Why I’ve Turned Bullish On Monitise Plc

Struggling mobile money group Monitise (LSE: MONI) has had a rough year. After issuing three revenue warnings in the space of 12 months, the company launched a strategic review in January and hired the investment bank Moelis to examine “all options”, including a sale of the company. 

At the end of March, Monitise announced the results of its strategic review. The company decided against a sale, after rejecting offers that were deemed unattractive. What’s more, Alastair Lukies, founder and co-chief executive, stepped down following the review. Mr Lukies is being replaced by Elizabeth Buse, a former Visa executive. 

And in many ways, this change at the top is great news for Monitise and the company’s shareholders. While under the stewardship of Mr Lukies, Monitise has consistently missed targets, struggled to raise cash and the group has failed to turn a profit. 

The appointment of Elizabeth Buse marks the beginning of a new era at the company. Unlike Mr Lukies, a former professional rugby player with little experience in the finance industry, Elizabeth Buse joined Monitise after a 16-year career at Visa

Ms Buse held a number of senior roles at Visa including leading the US payments conglomerate’s operations outside the US. So, Monitise’s new CEO has plenty of experience (at one point Ms Buse was considered to be the leading internal candidate to become Visa’s chief executive).

Additionally, along with a new CEO, two of Monitise’s key shareholders — Telefónica and Santander — have taken up their right to nominate a board member.

A new, more experienced management team is exactly what the doctor ordered for Monitise. As the company has continually failed to meet its own targets over the past few years, shareholders have lost trust in the company’s management.

A management reshuffle should restore confidence in the mobile payments group and bring in a new set of fresh ideas.  

What’s next for Monitise?

Now Monitise has a new CEO, the company can re-focus on trying to achieve its strategic long-term goals. 

The company is targeting sales of £90m to £100m for 2015, unchanged from 2014. Losses of £40m to £50m are expected before breaking even during 2016. 

Furthermore, Monitise is planning to streamline its business. This plan includes centralising the group’s research and development arm, exiting “non-core” business areas, and focusing sales in the group’s established regions of Europe, the Middle East and North America, rather than pursuing new markets.

These actions should help reduce Monitise’s cash burn. The company burnt through £63.6m in cash during 2014, although with a gross cash balance of £129m Monitise has enough cash to survive for two years, which should be long enough for the company’s turnaround plan to take effect. 

The bottom line 

All in all, with a new management team and plans to streamline the business, Monitise’s outlook is improving. Still, only time will tell if Monitise’s new management can turn the struggling company around and I wouldn’t expect fireworks from the group any time soon. 

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Rupert Hargreaves 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.