Seamless Distribution AB: Interim Report, Third Quarter of 2017
STOCKHOLM, Nov. 15, 2017 /PRNewswire/ --July - September 2017
The numbers refer to the remaining operations
-- Net sales for the period SEK 31.5 million (37.8)
-- Operating result for the period after nonrecurring items attributable to
restructuring SEK -12 932 million
-- Operating loss for the period SEK -33.5 million (-10.8)
-- Loss after tax for the period SEK -63 million (-11)
-- Earnings per share SEK -1.07 (-0.20)
-- Cash flow before changes in working capital for the period SEK -40.7
million (-22.4)
Jul-Sept Jul-Sept Jan-Sept Jan-Sept Full-Year
Overview
---
All numbers and key figures
are the remaining operation
----------------------------
2017 2016 2017 2016 2016
SEK thousand
------------
31 541 37 782 97 996 107 469 141 533
Net sales
---------
-12 932 -10 795 -35 986 -27 254 -31 391
Operating result without non-
recurring items attributable
to restructuring
-----------------------------
-33 500 -10 795 -58 555 -27 254 -31 391
Operating result
----------------
-29 321 -246 -32 564 -1 431 -3 396
Financial net and taxes
-----------------------
115 127 -9 989 80 043 -35 226 -52 141
Result from divested
operations and operations
under sale
--------------------------
-62 659 -11 041 -90 957 -28 685 -34 787
Loss for the period
-------------------
188 195 262 472 188 195 262 472 251 284
Balance sheet total
-------------------
-1,07 -0,20 -1,55 -0,57 -0,67
Earnings per share, basic and
diluted*
-----------------------------
neg neg neg neg neg
Operating margin
---
69% 59% 69% 59% 54%
Equity ratio
------------
262 - 1 922 - -
Capitalized development costs
-----------------------------
-12 829 -621 -14 161 -1 964 -2 644
Depreciation/Write down
-----------------------
-20 568 - -22 568 - -
Non-recurring items
attributable to restructuring
------------------------------
CEO´s COMMENT
Q3 saw the beginning of the transformation of Seamless, following the spin-out of the former group company SDS. The change in CEO and senior Management by the Board triggered a series of actions across the Company's activities.
In line with recent announcements, the Board and Management have initiated the process of shifting the Company's focus from B2C to B2B activities. Through the shift, the SEQR B2C offering will be wound down, preferably in the form of a sale, and going forward the Company will focus on the B2B operations within MeaWallet and eProducts. This report is structured to support the Company's new focus on B2B.
By the shift to B2B we can focus on activities we believe can deliver strong growth in profits in the period ahead. The winding down of the B2C offering will also result in important cash burn reductions. Activities related to the winding down have resulted in substantial restructuring costs in Q3.
Operationally, Q3 saw considerable focus on cost, with headcount reductions across most activities, with the aim to substantially reduce net cash burn. As redundancy costs are steadily reduced, we anticipate the benefits of these cost reductions to be seen strongly as of Q1 2018.
Within our B2B operations, both MeaWallet and eProducts showed progress. MeaWallet continued to expand its pipeline of potential orders, and eProducts aggressively addressed low and negative margin business.
As announced recently in the call for an EGM (which will be held on 24th November), it is critical that we complete the financial and operational stabilisation of the company. As a result of the spin-out of SDS, the Company has considerable financial assets linked to SDS; the Company still owns 23.3 % of the shares in SDS, and the Company also has a claim against SDS of SEK 50 million, based on a loan agreement which provides for an interest rate of 8 % per annum. Although the shares and the loan represent significant financial assets for the Company, the Board and Management assess that realisation of these assets is currently not optimal, partly due to existing lock-up arrangements. The rights issue proposed in the call for the upcoming EGM is intended to provide the financial stability which the Company needs to reach the target of moving into sustainable profits during 2018.
Through the intense ongoing efforts of Management and the Board, we believe we can begin to deliver financial results that are satisfactory for our shareholders.
Tomas Jalling
CEO
Significant events during the quarter
-- Seamless Distribution AB appoints new CEO.On July 10, the Board of
Seamless Distribution AB ("Seamless") has terminated Peter Fredell's
employment as CEO of Seamless. Tomas Jalling, who has been employed by
Seamless as Head of Legal since December 2012, becomes Seamless' new
CEO.
-- Seamless Distribution AB appoints new operating Management.The new
operating Management team, who will work with and support Tomas Jalling
as CEO are following: James Connelley, Head of SEQR, Lars Sandtorv, Head
of MeaWallet, Radoslaw Kozlowski, Head of Delivery, Martin N. Larsson,
Head of Treasury/IR, Martin Schedin, CFO/HR and Geir Norlund, CIO.
-- On July 21 the listing of SDS on Nasdaq First North Premier was
completed. Through the divestment of SDS, Seamless Distribution AB
receives SEK 191million. Seamless Distribution AB remains with a holding
of 23.3 % of the shares in SDS corresponding to a value of approximately
MSEK 36 per September 30th 2017.
-- SEQR Payments AB, part of Seamless Distribution AB, has been approved by
Mastercard as an issuer of Mastercard products in Europe. The
partnership with Mastercard will enable SEQR to use its e-money license
to open up innovative mobile payment opportunities within the European
market and to drive forwards its growth agenda within the mobile
payments industry.
-- Seamless delivers contactless payment solution to a Hungarian
Bank.MeaWallet A/S ("MeaWallet"), part of Seamless Distribution AB, has
signed an agreement with a Hungarian bank for delivery of MeaWallet's
proprietary technology for contactless card payments. The bank is one of
the major banks in Hungary, a market where more than half of the payment
cards in use have contactless capabilities. The solution will enable the
bank's clients to perform contactless card payments through the bank´s
existing banking application. This means that the subsidiary MeaWallet
enters into a new geographical market. Furthermore, the agreement
provides proof that the market for mobile payment solutions is
developing in the direction that MeaWallet has positioned itself for.The
total order value in addition to an agreed upfront fee of MSEK 1 is
currently unknown, but is estimated to be between MSEK 3 and 5.
-- Court rules in favour of Seamless in Accumulate cases.
-- Changes to ownership in Seamless Distribution.Seamless Distribution's
shareholder Tikvah Management has, after being approved by the Financial
Supervisory Authority in Sweden, exercised the option contract entered
into with Fredell & Co in June 2017. Following the transaction, Tikvah
strengthens its ownership in Seamless, which amounts to 8,604,635 shares
or 14.6 % of the votes. \
-- Seamless confirms annual savings in excess of MSEK 25.Following the Q2
report announcement related to up-coming activities to reduce cash burn,
Seamless is pleased to confirm that identified and executed actions will
result in annual savings in excess of MSEK 25 instead of previously
announced MSEK 15. Management will continue to address the Company's
structure in a way that will enable successful delivery of our growth
strategy, and also reduce additional expenditures in non-critical areas.
Significant events after the close of the reporting period
-- Seamless considers re-alignment for sustainable growthThe proposals that
are up for consideration are the following:1. Phasing out of the B2C
offering SEQR, and a renewed focus on B2B offerings, where traction is
both strong and accelerating. Phasing out the B2C offering SEQR would
preferably be made in the form of a sale. In connection with this,
Seamless will follow the business in a new way, i.e. in the following
segments: SEQR B2C, SEQR B2B, eProducts and Group Functions.2. To fund
the growth of B2B, and exit costs of B2C, the Board considers proposing
the launch of a rights issue, to be completed before year-end 2017, with
the goal to raise MSEK 100 with the following indicative terms:-
Shareholders in the company on the record date of the issue will receive
1 subscription right for each holding in the company.- One subscription
will entitle the holder to subscribe for 1 share for SEK 1.80 per share.
The proposals up for consideration are based on the following:- The
consideration of phasing out SEQR is based on a thorough analysis of
competitive advantage and highest probability of success factors. By
eliminating the highly cash consuming B2C offering, the company would be
able to both bring forward its move into profits, and to focus on the
activities where our competitive advantage is most obvious, and
sustainable.- With a pure B2B focus, Management and the Board believe
that Seamless' shareholders would gain exposure to rapid growth, with a
lower risk.- MeaWallet has proven traction, and is experiencing an
accelerating pipeline. MeaWallet is forecast to move into a clear profit
making position during 2018. Capital raised from a rights issue would be
primarily directed to funding expanded production and sales capacity in
MeaWallet.- eProducts, currently the company's largest revenue
generating activity, has been restructured and refocused after a
sustained period of losses. Under new leadership, and with a refreshed
product portfolio, we see a rapid move into profit and return on
invested capital going forward.- Following a rights issue, Seamless
would improve its balance sheet, and in possession of substantial
realizable financial assets. These funds would enable the company to
move more quickly into profit, and to a position of sustainable positive
cash flow generation.
-- Seamless announces shareholders' support for share issue. The Board of
Seamless Distribution wishes to express its gratitude to the Company's
four largest shareholders, including the Chairman John Longhurst
(together representing over 30 % of the Company's share capital), who
confirm their support (and intention to provide written undertakings)
for the proposed rights issue, and their support for the strategic
initiatives announced by the Board of Seamless.
-- Seamless prepares for new CEO and new Chairman. On October 25 Seamless
Distribution AB ("Seamless") announced that preparations are made to
appoint John Longhurst, currently Chairman of the Board, as new CEO of
Seamless. The appointment is intended to become effective at the time of
the extra general meeting ("EGM") on November 24th 2017.The notice for
the EGM includes a proposal to appoint Tomas Jalling as new member of
the Board. Tomas Jalling, the current CEO, is proposed to become new
Chairman of the Board as John Longhurst enters in his new role as
Seamless' CEO.
-- Notice of extraordinary general meeting in Seamless Distribution AB. The
shareholders of Seamless Distribution AB (publ) ("Seamless" or "the
Company") are summoned to the extraordinary general meeting to be held
on Friday November 24th 2017. Decision about following matters is
expected to be made:- Resolution on change of the Company's trade name
and the Articles of Association- Resolution regarding equity issue with
preferential rights to existing shareholders
-- MeaWallet signs new agreement with Norwegian bank. MeaWallet AS has
signed an agreement with a Norwegian bank for delivery of the Mea Token
Platform. Deploying the Mea Token Platform, which is integrated to
Mastercard Digital Enablement Service (MDES), will enable the bank's
customers to make smartphone payments in store, in app or on line, via
any of the OEM Pays (i.e. Apple Pay, Samsung Pay, Fitbit Pay etc.). With
a single point of integration to the Mea Token Platform, the bank will
open up all of the OEM Pays to its customers. This is the first time
MeaWallet deploys a purely OEM Pay solution. The solution will be
delivered as a managed service from MeaWallet's data center in
Switzerland. As a Norwegian company, signing a domestic bank is a huge
validation of MeaWallet's offering and an important reference as
MeaWallet builds a strong pipeline of international customers.
-- Patent court cases dismissedIn October 2013, Accumulate AB filed a
lawsuit against Seamless Distribution AB for alleged patent
infringement. In August 2014, Seamless filed a lawsuit against
Accumulate where Seamless claimed that Accumulate's patent should be
declared invalid.On September 15, 2017, the Swedish Patent and Market
Court announced its judgment in both cases. The judgement was appealed
to the Swedish Patent and Market Court of Appeal, and the court has now
decided to dismiss both cases.The reason behind the dismissal is that
the parties have reached a settlement on a final regulation of the
issues that have been dealt with in the cases. The settlement provides
that Seamless has not committed a patent infringement, and that the
parties agree that Accumulates patent (SE1050585-7, SE537539) will
continue to be valid.The settlement also provides for financial
compensation to Seamless related to legal costs.
-- Peter Fredell has informed the Chairman of the Board, John Longhurst,
that Fredell, effective immediately, resigns from Seamless Distribution
AB's Board of Directors.
-- Martin N Larsson, Head of Treasury and Investor Relations, has decided
to leave Seamless.
This is the type of information that Seamless Distribution AB (publ) is required to disclose pursuant to the Securities Market Act and/or the Financial Instruments Trading Act. The information was submitted for publication on November 15, 2017 at 08:50 a.m. (CET).
For further information, please contact:
Martin Schedin, CFO/IR
martin.schedin@seamless.se +46-8-564-878-00
ABOUT SEAMLESS
Seamless is one of the world's largest suppliers of payment systems for mobile phones since 2001. Seamless has two main business areas: Mobile payment solutions provided under the trademarks of MeaWallet(TM) and distribution of eProducts. www.seamless.se
Seamless interim report for the period July - September 2017 has been approved for publication by the Board of Directors, by its decision on November 14, 2017. This financial report has been subjected to a review by the Company's auditors.
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SOURCE Seamless Distribution AB
