The People's Operator PLC Trading Update (0785O)

TIDMTPOP

RNS Number : 0785O

The People's Operator PLC

15 May 2018

The People's Operator plc

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

Trading Update

The People's Operator (AIM: TPOP), the cause-based commercial mobile virtual network operator, provides the following update on its trading and operations.

Current Trading

Subscriber numbers during Q1 benefited from renewed marketing activity following the hiatus in marketing spend during December 2017. The UK business has been in growth mode since February but a net decline in US subscriber numbers has led to overall performance during the period being marginally down.

Margins for Q1 2018 are better than expected.

The Company continues to engage with several affiliates. Subscriber numbers from these avenues have been encouraging.

Average Revenue per User (ARPU) has remained broadly unchanged over the November to April period. Churn has continued to decline in percentage terms in both the UK and the US.

Overall, however, the Board has now concluded that the new subscriber additions will not achieve the anticipated levels upon which the current marketing plan is based and that therefore an alternative strategy is required.

Financial Outlook

In its statement of 7 December 2018 regarding the raising of funds via subscription, the Company stated that "in the absence of securing any additional funding or funds received as a result of the exercise of the Warrants it is possible that the Company will need to seek further funding in H2 2018". The current share price indicates that there is little likelihood of the Warrants being exercised and the performance of the business as set out above is such that further funds will be required. Consequently the Board has been examining other financing options.

The Board has reviewed the relative positions of the UK and US entities and has concluded that the Company should concentrate its effort on the UK market, which enjoys the larger number of subscribers, has been allocated the larger marketing budget and offers better growth prospects in the short and medium term.

Potential divestment of US Subscribers

The Board is negotiating final terms with a third party to migrate its US customer base to the purchaser's platform. Shareholders and investors should note that no definitive documents have been signed at this stage and there is no guarantee that the deal will complete.

It is envisaged that the deal will comprise a cash payment in respect of each customer successfully transferred and completion will also release the various sums held as deposits and assurances by the Company's US counterparties, which will revert to the Company.

Although the Company will retain its licence to operate in the US, the remainder of the US operation, including the small office in New York, the outsourced customer service operation and the outsourced legal and compliance functions will be closed. This will result in considerable cost savings, with overall monthly cash burn reducing by approximately 35 per cent. The business will be left focused exclusively in the UK and the target overall number of customers required to reach profitability at the net level will fall significantly.

The Company has been in discussion with Barclays plc, its sole secured creditor, regarding the use of proceeds from the migration and the extent to which such proceeds will be required to repay amounts outstanding to them, which currently stand at GBP1,020,000. The extent to which funds received from the potential divestment are not required to be used to repay facilities will dictate the overall strategy of the Company. The Company currently retains GBP647,000 of free cash outside of amounts that are held on deposit to support its current operations both in the UK and the US. If Barclays requires full repayment from the proceeds of the proposed US divestment then the Board will need to consider alternative financing for the UK operation.

The Company's overall tax-deductible trading losses since flotation will remain wholly within TPO plc, as will its UK customer base and existing wholesale agreements with Three.

Marketing Update

The Company continues to work closely with 360i on its digital marketing strategy. In addition, a range of major social media initiatives are in operation.

Online Parenting

TO is working with an online parenting association, engaging with a number of volunteer subscribers from within the association's online community. These volunteers have been provided with TPO subscriptions and will evaluate the key attraction of associated charitable donations as well as the general performance of the network. The product test group includes those parents debating the best approach to furnishing their children with their first mobile phone.

Online Social Influencers

The Company is in discussions with other online influencers regarding the provision of content and targeted audience tests are ongoing.

Fairphone

The Company announced on 10 April 2018 that it had entered into an association with Fairphone for the provision of ethical smartphones and sales of these have already commenced. As part of its ambition to create a network of ethically responsible providers, the Company is in advanced discussions around a similar agreement with other niche providers.

Charity Partnerships

The Company continues to communicate with the charities supported by its subscribers to ensure that both subscriber and charity are aware of the contributions being made and the significant value to each charity of support from groups of supporters as well as individuals. Consequently, both charity and supporter are encouraged to spread awareness of the TPO brand both online and by word of mouth.

2017 Results

The Company expects to release its results for the Financial Year to 31 December 2017 before the end of May 2018.

Further announcements will be made in due course.

For further details, please contact:

 
The People's Operator plc 
 Nick Dashwood Brown, Head of Investor 
 Relations                               07710 511259 
finnCap Ltd                                  020 7220 
 Stuart Andrews / Simon Hicks                    0500 
 

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

This information is provided by RNS

The company news service from the London Stock Exchange

END

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May 15, 2018 02:01 ET (06:01 GMT)