Should You Buy Monitise Plc After Today’s Results?

Do today’s results mark a turning point for Monitise Plc (LON:MONI)?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in mobile payment specialist Monitise (LSE: MONI) edged higher this morning after the firm published its half-year results that were broadly in line with expectations.

Revenue for the first half of the year was £33.4m, down by 21% from £42.4m during the same period last year. Losses from earnings before interest, tax, depreciation and amortisation (EBITDA) were £20.2m, reduced from an EBITDA loss of £30.8m during the first half of last year.

Importantly, Monitise expects the second half of the year to generate an EBITDA profit. The firm still has a cash balance of £53.4m and says it’s “well-funded to meet its future plans”.

Should you invest £1,000 in AstraZeneca right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if AstraZeneca made the list?

See the 6 stocks

Good news?

The shares’ positive reaction will be a relief for shareholders who have seen the value of their investment fall by 92% over the last year. However, I do have some concerns.

Monitise is pinning its hopes for the future on its cloud-based FINkit subscription platform. This is designed to replace the firm’s older Monitise Enterprise Platform (MEP) in Europe and the Vantage Platform in the Americas.

However, the majority of revenues still come from the MEP and Vantage platforms. FINkit deployment is at an early stage and the level of take-up by existing customers is uncertain. In today’s results, Monitise said:

As some existing MEP contracts come to an end, and while we seek to transition these clients to FINkit, we have plans in place to manage the cost base and the potential impact on EBITDA.”

This suggests to me that Monitise isn’t entirely confident that existing customers such as RBS and Santander will be happy switch from MEP to FINkit.

Can Monitise really make a profit?

One of the ways in which Monitise hopes to achieve an EBITDA profit this year is by continuing to cut costs. However, my calculations suggest this will be quite a challenge.

The firm’s total costs during the six months to 31 December were £53.6m, 23% less than during the same period the previous year.

Monitise expects to reduce costs by a further £3m per month during the second half of the financial year. This suggests that total costs should fall to £35.6m. This is still more than first half revenue of £33.4m.

Monitise says that revenue is expected to be “broadly similar” during the second half. That language doesn’t suggest to me that the firm expects much sales growth. Yet I estimate that for costs to fall below revenue, sales growth of at least 6.5% will be needed during the second half of the year.

I’m not sure how Monitise can be confident of positive EBITDA during the second half when its own forecasts suggest that costs may still be higher than revenue during this period.

But there’s plenty of cash…

It’s true that Monitise does still have plenty of cash. The firm reported a cash balance of £53.4m today, albeit down from £88.8m six months ago.

If cash burn does slow during the second half, as expected, then Monitise will gain time to make a success of its FINkit solution. However, in my view there’s a definite risk that sales will continue to disappoint and that Monitise may eventually run short of cash again.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Up 30% in weeks, does the BAE Systems share price still offer value?

The BAE Systems share price has been on a tear over the past couple of months. This writer sees limited…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Hunting for shares to buy as the market trembles? Remember this!

After a choppy week in global stock markets, our writer goes back to basics in his hunt for bargain shares…

Read more »

Investing Articles

3 simple principles to help build wealth in an ISA

As a new tax year opens up new ISA allowances for many investors, our writer shares a trio of things…

Read more »

Investing Articles

US trade tariffs: what they could mean for UK shares like Ashtead, Compass Group, and Experian

US trade tariffs continue to rock global markets, and the UK is no exception. Our writer considers how a new…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Dividend Shares

The Trump slump has smashed these FTSE 100 shares!

After a rough week for US and UK shares, investors have been shaken. But now these FTSE 100 stocks have…

Read more »

Investing Articles

£10,000 invested in Rolls-Royce shares 5 years ago is now worth…

Rolls-Royce shares have been on fire since April 2020. Part of this is the result of pandemic restrictions lifting, but…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

£10,000 invested in Tesla stock at its peak in 2024 is now worth…

Over the last few months, Tesla stock has lost nearly half its value. Here, Edward Sheldon explores a few takeaways…

Read more »

Investing Articles

Is the S&P 500 heading for an epic stock market crash?

Our writer shares his thoughts on a very crazy time for the S&P 500 and the wider stock market. How…

Read more »