================  =================  ========  ======== 
Exchange differences                -                    (65)                  -         -      (65) 
=====================  ==============  ======================  =================  ========  ======== 
At 30 June 
 2017                               -                 (2,198)                  -     (170)   (2,368) 
=====================  ==============  ======================  =================  ========  ======== 
 
Carrying amount 
=====================  ==============  ======================  =================  ========  ======== 
At 30 June 
 2017                          41,602                     295              4,043         -    45,940 
=====================  ==============  ======================  =================  ========  ======== 
At 31 December 
 2016                          41,561                     227              3,815         -    45,603 
=====================  ==============  ======================  =================  ========  ======== 
 

generic Top Level Domains

In 2012, the Group applied for new generic Top Level Domains to the Internet Corporation for Assigned Names and Numbers (ICANN). Successful applications are transferred from other long-term assets to Intangible assets. The Group capitalises the full cost incurred to pursue the rights to operate generic Top Level Domains including amounts paid at auction to gain this right where there are more than one applicant to ICANN for the same generic Top Level Domain.

This class of intangible assets are assessed to have an indefinite life as it is deemed that the application fee and amounts paid at auction give the Group indefinite right to this generic Top Level Domain.

8. Other long-term assets

 
                                H1 2017  31 December 
                                                2016 
                                $'000's      $'000's 
============================  =========  =========== 
Restricted cash                   2,217        2,217 
============================  =========  =========== 
Other long-term receivables       1,110        1,110 
============================  =========  =========== 
                                  3,327        3,327 
============================  =========  =========== 
 

The Group capitalises the costs incurred to pursue the rights to operate certain gTLD strings as these are deemed to provide probable future economic benefit.

During the application process capitalised payments for gTLD applications are included in Other Long Term Assets. While there is no assurance that MMX will be awarded any gTLDs, long-term receivables payments will be reclassified as intangible assets once the gTLD strings are available for their intended use, which is expected to occur following the delegation of gTLD strings by ICANN. In general, MMX does not expect to withdraw any of its applications unless the application has not passed the evaluation process and there is no further recourse or there is an agreement to sell or dispose of its interest in certain applications.

During the 2012 financial period, the Group paid US$13.5 million in application fees to the Internet Corporation for assigned Names and Numbers (ICANN) under ICANN's New generic Top Level Domain (gTLD) Program and deposited US$3.6 million to fund the letters of credit required by ICANN.

Since then, due to withdrawal either as a result of participation in auctions or management decision, the application fees to ICANN (where the gTLD is still in application phase) and the amounts to fund the letter of credit required by ICANN have decreased to $2,217k (2016: $2,217k) and $1,110k (2016: $2,217k) respectively.

Where MMX receives a partial cash refund for certain gTLD applications and/or to the extent the Group elects to sell or dispose of its interest in certain gTLD applications throughout the process, it may incur gains or losses on amounts invested. In such cases the application fee will be reclassified from a long-term asset. Refunds received will be properly recorded when received, gains on the sale of the Group's interest in gTLD applications will be recognised when realised, and losses will be recognised when deemed probable. Other costs incurred by MMX as part of its gTLD initiative not directly attributable to the acquisition of gTLD operator rights are expensed as incurred.

9. Cash and cash equivalents

Restricted cash

Included in the Group cash and cash reserves is restricted funds of $1million (2016: $1million) held in escrow to satisfy certain vendor requirements, to be released back to the Group over the next five years.

10. Trade and other receivables

 
                            H1 2017  31 December 
                                            2016 
                            $'000's      $'000's 
========================  =========  =========== 
Trade receivables             3,204        3,992 
========================  =========  =========== 
Other receivables               531        1,940 
========================  =========  =========== 
Prepayments                   1,781        1,943 
========================  =========  =========== 
Accrued revenue                 770           29 
========================  =========  =========== 
Due from joint ventures          44           49 
========================  =========  =========== 
                              6,330        7,953 
========================  =========  =========== 
 

11. Trade and other payables

Included within Trade and other payables:

 
                        30 June 2017  31 December 
                                             2016 
                             $'000's      $'000's 
======================  ============  =========== 
Trade payables                   290          878 
======================  ============  =========== 
Taxation liabilties                2          171 
======================  ============  =========== 
Other liabilities              5,045        5,917 
======================  ============  =========== 
Deferred revenue               5,538        6,095 
======================  ============  =========== 
Accruals                       1,484        1,853 
======================  ============  =========== 
Due to Joint Ventures             67           70 
======================  ============  =========== 
                              12,426       14,984 
======================  ============  =========== 
 

12. Share capital and premium

 
Called up, allotted, issued           Number of       Price per       Total 
 and fully paid ordinary                 shares           share       $ 000 
 shares of no par value                           (cents/pence) 
==============================  ===============  ==============  ========== 
 
As at 1 January 2016                767,104,685                      73,816 
==============================  ===============  ==============  ========== 
 
Shares repurchased                 (10,658,568)          11/7.7     (1,179) 
==============================  ===============  ==============  ========== 
Share warrants exercised: 
==============================  ===============  ==============  ========== 
24 May 2016 for cash on 
 exercise of options                  1,103,753           8.7/6          95 
==============================  ===============  ==============  ========== 
Shares repurchased: 
 3 October 2016 Tender Offer      (100,000,000)         16.9/13    (19,088) 
==============================  ===============  ==============  ========== 
Shares issued: 
==============================  ===============  ==============  ========== 
10 October 2016 Shares issued 
 for cash                            42,307,692         16.2/13       6,716 
==============================  ===============  ==============  ========== 
Cost of share issue                                                   (300) 
==============================  ===============  ==============  ========== 
As at 31 December 2016 and 
 30 June 2017                       699,857,562                      60,060 
==============================  ===============  ==============  ========== 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

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