7DIG.L Regulatory News (7DIG)

4 Dec 2007 07:02

UBC Media Group PLC04 December 2007 4 December 2007 UBC Media Group plc INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2007 Financial Highlights UBC Media (UBC:L) has made a positive start to the new financial year. Our corebusinesses have continued to perform strongly and we have launched Cliq(TM) - ourinnovative music downloading service. The main financial highlights for the six months are: - Group turnover up 9.7% at £7.57 million (2006: £6.90 million); - Operating profit before investment in Cliq(TM) up 20.9% at £434,000 (2006: £359,000); - Investment in Cliq(TM) of £909,000 (2006: £552,000), of which £472,000 (2006: £470,000) was capitalised; - Operating loss in the period of -£3,000 (2006: £277,000); - Profit after taxation of £351,000 (2006: -£233,000); - Revenues from Commercial Radio in the Networked Programming business up 13.1% at £5.44 million (2006: £4.81 million); - Revenues from other production in the Digital Content business up 17.5% at £1.68 million (2006: £1.43 million); - Cash in the bank at 30 September 2007 of £5.0 million (2006: £4.2 million). Strategic Highlights - Consumer launch of Cliq(TM) on Heart, Galaxy, Smooth, Real, Magic, Heat and Century. Development of JAVA application for Cliq(TM) - enabling Cliq(TM) to be received by 85% of mobile phones; - Agreement with Imagination Technologies to incorporate Cliq(TM) in PURE's next generation DAB and Internet digital radios; - Recovery in radio advertising market continues. UBC's Commercial Radio Networked Programme business grows ahead of the market with ad sales up 10%, compared with an industry average of 5.5%; - Growth in digital content businesses comes both from new BBC contracts and from significant non-BBC growth. BBC now represents only 66% of margin; - Smooth Operations wins first major non-BBC TV and interactive commission; - Sale of Classic Gold Digital network completed in the period for a cash consideration of £3.95 million. Cash proceeds from sale of Classic Gold Digital to be invested in Cliq(TM). Simon Cole, CEO of UBC, commented: "UBC has delivered on its pledge to become acompany focused on services to the radio industry rather than licence ownership.In this period, we have managed sustained growth in our core programme supplybusinesses both to the BBC and the commercial network, whilst preparing for themost important product launch in the Company's history. I am thrilled today tobe unveiling our Cliq application which, with the support of the major UK radiogroups, will begin the important process of turning radio listeners intocustomers." There will be a presentation to analysts and investors at 8.30am GMT thismorning at Shoreditch House, Ebor Street, Shoreditch, East London E1 6AW. Thepresentation will be available on the UBC website at www.ubcmedia.com Enquiries: Simon Cole, CEO, UBC Media Group plc Tel: 020 7453 1600 Diane Barnes or Verity Williams, Portland for UBC Tel: 020 7404 5344 Sarah Jacobs, Seymour Pierce for UBC Tel: 020 7107 8000 OPERATING REVIEW BY BUSINESS UBC Media Group has adopted IFRS and this Interim Statement is prepared inaccordance with the provisions of IFRS. Strong performance by the core businesses continue to underpin the Group'sdevelopment strategy UBC Media Group has delivered a positive set of results for the six month periodto 30 September 2007, with turnover from continuing activities up 9.7% at £7.57million (2006: £6.90 million). The core businesses benefited in particular froma moderate recovery in radio advertising, while our digital content businessescontinue to benefit from growth both in commissions from the BBC as well as inbreaking new ground in online and TV content. Consumer Launch of Cliq(TM) This interim results announcement coincides with the commercial launch ofCliq(TM) - the innovative service UBC has developed which allows consumers toinstantly buy the music they like as they hear it on the radio. In its launchversion Cliq(TM) is available on any 'JAVA' capable mobile phone - which is 85%of the current handset market. Cliq(TM) is initially broadcasting on Heart,Galaxy, Smooth, Real, Magic, Heat and Century, reaching approximately 30% ofradio listening in London, and available in every major UK radio market fromlaunch. As the radio industry adapts to the new digital economies, we believe that Cliq(TM) has a vital role to play in converting passive listeners to active customers. Although the application will concentrate initially on selling music to the 31 million people who listen to commercial radio every week, it is essentially an e-commerce application which will be used in future by stations to create direct retail relationships with their listeners. In an important development, Imagination Technologies, the leading producer ofDAB digital radios, has announced plans to launch a new generation of PUREdigital radios capable of operating the Cliq(TM) service in 2008. We expect anumber of other major manufacturers of DAB radios will follow suit with thelaunch in the next 12-18 months of products that are compatible with Cliq(TM),with the expansion of the full service onto mobile telephony devices followingin 2009. The consumer launch of Cliq(TM) is the most ambitious investment yet undertaken byUBC. It remains our view that in the first 12 months consumer demand for Cliq(TM)will grow only slowly, and that significant growth will occur from late 2008onwards as the number of devices incorporating the service as standardincreases. We expect to be able to provide the first significant update on theperformance of Cliq(TM) after 6 months trading. Continuing recovery in radio advertising 2007 2006 % £m £m change Networked programming 5.44 4.81 +13.1 In the first six months of the new financial year UBC's networked programmingbusiness reported revenues 13.1% ahead at £5.44 million (2006: £4.81 million).The first six months of the new financial year saw a continuing recovery inradio advertising from the depressed levels seen in the final quarter of 2006.Although this recovery is uneven and visibility remains limited, UBC remainsconfident that in its networked programming business it has a model which willbenefit from the increasingly fragmented media marketplace. UBC's networkpackages now offer advertisers 60% of the UK's commercial radio audience in aweek. Sponsorship & Promotions revenues have also been strong in the period andmajor contract wins include the Department of Health's 'Big Quit' radiocampaign. Growth of UBC's digital content business 2007 2006 % £m £m change Digital content 1.68 1.43 +17.5 UBC's digital content business reported revenues up 17.5% in the six months to30 September 2007 at £1.68 million (£1.43 million). Both of the Group's digitalcontent businesses performed well in the period, as they continue to benefitfrom the Group's strategy of broadening their activities into areas other thanradio. Smooth Operations, UBC's regional production business, delivered itsfirst major television commission in the period; while our London-basedproduction business, Unique, continues to extend its network of customers, andnow generates a third of its business from non-BBC sources. Investing in an international radio software business 2007 2006 % £m £m change Digital software 0.46 0.66 -30.3 In the six months to 30 September 2006 UBC reported revenues of £458,000 (2006:£659,000). UBC's Digital Software business continues to benefit from its maincustomer, XM Radio, in the United States. In the period UBC has reduced theamount of small value, lower margin contract work it undertakes and as a resultmargins have improved at the expense of turnover. Discontinued operations UBC's results for the six months to 30 September 2007 include a three monthcontribution from Classic Gold Digital, covering the period prior to the sale ofthe Classic Gold Digital network in June 2007. Classic Gold Digital deliveredturnover in the period of £1.02 million (£2.16 million in the full six months to30 September 2006). UBC reported a profit from discontinued operations of£674,000. The sale of Classic Gold Digital reflected the Group's strategy offocusing on providing services to the radio industry and withdrawing from theownership of radio licences and operation of radio stations. UBC received cashproceeds of £3.95 million from the sale of its 80% shareholding in the ClassicGold Digital network and the proceeds will be invested in the launch of theGroup's music downloading service. Investing in Multiplex ownership UBC is a member of the 4 Digital Group consortium led by Channel 4 which in July2007 was awarded the second national DAB multiplex. UBC's investment in 4Digital Group fits well with the Group's strategy of focusing on the supply ofservices to the radio industry. UBC's technical expertise and track record inthe supply of software products to the radio industry will be a valuable elementof the services offered by the multiplex. UBC is also a shareholder in the MXRconsortium which operates regional digital radio multiplexes covering North Eastand North West England, the West Midlands and South Wales and the SevernEstuary. Board of Directors Jennifer Donald has announced her intention to resign as Finance Director of UBCMedia Group in order to fulfil a longstanding ambition to sail around the world.Gavin Rigby, Financial Controller of UBC for the last four years will becomeUBC's acting Finance Director while a permanent replacement is sought. JohnQuinn has been appointed Chief Operating Officer, overseeing the Company's dayto day business and allowing Chief Executive Simon Cole to focus on theimportant launch of the Cliq(TM) business. Matthew Honey is on sabbatical and hasstood down from the board. Prospects The full consumer launch of Cliq(TM) is a key milestone in the Company's history.The creation of a service that allows listeners to purchase music directly fromthe radio is the most ambitious investment undertaken by the Company. We haveinvested heavily in the last couple of years developing, testing and refiningthe service and are excited about the prospects for this new business. However,we expect it will be some months before it is possible to accurately gauge itssuccess with consumers. In the meantime, UBC's core businesses continue to tradestrongly. Advertising revenues in October and November outperformed the industryand these signs of improved trading conditions give the Board confidence of theGroup's performance in the full year. FINANCIAL REVIEW For the financial year ended 31 March 2008 UBC Media Group is required to reportits results under International Financial Reporting Standards ("IFRS").Accordingly, the results reported in this announcement have been prepared inaccordance with the recognition and measurement bases of IFRS and thecomparative figures for 2007 have been restated in accordance with the relevanttransitional rules. Investment in Digital Music Downloading In the six-months to 30 September 2007 UBC invested £909,000 (2006: £552,000) inthe development of Cliq(TM), its digital music downloading service, of which£472,000 (2006: £470,000) was capitalised. Sale of Classic Gold Digital In June 2007 UBC completed the sale of the 18 AM licences and associated digitalradio licences comprising the Classic Gold Digital network to GCap Media plc.UBC received cash proceeds from the sale of £3.95 million and reported a profiton the disposal of £674,000. Expenditure on Digital Radio In the six-months to 30 September 2007 UBC spent £348,000 (2006: £494,000) ontransmission of Classic Gold Digital on digital multiplexes, primarily coveringNorthern England. In the period to 30 September 2007 the Group has provided atotal of £2.5 million, representing the estimated discounted future cost oftransmitting on the digital multiplexes which are no longer required followingthe sale of the Classic Gold Digital network. In addition, UBC made jointventure investment of £314,000 (2006: £321,000) in Oneword Radio. Investment in 4 Digital Group UBC is a shareholder in the 4 Digital Group consortium, which in July 2007 wasawarded the second national DAB multiplex. In the six months to 30 September2007 UBC invested £150,000 in 4 Digital Group. UBC is committed to investing amaximum of a further £250,000 in the launch of the second national DABmultiplex. Cash Flow In the six-months to 30 September 2007 UBC had a cash inflow from operations of£420,000 (2006: -£2.32 million). Cash At 30 September 2007, UBC had cash in the bank of £5.0 million (2006: £4.2million). Loss per Share In the six months to 30 September 2007 UBC reported basic and diluted earningsper share of -0.17p (2006: 0.02p) from continuing operations and basic anddiluted earnings per share of 0.18p (2006: -0.13p) from continuing and discontinued operations. Dividend The Board is not recommending the payment of an interim dividend. CONSOLIDATED INCOME STATEMENTFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 Unaudited Unaudited Audited Six months Six months Full year ended ended ended 30-Sep-07 30-Sep-06 31-Mar-07 £'000 £'000 £'000Continuing operationsRevenue 7,571 6,897 13,246Cost of sales -5,735 -5,016 -9,810Gross profit 1,836 1,881 3,436 Administrative expenses before impairment of fixed asset -1,402 -1,522 -2,928investment and development costsImpairment of fixed asset investment - - -306Costs associated with development of music downloading -437 -82 -511Total administrative expenses -1,839 -1,604 -3,745Operating (loss)/profit -3 277 -309Investment revenues 68 52 102Finance costs - -9 -18Other gains and losses - 66 112Share of results of joint ventures -314 -283 -610(Loss)/profit before tax -249 103 -723Tax -74 -74 -139(Loss)/profit for the period from continuing operations -323 29 -862Discontinued operations:Profit/(loss) for the period from discontinued operations 674 -262 -381Profit/(loss) for the period 351 -233 -1,243 Earnings per shareFrom continuing operationsBasic -0.17 0.02 -0.46Diluted (0.17) 0.02 (0.46)From continuing and discontinued operationsBasic 0.18 ( 0.13) ( 0.67)Diluted 0.18 (0.13) (0.67) CONSOLIDATED BALANCE SHEETAS AT 30 SEPTEMBER 2007 Unaudited Unaudited Audited Six months ended Six months ended Full year ended 30-Sep-07 30-Sep-06 31-Mar-07 £'000 £'000 £'000ASSETSNon-current assetsGoodwill 2,834 2,834 2,834Intangible assets 1,920 867 1,452Property plant and equipment 235 252 265Interest in joint ventures - 306 -Available-for-sale financial asset 150 - - 5,139 4,259 4,551Current assetsInventory: work in progress 47 17 45Trade and other receivables 3,709 5,024 5,314Assets held for sale - - 40Cash and cash equivalents 5,003 4,218 1,933 8,759 9,259 7,332Total assets 13,898 13,518 11,883 LIABILITIESCurrent liabilitiesTrade and other payables -3,104 -4,475 -3,786Liabilities held for sale - -232 -241Share of net liabilities of joint - -49 -ventures -3,104 -4,756 -4,027Net current assets 5,655 4,503 3,305Non-current liabilitiesDeferred tax liability -223 -74 -149Provisions -2,513 - - -2,736 -74 -149Total liabilities -5,840 -4,830 -4,176Net assets 8,058 8,688 7,707 EQUITYShare capital 1,927 1,898 1,927Shares to be issued - 494 -Share premium account 18,676 18,182 18,676Other reserves -801 -801 -801Accumulated losses -11,744 -11,085 -12,095Total equity 8,058 8,688 7,707 CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 Unaudited Unaudited Audited Six months ended Six months ended Year ended 30-Sep-07 30-Sep-06 31-Mar-07 £'000 £'000 £'000Cash flows from operating activitiesCash from/(used in) operations 420 -2,318 -2,765Cash used in discontinued operations -245 -256 -373Tax paid - - -15Net cash from/(used in) operating activities 175 -2,574 -3,153 Investing activitiesInterest received 38 50 102Proceeds from disposal of trade and assets of subsidiary 3,796 - -Investment in multiplex -150 - -Disposal of interest in joint venture - 66 66Distribution received from trading investment 30 - -Investment in joint venture -316 -311 -642Deferred consideration on prior period acquisition - - -741Purchase of property, plant and equipment -31 -163 -237Investment in intangible assets -472 -470 -1,111Net cash from/(used in) investing activities 2,895 -828 -2,563 Financing activitiesProceeds on issue of ordinary shares - 2,943 2,972Net cash from financing activities - 2,943 2,972 Net increase/(decrease) in cash and cash equivalents 3,070 -459 -2,744 Cash and cash equivalents at beginning of period 1,933 4,677 4,677 Cash and cash equivalents at end of period 5,003 4,218 1,933 Cash and cash equivalents 5,003 4,218 1,933Cash and cash equivalents at end of period 5,003 4,218 1,933 UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 Share Shares to Share Other Accumulated Total Minority Total Capital be issued premium reserves losses interest account £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2006 as 1,748 494 15,389 -801 -10,395 6,435 -492 5,943previously reportedChanges in -457 -457 492 35accounting policyrelating to firsttime adoption ofIFRSAt 1 April 2006 as 1,748 494 15,389 -801 -10,852 5,978 - 5,978restatedNew share capital 150 2,793 2,943 2,943subscribedLoss for the period -233 -233 -233At 30 September 2006 1,898 494 18,182 -801 -11,085 8,688 - 8,688as restatedNew share capital 29 -494 494 29 29subscribedLoss for the period -1,010 -1,010 -1,010At 31 March 2007 as 1,927 - 18,676 -801 -12,095 7,707 - 7,707restatedProfit for the 351 351 351periodAt 30 September 2007 1,927 - 18,676 -801 -11,744 8,058 - 8,058 NOTES TO THE UNAUDITED INTERIM STATEMENTFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 1. Presentation of financial information and accounting policies The Group prepared its consolidated financial statements under UK GAAP up to andincluding the year ended 31 March 2007. From April 2007 onwards the Group isrequired to prepare its consolidated financial statements in accordance withInternational Accounting Standards ("IAS") and International Financial ReportingStandards ("IFRS") in accordance with European Union regulations. These results for the six months ended 30 September 2007 are the Group's firstinterim results reported under IFRS. The first annual report under IFRS will befor the year ending 31 March 2008. This document includes an explanation of howthe Group's reported performance and financial position are impacted by thischange. As the Group's interim results have been prepared under IFRS, theaccounting policies applied the interim results are not the same as thosepresented in the 2007 annual report. The Group's revised accounting policesunder IFRS are presented below. The comparative information contained withinthis document has been restated under these new accounting policies andreconciliations to the UK GAAP profits as previously reported are provided inAppendix 1. Reconciliations explaining how the Group's consolidated statementsof equity have been restated are also included in Appendix 1. The Group has taken advantage of the exemption available under IFRS 2 sharebased payments and IFRS 3 business combinations and as such no adjustmentsrelating to these standards have been included in the restated comparatives forthe six months ended 30 September 2007. For the interim results for the sixmonths ended 30 September 2007, a restatement of the opening balance sheet at 1 April 2006 has been made to align the Group's 2007 opening position, resultingin a decrease in equity of £457,000. Principal accounting policies The principal accounting policies set out below have been consistently appliedto all the periods presented in this interim statement. Basis of preparation The interim statement has been prepared in accordance with the recognition andmeasure basis of IFRS for the first time. The disclosures required by IFRS 1 inrespect of the transition from UK GAAP to IFRS are provided for in these notes. Basis of consolidation (a) Subsidiaries The Group financial statements consolidate the financial statements of theCompany and its subsidiary undertakings. Intra-group sales and profits areeliminated on consolidation. Where a consolidated company is less than 100%owned by the Group, the minority interest share of its results and net assetsare recognised at each reporting date. Where a company has net liabilities, noasset is recorded within minority interests unless the minority shareholder hasan obligation to make good its share of the net liabilities. As permitted by Section 230 of the Companies Act of 1985, a separate profit andloss account is not presented for UBC Media Group plc. (b) Joint Ventures Joint ventures are accounted for using the gross equity method from the date oftheir formation to the date of their sale. A fair value is attributed to theGroup's share of separable assets and liabilities acquired on the formation ofthe joint venture and any excess of consideration over this fair value isdisclosed in the balance sheet as goodwill. The Group's share of its jointventures' post-acquisition profits or losses is recognised in the incomestatement and as a movement in the Group's share of joint ventures' net assetsin the balance sheet. Its share of any post-acquisition movements in reservesis recognised directly in equity. Losses of the joint ventures in excess of theGroup's interest in those joint ventures are not recognised. Where a Groupcompany transacts with a joint venture of the Group, profits and losses areeliminated to the extent of the Group's interest in the relevant joint venture. Turnover Turnover represents amounts receivable for goods and services provided in thenormal course of business, and excludes intra-group sales, Value Added Tax andtrade discounts. Turnover comprises: - Sale of programmes and content: The value of goods and servicessupplied is recognised on delivery of content. Production costs are recognisedon the same date as the relevant turnover. - Sale of advertising time: Advertising revenue is recognised on thedate the relevant advertisement appears. Advertising revenue is recognised grosswhere the Group is exposed to the majority of the risks and rewards of thetransactions and, as such, acts as principal. Where the Group does not bear themajority of the risks and rewards of the transactions it assumes the role asagent and revenue is recognised net of associated costs. Goodwill Goodwill represents the excess of the fair value of the consideration given overthe fair values of the identifiable net assets acquired. Following initialrecognition, goodwill is carried at cost less any accumulated impairment losses.Goodwill recognised under UK GAAP prior to the date of transition to IFRS isstated at net book value as at that date. Goodwill is reviewed for impairment annually or more frequently if events orchanges in circumstances indicate that the carrying value may be impaired. Anyimpairment is recognised immediately in the income statement and is notsubsequently reversed. Deferred consideration on acquisitions is provided based on the directors' bestestimate of the liability at the balance sheet date. The liability is discountedand an imputed interest charge is included in the income statement. Changes toestimates of amounts payable are made to deferred consideration and goodwill. Intangible assets Acquired intangibles assets Intangible assets are included at cost less provision for impairment, ifapplicable. Amortisation is calculated to write off the cost of intangibleassets on a straight-line basis over its expected useful economic life. Theuseful economic life is estimated by reference to the period over which eachasset is estimated to be capable of earning revenue. Internally generated intangible assets An internally generated intangible asset arising from the Group's developmentactivities is recognised only if all of the following conditions are met: - an asset is created that can be identified; - it is probable that the asset created will generate future economicbenefits; and - the development cost of the asset can be measured reliably. Where these criteria are met, the development expenditure is capitalised atcost. Where they are not met development expenditure is recognised as anexpense in the period in which it is incurred. Expenditure on researchactivities is recognised as an expense in the period in which it is incurred. Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulateddepreciation. Depreciation is charged to write off the cost of these fixedassets to their residual value over their expected useful lives, using thestraight-line method, on the following basis: %Technical equipment 50Computer equipment 33 1/3Office equipment 20 The gain or loss arising on the disposal or retirement of an asset is determinedas the difference between the sales proceeds and the carrying amount of theasset and is recognised in the income statement. Work in progress Programmes in production are stated at the lower of cost and net realisablevalue and included in work in progress. Programme material is written off fullyon first transmission or sale. Expenditure relating to programmes that havebeen commissioned for production is carried forward at cost. Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand and deposits with anoriginal maturity of three months or less, net of overdrafts. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss, if any. Where the asset does not generate cashflows that are independent from other assets, the Group estimates therecoverable amount of the cash-generating unit to which the asset belongs. Anintangible asset with an indefinite useful life is tested for impairmentannually and more frequently if there is an indication that the asset may beimpaired. Provisions Provisions are recognised when the Group has a present obligation (legal orconstructive) as a result of a past event, it is probable that an outflow ofresources will be required to settle the obligation and a reliable estimate canbe made of the amount of the obligation. Where broadcasting licences remain unutilised by the Group and have not beensublet, provision is made in full for the outstanding lease payments togetherwith other outgoings for the remaining period of the licence. This provisiontakes into account any future sublet income reasonably expected. Future licencepayments are charged against this provision in the period in which they aremade. Share capital Ordinary shares are classified as equity instruments. Equity instruments issuedby the Company are recorded at the proceeds received, net of direct issue costs. Taxation Current tax is provided at amounts expected to be paid (or recovered) using thetax rates and laws that have been enacted or substantially enacted by thebalance sheet date. Deferred taxation arises as a liability or asset if transactions have occurredat the balance sheet date that give rise to an obligation to pay more taxationin future, or a right to pay less taxation in future. The deferred tax liabilitythat is the result of timing differences that are not permanent is recognised infull. Deferred tax assets are only recognised to the extent that, on the basisof all available evidence, they are recoverable. Deferred tax assets andliabilities recognised have not been discounted. Employee benefits The retirement benefits for employees are provided by a defined contributionscheme, which is funded by contributions by employees with a Group contributionfor certain employees only. The amount charged to the income statement is thecontribution payable in the year by Group companies. Leases Leases where the lessor retains substantially all the risks and benefits ofownership of the asset are classified as operating leases. Operating leaserentals are charged to the income statement over the lease term on astraight-line basis. Share-based payment transactions The Group has applied the requirements of IFRS 2 'Share-based payment'. Inaccordance with the transitional provisions, IFRS 2 has been applied to allgrants of equity instruments after 7 November 2002 that remained unvested as of1 January 2005. Certain employees receive remuneration in the form of share-based payments,including shares or rights over shares. The cost of equity-settled transactionswith employees is measured by reference to the fair value of the instrumentsconcerned at the date at which they are granted. In valuing equity-settledtransactions, no account is taken of any performance conditions, other thanconditions linked to the price of the shares of the Company. The cost of equity-settled transactions is recognised, together with acorresponding increase in equity, over the period in which the performanceconditions are fulfilled, ending on the vesting date on which the relevantemployees become fully entitled to the award. The cumulative expense recognisedfor equity-settled transactions at each reporting date until the vesting datereflects the extent to which the vesting period has expired and the number ofawards that, in the opinion of the directors at that date, will ultimately vest. The dilutive effect of outstanding options is reflected as additional sharedilution in the computation of diluted earnings per share. As a result of the grant of share options under an unapproved share optionscheme since 6 April 1999, the Group will be obliged to pay National Insurancecontributions on the difference between the market value of the underlyingshares and their exercise price when the options are exercised. The liabilityis estimated using the market value of the Company's shares at each balancesheet date. The movement in the provision is charged to the profit and lossaccount as a staff cost. Foreign currencies Transactions in foreign currencies are recorded at the exchange rate ruling atthe date of the transaction. Upon settlement, monetary assets and liabilitiesdenominated in foreign currencies are re-translated at the exchange-rate rulingon the settlement date. Monetary assets and liabilities denominated in foreigncurrencies at the year-end are re-translated at the exchange rate ruling at thebalance sheet date. Exchange differences arising from re-translation at thesettlement date or balance sheet date are included in the income statement. Non-monetary items carried at fair value that are denominated in foreigncurrencies are translated at the rates prevailing at the date when the fairvalue was determined. Non-monetary items that are measured in terms ofhistorical cost in a foreign currency are not converted. Segment reporting A business segment is a group of assets and operations engaged in providingservices that are subject to risks and returns that are different from those ofother business segments. A geographical segment is engaged in providing serviceswithin a particular economic environment that are subject to risks and returnsthat are different from those of segments operating in other economicenvironments. Segment result is segment-operating profit stated before theshare of results of joint ventures. Financial instruments Financial assets are accounted for on the trade date. Financial assets andfinancial liabilities principally include the following: Trade receivables Trade receivables do not carry interest and are stated at their fair value asreduced by appropriate allowances for estimated irrecoverable amounts. Available-for-sale financial assets Available-for-sale financial assets are initially measured at cost, includingtransaction costs and at subsequent reporting dates at fair value. Gains andlosses arising from changes in fair value are recognised directly in equity,until the security is disposed of or is determined to be impaired, at which timethe cumulative gain or loss previously reported in equity is included in the netprofit or loss for the period. Impairment losses recognised in profit or lossfor equity instruments classified as available-for-sale are not subsequentlyreversed through profit or loss. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Direct issue costs are amortised over theperiod of the loans and overdrafts to which they relate. Finance charges,including premiums payable on settlement or redemption are charged to the incomestatement as incurred using the effective interest method and are added to thecarrying value of the instrument to the extent that they are not settled in theperiod in which they arise. Trade payables Trade payables are not interest bearing and are stated at their fair value. Derivative financial instruments The Group does not use or trade in derivative financial instruments. Appendix 1 First-time adoption of International Financial Reporting Standards This interim statement has been prepared in accordance with the revisedaccounting policies set out in note 1 above. These policies have been revisedfrom those published in the Group's 2007 Report and Accounts following theGroup's transition to reporting under IFRS. The following notes andreconciliations provide an explanation of the impact of the transition to IFRS. First-time adoption of IFRS The rules for first-time adoption of IFRS are set out in IFRS 1 'First TimeAdoption of International Financial Reporting Standards'. The Group is requiredto establish its IFRS accounting policies which it will use to prepare itsresults for the year to 31 March 2008 and, in general, apply theseretrospectively to determine its opening balance sheet under IFRS at the date oftransition, 1 April 2006. The standard permits certain optional exemptions fromthis general principle. The Group has elected to take the following principalexemptions and the information presented has been prepared on this basis. Share-based Payments (IFRS 2, "Share-based Payment") The Group has elected to apply IFRS 2 to all relevant share-based paymenttransactions granted on or before 7 November 2002 and after 7 November 2002 thathad not vested before the later of a) transition date and b) 1 January 2005. Business combinations prior to the date of transition (IFRS 3, "BusinessCombinations") The Group has elected not to apply IFRS 3 retrospectively to businesscombinations which occurred prior to the date of transition. Reconciliation of UK GAAP to IFRS The following reconciliations are presented below in order to explain the effectof the transition to IFRS and to show how the comparative results have beenrestated. - Reconciliation of profit for the six months ended 30 September 2006 - Reconciliation of profit for the year ended 31 March 2007 - Reconciliation of equity at 1 April 2006 - Reconciliation of equity at 30 September 2006 - Reconciliation of equity at 31 March 2007 The IFRS adjustments included within these reconciliations are explained below. Appendix 1 (cont) First-time adoption of International Financial Reporting Standards (cont) RECONCILIATIONS FROM UK GAAP TO IFRSUNAUDITED RECONCILIATION TO PROFIT FOR THE SIX MONTHS ENDED 30 SEPTEMER 2006 UK GAAP Goodwill Minority Discontinuing Other IFRS amortisation interest operations £'000 £'000 £'000 £'000 £'000 £'000 Note (a) Note (c) Note (d) Note (e)-(g) Continuing operationsRevenue 9,052 -2,155 6,897Cost of sales -6,619 1,603 -5,016Gross profit 2,433 - - -552 - 1,881Administrative expenses -2,601 266 814 -1 -1,522Costs associated with development of -82 -82music downloadingOperating (loss)/profit -250 266 - 262 -1 277Investment revenues 52 52Finance costs - -9 -9Other gains and losses 66 66Share of results of joint ventures -283 -283(Loss)/profit before tax -415 266 - 262 -10 103Tax - (74) -74(Loss)/profit for the period from -415 266 - 262 -84 29continuing operationsDiscontinued operations:Loss for the period from discontinued - -262 -262operationsLoss for the period -415 266 - - -84 -233Equity minority interest 68 -68 -Group loss for the period -347 266 -68 - -84 -233 Appendix 1 (cont) First-time adoption of International Financial Reporting Standards (cont) RECONCILIATIONS FROM UK GAAP TO IFRSAUDITED RECONCILIATION TO PROFIT FOR THE YEAR ENDED 31 MARCH 2007 UK Goodwill Joint Minority Discontinuing Other IFRS amortisation venture interest operations GAAP £'000 £'000 £'000 £'000 £'000 £'000 £'000 Note (a) Note (b) Note (c) Note (d) Note (e)-(g) Continuing operationsRevenue 17,628 -4,382 13,246Cost of sales -12,961 3,151 -9,810Gross profit 4,667 - - - -1,231 - 3,436Administrative expenses -5,114 531 1,633 22 -2,928Impairment fixed asset investment -306 -306Costs associated with development -511 -511of music downloadingOperating loss -1,264 531 - - 402 22 -309Investment revenues 105 -3 102Finance costs - -18 -18Other gains and losses 112 112Share of results of joint ventures -638 28 -610Loss before tax -1,685 531 28 - 399 4 -723Tax 28 -18 (149) -139Loss for the period from -1,657 531 28 - 381 -145 -862continuing operationsDiscontinued operations:Loss for the period from - -381 -381discontinued operationsLoss for the period -1,657 531 28 - - -145 -1,243Equity minority interest 112 -112 - -Group loss for the period -1,545 531 28 -112 - -145 -1,243 Appendix 1 (cont) First-time adoption of International Financial Reporting Standards (cont) RECONCILIATIONS FROM UK GAAP TO IFRSAUDITED RECONCILIATION OF CONSOLIDATED STATEMENT OF EQUITY AS AT 1 APRIL 2006 Note Share Shares Share Other Accumulated Total Minority Total Capital to be premium reserves losses interest issued account £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 April 2006 as 1,748 494 15,389 -801 -10,395 6,435 -492 5,943previously reportedMinority interest c -492 -492 492 -Holiday benefits e -62 -62 -62Loan interest f 114 114 114Other g -17 -17 -17At 1 April 2006 as 1,748 494 15,389 -801 -10,852 5,978 - 5,978restated UNAUDITED RECONCILIATION OF CONSOLIDATED STATEMENT OF EQUITY AS AT 30 SEPTEMBER 2006 Note Share Shares Share Other Accumulated Total Minority Total Capital to be premium reserves losses interest issued account £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 30 September 2006 as 1,898 494 18,182 -801 -10,742 9,031 -561 8,470previously reportedGoodwill amortisation a 266 266 266Minority interest c -561 -561 561 -Holiday benefits e -71 -71 -71Loan interest f 105 105 105Other g -82 -82 -82At 30 September 2006 as 1,898 494 18,182 -801 -11,085 8,688 - 8,688restated AUDITED RECONCILIATION OF CONSOLIDATED STATEMENT OF EQUITY AS AT 31 MARCH 2007 Note Share Shares Share Other Accumulated Total Minority Total Capital to be premium reserves losses interest issued account £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 31 March 2007 as 1,927 - 18,676 -801 -11,940 7,862 -604 7,258previously reportedGoodwill amortisation a 531 531 531Joint venture b 28 28 28Minority interest c -604 -604 604 -Holiday benefits e -57 -57 -57Loan interest f 96 96 96Other g -149 -149 -149At 31 March 2007 as 1,927 - 18,676 -801 -12,095 7,707 - 7,707restated Appendix 1 (cont) First-time adoption of International Financial Reporting Standards (cont) Notes to IFRS adjustments a) IFRS 3 Business combinations - Goodwill Under IFRS goodwill is not amortised. IFRS 3, "Business Combinations" requiresthat goodwill is subject to annual impairment reviews. As the Group has electednot to apply IFRS 3 retrospectively to business combinations which occurredprior to 1 April 2006, the UK GAAP goodwill balance at 31 March 2006 has beenincluded in the opening IFRS balance sheet at 1 April 2006. Goodwillamortisation charged to the income statement in the period to 31 March 2007 hasbeen added back to profits. The Group has also conducted an impairment review of goodwill at 1 April 2006 inaccordance with the requirements of IAS 36 Impairment of Assets. No opening IFRSimpairment charge on goodwill has been done. Under UK GAAP, where no indicatorof impairment was apparent to management, no review was required to beperformed. Under IFRS an impairment review is required of all goodwill balancesregardless of whether or not an indication of impairment is apparent. b) IAS 28 Investment in associates - Joint venture IAS 28 establishes a principal of equity accounting whereby, when an investor'sshare of losses of an associate equals or exceeds its "interest in theassociate", the investor discontinues recognising its share of further losses.As the Group equity-accounts for its investments in joint ventures, thisprincipal is also applied where the Group has incurred losses in excess of thejoint venture investment. These amounts have been added back to profit for theperiod. If the joint ventures subsequently reports profits, the Group will resumerecognising its share of those profits only after its share of the profitsequals the share of losses not recognised. c) IAS 27 Consolidated and separate financial statements - Minority interest Where losses applicable to the minority exceed the minority interest in theequity of the relevant subsidiary, the excess, and any further lossesattributable to the minority, are charged to the group unless the minority has abinding obligation to, and is able to, make good the losses. The Group has adjusted its profits by the previously reported recoverableminority interest. d) IFRS 5 Non-current assets held for sale and discontinued operations Non-current assets held for sale and the assets of a disposal group held forsale are presented separately from other assets in the balance sheet. Similarly,the liabilities of a disposal group held for sale are presented separately fromother liabilities in the balance sheet. The Group has reclassified assets and liabilities disposed of as part of thesale of the trade and assets of Classic Gold Digital Limited. e) IAS 19 Employee benefits - Holiday benefit Under IAS 19, all accumulating employee-compensated absences that are unused atthe balance sheet date must be recognised as a liability. There is no similarrequirement under UK GAAP. Employee benefits which fall within the scope of IAS19 have been recognised in the Group's balance sheet. f) IAS 39 Financial instruments and measurement IAS 39 requires loans to be carried at amortised cost calculated using theeffective interest rate method. The Group has measured the £337,000 interestfree loan from GCAP Media plc on this basis. The difference between the nominalvalue of the loan and the present value at the date of inception has been takento equity. The implied interest charge on remeasurement is taken to profit forthe period. g) Other Other adjustments have been made in respect IAS 16 Property plant and equipmentand IAS 12 Income taxes. This information is provided by RNS The company news service from the London Stock Exchange