7DIG.L Regulatory News (7DIG)

25 Jun 2007 07:03

UBC Media Group PLC25 June 2007 25 June 2007 UBC Media Group plcPreliminary results for the year ended 31 March 2007 POSITIONED FOR GROWTH AFTER CHALLENGING YEAR FOR RADIO - Normalised loss* ahead of Reuters consensus estimate - New financial year has started with return to revenue growth Financial Highlights - £1.6m invested in service to purchase music from radio stations, branded today as 'Cliq'. - Digital software sales show strong international growth with revenues up 31.5% at £1.06 million (2006: £806,000). - Group revenues down 9.3% to £17.63 million (2006: £19.44 million). - Normalised loss* £948,000 (2006: £55,000 loss). - Successful sale of non-core 80% holding in Classic Gold business subject to Ofcom approval after year-end for £3.95m in cash, boosting cash reserves. Statutory Results - Group Turnover of £17,628,000 (2006: £19,435,000). - Operating loss of £1,264,000 (2006: £193,000 loss). - Loss before taxation for the year was £1,685,000 (2006: £234,000 loss). Strategic Highlights - Cliq music purchase system now broadcast in London and ready for national launch before year-end. - Imagination Technologies to incorporate Cliq application in future digital radio devices. - Cliq technology to be licensed for trials in Ireland with other European trials expected shortly. - Major deal announced with XM Satellite Radio in the US for text and data software. - UBC chosen by BBC for new DRM broadcast trials in SW England. - Sky News Radio Network now in profit and Networked Programming revenues recovering strongly: April & May 2007 30% up on same period last year. - Digital Content businesses move into TV: Unique launches web video service for Marie Claire, Smooth Operations wins contract for Microsoft Live Earth coverage. - Partnership with Channel 4 in application for second national digital multiplex. * Normalised loss is the group loss on ordinary activities before taxation butexcluding exceptional items, goodwill amortisation and the impairment of fixedasset investment. Chief Executive, Simon Cole, commented, "This has been an exceptionally difficult year for the radio industry. Howeverwe maintained our strategic focus throughout. We now emerge into a more benignclimate with advertising revenues recovering, good growth in our first quarter,a stronger cash position and poised to launch our innovative Cliq service withthe backing of the industry's biggest device maker". There will be a presentation to analysts and investors at 9.00am BST, which willtake place at Tower 42, 25 Old Broad Street, London, EC2N 1HQ. Enquiries Simon Cole, Chief Executive, UBC Media Group plc: Tel: 020 7453 1600Diane Barnes, Portland for UBC: Tel: 020 7404 5344 CHAIRMAN'S STATEMENT As predicted, the twelve months period to 31 March 2007 proved to be atransitional year for UBC Media Group. Our strategic objective remains to create a substantial radio services businesscapable of delivering sustained growth in the future. UBC's strategy is basedon investing the returns from our traditional businesses to finance the Group'sdigital expansion. As promised, UBC has invested heavily this year in thedevelopment of our innovative music downloading service. As a result, we endedthe financial year with the technology proven and ready for launch. The Group's Performance A harsh advertising market experienced across the commercial radio industry heldback the overall performance of the Group's traditional businesses. Grouprevenues fell by 9.31% to £17.63 million (2006: £19.44 million) in the year to31 March 2007. Our total investment in the year in developing UBC's new musicdownloading service on digital radio was £1.62 million (2006: £396,000), ofwhich £1.11 million (2006: £326,000) was capitalised. UBC's operating loss forthe year was £1.26 million (2006: £193,000 loss) and loss before taxation was£1.69 million (2006: £234,000 loss). Revenues from UBC's Networked Programming business were broadly flat in thefirst half of the year. This was followed by a sharp decline in trading in thethird quarter that had a significant impact on the Group's overall performancefor the year. Although UBC experienced an improvement in trading conditions inthe final quarter of the year, the recovery was insufficient to make up forrevenues lost in the third quarter. Despite the disappointing performance inthe year, prospects for UBC's Networked Programming business remain good. Theimproved trading conditions have continued into the new financial year and weare making good progress in building the network of stations taking the new SkyNews Radio service. I am confident that after this short phase of retrenchmentin 2007, UBC's Networked Programming business will revert to deliveringsustained growth in the future. The performance of the Group's Digital Content and Digital Software businesseswere more satisfactory. UBC's Digital Content revenues declined 8.9% to £3.19million (2006: £3.5 million), reflecting the closure last year of a low marginstudio operation. During the year UBC has continued to build revenues from arange of new customers, including The Times, The Daily Telegraph and The Sun,and the business is increasingly focused on securing a smaller number of highermargin commissions from the BBC. UBC's Digital Software made good progress indeveloping its international client base, securing important sales in a numberof major international markets, with revenues up 31.5% at £1.06 million (2006:£806,000). Launching our Music Downloading Service Learning a lesson from the launch of DAB digital radio (where broadcasterslaunched new radio services at great costs many months before affordable DABradios were available for consumers to buy), we took the decision at the end ofthe financial year to pause on the full consumer launch of our music downloadingservice. After so much hard work and investment, this short delay isfrustrating, but we have used the time well since then to refine the product andto bring new partners on board. Focusing on Radio Services UBC's primary activity has always been supplying services to radio. Theseservices are varied and cover a wide range of activities, including providingfree radio programming to radio stations in return for advertising airtime;supplying innovative software solutions to the radio industry; and producingprogrammes and other audio content to the BBC and others. The launch of ourmusic downloading service will further extend the range of services that UBCsupplies the radio industry. The Classic Gold network of radio stations has formed part of the Group for morethan six years and in that time has made a useful contribution to the Group'sperformance. However, the Board of UBC had felt for some time that the ownershipof radio licences and operation of radio stations did not fit well with the restof the Group's operations and was a potential distraction of the managementteam's time and focus. For this reason the Board was pleased to secure a £3.95million cash offer from GCap Media plc for UBC's 80% shareholding in ClassicGold Digital, subject to Ofcom approval. UBC proposes to invest the proceedsfrom the disposal in its music downloading service. Our Team In recognition of the very significant challenges involved in launching a majornew consumer technology, the management structure of UBC was streamlined duringthe year. John Quinn, Commercial Director was appointed to manage the BroadcastDivision, with responsibility for the Group's Networked Programming, DigitalContent and Digital Stations businesses. The Board was shocked and saddened by the death of Prof. Roger Silverstoneduring the year. Roger had been a non-executive director of UBC Media Groupsince the Company's flotation in June 2000. During that time Roger made asignificant and valuable contribution to the deliberations of the Board. UBC is a people-based business and the achievements of the past year havedepended on our employees' commitment, enthusiasm and hard work. The Board ofUBC would like to thank the management and staff of UBC for their dedication indelivering a series of challenging targets, often in the face of a hostiletrading environment. Prospects Although it is still early, we have made an encouraging start to the newfinancial year. Our two divisions all have good market positions, leaving usideally placed to exploit opportunities for growth. The board looks forward to ayear of strong financial performance and strategic progress. CHIEF EXECUTIVE'S REVIEW A Business Poised For Growth For six years, UBC has carefully balanced investment in innovative digital radioservices whilst maintaining a strong core business of programme supply andadvertising sales. This combination, with support from our shareholders, hasallowed us to develop a leading position in the rapidly emerging digital radiomarket with strong content focused businesses and, for the first time this year,significant international software revenues. This time last year, UBC embarked on its most ambitious and potentially valuabledigital development: the creation of a service that will allow listeners topurchase music directly from radio stations. This service, branded today as 'Cliq', uses radio's strength as a prompt to purchase to create new revenuestreams for the industry. In the end, this development has had to take place against a backdrop of theworst advertising climate in the UK radio industry for many years. Revenuesand profits have fallen across the board and our core businesses have sufferedin line with the industry as a whole. UBC revenues for 2007 were down 9.3% onthe previous year at £17.63 million (2006: £19.44 million). However, because ofa strong balance sheet with no debt, we have been able to maintain ourdevelopment throughout this period. We have pushed ahead with Cliq, startinglive transmission in London, signing up stations to the service and ensuringthat devices will be available for our launch. In our core business, we have launched a new national commercial news servicewith BSkyB's award winning Sky News to add to our existing commercial networkservices of Traffic and Travel and Entertainment News. These three services nowposition UBC as the leading provider of network services in the UK and mean wecan offer advertisers an unrivalled airtime package with access to 56% of theUK's commercial radio audience. We have also successfully developed new onlinecontent revenues to add to a substantial business from the BBC and havesuccessfully moved our radio production operations into television. The difficult climate has also provided opportunity for focus. We havedetermined that UBC should concentrate on its service businesses. After theyear-end, we successfully disposed of our Classic Gold broadcast business toGCap, subject to approval from Ofcom. We emerge from a difficult year in good shape and with a recovering advertisingmarket benefiting our enlarged network business that is showing strong growth inthe first quarter of the new financial year. Advertising revenues in the firstquarter of the new financial year are 21% ahead of the same period last year.International software sales are continuing to develop and Cliq is poised tolaunch in the UK later this year. The Advertising Recovery Despite the recent falls in radio's share of the advertising market, thefundamental strengths of radio advertising remain compelling and consequently wecan expect there will be a recovery in both the value of radio advertising andradio's share of the advertising market in the future as advertisers becomeaccustomed to a fragmented market place. In this climate it is likely thatnetwork services, with their ability to offer large editorially focused nationalaudiences, will see disproportionate growth. UBC offers the radio industry three 'must-have' radio programmes, in the form ofNetwork Drive, Entertainment News and Sky News Radio. The attraction of thenetworked business model, in which UBC supplies programming to radio stationsfree of charge in return for advertising space, is an ideal business solutionfor an industry experiencing declining revenues and increasing pressure onmargins. The appeal of networked programmes is demonstrated by the fact thatUBC now supplies all but one of the main radio groups in the UK with one or moreof the programmes. The exception is GCap, who introduced a new inventory policyduring the year and removed the former GWR stations from our networks. We announced a number of contract wins for Sky News Radio - our newest networkedprogramme - during the year and expect further growth from the network ofstations in the year ahead. Revenues from our networked programming business declined 18.3% in the year to£9.00 million (2006: £11.01 million), reflecting a sharp deterioration intrading in the third quarter. A recovery in radio advertising in the finalquarter has continued strongly into the new financial year. If the currentrecovery in radio advertising is maintained, we are confident that the Groupwill once again deliver revenue growth in the forthcoming year. New Digital Content Revenues As well as content supply through our advertiser-funded commercial radionetworks, UBC has always had a strong supply business to the BBC through its twoproduction companies, Unique in London and Smooth Operations in Manchester andCambridge. These businesses too have been changing to reflect a new and dynamicmarket for digital audio content. We recognise that radio revenues from the BBC are likely to be at best flat inthe coming years following the BBC's lower than inflation licence feesettlement. Consequently, both our production operations have successfullydeveloped new revenue streams which we anticipate providing growth in the comingyear. The top national media brands are increasingly flexible about what platformsthey use to reach their audiences, with more and more of the UK nationalnewspapers and magazines investing in broadcasting on-demand content, such aspodcasts. Although the BBC remains the largest customer of our digital contentbusiness, nearly 40% of the programming produced by UBC's London-basedproduction business was in supplying audio podcasts to a growing number ofcustomers, including News International, The Guardian, Telegraph Media Group,Channel 4 and Marie Claire. In the case of Marie Claire, we are also producing streamed IPTV video contentfor their websites and we believe the time is now right for both our productioncompanies to increase their television production activities. The advance ofdigital content supply has radically changed the video production industry, haslowered the barriers to entry which previously existed and has created aproduction process requiring less manpower and much more akin to the radioproduction model already familiar to UBC. Our Manchester-based productionbusiness, Smooth Operations has been commissioned by Microsoft to providestreamed video content for the forthcoming Live Earth music event and will alsobe producing four television programmes for BBC 4 on this month's Cambridge FolkFestival. Following the closure last year of a studio operation largely servicing externalclients, UBC's studio business has been incorporated in the Group's digitalcontent business, reflecting its predominant role as a provider of studioservices to the Group. In the year to 31 March 2007 UBC's digital contentbusiness, including studios, reported turnover in the period of £3.19 million(2006: £3.5 million). Important re-commissions for both Unique and SmoothOperations provide the business with a good foundation for the year ahead. An International Digital Software Business UBC is fast establishing itself as a leading international supplier of digitalsoftware products, with a growing presence in a number of key overseas markets.UBC has two main software products: 'ManDLS', which is used to manage the textdisplay (Dynamic Label Segment) element of a digital radio service; and themanagement system used to operate electronic programme guide (EPG) servicesbroadcasting to EPG-enabled digital devices. In the year to 31 March 2007 UBCreported revenues from sales of its software services up 31.5% at £1.06 million(2006: £806,000). Although originally developed for application in the UK, the technical lead thatUBC has in this area has meant it has been able to adapt its software to meetmany of the other digital radio standards around the world. During the year wewon new contracts for our software products in the emerging North American andAustralian digital radio markets. In Australia, Commercial Radio Australia, theorganisation leading commercial radio's digital development strategy, announcedplans to use UBC's EPG service during its digital radio trials in Sydney. Inaddition, UBC secured significant software contracts covering the United Statesand Canada that, if rolled out across both markets, have the potential todeliver future revenue growth. Cliq - An Innovative Technology for Music Radio One of radio's greatest strengths is that it is the place where consumersdiscover music. Various studies in the last few years have estimated thatbetween 60-65 % music buyers are prompted by radio to make their purchase. Despite the rapid increase in ownership of portable digital music players, thenumber of people who listen to music on the radio is not in decline, indicatingthat in a world where digital music is becoming increasingly important, radiohas a key role to play. Each listener may well listen to his or her favouriteradio station for ten or more hours a week and each month will listen tohundreds of different music tracks. At the same time, music buyers in the UKspend on average over £90 each year on music - whether online or from the HighStreet. Cliq allows radio stations to offer the music they play to listeners for instantpurchase. In creating the service, UBC has not only developed proprietarytechnology, but has brought together the major radio companies, recordcompanies, digital music suppliers and hardware manufacturers. This combinationdelivers a one-stop or 'One Cliq' service to the listener and provides the radioindustry with a valuable additional revenue stream. A track listing of the songs as they are played appears on the screen ofsuitably equipped digital radios, sent over the radio spectrum together with allthe information necessary to make the song purchase from UBC's digital musicsupplier. Simply highlighting the track, with one 'Cliq' the listener will beable to purchase that song with their pre-paid account debited and the songinstantly e-mailed to them or made available on the portable device they areusing to listen to their favourite station. UBC has spent the last year developing and testing the technology after veryencouraging consumer trials. During the year we invested a total of £1.6 millionon the music downloading service and since March it has been transmitting as alive service 24 hours a day on Heart in London. At present the only devicecapable of receiving the service is the 'Lobster' digital radio equipped mobilephone. The commercial success of music downloading relies, however, on the wideravailability of digital radios capable of operating the service. Today, UBC hasannounced an agreement with Imagination Technologies to incorporate Cliq on awide variety of its future digital radios, including a new generation of radiosthat will be capable to being connected to the Internet via WiFi UBC stands poised, ready to capitalise on the excellent progress of the lasttwelve months. Sale of Classic Gold Digital Classic Gold Digital delivered a satisfactory performance during the year, withrevenues 6.3% ahead at £4.38 million (2006: £4.12 million), helped by a buoyantsponsorship and promotions market. For some years it has been clear that thelong-term prospects for the Classic Gold network have been held back by thesteady loss of AM listeners to the service. Although the impact of this has beenmitigated partly by growing digital listening, the profitability of the businesshas come under increasing pressure. With UBC focusing on providing services tothe radio industry, the ownership of radio licences and operation of radiostations was viewed by the Board as a non-core activity. Accordingly, since theyear-end the board has secured a £3.95 million cash offer from GCap Media forits 80% shareholding in the Classic Gold network, subject to approval of thedisposal from Ofcom. It is the Board's intention that the proceeds from the salewill be used to provide additional resources for UBC to invest in the launch ofthe Group's music downloading service. Outlook The last year has been the most exciting and challenging in the Company'shistory. We are now poised to deliver on much of what we have strived to developin the past few years. Our focus for this year remains firmly on our strengthsas a radio services company and I believe we have put in place the buildingblocks that will deliver real progress in the months ahead. We are committed toour networked programming business delivering growth in the year ahead and thesuccessful launch of our music downloading service. I believe the future outlookfor UBC Media Group remains good. FINANCIAL REVIEW In the year to 31 March 2007 Group revenues declined 9.31% to £17.63 million(2006: £19.44 million). Revenues by operation for the period were as follows: Broadcast Division: £16.57 million (2006: £18.63 million) -11.1% - Networked Programming: £9.00 million (2006: £11.01 million) -18.3% - Digital Content: £3.19 million (2006: £3.5 million) -8.9% - Digital Stations: £4.38 million (2006: £4.12 million) +6.3% Digital Division: £1.06 million (2006: £806,000) +31.51% - Digital Software: £1.06 million (2006: £806,000) +31.51% The decline in revenues from the Networked Programming business, down 18.3% at£9.00 million (2006: £11.01 million), reflects the impact of a sharp downturn inradio advertising experienced in the third quarter. Revenues were broadly flatfor the first half of the year and a recovery in radio advertising in the finalquarter failed to make up the ground lost in poor third quarter trading. Revenues from our Digital Content business, which includes UBC's programmeproduction businesses, were 8.9% down at £3.19 million (2006: £3.5 million). Thefall in revenues reflects the closure in the previous year of a studiooperation. Our regional and specialist music business has continued to performwell and the Digital Content business reported increasing revenues from thesupply of podcasts and other audio content to a number of new entrants to theaudio broadcasting sector. Revenues from the Classic Gold Digital network of radio stations were up 6.3% onthe previous year at £4.38 million (2006: £4.12 million), reflecting a stronglocal sponsorship and promotions market and stable audiences for much of theyear. Since the year-end UBC has sold its 80% interest in the Classic Goldnetwork of stations for a cash consideration of £3.95 million, subject to Ofcomapproval. UBC's Digital Software operation delivered revenues up 31.51% year-on-year at£1.06 million (2006: £806,000), reflecting strong growth from the sale of theGroup's digital software services in North America. (Year ended 31 March) 2007 2006 (£'000) (£'000) Turnover 17,628 19,435Gross Profit 4,667 5,083Administrative Expenses 3,569 3,519Amortisation of goodwill and intangible assets (543) (542)Digital Licence Costs (1,001) (1,145)Music Downloading Costs* (511) (70)Impairment of fixed asset investment (306)Operating Loss (1,263) (193) * Investment in Music Downloading in 2007 was £1,622,000 (2006: £396,000),£1,111,000 (2006: £326,000) of which was capitalised. Included in these costsis an allocation of the salaries of the Chief Executive and the ManagingDirector, Digital Division together with certain data licence fees. UBC reported a loss on ordinary activities before taxation in the year of £1.69million (2006: £234,000 loss). Investment in Digital Radio In the year to 31 March 2007 UBC invested the following amounts in thedevelopment of digital music downloading and digital radio: - Investment of £1.62 million (2006: £396,000) in Digital Music Downloading,of which £1.11 million (2006: £326,000) was capitalised; - Expenditure on Classic Gold Digital licences of £1,001,000 (2006:£977,000), relating to the transmission of Classic Gold Digital on digitalmultiplexes covering Northern England and London; - Joint venture funding of £642,000 (2005: £503,000) in Oneword Radio.; UBC expects its investment in the development of its music downloading serviceto increase substantially in the forthcoming year as a result of its plans tolaunch a full commercial music downloading service using digital radio withinthe next twelve months. Fundraising In June 2006 UBC raised £3 million before expenses through a placing of15,000,000 new Ordinary Shares at 20p each. The shares were placed with existingand new institutional investors and certain directors and the proceeds used tofurther the Company's investment in its digital music downloading technology. Disposal of Shareholding in Digital News Network In July 2006 UBC received cash proceeds of £66,000 from the sale of its 28.05%shareholding in the digital radio station Digital News Network. UBC's investmentin Digital News Network was a non-core investment. Smooth Operations - Deferred Consideration The acquisition of the business of Smooth Operations in August 2004 included amaximum deferred consideration of £1.9 million depending upon the profit growthachieved by Smooth Operations in each of the two years following theacquisition. The final tranche of the deferred consideration of £1,235,000became payable in September 2006, comprising a cash payment of £741,000 and theissue of approximately 2.44 million new UBC ordinary shares. Bank Facility Since 31 March 2007 the Group has renewed an unutilised bank facility withBarclays Bank of £2.0 million. Cash Flow During the year, UBC had a cash out flow from operating activities beforeworking capital movements of £260,000 (2006: £468,000 inflow). Including workingcapital movements, UBC had a cash out flow from operating activities of £3.16million (2006: £1.31 million inflow). Cash At 31 March 2007, UBC had cash in the bank of £1.93 million (2006: £4.68million). Loss per Share In the year to 31 March 2007 UBC reported EPS of -0.83p (2006: -0.07p). Dividend The Board is not recommending the payment of a dividend. Post Balance Sheet Event Subsequent to the year-end UBC announced the sale of the 18 AM and associateddigital radio licences that comprise the Classic Gold network to GCap Media plc,subject to the consent of Ofcom. UBC will receive cash proceeds from the sale of£3.95 million. Notes The financial information contained in this Preliminary Announcement does notconstitute the Company's statutory accounts for the years ended 31 March 2007and 2006. The financial information for the year ended 31 March 2006 is derivedfrom the statutory accounts for that year that have been delivered to theRegistrar of Companies. The auditors reported on those accounts; their reportwas unqualified and did not contain a statement under s237(2) or (3) CompaniesAct 1985. The statutory accounts for the year ended 31 March 2007 will be finalised on thebasis of the financial information presented by the directors in thispreliminary announcement and will be delivered to the Registrar of Companiesfollowing the company's annual general meeting. Copies will be available fromthe Company's registered office at 50 Lisson Street, London NW1 5DF. The preliminary announcement is prepared on the basis of the accounting policiesof the financial statements for the year ended 31 March 2006. Whilst the financial information included in this preliminary announcement hasbeen computed in accordance with United Kingdom Generally Accepted AccountingPractice (UK GAAP), this announcement does not itself contain sufficientinformation to comply with UK GAAP. The Company expects to publish fullfinancial statements that comply with UK GAAP in due course. CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 MARCH 2007 2006 £'000 £'000 Turnover (including share of joint ventures) 17,664 19,484Less: Share of turnover of joint ventures (36) (49)Group turnover 17,628 19,435Cost of sales (12,961) (14,352)Gross profit 4,667 5,083 Administrative expenses before digital licence costs, development (3,570) (3,519)costs, goodwill amortisation and impairment of fixed assetinvestmentDigital licence costs (1,001) (1,145)Costs associated with development of music downloading (511) (70)Goodwill amortisation (543) (542)Impairment of fixed asset investment (306) -Total administrative expenses (5,931) (5,276) Operating loss (1,264) (193)Share of operating loss in joint ventures (638) (522)Total operating loss: Group and share of joint ventures (1,902) (715)Exceptional non-operating items 112 363Interest receivable 105 119Interest payable - (1)Loss on ordinary activities before taxation (1,685) (234)Tax credit/(charge) 28 (10)Loss on ordinary activities after taxation (1,657) (244)Equity minority interest 112 117Retained loss for the financial year (1,545) (127) Loss per share Basic pence (0.83) (0.07) Diluted pence (0.83) (0.07) CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 31 MARCH 2007 2006 £'000 £'000(Loss)/profit for the financial year Group (907) 395 Joint ventures (638) (522)Retained loss for the financial year (1,545) (127) Release of merger reserve - 670Total recognised (losses) and gains for the year (1,545) 543 All activities relate to continuing operations. CONSOLIDATED BALANCE SHEETAS AT 31 MARCH 2007 2006Group £'000 £'000Fixed assetsGoodwill and intangible assets 3,788 3,220Fixed asset investments - 306Tangible assets 272 189 4,060 3,715Current assetsWork in progress 45 36Debtors 5,314 3,459Cash at bank and in hand 1,933 4,677 7,292 8,172Creditors: amounts falling due within one year (3,729) (5,529)Net current assets 3,563 2,643Total assets less current liabilities 7,623 6,358Creditors: amounts falling due after more than one year (337) (337)Provisions for liabilities (28) (78)Net assets 7,258 5,943 Capital and reservesCalled up share capital 1,927 1,748Shares to be issued - 494Share premium account 18,676 15,389Other reserves (801) (801)Profit and loss account (11,940) (10,395)Shareholders' funds 7,862 6,435Equity minority interest (604) (492)Capital employed 7,258 5,943 CONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 31 MARCH 2007 2006 £'000 £'000Net cash (outflow)/inflow from operating activities (3,159) 1,312Returns on investments and servicing of financeInterest received 105 119Interest paid - (1)Net cash inflow from returns on investment and servicing of finance 105 118 TaxationUK Corporation tax received 3 8Capital expenditure and financial investmentPurchase of tangible fixed assets (237) (136)Purchase of intangible fixed assets (1,111) (326)Sale of tangible fixed assets - 11Loans to joint ventures (642) (511)Net cash outflow from capital expenditure and financial investment (1,990) (962) Acquisitions and disposalsPurchase of subsidiary undertakings (741) (399)Sale of subsidiary undertakings - 932Sale of interest in joint venture 66 -Net overdrafts disposed with subsidiary undertakings - 39Net cash (outflow)/inflow from acquisitions and disposals (675) 572Net cash (outflow)/inflow before financing (5,716) 1,048 FinancingIssue of ordinary share capital 3,031 96(Expense)/refund of share issue (59) 35Net cash inflow from financing 2,972 131(Decrease)/increase in cash in the year (2,744) 1,179Cash balances at the beginning of the year 4,677 3,498Cash balances at the end of the year 1,933 4,677 Represented byCash and bank balances 1,933 4,677 RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES 2007 2006 £'000 £'000Operating loss (1,264) (193)Loss/(profit) on sale of fixed assets 8 (6)Amortisation of intangible assets 12 11Amortisation of goodwill 531 531Impairment of fixed asset investment 306 -Depreciation of tangible fixed assets 146 125Increase in work in progress (9) -Increase in debtors (1,842) (255)(Decrease)/increase in creditors (1,047) 1,099Net cash (outflow)/inflow from operating activities (3,159) 1,312 This information is provided by RNS The company news service from the London Stock Exchange