Aeorema Comm. Regulatory News (AEO)

30 Oct 2007 07:01

Cheerful Scout PLC30 October 2007 Cheerful Scout Plc / Index: AIM / Epic: CLS / Sector: Media 30 October 2007 Cheerful Scout Plc ('Cheerful Scout' or 'the Company') Final results Cheerful Scout plc, the AIM listed multi-media specialist, announces its resultsfor the year ended 30 June 2007. Overview • Focused on widening offering and building a broad based consultancy through organic growth or via acquisition • Core DVD production and design division increased market share and delivered a number of diverse projects for a wide range of leading distributors • Corporate creative consultancy going through a transitional period • Film and video production team working with an increasing number of blue-chip companies including BP and BAA • Events team slowed in the second half - examining how best to build on strengths in this area • Established joint venture to fully utilise technology and creative abilities and take advantage of opportunities in the business intelligence market • Won two awards at the New York Festivals International Film & Video Awards for films produced for the COI and the UK Home Office • Profit before taxation and goodwill amortisation of £141,012 (2006: £259,032) • Turnover of £2,085,367 (2006: £2,173,163) • Gross profit of £867,360 (2006: £864,551) and cash balances stand at £1,039,275 (2006: £885,559) Chairman's Statement We continue to make progress as we diversify into new complementary areas andbuild on our position as a leading multi-media creative consultancy. Our focushas primarily been orientated around establishing a wider offering for ourclients and building a broad based consultancy, which has the ability to offeran all encompassing solution. We have recognised that we need to expand our offering to maintain our profilein an ever-increasing competitive environment. The market has been tough but Ifeel that although we have remained relatively flat in terms of turnover, wehave the ability and technical offering to fulfil our growth ambitions. Financial Results Whilst our trading subsidiary continues to be profitable, costs involved inrunning a public company have increased. Our focus on building a foundation forfuture growth has meant that our numbers are relatively static and as a resultthe Group is reporting a profit before taxation and goodwill amortisation of£141,012 (2006: £259,032) on a turnover of £2,085,367 (2006: £2,173,163) for theyear ended 30 June 2007. Gross profit increased 1.81% to £867,360 (2006:£864,551) and cash balances stand at £1,039,275 (2006: £885,559). No dividendwill be payable, but the Directors continue to review this position. The financial results of the Group for the year ended 30 June 2007 have beenprepared under United Kingdom Generally Accepted Accounting Principles (UK GAAP)and not International Financial Reporting Standard (IFRS). The Group will adoptIFRS principles with effect from 1 July 2007. Operations Cheerful Scout's two key divisions incorporate a corporate creative consultancyand a DVD production and design facility. Whilst we were pleased with the growthof our core DVD production and design division, which delivered a number ofdiverse projects for a wide range of leading distributors, our corporatecreative consultancy has been going through a transitional period. We believethis division has a bright future but understand the need to increase investmentand attract the right people to drive it forward. Additionally, to fully utilise our technology and creative abilities and takeadvantage of opportunities in the rapidly maturing business intelligence marketwe have established a new joint venture company, which is breaking new groundand we hope will add significant turnover in the longer term. Corporate Creative Consultancy Division Film and Video Programme Production Our production team, which conceives and produces unique films and videos for awide range of corporations and organisations, continues to perform well. We areworking with an increasing number of blue-chip companies and believe that ourreputation is growing within the industry as a provider of choice. We have added big names to add to our client list including BP, for whom wecreated an internal film working alongside BP's chief scientist Steve Koonin.Also, in addition to our COI and Centrica rosters, we have won a three yearcontract with BAA. Other companies we have worked for during the year include the University ofHuddersfield, the Royal Bank of Scotland and Allianz, for whom we produced twocorporate films. Additionally, we further strengthened our relationship with theDepartment of Optometric Continuing Education & Training ('DOCET') when we werecontracted to produce two videos as follow-on work from the video produced inAugust 2006. I was particularly happy that our presentational abilities were recognised inthe form of the two awards, which we won at the New York Festivals InternationalFilm & Video Awards for two films we produced for the COI and the UK HomeOffice. I remain confident that through investment the Company will thrive. Events We devise and stage dynamic and engaging live events and conferences forcorporate clients. These are truly interactive events and include high-impact 3Dvisual presentations in which live elements can be created and incorporated inreal time, ultimately driving and shaping the outcome of a conference. Earlier in the year, the team was very busy producing a number of major eventsin the UK and Europe including a week long event for Allen & Overy to mark theopening of the global law firm's new London headquarters and two events for topcorporate communications professionals in the UK in partnership with CorpCommsMagazine. However, in recent months the pace has slowed and we are now examininghow best to build on our strengths in this area. Possibilities include acquiringa complementary outfit and additional experienced people. DVD Production and Design Division Our DVD production and design facility has performed well this year, increasingits market share through the acquisition of new clients and work on numeroushigh-profile titles. This has been further strengthened by a two-year contractwith Contender Entertainment Group. We have created an extensive list of titles for the corporate and retail marketsincluding a number of major features such as La Vie en Rose and City of Violenceand various television series such as Life on Mars and Spooks. We are alsoworking with a growing number of major distribution companies includingFremantleMedia, 2 entertain, Icon, 16 Films, Clear Vision and UniversalPictures. We now have a strong foothold in the sector and believe that with the righteconomic conditions we can gain even more market share. For this reason, we haveinvested in additional high-end equipment and expect to see further growth inthis division. Business Data Interactive Joint Venture In August 2007 we took the decision to form a new 60/40 joint venture company,Business Data Interactive ('BDI'), with Apperly & Associates Limited ('A&A'), tofully optimise the potential of our proprietary visualisation software package,which displays business data using real-time, 3D video graphics, allowing theuser rapidly to assess and compare multiple business scenarios. By combining ourtechnology with A&A's sophisticated analytics and advanced data miningcapabilities, BDI aims to develop powerful, bespoke computer software programmesto analyse and display business data. We believe our technology is at the forefront of the vast business intelligencemarket and we are excited about the opportunities presenting themselves to us. Dr James Apperly, who is fronting the new joint venture company, hasconsiderable experience and excellent contacts in the corporate arena. Hepreviously worked at leading management consultancy, McKinsey & Company, afterwhich he established A&A where he worked with a number of blue-chip companiesincluding BP and Chevron-Texaco US designing and implementing businessintelligence systems. The Team The team is naturally key to the success of the business and I am highlyconfident in each member's abilities to help Cheerful outshine its competitors.We use the best talent available and that includes the talent for working as astrategic partner with our clients as well as talent in the creative, technicaland visual areas. Our team members are dedicated to the job, expect the best of each other andbelieve in our business ethic which is based on one simple aim - to make everyproject the best it can be. We have an active recruitment policy and are looking to further strengthen theteam on both the creative and sales sides. Outlook Having established the areas within the business which need further development,the Company is focused on strengthening its offering through organic growth orvia acquisition. I look forward to updating shareholders on our progress. S AppletonChairman29 October 2007 Consolidated profit and loss account For the year ended 30 June 2007 Notes Pre 2007 2007 Pre goodwill Goodwill 2006 goodwill Goodwill Total amortisation amortisation Total amortisation amortisation and and reorganisation reorganisation costs costs £ £ £ £ £ £ Turnover 2 2,085,367 - 2,085,367 2,173,163 - 2,173,163Cost of sales (1,218,007) - (1,218,007) (1,308,612) - (1,308,612)Gross profit 867,360 - 867,360 864,551 - 864,551Administrative (764,188) (25,476) (789,664) (635,581) (50,499) (686,080)expensesOperating Profit 3 103,172 (25,476) 77,696 228,970 (50,499) 178,471Interest 37,840 - 37,840 30,104 - 30,104receivable 4 - - - (42) - (42) Interest payableand similarcharges Profit on ordinary 141,012 (25,476) 115,536 259,032 (50,499) 208,533activities beforetaxation Tax on profit on 5 (3,036) - (3,036) (54,000) - (54,000)ordinaryactivities 14 137,976 (25,476) 112,500 205,032 (50,499) 154,533 Retained profitfor the yearEarnings perordinary shares:Basic 7 1.14796p 1.57687pDiluted 7 1.13929p 1.56932p The profit and loss account has been prepared on the basis that all operationsare continuing operations.There are no recognised gains or losses other than those passing through theprofit and loss account. Balance Sheets As at 30 June 2007 Notes Group Company 2007 2006 2007 2006 £ £ £ £Fixed assetsIntangible assets 8 817,003 793,194 - -Tangible assets 9 91,159 129,678 - -Investments 10 - - 1,700,000 1,700,000 908,162 922,872 1,700,000 1,700,000Current assetsStock 2,285 2,268 - -Debtors 11 465,339 615,914 249,534 519,669Cash at bank and in hand 1,039,275 885,559 918,983 742,811 1,506,899 1,503,741 1,168,517 1,262,480 Creditors: amounts falling 12 (237,569) (361,621) (15,456) (11,276)due within one year Net current assets 1,269,330 1,142,120 1,153,061 1,251,204 Total assets less current 2,177,492 2,064,992 2,853,061 2,951,204liabilities Net assets 2,177,492 2,064,992 2,853,061 2,951,204Capital and ReservesCalled up share capital 13 1,225,000 1,225,000 1,225,000 1,225,000Special reserves 14 1,747,416 1,747,416 1,747,416 1,747,416Profit and loss account 14 (794,924) (907,424) (119,355) (21,212)Total capital employed 15 2,177,492 2,064,992 2,853,061 2,951,204 Approved by the Board and authorised for issue on 29 October 2007. P Litten, DirectorN J Newman, Director Consolidated cash flow statement For the year ended 30 June 2007 2007 2006 £ £ £ £Net cash inflow from operating 258,123 231,209activities Returns on investments andservicing of finance Interest received 37,840 30,104Interest paid - (42) Net cash inflow for returns on 37,840 30,062investments and servicing offinance Taxation - - Capital expenditure and financialinvestment Payments to acquire intangible (95,802) (66,052)assetsPayments to acquire tangible assets (46,445) (31,417) Net cash outflow for capital (142,247) (97,469)expenditure Increase in cash in the year 153,716 163,802 Notes to the consolidated cash flow statement For the year ended 30 June 2007 1) Reconciliation of operating profit to net cash 2007 2006inflowfrom operating activities £ £ Operating profit 77,696 178,471Depreciation of tangible assets 84,964 113,891Amortisation of intangible assets 71,993 71,993Increase/(decrease) in debtors 150,575 (373,968)(Decrease)/increase in creditors within one year (127,088) 241,879(Increase) in stock (17) (1,057)Net cash inflow from operating activities 258,123 231,209 2) Analysis of net funds 1 July 2006 Cash flow 30 June 2007 £ £ £Net cash:Cash at bank and in hand 158,916 (29,051) 129,865Liquid resources:Bank deposits 726,643 182,767 909,410Net funds 885,559 153,716 1,039,275 3) Reconciliation of net cash flow to movement in net 2007 2006funds £ £(Decrease)/Increase in cash in the year (29,051) 158,916Cash inflow from movement in liquid resources 182,767 4,886Change in net funds resulting from cash flows 153,716 163,802Movement in net funds in the year 153,716 163,802Opening net funds 885,559 721,757Closing net funds 1,039,275 885,559 Notes to the consolidated financial statements For the year ended 30 June 2007 1 Accounting policies 1.1 Accounting convention The financial statements are prepared under the historical cost convention. 1.2 Compliance with accounting standards The financial statements are prepared in accordance with applicable accountingstandards. 1.3 Basis of consolidation The consolidated profit and loss account and balance sheet include the financialstatements of the Company and its subsidiary undertakings made up to 30 June2007. The results of subsidiaries sold or acquired are included in the profitand loss account up to, or from the date control passes. Intra-group sales andprofits are eliminated fully on consolidation. 1.4 Turnover Turnover represent amounts receivable for goods and services, net of VAT andtrade discounts and has been derived from its principal activity. 1.5 Goodwill and impairment Goodwill arising on acquisition is written off in equal annual instalments overits estimated useful economic life of 20 years. The carrying value of goodwill is reviewed for impairment in periods if eventsor changes in circumstances indicate the carrying value may not be recoverable.These reviews assess the recoverable amount by reference to the net presentvalue of expected future cash flows of the relevant income generatingunit at a discount rate of 2.8%. Impairment losses are recognised in the periodin which they are identified. 1.6 Development costs Development expenditure is written off to the profit and loss account in theyear in which it is incurred, unless the directors are satisfied as to thetechnical, commercial and financial viability of individual projects. In thissituation, the expenditure is deferred and amortised over the period duringwhich the company is expected to benefit. Development costs of current projectswill be amortised over 4 years. 1.7 Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost lessestimated residual value of each asset over its expected useful life, asfollows: Leasehold land and buildings straight line over the life of the lease Fixtures, fittings and equipment 25% straight line 1.8 Leasing Rentals payable under operating leases are charged against income on a straightline basis over the lease term. 1.9 Investments Fixed asset investments are stated at cost less provision for diminution invalue. 1.10 Stock Stock is valued at the lower of cost and net realisable value. 1.11 Deferred taxation The accounting policy in respect of deferred tax reflects therequirements of FRS19 - Deferred tax. Deferred tax is provided in full inrespect of taxation deferred by timing differences between the treatment ofcertain items for taxation and accounting purposes. Deferred tax is measured ona non-discounted basis. 1.12 Pensions The pension costs charged in the financial statements represent thecontributions payable by the Group during the year in accordance with FRS17. 1.13 Financial instruments The Group does not enter into derivative transactions and does not trade infinancial instruments. For the purpose of note 20, short term debtors andcreditors are not treated as financial assets or financial liabilities. 1.14 Foreign currency translation Monetary assets and liabilities denominated in foreign currencies are translatedinto sterling at the rates of exchange ruling at the balance sheet date.Transactions in foreign currencies are recorded at the rate ruling at the dateof the transaction. All differences are taken to profit and loss account. 1.15 Share-based payment schemes The fair value of equity rights is estimated using the Binomial model at thedate of grant to key employees and is dependent on factors such as the exerciseprice, expected volatility, option price and risk free interest rate. The fairvalue is then amortised through the Income Statement on a straight-line basisover the vesting period. Expected volatility is determined based on thehistorical share price volatility for the Company. Further information is givenin note 19 to the financial statements. 2 TurnoverGeographical market 2007 2006 £ £United Kingdom 1,923,918 2,008,332Europe 161,449 144,061Rest of the world - 20,770 2,085,367 2,173,163 3 Operating ProfitOperating profit is stated after charging: 2007 2006 £ £Amortisation of intangible assets 71,993 71,993Depreciation of tangible assets 84,964 113,891Auditors' remuneration (Company £4,750) - statutory audit 13,000 13,000Operating leases 84,232 83,545 4 Interest Payable 2007 2006 £ £Other Interest - 42 5 Taxation 2007 2006 £ £Current year tax 3,036 -Deferred taxDeferred tax charge for the year - 54,000Factors affecting the tax charge for the yearProfit on ordinary activities before taxation 115,536 208,533Profit on ordinary activities before taxation multiplied by 21,952 39,621standard rate of UK corporation tax of 19% (2006 - 19%) Effects of:Non deductible expenses 753 232Depreciation add back 21,027 21,683Capital allowances (11,408) (12,140)Research and development allowances (28,338) (20,825)Other tax adjustments (950) (28,571) (18,916) (39,621)Current tax charge 3,036 - 6 Loss for the financial year As permitted by section 230 of the Companies Act 1985, the holding company'sprofit and loss account has not been included in these financial statements.The loss for the financial year is made up as follows:- 2007 2006 £ £Holding company's loss for the financial year (98,143) (53,453)Transfer to special reserves (See Note 14) - 32,241Retained loss for the year (98,143) (21,212) 7 Earnings per ordinary share Basic earnings per share are calculated by dividing the profit attributable toordinary shareholders of £112,500 (2006: £154,533) using a weighted average of9,800,000 (2006: 9,800,000) ordinary shares in issue during the year. Diluted earnings per share are adjusted for share options granted to employeeswhere the exercise price is less than the price of the Company's ordinary sharesduring the year. These adjustments give rise to an increase of 74,597 (2006:47,162) ordinary shares. 8 Intangible fixed assetsGroup Goodwill Development Costs Total £ £ £CostAt 1 July 2006 2,728,292 436,343 3,164,635Additions - 95,802 95,802At 30 June 2007 2,728,292 532,145 3,260,437AmortisationAt 1 July 2006 2,324,924 46,517 2,371,441Charge for the year 25,476 46,517 71,993At 30 June 2007 2,350,400 93,034 2,443,434Net book valueAt 30 June 2007 377,892 439,111 817,003At 30 June 2006 403,368 389,826 793,194 9 Tangible fixed assetsGroup Leasehold land Fixtures, fittings Total and buildings and equipment £ £ £ Cost At 1 July 2006 142,218 727,142 869,360Additions 4,360 42,085 46,445At 30 June 2007 146,578 769,227 915,805DepreciationAt 1 July 2006 104,761 634,921 739,682Charge for the year 28,311 56,653 84,964At 30 June 2007 133,072 691,574 824,646Net book valueAt 30 June 2007 13,506 77,653 91,159At 30 June 2006 37,457 92,221 129,678 10 Fixed asset investmentsCompany Shares in subsidiary £ CostAt 1 July 2006 and 30 June 2007 3,144,213ImpairmentAt 1 July 2006 and 30 June 2007 (1,444,213)Valuation as at 30 June 2007 1,700,000 In the opinion of the directors, the aggregate value of the Company's investmentin subsidiary undertakings is not less than the amount included in the balancesheet. Holdings of more than 20% The Company holds more than 20% of the share capital of the following companies: Company Country of Shares held registration or incorporation Class %Subsidiary undertakingsCentralfix Limited England and Wales Ordinary 100nVision Technology Limited England and Wales Ordinary 100 The principal activity of these undertakings for the last relevant financialyear was as follows:Company Principal activityCentralfix Limited Provision of business communication servicesnVision Technology Limited Dormant 11 Debtors Group Company 2007 2006 2007 2006 £ £ £ £Trade debtors 363,333 516,023 - -Amounts owed by group undertakings - - 241,117 511,681Other debtors 37,250 39,014 - -Prepayments and accrued income 64,756 60,877 8,417 7,988 465,339 615,914 249,534 519,669 Other debtors include £35,473 (2006: £35,473) rental deposit which is secured bya charge in favour of the landlords. 12 Creditors: amounts falling due within one year Group Company 2007 2006 2007 2006 £ £ £ £Trade creditors 98,113 170,593 - -Amounts due to group undertakings - - 1 1Taxes and social security costs 70,595 76,126 - -Accruals and deferred income 68,861 114,902 15,455 11,275 237,569 361,621 15,456 11,276 13 Share capital 2007 2006 £ £Authorised28,000,000 Ordinary shares of 12.5p each 3,500,000 3,500,000 Allotted, called up and fully paid9,800,000 Ordinary shares of 12.5p each 1,225,000 1,225,000 During the year every 25 issued and unissued ordinary shares of 0.5 pence wereconsolidated into 1 ordinary share of 12.5 pence in the capital of the Company. The Company has entered into a scheme to provide share option incentives for keyemployees. A total of 72,000 ordinary shares of 12.5p each have been offered atan option price of 62.5p per share exercisable between 3 and 10 years after thedate of grant, which was 1 May 2002. An additional 244,200 ordinary shares of12.5p each have been offered at an option price of 18.75p per share exercisablebetween 3 and 10 years after the date of grant, which was 28 October 2004.During the year 22,600 (2006: 32,000) options to subscribe for ordinary shareslapsed. Further information can be found in note 19. 14 Statement of movements on reservesGroup Special reserves Profit and loss account £ £Balance at 1 July 2006 1,747,416 (907,424)Retained profit for the year - 112,500Balance at 30 June 2007 1,747,416 (794,924) Company Special Reserves Profit and loss account £ £Balance at 1 July 2006 1,747,416 (21,212)Retained loss for the year - (98,143)Balance at 30 June 2007 1,747,416 (119,355) In the previous year the Company successfully applied to the High Court ofJustice to transfer to a special reserve the sum of £3,360,169 being the balanceof the share premium account. In addition accumulated losses of £1,612,753 to30th November 2005 were also transferred to the special reserve with theapproval of the High Court of Justice. 15 Reconciliation of total capital employedGroup 2007 £ Profit for the financial year 112,500Opening shareholders' funds 2,064,992Closing shareholders' funds 2,177,492 Company 2007 £ Loss for the financial year (98,143)Opening shareholders' funds 2,951,204Closing shareholders' funds 2,853,061 16 Financial commitments At 30 June 2007 the Group had annual commitments under non-cancellable operatingleases as follows: Land and Building 2007 2006 £ £Expiry date:In over five years 84,232 83,545 17 Directors' emoluments 2007 2006 £ £Emoluments for qualifying services 150,000 127,500 Directors' remuneration includes £15,000 (2006: £12,750) which has beencapitalised as development costs. 18 Related party transactions During the year, £37,595 (2006: £21,715) was charged by Harris & Trotter LLP inrespect of professional services. N J Newman is a member of that firm. Cheerful Scout Plc is a guarantor for the lease entered into by CentralfixLimited, its subsidiary undertaking. 19 EmployeesNumber of employees 2007 2006The average monthly number of employees(including directors) during the year was: Number NumberProduction 17 13Administration 4 4 21 17 Employment costs 2007 2006 £ £Wages and salaries 596,140 498,535Social security costs 69,305 53,091Pension costs 1,172 172 666,617 551,798 Share options incentives The Company has set up an EMI Share option scheme for key employees. The maximumterm of current arrangements under the EMI scheme ends on 27 October 2014. Uponvesting, each option allows the holder to purchase one ordinary share at the preagreed option price. At 30 June 2007, the following share options have not been exercised: Date of Grant Number of shares Exercise price per share 1 May 2002 72,000 62.50p28 October 2004 221,600 18.75p Changes in accounting policies In line with the requirements of FRS 20 share-based payments, the Group haschanged its policy on the accounting of share options issued as detailed below.There is no adjustment required to prior years as this was not material. Share-based payments The Group has applied the requirements of FRS 20 share-based payments from 1July 2006. In accordance with the transitional provisions, FRS 20 has beenapplied to all grants of equity instruments after 7 November 2002 that wereunvested as of 1 July 2006. The Group issues equity-settled share-based payments to employees.Equity-settled share-based payments are measured at fair value at the date ofgrant. The fair value as determined at the grant date of equity-settledshare-based payments is expensed on a straight line basis over the vestingperiod, based on the Group's estimate of shares that will eventually vest. Fair value is measured by using the Binomial model. The expected life used inthe model has been adjusted based on management's best estimate for the effectof non-transferability, exercise restrictions and behavioural considerations. This is the first year of adoption of FRS 20 share-based payments. The fair value of the options is calculated using the Binomial model assumingthe following assumptions: Grant date 28 October 2004Share price at grant date 16.25pExercise price 18.75pExpected life 4 yearsContractual life 10 yearsRisk free rate 6%Expected volatility 43%Expected dividend rate 0%Fair value option 5.9868p The fair value calculated gives rise to a potential adjustment in the accountsof £3,943 for the current year and £6,572 for the prior year. In the opinion ofthe directors, no adjustment to the financial statements is required as theamounts are considered to be immaterial. 20 Treasury activities and financial instruments The Group's financial instruments comprise cash and liquid resources. The mainrisks arising from the group's financial instruments are the interest raterisks. The Board reviews and agrees policies for managing these risks. Interest rate risk profile of financial assets The interest rate profile of the financial assets of the Group at 30 June 2007is as follows: Financial assets on which Floating rate financial Total no interest is earned assets £ £ £ 5,000 1,034,275 1,039,275 Sterling The floating rate financial assets comprise cash deposits on moneymarket deposits at monthly rates. Fair value of financial assets The Group's book value of the financial assets equates to their fair values. 21 Pension costs Defined contribution The Group makes pre-defined contributions to employees' personal pension plans. Contributions payable by the Group for the year were £1,172 (2006: £172). 22 Post Balance Sheet Events Subsequent to the year end, Cheerful Scout Plc formed a new company, BusinessData Interactive Limited, in a joint venture with Apperly & Associates Limited,to take advantage of opportunities in the fast growing Business intelligencemarket. Under the terms of the agreement, Cheerful Scout Plc, which will own 60% ofBusiness Data Interactive Limited, will invest £200,000 and licence theintellectual property for its proprietary visualisation software products to thenew business. 23 Control There is no overall controlling party. This information is provided by RNS The company news service from the London Stock Exchange