Strong H2 financial performance: In line with previous guidance, H2 16 revenues were comparable to H1 (£33.4m). This was accompanied by a major swing into EBITDA profitability (vs a £20.4m loss in H1 2015) driven by a significant decline in total costs. Cash outflows were much reduced versus comparable periods and we understand, include one-off restructuring outflows and the termination of certain onerous contracts. A total outflow of £11m is around a third of the levels reported for H1 2015 and H2 2015, and left gross cash at £42m, c£8m ahead of our forecast. 

Initial revenues from FINKit: FINkit® is a cloud-based development platform and toolkit designed specifically for banks and financial services clients. Having commenced product marketing in the latter part of 2015, Monitise recorded the first revenues from technical and operational trials in fiscal-H2 16. Management revealed that contracts are taking longer to conclude than they originally anticipated. Nevertheless, this is a welcome development given our view that FINKit sales will be the group’s primary revenue driver going forward. 

Earnings estimates unchanged: We make no changes to earnings forecasts following the release. Management have flagged their expectation that FY17 revenues will be lower than FY16, reflecting migration from legacy product sales (MEP, MVP) towards FINKit. This is consistent with our existing forecasts (previously published in March 2016 and summarised below). 

We believe the migration from legacy products to FINKit represents the key near-term challenge and opportunity for the group. The delivery of EBITDA breakeven and much reduced cash outflows are positive signs from the recent restructuring. In our view, the much improved financial performance reported in H2 16 provides grounds for cautious optimism on the future.