27 April 2023

Mobile Tornado Group plc

("Mobile Tornado", the "Company" or the "Group")

2022 Final results

Mobile Tornado Group plc, a leading provider of resource management mobile solutions to the enterprise market, announces its audited results for the year ended 31 December 2022.

Financial Highlights

·      Total revenue decreased by 12% to £2.28m (2021: £2.59m)

o  Recurring revenues decreased by 7% to £1.97m (2021: £2.11m)

o  Non-recurring revenues* decreased by 35% to £0.31m (2021: £0.48m)

·      Gross profit decreased by 11% to £2.22m (2021: £2.49m)

·      Administrative expenses before depreciation, amortisation, exceptional items and exchange differences decreased by 1% to £2.51m (2021: £2.53m)

·      Adjusted EBITDA** loss of £0.28m (2021: loss of £0.03m)

·      Group operating loss for the year increased to £0.72m (2021: £0.25m)

·      Loss after tax of £1.38m (2021: loss of £0.63m)

·      Basic loss per share of 0.36p (2021: loss of 0.17p)

·      Cash at bank at 31 December 2022 of £0.15m (31 December 2021: £0.07m) with net debt of £10.44m (2021: £9.63m)

* Non-recurring revenues comprise installation fees, hardware, professional services and capex license fees

** Administrative expenses excludes depreciation, amortisation and exchange differences

***Earnings before interest, tax, depreciation, amortisation, exceptional items and excluding exchange rate differences

Operating highlights

·      Successful trials completed with several public sector organisations across South & Central America and commercial discussions now in progress

·      Deal closed in Caribbean with leading mobile network operator ("MNO")

·      Landmark push-to-talk over cellular ("PoC") deal concluded with Leeds Bradford Airport post year-end, having run extensive trials during 2022

·      Post year end fundraise to support the scale up of our sales, marketing and business development activities

Jeremy Fenn, Chairman of Mobile Tornado, said: "The business has successfully established itself as a key player in the PoC market, with a presence in Africa, South America and Europe. We deliver a high-quality, reliable PoC solution that meets the mission-critical communication needs of our customers. Our platform boasts several key differentiators, such as seamless transition, market-leading group sizes, a unique dispatcher console, and highly efficient data utilization, which set us apart from our competitors and contribute to our platform's reputation for superior performance.

"The Board is fully committed to maintaining the technical advantages that have been established, at the same time driving a much deeper and wider business development operation. The outreach campaign that has been running since the start of the year has already generated a good flow of new partner and customer opportunities, many of them in new geographic markets. We believe that this momentum can be accelerated significantly if we can successfully deploy our solution into a public safety organisation. Our teams worked hard on multiple trials during the last 15 months and we are hopeful that we will very shortly see a successful conclusion with full platform deployment. This would represent a significant commercial breakthrough, and we are confident will lead to a material uplift in financial performance as we push towards profitability in 2023."

Enquiries:

Financial results and key performance indicators

Total revenue for the year ended 31 December 2022 decreased by 12% to £2.28m (2021: £2.59m). Recurring revenues decreased by 7% to £1.97m (2021: £2.11m). Non-recurring revenues, comprising installation fees, hardware, professional services and capex license fees decreased to £0.31m (2021: £0.48m). As a result, gross profit decreased by 11% to £2.22m (2021: £2.49m).

Our former customer located in Canada, which the Group lost at the end of 2021 as previously reported, accounted for 20% of total revenue and 10% of recurring revenues in the prior year comparative figures. It is pleasing to report therefore, that outside of this, we recorded a modest increase in both our total and recurring revenues across the remainder of our customer base.

Administrative expenses before depreciation, amortisation, exceptional items and exchange differences in the year decreased by 1% to £2.51m (2021: £2.53m), reflecting the continued positive impact that further investment in the development and operating efficiencies of our enhanced technical platform have delivered.

Due to the annual retranslation of certain financial liabilities on the balance sheet, the Group reported a translation loss of £0.23m (2021: gain of £0.08m) arising from the depreciation of Sterling relative to both the Euro and the US Dollar as at 31 December 2022 versus the previous year end. The Group recorded a net income tax credit of £0.04m (2021: £0.23m).

The loss after tax for the year increased to £1.38m (2021: loss of £0.63m) equating to a basic loss per share of 0.36p (2021: 0.17p).

The net cash used in operations decreased to £0.17m (2021: £0.25m). At 31 December 2022, the Group had £0.15m cash at bank (2021: £0.07m) and net debt of £10.44m (31 December 2021: £9.63m).

The balance sheet continues to reflect the cumulative loss position of the Group, and those net liabilities that have resulted from this. We continue to hold levels of debt in the Group which have funded these historical losses.

Results and dividends

The Directors do not recommend the payment of a dividend in respect of the year ended 31 December 2022 (year ended 31 December 2021: nil). The Company currently intends to reinvest future earnings to finance the growth of the business over the near term.

Review of operations

We have delivered a year of steady progress, managing the exit of one of our biggest customers and maintaining and securing modest growth across the balance of the customer base.

Much of our efforts in 2022 were directed towards public safety organisations in South and Central America, where we have witnessed growing interest in our solution having delivered 100% service reliability to our customer base in Colombia over the last 2 years. Our technical team worked hard during the year to introduce new features and functionality to meet the requirements of these organisations and we are pleased to report that all trials concluded successfully. As is always the case with public sector organisations, we are in a commercial process which always runs longer than expected and so it is difficult to know when service deployment will commence. We anticipate initial deployments in El Salvador and Guatemala, and providing these run successfully, further engagements in Costa Rica, Nicaragua and Honduras.

We are increasingly confident that our PoC technology platform has the potential to greatly enhance communication and coordination among first responders, law enforcement, and emergency services. By providing real-time, reliable, and secure communication channels, PoC can significantly improve response times and operational efficiency, and this has been borne out by the results of the trials that ran during the year. Encouragingly, we are now seeing public safety organisations in other territories express interest in running trials and we hope to achieve significant commercial breakthroughs during 2023.

As previously reported, our Caribbean partner signed a contract with a prominent mobile network operator (MNO) in 2022, initiating trials and discussions with numerous customers across various countries. A robust sales pipeline has developed, and we are now seeing the first commercial deployments across hotel groups, transportation companies and airports. At the same time, trials have commenced with several public safety organisations.

Activity levels across South Africa have been low due to economic and political challenges, but we maintain engagement with public utilities and agencies interested in deploying our platform. We are hopeful that commercial success with public safety organisations in South and Central America will stimulate broader engagement in the region.

Our UK partner recently finalised a landmark deal with Leeds Bradford Airport having run extensive trials during 2022. We understand this is one of the first airports in Europe to replace a legacy analogue radio system with PoC and anticipate that this will open engagement and discussions with many others.

Since we announced the Board changes on 9 January 2023, we are pleased to report that the business has moved quickly to scale up its sales and business development operation and is now actively engaged with several potential new partners and customers. We are in the process of finalising agreements with new partners across several markets, including Brazil, USA, Philippines and the Middle East.

Having navigated through the COVID period without any external funding (the last equity raise was in July 2019), we raised £500k through a strategic funding round in March 2023 to support marketing and business development activities. This will be directed towards enhanced PR activity, participation in major industry trade shows and the recruitment of additional sales professionals to manage the increasing portfolio of partners.

Research and Development

We are confident that our PoC platform provides a top-tier mission-critical communications solution, which is distinguished by the following key differentiators:

Seamless transition - our platform ensures uninterrupted communication during shifts between different networks or coverage zones. This allows users to maintain constant connectivity and enables efficient collaboration across teams, regardless of their location or network conditions.

Market-leading group sizes - our platform supports larger group sizes compared to competing solutions, making it ideal for organizations with extensive teams or complex communication requirements. The solution can manage group sizes of 5,000 compared to competing products that are limited to several hundred.

Dispatcher console - the dispatcher console is a centralized and user-friendly interface that allows for efficient coordination and management of communication channels. It enables dispatchers to monitor and control conversations, prioritize messages, and allocate resources, ensuring smooth communication flow and rapid response times during critical situations. Our console is capable of managing 64 groups simultaneously, which we believe puts us ahead of all competing platforms.

Data utilization - our platform optimizes data usage by employing advanced compression techniques and minimizing bandwidth consumption. This results in cost savings for customers while maintaining high-quality voice and data transmission. Additionally, the platform's efficient data management allows for seamless integration with other systems, further enhancing its versatility and adaptability to various organizational needs.

Our development teams in Israel and India will continue to enhance the platform, in line with the demands from our customers, to ensure we maintain our current competitive advantage.

Funding

We increased our £0.3m revolving loan facility to £500,000 on 24 March 2022 with our principal shareholder InTechnology plc and extended the term for a further 12 months. This facility now has a term ending on 26 September 2023 with a maximum principal amount of £500,000 (previously £300,000). As at 31 December 2022, the balance drawn down was £400,000 (31 December 2021: £150,000).

In March 2023, we concluded a subscription for 25.0m new ordinary shares of 2 pence each representing approximately 6.6 per cent. of the existing issued ordinary share capital of the Company at a price of 2 pence per share to raise £500,000. The Company also announced the capitalisation of £259,490 of indebtedness owed by the Company to InTechnology plc into 12,974,492 new Ordinary Shares, also at 2 pence per share.

We remain confident that our available cash resources together with our long-established recurring revenue customer base and anticipated future contracts will provide us with adequate financial resources for the foreseeable future.

Principal risks and uncertainties

The management of the business and the nature of the Group's strategy are subject to a number of risks. The Directors have set out below the principal risks facing the business. The Directors are of the opinion that a thorough risk management process is adopted, which involves the formal review of all the risks identified below. Where possible, processes are in place to monitor and mitigate such risks.

Product obsolescence

Due to the nature of the market in which the Group operates, products are subject to technological advances and as a result, obsolescence. The Directors are committed to the Group's current research and development strategy and are confident that the Group can react effectively to developments within the market.

Indirect route to market

As described above, one of the Group's primary channels to market are MNOs reselling our services to their enterprise customers. Whilst MNOs are ideally positioned to forward sell our services and are likely to possess material resources for doing so, there remains an inherent uncertainty arising from the Group's inability to exert full control over the sales and marketing strategies of these customers.

Going concern

The Financial Statements are prepared on a going concern basis.

When determining the adoption of this approach, the Directors have considered a wide range of information relating to present and future conditions, including the current state

of the Balance Sheet, together with that continued support offered by our principal shareholder Intechnology plc, who, as in previous years, has agreed not to call on existing loans and borrowings totaling £10,148,000 and to extend the duration of our £500,000 working capital facility if requested to do so. Further consideration has been given to future projections, cash flow forecasts, access to funding, ability to successfully secure additional investment, available mitigating actions and the medium-term strategy of the business.

The Group is dependent on its ability to meet its cash flow forecasts.  Within those forecasts the Group has included a number of significant payments and receipts based on its best estimate but, as with all forecasts, there does exist some uncertainty as to the timing and size of those payments and receipts. In particular, the forecasts assume the ongoing deferral and phased payment of some of the Group's creditors, including a contingent consideration balance of £2,815,000, (as disclosed in note 12 to the financial statements), and the continuation at the current level of recurring revenue and a significant increase in the level of non-recurring revenues. In the event that some or all of these receipts are delayed, deferred or reduced, or payments not deferred, management has considered the actions that it would need to take to conserve cash. These actions would include significant cost savings (principally payroll based) and/or seeking additional funding from its shareholders, for which there is currently no shareholder commitment requested. These conditions, together with the other matters explained in note 1 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

The Directors, whilst noting the existence of a material uncertainty and having considered the possible management actions as noted above, are of the view that the Group is a going concern and will be able to meet its debts as and when they fall due for a period of at least 12 months from the date of signing these accounts.

Section 172 statement - our stakeholders

The Board recognises its duty to consider the needs and concerns of the Group's key stakeholders during its discussions and decision-making. The Board has had regard to the importance of fostering relationships with its stakeholders as set out below, and also detailed in the Corporate Governance section of this Annual Report.

Colleagues

We have an experienced, and dedicated workforce which we recognise as the key asset of our business. It is vital to the success of the Group to continue to create the right environment to encourage and create opportunities for individuals and teams to realise their full potential. The Board and management team pay close attention to employee feedback and seek to respond constructively to any suggestions or concerns raised.

Regular colleague briefing sessions are held with the Chief Executive Officer to enable colleagues to ask questions and raise issues and for colleagues to be provided with updates on the business. Key performance information such as trading updates and financial results are always promptly communicated to colleagues. The Group has in place a share option scheme to enable colleagues to become personally invested as shareholders of the Group.

Customers

Regular communication is with the Group's core customers to discuss operational updates, product roadmap developments and gain key customer feedback. This enables increased engagement with customers at a strategic level and a greater understanding of both customer pain points and future requirements from strategic to end-user level.

Strategy

The Group continues to invest in an R&D strategy, current details of which are provided in paragraph six of the review of operations.

Suppliers

The Board is committed to building trusted partnerships with the Group's suppliers. Through these partnerships, we deliver value and quality to our other stakeholders.

Shareholders

The Executive Chairman holds analyst and investor roadshow meetings during the year, particularly following the release of the Group's interim and full year results and feedback from those meetings is shared with the Board. The AGM is a key opportunity for engagement between the Board and shareholders, particularly private shareholders. The Group's annual report and accounts is made available to all shareholders both online and in hard copy where requested. All presentations and announcements and other key shareholder information is available on the investor section of the Group's website.

Outlook

The business has successfully established itself as a key player in the PoC market, with a presence in Africa, South America and Europe. We deliver a high-quality, reliable PoC solution that meets the mission-critical communication needs of our customers. Our platform boasts several key differentiators, such as seamless transition, market-leading group sizes, a unique dispatcher console, and highly efficient data utilization, which set us apart from our competitors and contribute to our platform's reputation for superior performance.

The Board is fully committed to maintaining the technical advantages that have been established, at the same time driving a much deeper and wider business development operation. The outreach campaign that has been running since the start of the year has already generated a good flow of new partner and customer opportunities, many of them in new geographic markets. We believe that this momentum can be accelerated significantly if we can successfully deploy our solution into a public safety organisation. Our teams worked hard on multiple trials during the last 15 months and we are hopeful that we will very shortly see a successful conclusion with full platform deployment. This would represent a significant commercial breakthrough, and we are confident will lead to a material uplift in financial performance as we push for profitability in 2023.

As always, we would like to thank our team for their outstanding efforts across the last financial year. We have started the new year with renewed energy, and we are encouraged by the early results. We look forward to updating shareholders as the year develops, and sincerely believe that we are very close to realizing the potential we have seen now for some years.

Approved by the Board of Directors and signed on behalf of the Board

Jeremy Fenn

Chairman

27 April 2023

Consolidated income statement                  

For the year ended 31 December 2022

Consolidated statement of comprehensive income                      

For the year ended 31 December 2022

Consolidated statement of financial position                                  

As at 31 December 2022