We don’t often comment on AIM-listed, mobile banking play, Monitise, but today’s announcement of its first ‘fully fledged’ acquisition (i.e. beyond subsuming JV partners), that of US peer, Clairmail, caught my eye. You see, both Monitise and Clairmail lose money even at the EBITDA level, Monitise to the tune of nearly £15m (FY to June 2011) and Clairmail not far off that, at some £13m in 2011. On a pro forma basis, EBITDA losses of the enlarged group were £28m, on £35m of revenues. At its interim results last month, Monitise CEO, Alastair Lukies, confirmed they were ‘on target’ for cash break-even in 2013. The expectation is now that the group will be EBITDA positive by the end of 2013.
At least the acquisition didn’t involve any cash. The all-share deal values Clairmail at $173m (£109m) at Monitise’s 35p share price, almost 10x Clairmail's revenues, and about 40% of Monitise’s market cap. Monitise had net cash on the balance sheet of some £40m (inc. STIs) at half-time.
Monitise had the most unlikely of beginnings, being born of reseller Morse in 2003. Indeed, I remember my first (and I think only) meeting with Lukes not long after (when I was still ‘on the dark side’ in equities research) as he and then Morse CFO, Gavin James, pitched the merits of the start-up. I must admit, it did sound interesting. Monitise was later spun out of Morse (just as well) and IPO’d in June 2007 at 22p. Morse ex-CEO, Duncan McIntyre, chairs Monitise.
It’s great to see a UK start-up making a mark in international markets, especially in one of the hottest tech areas. But it would be even greater if they could actually make a profit.