Chief Executive's Statement 2017

A few words from Jay Patel | Chief Executive Officer

I am pleased to report that we have recorded another year of financial, operational and strategic progress across all business units of the Group. We have grown our recurring revenue base and extended our record of profitable cash generative growth. We have continued to invest in technology development, new commercial partnerships as well as in our marketing content and systems.

Our acquisition of Infracast in March 2017 consolidates our position in the UK financial services market and provides additional technical and product capabilities.

Market overview

A recent CEO survey conducted by PWC suggested that the speed of technological change is one of the key concerns of 2017 along with changes in consumer behaviour. We believe that we continue to be well placed to work with our customers to meet and embrace these challenges through the use of the latest mobile and digital technologies.

The technological and digital revolution has altered the way in which we live, think and interact with one another and with businesses. There continues to be an overwhelming need for companies such as banks, mobile operators, retailers, utilities and major brands to invest in improving customer experience, predominantly through digital channels. A key part of delivering a better customer experience is for more relevant, contextual and personalised communications and this is what we help our clients achieve. Our strategy is to be at the heart of these digital interactions for our clients.

It is the usage of digital devices, as opposed to their penetration, that is now the most significant development within the market. It is estimated that consumers spend 90% of the time on mobile phones using email and messaging platforms, such sa SMS, Facebook Messenger, and WhatsApp and a recent survey by Deloitte (‘UK Global Mobile Consumer Survey 2016’) highlighted that 31% of smartphone users make no traditional voice calls in a given week, in contrast with a quarter in 2015, and just 4% in 2012. During this ‘second-wave’ of digital engagement, enterprises now need to cater for numerous new smartphone based channels through which customers can and often prefer to engage. Enterprises that embrace the changes in customer behaviour and new technologies can both improve customer experience whilst cutting operational costs.

Our addressable market remains fragmented, highly competitive and rapidly changing, with IT and communication vendors of all sizes looking to offer services to accelerate mobile and digital transformation. A report published by MarketsAndMarkets estimates that the digital transformation global market size is set to grow from $148bn in 2015 to $392bn by 2021. We believe that the agile and evolving nature of our product portfolio aligns well with these addressable markets.

Software and solutions offering

Last year we clarified and simplified our product offering and during the past year we have focussed on executing our go-to-market strategy for some of our key products and have recorded many successes. We have also added additional product capability through the development of an artificial intelligence and automation product. Our core platform is IMIconnect and it remains the area of greatest investment.

IMIconnect

IMIconnect is a cloud based software platform that helps time and resource constrained IT teams to quickly and easily automate customer interactions across communications channels such as SMS, Voice, Facebook and other messaging applications, and link those interactions with backend business systems. The platform has a visual ‘drag and drop’ tool so users can build workflows with ease, reducing the time, risk and complexities inherent in a traditional programming-intensive approach.

Over the last year we have introduced support for new communication channels such as Skype for Business, email, web push and push notifications and this has generated significant opportunities and secured important new customers. We have also invested further in scalability and usability and believe we have the market-leading product for large enterprises. The platform is currently powering live services for clients such as Vodafone, O2, Centrica, the AA and a number of financial institutions.

IMIconnect is a key enabler for customer experience transformation and a key foundation for future growth.

IMIchat

IMIchat is a cloud application that enables contact centres to improve their customer interactions whilst optimising their operational costs and efficiency. This product allows for real-time agent interactions for either customer support or sales across multiple message channels. The application can be fully integrated into other contact centre applications and is currently being utilised by customers to have conversations on fraud issues, payment reminders, scheduling appointments and complaint handling.

This year we added over 150 new features and enhancements and we introduced four new communications channels: email, Facebook, Twitter and webchat. Clients that currently use IMIchat include Centrica, Sky, Saga, CarillionAmey, BT, Cirrus and retail banks.

The commercial model for IMIchat is based primarily on the number of users. There has been a tenfold increase in the number of agents using the product in the last year and we anticipate that this will grow significantly in the years to come.

IMIcampaign

IMIcampaign is a cloud campaign management software application designed for multi-channel marketing communication. It allows marketing departments to create, manage, deploy, monitor and adapt marketing campaigns targeted at a customer’s mobile device. Channels supported include SMS, MMS, email, social media, mobile internet, push notifications and USSD.

During the year IMIcampaign delivered over 1.5 billion marketing messages on behalf of over 25 clients. The product also gained recognition from Gartner in their Market Guide for Mobile Marketing Platforms. The product is used by mobile operators, retailers and gaming companies such as EE, O2, Dreams, Vodafone and Betway.

IMIdigital

IMIdigital helps organisations to offer mobile content and rich media services such as video streaming to mobile devices across multiple touchpoints. IMIdigital is used in several multi-country deployments, providing a consistent brand and user experience, and it also helps manage content licensing and reporting.

Over the past year, we have introduced various new product capabilities to IMIdigital including the addition of social channels such as Facebook Messenger, push notifications and our chatbot solution, to enhance and automate the mobile content service discovery experience for consumers. We have continued to power content subscription services and billing transactions across multiple international territories. The platform is utilised by trusted and recognised brands such as Universal Music Group, MTN, Aircel, Airtel and Orange.

IMIbot

IMIbot is a product built for the creation of chatbots for enterprises and to help automate customer interactions. The solution brings together the best global libraries of artificial intelligence, proprietary domain insights and tools to equip businesses with the ability to create menu or NLP (Natural Language Processing) driven chatbots. These bots can engage customers across multiple messaging channels and automate significant aspects of the customer service experience.

IMIbot is delivered through our cloud infrastructure and offers a highly efficient and quick way for businesses to implement an automation solution which easily integrates with existing systems, processes and services. The product is integrated with our IMIchat product and thereby provides our clients with both an automated approach and seamless fall back to agents when required.

IMIsocial

IMIsocial is a cloud application that centrally collates high volumes of inbound customer or audience messages from multiple social channels such as Facebook, Twitter, SMS, YouTube and Instagram, allowing broadcasters to use audience generated content in their programming. This facilitates real-time audience interaction as well as premium rate services such as competitions and voting, therefore transforming audience engagement into improved ratings and revenues.

The product gives editors, producers and presenters real-time feedback on audience reactions, comments and sentiment in one accessible, easy-to use dashboard with an auto filter on content preferences. IMIsocial is used by the BBC and other major media houses to power their audience engagement programmes and the platform has been used for major events including the London Marathon, Sports Personality of the Year and Children in Need.

Textlocal

Textlocal is a cloud-based, self-serve platform that allows SMEs to have instant, affordable access to SMS messaging and mobile marketing tools. The platform is easy to sign-up for and begin deploying mobile messaging campaigns and services without the need for advance training.

Customers can benefit from increased customer engagement and marketing ROI through SMS marketing. Textlocal was acquired in October 2014 and since then we have invested in the product, adding several features and capabilities enabling it to be launched in India in 2015 and Myanmar during 2016.

All the key products support multi-tenancy and are hosted and managed within the IMIcloud which provides a highly available, highly scalable data centre and network infrastructure. In the last year, we have started using Amazon Web Services to provide additional cloud capability. The IMIcloud supports our integrations and connectivity with mobile operators, device environments (for example, Apple and Google), payment gateways and other third party service providers.

We also operate a private cloud co-located in multiple data centres across the UK, US and India and our platform modules have been deployed with geo-redundancy to offer very high service availability.

The infrastructure, platform and software applications are all supported by our Virtual Network Operations Centre (“VNOC”) operating 24/7 across support centres in the UK and India. We are ISO 9001 and 27001 accredited and operate several services within a PCI DSS compliant environment.

Our cloud infrastructure and applications today process 27 billion SMS messages per year, 15 billion voice flows, 42 billion commerce transactions and 240 million emails.

Regional performance

The Group is managed commercially and strategically on a regional basis with centralised resources for software development, finance and general management. A key operating metric for each region is gross profit as there are considerable differences in gross margins across regions, vertical sectors, product lines and revenue models. Gross profit additionally measures most directly the value of the software and associated services delivered by the Group which excludes the impact of network infrastructure, third party hardware and content costs.

Europe and Americas

Gross profit £22.9m (2016: £19.9m)

Gross profits in this region have risen by 15%. This growth was driven by a number of significant contract wins across multiple sectors including mobile operator, banking, utilities, retail, estate agent and gambling and gaming.

We have also renewed our IMIcampaign contract with O2 this year, providing a two year extension into 2019.

We continued to invest in our partnership strategy and are pleased that a significant contract win has originated through our partnership with BT for the provision of IMIconnect for the Royal Mail Group. We have seen a growing pipeline of opportunities through this and other partnerships.

Our two largest client sectors in the region continue to be mobile operators and financial services. Our position as a leading digital customer interaction software provider in these verticals has been enhanced through our acquisition in March of Infracast. The enlarged Group processes the majority of digital notifications for four of the top five tier one UK retail banking groups. The acquisition also means that we are the leading reseller partner for mobile operators in the UK for digital communications solutions.

Infracast’s complementary customer and product portfolio provides significant cross-sell and upsell opportunities and is expected to enhance Group earnings during the coming year.

Textlocal continues to perform strongly, with year on year gross profit growth of 18%. We continue to see strong interest in the broader product set from small and mid-sized businesses. During the last year, we have successfully launched a Textlocal bureau service in the UK to deliver a service that promotes SMS usage and improves customer retention rates. Two of our deployments were also recognised at the 2016 Mobile Marketing Awards for ‘Most Effective Sales Promotion Campaign’ as well as ‘Most Effective Automotive Campaign’.

Following the decision for the UK to leave the EU on 23 June 2016, we have assessed the potential impact on our business in the region and our initial view is that ‘Brexit’ is unlikely to have any immediate effect.

We continue to invest in establishing our operations in the Americas and have significantly grown gross profit in the region through working with the tier one mobile operator Sprint. We will continue to invest in the region, as it is the single largest addressable market for our product portfolio.

Middle East and Africa

Gross profit £13.5m (2016: £11.3m)

The integration of Archer Digital into the Group is progressing well and we continue to explore cross-selling opportunities. We were pleased to have sold IMIconnect into one of Archer’s largest banking clients.

Gross profits in this region have risen by 20%, of which 2% was organic¹ growth. The major contributor of gross profit continues to be the long-term contracts that we have established with mobile operator groups which are largely made up of deployments of IMIdigital and IMIcampaign across multiple countries.

We were pleased that we renewed the multi-year contract with MTN, the leading mobile telecommunications company in Africa, to support its digital lifestyle services. Under the agreement, we provide our digital customer engagement software suite to help MTN take advantage of new digital technology trends, to optimise the customer experience for rich digital content services.

A significant proportion of our African business originates from Nigeria, where we work with all the leading mobile operator groups in the region. However, as has been widely reported, there have been a number of economic and liquidity issues in Nigeria. The resultant decision to unpeg the Naira from the US Dollar subsequently devalued the currency and has created challenges in exchanging Naira into other currencies. We continue to explore various alternatives for the uses and exchanges of this cash.

The integration of Archer Digital into the Group is progressing well and we continue to explore cross-selling opportunities. We were pleased to have sold IMIconnect into one of Archer’s largest banking clients and the Archer team has also supported various rich media and video initiatives across the Group, providing early encouraging signs of our ability to deliver synergies through this acquisition. Although the current political uncertainty in South Africa does create a challenging economic and trading environment we have an experienced regional team and long standing client relationships that will provide foundations for growth.

India and SE Asia

Gross profit £7.0m (2016: £5.3m)

A major win in this region was the Telenor Group where we are in the process of deploying our VAS Virtualization platform in various territories including Bangladesh, Malaysia and Thailand.

There has been strong growth in the region, with gross profits rising by 31%. The India operator business has established stable recurring revenues with significant growth in the mobile operator sector coming from deployments in other areas of South East Asia such as Myanmar, Nepal and Sri Lanka. Additional strong growth has come from our brands and agencies business where we have established a track record and now are delivering campaigns for our customers with greater regularity.

During the year we also won a number of contracts which will contribute to growth in future periods. As mentioned above, a major win in this region was the Telenor Group where we are in the process of deploying our VAS Virtualization platform in various territories including Bangladesh, Malaysia and Thailand. Additionally, we have won a new contract with the Government of Telangana in India.

We are pleased with the success from our introduction of the Textlocal platform to the region, as it now has over 9,000 customers in India and we also have early success with it being launched in Myanmar in partnership with a mobile operator group.

Growth strategy and outlook

Our growth strategy has remained consistent over a number of years and our primary aim is to be at the heart of digital interactions for our customers. This overarching strategic objective requires different strategies depending on region, sector and our existing position and integrations.

As mentioned above, the pace of technological innovation is unwavering and the fast-moving landscape in which we operate will continue to create significant opportunities for our business. Consumers have become increasingly digital and the imperative for digital transformation is clear and established in most sectors. Our product strategy is to provide businesses with a digital agility that allows them to integrate customer touchpoints to existing business systems and to orchestrate and deliver a better customer experience.

We remain confident that we can continue to grow organically on the basis of strong relationships with existing customers, built over a number of years, and continual product innovations. We currently have 27 customers that generate annual revenues of over £0.5m p.a. compared with 18 in the year to 31 March 2016. We recognise that, as mobile and digital touchpoints become business critical for all organisations, we can continue to grow our number of clients across all regions and increase the size of these clients. We intend to accelerate growth through our partnership strategy and are increasingly confident after the early wins we have had this year.

We continue to review acquisition opportunities that will accelerate our sales into major blue chip clients and have maintained a strong financial position in order to pursue these opportunities. However, these need to meet specific acquisition criteria and we recognise the importance of waiting for the right opportunities in a fragmented fast-changing market. To date, we are pleased with the acquisitions the Group has made since its foundation (WIN plc, Textlocal, Archer Digital and Infracast) and will apply similar strategic and financial criteria for further acquisitions.

The current financial year has started well, we have strong pipelines in all regions our product suite remains hugely relevant in large growing addressable markets.

Jay Patel

CEO