IME.L Regulatory News (IME)

12 May 2008 06:09

12 May 2008 IMMEDIA BROADCASTING PLC Preliminary Statement of Results for the FY to 31 December 2007 Immedia Broadcasting PLC ("Immedia"), the UK's leading provider of live,tailored radio and video for retail, today announces its preliminary financialresults for the year to 31 December 2007. Overview ·; Underlying revenue (i.e. excluding one-off contributions from discontinued contracts) of £3.8m (2006 : £3.8m) ·; Underlying operating loss before tax (i.e. excluding Cube impairment and one-off contributions from discontinued contracts) of £0.41m (2006: Loss £0.79m) ·; New 2-year contract with HSBC to continue to provide HSBC Live! to 940 branches in the UK ·; GAME Live! roll-out complete - now broadcasting to c. 370 stores across the UK ·; Immedia's IKEA Live! performing well and broadcasting to all 20 IKEA stores across the UK ·; Lloyds Pharmacy Live! contract renewed - now entering its sixth year ·; Integration of Cube into Immedia brand now complete Financial Summary 12 months to 31 December 12 months to 31 2007 December 2006Revenue £3,904,815 £4,472,225Underlying revenue 1 £3,799,586 £3,855,034Operating profit before depreciation, amortisation and impairment £206,369 £643,418charges (EBITDA)Underlying EBITDA 2 £101,140 £30,387Impairment charge on intangible assets £1,055,225 -Operating loss £(1,375,909) £(363,523)Underlying operating loss 2 £(405,022) £(785,613)Loss before taxation £(1,355,410) £(359,650)Basic and diluted loss per share (9.13)p (2.54)pYear end balance of cash and cash equivalents £661,845 £242,795 1 - Excluding one-off contributions from discontinued contracts 2 - Excluding Cube impairment and one-off contributions from discontinued contracts Bruno Brookes, Chief Executive of Immedia, said : "2007 was a challenging year for Immedia but I am pleased with what has beenachieved in terms of structure, product offering and pipeline developments. As aresult of the changes that have been made in 2007 I am confident that we havealigned Immedia's offering towards the most profitable areas of growth for 2008and beyond. "We believe that we are well equipped to benefit from the growth of the widerdigital out-of-home market, and that the actions we have taken over the last sixmonths will enable us to make good progress during the current year." Enquiries: Immedia Broadcasting PlcBruno Brookes - Chief Executive +44 (0) 1635 572 800Hudson SandlerNick Lyon / Sandrine Gallien +44 (0) 20 7796 4133Daniel Stewart & Company PlcSimon Leathers / Simon Starr +44(0) 20 7776 6550 Chairman's Statement The year was a tough one for the company but the Board are confident that thereviews undertaken following the underperformance of the Cube acquisition andconsequent changes made in both business strategy and structure will bear fruitin the coming year. Underlying revenue for the year was slightly down at £3,799,586 compared to£3,855,034 for 2006 with the underlying operating loss of £405,022 for the yeara significant improvement on the 2006 underlying operating loss of £785,613. The strengthened finance function has kept a rigorous control on costs and thecompany remains cash generative with cash and cash equivalents of £661,845 atthe year-end, again a significant improvement on the prior year balance of£242,795. The sector that Immedia operates in is undergoing change with a growth inscreen-based digital out-of-home media. Digital out-of-home media isincreasingly found in the retail sector but importantly also in the leisuresector and whilst this growth has initially been hardware driven, as hardwarepenetration increases so does the demand for content. We believe that Immediahas the strategy and the skills to exploit this demand for content and foreseethat this could become an important source of revenue and profit going forward. Although it is still early days we have a pipeline of new business that gives usencouragement for the year ahead. Geoff Howard-Spink Chairman Business Review I am pleased to present our full year results for the financial year ending 31December 2007. Results & Financial Performance 2007 was a challenging year but we believe Immedia has sustained its positionwell with a strong focus on cost control and profitability. Revenue for the yearwas £3,904,815 (2006: £4,472,225) with underlying revenue (excluding one-offcontributions from discontinued contracts) flat on last year. The underlyingoperating loss before income tax was reduced from £785,613 to £405,022. Thisyear's results have been impacted by the previously disclosed £1.055 millionwrite-off of Cube's intangibles. We do not anticipate any further impairmentcharges. Following a disappointing performance by Cube since its acquisition and the lossof two significant contracts in the first quarter of 2007, one of our prioritiesfor 2007 was to restructure the business in order to bring Cube's strongexpertise in in-store television under the Immedia brand. This has now beencompleted and the problems linked to Cube's underperformance are now behind us.In addition, since last September, we have undertaken a significant number ofsound and visual installations in the retail sector and remain positive aboutCube's clients' contribution to performance at Group level going forward. At Group level, significant progress has also been made on the financialstructure of the Company, with all loans having been repaid during the year.Costs have been rigorously controlled and the Group remains cash generative,with £661,845 cash in the bank (31 December 2006: £242,795). On the basis of current financial projections prepared up to the end of 2009,recent news of contract renewals, continuing improvements in management ofcosts, and ongoing availability of facilities, the Directors are satisfied thatthe Group has adequate resources to continue in operation for the foreseeablefuture and consequently the financial statements have been prepared on the goingconcern basis. Subscription Stations All of our subscription radio stations continue to perform well. In October2007, we were delighted to announce a contract with The GAME Group plc toprovide subscription radio to all of the GAME stores across the UK. Theroll-out has been successful and we currently broadcast GAME Live! toapproximately 370 stores. In September, we were also pleased to announce that we had signed a new contractwith SPAR UK to continue to broadcast SPAR Live! under a subscription model tocirca 1,400 stores for another three years. The radio station is performingextremely well and we are pleased to say that all advertising airtime has beensold until October 2008. Immedia has provided SPAR with a full service radiostation since June 2004 and we have a strong relationship with the SPAR teamwhich we will seek to build on going forward. Our station HSBC Live! which broadcasts to 940 branches across the UK continuedto perform well. IKEA Live! rolled out as planned and the station broadcasts to all 20 IKEAstores across the UK. Lloyds Pharmacy Live! is operating well across all 1,500 stores, our contracthas been renewed and we are entering our sixth year of partnership with LloydsPharmacy's team. We have made good progress trialling other radio stations and as one of ourobjectives to develop content provision going forward, we have continued toprovide tailored visual content for a range of first class brands. Current Trading and Outlook 2007 was a challenging year for Immedia but I am pleased with what has beenachieved in terms of structure, product offering and pipeline developments. As aresult of the changes that have been made in 2007 I am confident that we havealigned Immedia's offering towards the most profitable areas of growth for 2008and beyond. In the second half of the year, it had become apparent that there were numerousopportunities within the wider market of 'digital out-of-home'. The digitalout-of-home sector is widely reported to be one of the fastest growingadvertising markets in the world. We have invested substantial time and effortclarifying how we could develop innovative solutions to service customers' needsin this field and as a consequence our strategy is now as follows: - To continue to win radio and RadioVision contracts from retailers but also in other sectors - To drive new networks in new territories with existing clients - To launch new and innovative TV solutions - To develop our thriving installation and maintenance services - To generate and develop content for digital network owners across Europe, the Middle East and Africa (EMEA) - To sign reseller agreements with providers across the EMEA region to offer and distribute Immedia's first class offering This strategy is being successfully implemented and we also remain focused oncost management and profitability. Current trading is in line with our expectations and we are also delighted toannounce today that our contract with HSBC has been renewed for another twoyears. We look forward to developing our relationship with HSBC further. We believe that we are well equipped to benefit from the growth of the widerdigital out-of-home market, and that the actions we have taken over the last sixmonths will enable us to make good progress during the current year. Bruno Brookes Chief Executive Consolidated Income Statement for the year ended 31 December 2007 Note 2007 2006 £ £ Revenue 5 3,904,815 4,472,225Cost of sales (1,691,821) (1,958,973) Gross profit 2,212,994 2,513,252 Administrative expenses before impairment charge on intangible assets 14 (2,533,678) (2,876,775) Impairment charge on intangible assets (1,055,225) - Operating loss (1,375,909) (363,523) Operating profit before depreciation, amortisation and impairment charge 206,369 643,418Depreciation and amortisation (527,053) (1,006,941)Impairment charge on intangible assets (1,055,225) - Finance income 9 22,374 21,428Finance expense 9 (1,875) (17,555) Loss before taxation 6 (1,355,410) (359,650)Income tax 10 72,750 44,738 Loss for the year attributable to equity shareholders (1,282,660) (314,912) Continuing operationsLoss per share - basic and diluted 11 ( 9.13) p (2.54) p There was no income and expense for the current or comparative periods otherthan that reported in the consolidated income statement. Consolidated Balance Sheet At 31 December 2007 2007 2006 Note £ £AssetsProperty, plant and equipment 13 208,837 561,687Intangible assets 14 377,190 1,659,773Total non-current assets 586,027 2,221,460 Current assetsInventories - work in progress 3,703 2,409Trade and other receivables 16 675,975 1,062,296Prepayments for current assets 151,550 167,138Cash and cash equivalents 17 661,845 246,147Total current assets 1,493,073 1,477,990Total assets 2,079,100 3,699,450 Share capital 18 1,455,684 1,334,056Share premium 18 3,586,541 3,525,727Shares to be issued 18 - 237,175Merger reserve 18 2,245,333 2,245,333Retained losses 18 (6,712,729) (5,430,069)Total equity 23 574,829 1,912,222 LiabilitiesLoans and borrowings 19 - 3,187Deferred tax liabilities 20 12,480 85,230Total non-current liabilities 12,480 88,417 Loans and borrowings 19 - 19,047Trade and other payables 21 1,416,926 1,234,865Deferred income 74,865 444,899Total current liabilities 1,491,791 1,698,811Total liabilities 1,504,271 1,787,228Total equity and liabilities 2,079,100 3,699,450 Consolidated Cash Flow Statement for the year ended 31 December 2007 2007 2006 Note £ £Cash flows from operating activitiesLoss for the year attributable to equity shareholders (1,282,660) (314,912)Adjustments for:Depreciation, amortisation and impairment 1,582,278 1,006,941Financial income (22,374) (21,428)Financial expense 1,875 17,555Loss on sale of property, plant and equipment 19,138 -Deferred tax credits 10 (72,750) (30,250)Decrease/(increase) in trade and other receivables 401,909 (140,827)(Increase) in inventories (1,294) (2,409)(Decrease)/increase in trade and other payables (187,973) 342,690Tax paid - 1,882 Net cash from operating activities 438,149 859,242 Cash flows from investing activitiesProceeds from sale of property, plant and equipment 1,753 -Interest received 22,374 21,428Acquisition of subsidiary, net of cash acquired 12 - (1,076,733)Acquisition of property, plant and equipment 13 (22,469) (200,894) Net cash from investing activities 1,658 (1,256,199) Cash flows from financing activitiesProceeds from exercise of share options - 14,875Interest paid (1,875) (17,555)Repayment of borrowings (14,104) (9,500)Repayment of other loans - (175,000)Payment of finance lease liabilities (4,778) (4,932) Net cash from financing activities (20,757) (192,112) Net increase/(decrease) in cash and cash equivalents 419,050 (589,069)Cash and cash equivalents at 1 January 242,795 831,864 Cash and cash equivalents at 31 December 17 661,845 242,795 Notes(forming part of the financial statements) The financial information set out above does not constitute the Company'sstatutory accounts for the years ended 31 December 2007 or 2006 but is derivedfrom those accounts. Statutory accounts for 2006 have been delivered to theregistrar of companies, and those for 2007 will be delivered in due course. Theauditors have reported on those accounts; their report was (i) unqualified, (ii)did not include a reference to any matters to which the auditors drew attentionby way of emphasis without qualifying their report and (iii) did not contain astatement under section 237(2) or (3) of the Companies Act 1985. The 2007accounts will be delivered to the registrar of companies following the Company'sAnnual General Meeting. The Annual Report and Notice of Annual General Meetingwill be posted to the shareholders by 6 June 2008. This preliminaryannouncement was approved by the Board on 9 May 2008. 1 Reporting entity Immedia Broadcasting plc (the "Company") is a company incorporated and domiciledin the United Kingdom. The address of the Company's registered office is 8-10New Fetter Lane, London EC4A 1RS. The consolidated financial statements of the Company as at and for the yearended 31 December 2007 comprise the Company and its subsidiaries (togetherreferred to as the "Group"). The Group primarily is involved in marketing andcommunication services through radio and screen based media. 2 Basis of preparation The consolidated financial statements have been prepared and approved by thedirectors in accordance with International Financial Reporting Standards asadopted by the EU ("Adopted IFRSs"). On the basis of current financial projections prepared up to the end of 2009,recent news of contract renewals, continuing improvements in management ofcosts, and ongoing availability of facilities, the Directors are satisfied thatthe Group has adequate resources to continue in operation for the foreseeablefuture and consequently the financial statements have been prepared on the goingconcern basis. (a) Statement of compliance The AIM Rules require that the consolidated financial statements of the Companyfor the year ending 31 December 2007 be prepared in accordance withInternational Financial Reporting Standards (IFRSs) as adopted by the EU("Adopted IFRSs"). The accounting policies set out below have, unless otherwise stated, beenapplied consistently to all periods presented in these consolidated financialstatements and in preparing an opening IFRS balance sheet at 1 January 2006 forthe purposes of the transition to Adopted IFRSs. Judgements made by the directors, in the application of these accountingpolicies that have significant effect on the financial statements and estimateswith a significant risk of material adjustment in the next year are discussed innote 2(c). (b) Measurement convention The consolidated financial statements have been prepared on the historical costbasis except as noted in note 3 (a) below. (c) Use of estimates and judgements The preparation of financial statements requires management to make judgements,estimates and assumptions that affect the application of accounting policies andthe reported amounts of assets, liabilities, income and expenses. Actualresults may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisionsto accounting estimates are recognised in the period in which the estimate isrevised and in any future periods affected. In particular, information about significant areas of estimation uncertainty andcritical judgements in applying accounting policies that have the mostsignificant effect on the amount recognised in the financial statements aredescribed in the following notes: ·; Note 4 determination of fair values ·; Note 14 intangible assets (goodwill impairment tests); ·; Note 16 trade and other receivables (review and provisions against doubtful debts). 3 Significant accounting policies The accounting policies set out below have been applied consistently to allperiods presented in these consolidated financial statements, and have beenapplied consistently by Group entities. (a) Basis of consolidation (i) Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Grouphas the power to govern the financial and operating policies of an entity so asto obtain benefits from its activities. The financial statements ofsubsidiaries are included in the consolidated financial statements from the datethat control commences until the date that control ceases. The Group includesan Employee Benefit Trust which is included in the consolidation. (ii) Acquisitions Acquisitions are accounted for using the purchase method. The cost of anacquisition is measured at fair value at the date of exchange of theconsideration provided plus costs directly attributable to the acquisition.Identifiable assets and liabilities of the acquired business that meet theconditions for recognition under IFRS 3 ('Business Combinations') are recognisedat their fair value at the date of acquisition. To the extent that the cost ofan acquisition exceeds the fair value of the net assets acquired the differenceis recorded as goodwill. Where the fair value of the net assets acquired exceedsthe cost of an acquisition the difference is recorded in the income statement. (iii) Transactions eliminated on consolidation Intra-group balances and any unrealised income and expenses arising fromintra-group transactions are eliminated in preparing the consolidated financialstatements. (iv) Merger On 20 November 2003 a new holding company was brought into the Group. This wascarried out by a share for share exchange and the existing shareholders ofImmedia Broadcast Limited received 1,000 10p Ordinary shares in ImmediaBroadcasting Plc for every share held. There was no cash consideration. Aspart of its transition to IFRS on 1 January 2006 the Group has not restated theGroup reconstruction which has been accounted for as a merger as permitted by UKGAAP. (b) Property plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulateddepreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition ofthe asset. Purchased software that is integral to the functionality of therelated equipment is capitalised as part of that equipment. (ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment isrecognised in the carrying amount of the item if it is probable that the futureeconomic benefits embodied within the part will flow to the Group and its costcan be measured reliably. The costs of the day-to-day servicing of property,plant and equipment are recognised in income and expenditure as incurred. (iii) Depreciation Depreciation is recognised as an expense in income and expenditure on astraight-line basis over the estimated useful lives of each part of an item ofproperty, plant and equipment. Leased assets are depreciated over the shorterof the lease term and their useful lives. The estimated useful lives for the current and comparative periods are asfollows: Plant and machinery - 3 years Fixtures and fittings - 3 to 5 years Network equipment - 5 years Depreciation methods, useful lives and residual values are reviewed at eachbalance sheet date. (c) Intangible assets and goodwill (i) Goodwill Goodwill arises on the acquisition of subsidiaries and is stated at cost lessany accumulated impairment losses. Goodwill, which under IFRSs is not amortised,is tested annually for impairment. Acquisitions prior to 1 January 2006 As part of its transition to IFRSs, the Group elected to restate only thosebusiness combinations that occurred on or after 1 January 2006. In respect ofacquisitions prior to 1 January 2006, goodwill represents the amount recognisedunder the Group's previous accounting framework, UK GAAP. Acquisitions on or after 1 January 2006. For acquisitions on or after 1 January 2006, goodwill represents the excess ofthe cost of the acquisition over the Group's interest in the net fair value ofthe identifiable assets, liabilities and contingent liabilities of the acquiree. (ii) Amortisation Amortisation is recognised as an expense in income and expenditure on astraight-line basis over the estimated useful lives of intangible assets, otherthan goodwill, from the date that they are available for use. The estimateduseful lives for the current and comparative periods are as follows: Customer relationships - 2 to 3 years Video library - 10 years (d) Leased assets Leases in terms of which the Group assumes substantially all the risks andrewards of ownership are classified as finance leases. Upon initial recognitionthe leased asset is measured at an amount equal to the lower of its fair valueand the present value of the minimum lease payments. Subsequent to initialrecognition, the asset is accounted for in accordance with the accounting policyapplicable to that asset. Other leases are operating leases and are not recognised on the Group's balancesheet. (e) Lease payments Payments made under operating leases are recognised in profit or loss on astraight-line basis over the term of the lease. Lease incentives are recognisedas an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between thefinance expense and the reduction of the outstanding liability. The financeexpense is allocated to each period during the lease term so as to produce aconstant periodic rate of interest on the remaining balance of the liability. (f) Inventories Inventories are measured at the lower of cost and net realisable value. Indetermining the cost of raw materials, consumables and goods purchased forresale, the weighted average purchase price is used. For work in progress and finished goods cost is taken as productioncost, which includes an appropriate proportion of attributable overheads. (g) Trade receivables Trade receivables are stated initially at fair value then measured at amortisedcost less provisions for impairment. Provisions for impairment are recognisedwhen there is objective evidence that the Group will not be able to collect allamounts due according to the original terms of the receivables. The impairmentrecorded is the difference between the carrying value of the receivables and theestimated future cash flows discounted where appropriate. Any impairmentrequired is recorded in the income statement. (h) Trade payables Trade payables are not interest bearing and are stated at their nominal value. (i) Impairment Non-financial assets Assets that have indefinite lives are tested for impairment annually. Assetsthat are subject to amortisation or depreciation are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying value maynot be recoverable. An impairment loss is recognised if the carrying amount of an asset or itscash-generating unit exceeds its recoverable amount. A cash-generating unit isthe smallest identifiable asset group that generates cash flows that largely areindependent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognisedin respect of cash-generating units are allocated first to reduce the carryingamount of any goodwill allocated to the units and then to reduce the carryingamount of the other assets in the unit on a pro rata basis. The recoverable amount of an asset or cash-generating unit is the greater of itsvalue in use and its fair value less costs to sell. In assessing value in use,the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time valueof money and the risks specific to the asset. An impairment loss in respect of goodwill is not reversed. In respect of otherassets, impairment losses recognised in prior periods are assessed at eachreporting date for any indications that the loss has decreased or no longerexists. An impairment loss is reversed if there has been a change in theestimates used to determine the recoverable amount. An impairment loss isreversed only to the extent that the asset's carrying amount does not exceed thecarrying amount that would have been determined, net of depreciation oramortisation, if no impairment loss had been recognised. (j) Revenue Revenue represents the amount invoiced by the Group for the provision of mediaservices and their related equipment in the normal course of business, excludingvalue added tax. Revenue from these services and equipment is recognised on thedate of broadcast or delivery. Sponsorship and promotions revenue is recognisedover the life of the contract. (k) Finance income and expenses Finance income comprises interest income on bank deposits and is recognised asit accrues using the effective interest method. Finance expenses comprise interest expense on borrowings which is recognised inprofit or loss using the effective interest method. (l) Taxation Tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year,using tax rates enacted or substantively enacted at the reporting date, and anyadjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes.Deferred tax is not recognised for the following temporary differences: theinitial recognition of goodwill, the initial recognition of assets orliabilities in a transaction that is not a business combination and that affectsneither accounting nor taxable profit, and differences relating to investmentsin subsidiaries to the extent that they will probably not reverse in theforeseeable future. Deferred tax is measured at the tax rates that are expectedto be applied to the temporary differences when they reverse, based on the lawsthat have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognised to the extent that it is probable that futuretaxable profits will be available against which temporary difference can beutilised. Deferred tax assets are reviewed at each reporting date and arereduced to the extent that it is no longer probable that the related tax benefitwill be realised. (m) Share capital Incremental costs directly attributable to the issue of ordinary shares andshare options are recognised as a deduction from equity. (n) Earnings per share The Group presents basic and diluted earnings per share (EPS) data for itsordinary shares. Basic EPS is calculated by dividing the profit or lossattributable to ordinary shareholders of the Company by the weighted averagenumber of ordinary shares outstanding during the period. Diluted EPS isdetermined by adjusting the profit or loss attributable to ordinary shareholdersand the weighted average number of ordinary shares outstanding for the effectsof all dilutive potential ordinary shares, which comprise convertible loans (upto 30 June 2006) and share options granted to employees. (o) Employee benefits (i) Defined contribution plans Obligations for contributions to defined contribution pension plans arerecognised as an expense in profit or loss when they are due. (See note 26). (ii) Share-based compensation The Group operates an equity settled compensation scheme which grants options tokey employees. The grant date fair value of options granted to employees isrecognised as an employee expense, with a corresponding increase in equity, overthe period in which the employees become unconditionally entitled to theoptions. The amount recognised as an expense is adjusted to reflect the actualnumber of share options that vest unless this adjustment is due to the shareprice not achieving the set thresholds for vesting. As permitted by IFRS 1 ('First time adoption of IFRSs') the Group has taken the exemption not to applythis standard before the transition date. (iii) Employee benefit trust The Group operates an employee benefit trust (EBT) for the benefit of itsemployees through Immedia Broadcasting Trustees Limited which acts as Trustee.Transactions of the EBT are treated as being those of the Group and aretherefore reflected in the consolidated financial statements. In particular,the trust's purchases and sales of shares in the Company are debited andcredited directly to equity. (p) Segment reporting A segment is a distinguishable component of the Group that is engaged either inproviding related services (business segment), or in providing services within aparticular economic environment (geographical segment), which is subject torisks and rewards that are different from those of other segments. The Group'sprimary format for segment reporting is based on business segments. (q) Adopted IFRSs not yet applied The following Adopted IFRSs were available for early application but have notbeen applied by the Group in these financial statements. Their adoption is notexpected to have a material effect on the financial statements. IFRS 8 'Operating Segments' (mandatory for the year commencing on or after 1January 2009). IFRIC 11 'Group and treasury share transactions' (mandatory for the yearcommencing on or after 1 March 2007). 4 Determination of fair values A number of the Group's accounting policies and disclosures require thedetermination of fair value, both for financial and non-financial assets andliabilities. Fair values have been determined for measurement and / ordisclosure purposes based on the following methods. Where applicable, furtherinformation about the assumptions made in determining fair values is disclosedin the notes specific to that asset or liability. (i) Intangible assets The fair value for initial recognition and impairment review of intangibleassets is based on the discounted cash flows expected to be derived from the useand eventual sale of the assets (see note 14 below). (ii) Trade and other receivables The fair value for initial recognition and impairment review of trade and otherreceivables is estimated as the present value of future cash flows, discountedat the market rate of interest at the reporting date. (iii) Trade and other payables The fair value of trade and other payables is estimated as the present value offuture cash flows, discounted at the market rate of interest at the reportingdate. (iv) Cash and cash equivalents The fair value of cash and cash equivalents is estimated as their carrying valuewhere the cash is repayable on demand. 5 Segment reporting Segment information is presented in respect of the Group's business andgeographical segments. The primary format, business segments, is based on theGroup's management and internal reporting structure. Inter-segment pricing is determined on an arm's length basis. Segment results, assets and liabilities include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.Unallocated items comprise mainly head office expenses and income tax assets andliabilities. Segment capital expenditure is the total cost incurred during the period toacquire property, plant and equipment, and intangible assets other thangoodwill. 5 Segment reporting (continued) Business segments The Group comprises the following main business segments: Radio services. The production and transmission of live radio programmes forin-store retailer use. Audio and visual content production. The production and transmission of music,video and other screen based content for business use. Geographical segments The Group operates principally within the United Kingdom, with some EuropeanEconomic Area (EEA) customers. All Group activities originate in the UnitedKingdom. In presenting information on the basis of geographical segments, segment revenueis based on the geographical location of customers. Segment assets are based onthe geographical location of the assets. Business segments Radio Audio visual Total Radio Audio Total visual 2007 2007 2007 2006 2006 2006 £ £ £ £ £ £Revenue 3,050,044 854,771 3,904,815 3,710,194 762,031 4,472,225 Gross profit 1,780,644 432,350 2,212,994 2,275,843 237,409 2,513,252Administrative expenses beforedepreciation, amortisation andimpairment charge (1,543,216) (463,409) (2,006,624) (1,658,204) (211,630) (1,869,834) EBITDA 237,428 (31,059) 206,369 617,639 25,779 643,418Depreciation (328,272) (26,156) (354,428) (798,567) (20,487) (819,054)Amortisation of intangible assets - (172,625) (172,625) (36,637) (151,250) (187,887)Impairment charge on intangible assets - (1,055,225) (1,055,225) - - - Operating loss (90,844) (1,285,065) (1,375,909) (217,565) (145,958) (363,523)Net finance income 20,499 3,873Income tax credit 72,750 44,738 Loss for the financial yearattributable to equity shareholders (1,282,660) (314,912) Segment assets 926,760 214,712 1,141,472 2,870,494 319,674 3,190,168Unallocated assets 937,628 509,282Segment liabilities (832,313) (97,520) (929,833) (1,092,039) (184,868) (1,276,907)Unallocated liabilities (574,438) (510,321) Total net assets 574,829 1,912,222 Capital expenditure 11,259 11,210 22,469 198,656 2,238 200,894 Geographical segments UK EEA Total UK EEA Total £ £ £ £ £ £Revenue 3,676,626 228,189 3,904,815 3,504,890 967,335 4,472,225 Segment assets 1,141,472 - 1,141,472 3,090,585 99,583 3,190,168Unallocated assets 937,628 509,282Segment liabilities (929,833) - (929,833) (1,215,574) (61,334) (1,276,907)Unallocated liabilities (574,438) (510,321) Total net assets 574,829 1,912,222 6 Expenses and auditors' remuneration 2007 2006 £ £Included in profit/loss are the following: Auditors' remunerationGroup - audit 34,000 34,400- fees paid to the auditors and their associates in respect of other services 8,060 8,760- fees paid to the auditors in respect of acquisition due diligence - 60,500Depreciation and amounts written off tangible and intangible fixed assets- Owned 524,017 889,230- Leased 3,036 3,788Loss on disposal of tangible fixed assets 19,138 -Impairment charge on intangible fixed assets 1,055,225 -Hire of plant & machinery - -Hire of other assets - operating leases 101,030 78,390 7 Remuneration of Directors 2007 2006 £ £Directors' emoluments (including employer's national insurance of £47,973 in 20072007 and £40,335 in 2006) 571,303 539,222Amounts receivable under long term incentive schemes - - 571,303 539,222Contributions to defined contribution plans - - 571,303 539,222 The aggregate of emoluments and amounts receivable under long term incentiveschemes of the highest paid Director was £175,691 (2006: £177,614). 2007 2006 Number of Number of Directors Directors The number of Directors who exercised share options was - 2 Retirement benefits are accruing to the following numbers of Directors under moneypurchase pension schemes 1 1 8 Staff numbers and costs The full time equivalent average number of persons employed (includingDirectors) during the year, analysed by category, was as follows: Number of employees 2007 2006 Administration 13 14Production and distribution 16 12 29 26 The aggregate payroll costs of these persons were as follows: 2007 2006 £ £ Wages and salaries 1,335,770 962,105Compulsory social security contributions 132,719 118,273Contributions to defined contribution plans - - 1,468,489 1,080,378 The Group made no pension contributions in the year (2006: £nil). 9 Finance income and expense 2007 2006 £ £Interest income on bank deposits 22,374 21,428 2007 2006 £ £ Interest expense on bank loans and overdrafts 653 2,161Interest expense on other loans - 13,173Interest expense on finance leases 726 936Other interest expense charges 496 1,285 Finance expense 1,875 17,555 Net finance income 20,499 3,873 10 Income tax credit in the income statement 2007 2006 £ £Current tax (credit)Current period - -Adjustment for prior periods - (14,488) Deferred tax (credit)Reversal of temporary differences (72,750) (30,250) Total tax (credit) in consolidated income statement (72,750) (44,738) Reconciliation of effective tax rate The current tax charge for the period is based on an effective rate of 20%.(2006: 19.75%) and is higher (2006: higher) than the standard rate ofcorporation tax in the UK for small companies (20%, 2006: 19%). The differencesare explained below: Loss before tax (1,355,410) (359,650) Current tax at 20% (2006: 19%) (271,082) (68,333) Effects of:Expenses not deductible for tax purposes 4,637 14,528Amortisation and impairment of intangibles 243,326 35,698Movement in unprovided deferred tax asset (23,119) 25,206Reversal of temporary differences (72,750) (30,250)Tax deductions not in accounts (exercise of share options) - (8,108)Pre-acquisition movements in Cube - 1,009Credit adjustments in respect of prior periods - (14,488) Total income tax credit (72,750) (44,738) 11 Loss per share 2007 Number 2006 NumberWeighted average number of shares in issue 14,260,271 12,772,489Less weighted average number of own shares (213,500) (383,747) Weighted average number of shares in issue for basic loss per share 14,046,771 12,388,742 The basic and diluted loss per share are calculated using the loss for thefinancial period of £1,282,660 (2006: loss £314,912). The weighted number ofshares used for the diluted loss per share is calculated after reflecting theoutstanding share options and conditional issuable shares at the year end. Butin accordance with IAS 33 the diluted basic loss per share is stated as the sameamount as basic as there is no dilutive effect. 12 Acquisition of subsidiaries Business combination On 8 May 2006 the Company acquired all the shares of The Cube Group of CompaniesLimited and its trading subsidiary Cube Music Limited. The acquisition had thefollowing effect on the Group's assets and liabilities on acquisition date: Pre acquisition carrying Fair value adjustments Recognised values on amounts acquisition £ £ £Net assets acquiredProperty plant and equipment 69,520 1 69,521Intangible assets 362,000 330,880 692,880Trade and other receivables 222,185 - 222,185Cash and cash equivalents 204,236 - 204,236Loans and borrowings (33,314) - (33,314)Trade and other payables (313,496) - (313,496)Deferred taxation - (115,480) (115,480) Net identifiable assets and 511,131 215,401 726,532liabilities Goodwill on acquisition 1,063,410 Consideration paid * 1,789,942Cash acquired (204,236) Net consideration outflow 1,585,706 Of which: Number Fair (market) value £Paid in shares 1,632,653 20.0 pence 326,531 1,216,281 15.0 pence 182,442Paid in cash 1,076,733 1,585,706 * Includes professional fees of £218,775 and stamp duty £12,195. The fair value adjustments on intangible assets relate to customer relationshipsand the video library (see note 14 below). The goodwill on acquisition arises from Cube Music's staff and its connectedrelationships with recording companies. Pre-acquisition carrying amounts were determined based on applicable IFRSsimmediately before the acquisition. The value of assets, liabilities recognisedon acquisition are their estimated fair values (see note 4 for methods used indetermining fair values). In determining the fair value of contractrelationships with customers, the Group applied the discount rate of 23% to theestimated future net earnings; in determining the fair value of the videolibrary the Group used estimated replacement cost. The consolidated results of the Cube Group of Companies Limited and its subsidiary Cube Music Limited, directly priorto and post acquisition were as follows: Year to 30 7 months to 8 8 months to 31 September 2005 May 2006 December 2006 (unaudited) £ £ £Revenue 1,677,862 1,069,437 762,031Operating profit/(loss) 157,660 6,474 (32,035)Finance expense (3,904) (1,167) (1,081)Profit/(loss) before taxation 153,756 5,307 (33,116)Income tax (16,315) - 14,488Profit/(loss) for the period attributable to equity shareholders 137,441 5,307 (18,628) 13 Property, plant and equipment Plant and Fixtures & Network Total equipment fittings Equipment £ £ £ £ CostAt 1 January 2007 675,740 335,620 2,192,517 3,203,877Additions 4,087 13,638 4,744 22,469Disposals & retirements - - (1,539,884) (1,539,884) At 31 December 2007 679,827 349,258 657,377 1,686,462 Depreciation and impairment losses At 1 January 2007 593,453 245,832 1,802,905 2,642,190Charge for year 61,083 50,748 242,597 354,428On disposals & retirements - - (1,518,993) (1,518,993) At 31 December 2007 654,536 296,580 526,509 1,477,625 Carrying amountsAt 31 December 2007 25,291 52,678 130,868 208,837 CostAt 1 January 2006 615,366 245,852 2,378,993 3,240,211Acquisition 52,009 69,011 - 121,020Additions 8,365 27,132 165,397 200,894Disposals & retirements - (6,375) (351,873) (358,248) At 31 December 2006 675,740 335,620 2,192,517 3,203,877 Depreciation and impairment lossesAt 1 January 2006 441,317 153,773 1,489,409 2,084,499Acquisition 25,047 26,452 - 51,499Charge for year 127,089 67,732 624,233 819,054On disposals & retirements - (2,125) (310,737) (312,862) At 31 December 2006 593,453 245,832 1,802,905 2,642,190 Carrying amountsAt 31 December 2006 82,287 89,788 389,612 561,687 Disposals and retirements in 2007 In April 2007 the Group ceased broadcasting on a free of charge basis itsImpulse radio brand for independent newsagents and replaced this with asubscription only service. Radio receiving network equipment which the Group had provided to independentnewsagents to receive Impulse radio and which had been fully depreciatedfollowing an impairment charge in the Group's 2005 financial statements, hasbeen retired. Other radio network equipment with a residual value of £20,891 was disposed ofon termination of a contract. Finance leases There were no outstanding finance leases in respect of property, plant andequipment at 31 December 2007 (in 2006 the net book value of fixtures andfittings included an amount of £3,036 in respect of assets held under financeleases). 14 Intangible assets Customer Video Goodwill Total relationships library £ £ £ £CostAt 1 January 2007 566,880 126,000 1,228,043 1,920,923Adjustment * - - (54,733) (54,733) At 31 December 2007 566,880 126,000 1,173,310 1,866,190 Amortisation and impairment lossesAt 1 January 2007 142,750 8,500 109,900 261,150Charge for year 159,500 13,125 - 172,625Impairment losses 191,125 - 864,100 1,055,225 At 31 December 2007 493,375 21,625 974,000 1,489,000 Carrying amountsAt 31 December 2007 73,505 104,375 199,310 377,190 CostAt 1 January 2006 - - 109,900 109,900Acquisition 566,880 126,000 1,118,143 1,811,023 At 31 December 2006 566,880 126,000 1,228,043 1,920,923 Amortisation and impairment lossesAt 1 January 2006 - - 73,263 73,263Charge for year 142,750 8,500 36,637 187,887 At 31 December 2006 142,750 8,500 109,900 261,150 Carrying amountsAt 31 December 2006 424,130 117,500 1,118,143 1,659,773 * The adjustment to the cost of goodwill arises from the change in the shareprice and therefore the value of the deferred share consideration between thatinitially provided for at 31 December 2006, and that at which the shares wereissued on 30 March 2007. Impairment review and movements in intangible assets and goodwill For the initial allocation of goodwill arising on the acquisition of Cube Groupof Companies to cash-generating units (CGUs) on the adoption of IFRSs (asdisclosed in note (12)) the Group engaged independent expert valuers. Assets that have indefinite lives are tested for impairment annually. Assetsthat are subject to amortisation or depreciation are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying value maynot be recoverable. The recoverable amounts of the cash generating units are determined from valuein use calculations. The key assumptions for the value in use calculations arethose regarding discount rates, growth rates and expected changes to sellingprices, and direct costs during the period. Management have estimated thediscount rate using the weighted average cost of capital of the business,changes in selling prices and direct costs are based on past experience andexpectations of future change in the market. The group prepares cash flows derived from the most recent financial budgetsapproved by management for the next year and extrapolates cash flows usingestimated growth rates beyond the budgeting period. The key assumptions for the value in use calculations are: management forecastmodest growth to extrapolate cash flows in the period through to December 2009.A post tax discount rate of 21% was applied to cash flow projections whichequates to a pre tax rate of approximately 26%. During the first half of 2007 there were clear indications of impairment of thecustomer relationships intangible asset and as a result management completedimpairment tests on all the Group's intangible assets, including goodwill. The resulting impairment charges were disclosed in the Group's interim financialstatements and are explained in more detail below. During the second half of 2007 there has been a performance improvement in theaudio visual part of the business, but no reversal has been made of any of theimpairment charges made during the first half year. Method In the period ending 30 June 2007, the performance of audio visual business wassignificantly weaker than anticipated following the non-renewal of a significantcontract and lower than expected activity with other customers. These factorsindicated potential impairment in customer relationships and goodwill during theperiod. The test for impairment under IAS 36 compares the carrying value of anintangible asset against its recoverable amount to the business, where economicvalue is defined as the higher of the asset's fair value less costs to sell orits value in use. (These measures are based on the net present value of futurecash flows). If the carrying value exceeds the economic value, an impairmentexists. Economic values of intangible assets For the Group's intangible assets, the fair values less costs to sell areconsidered to be the same as the values in use because identical assumptions areused for both valuations. Management has reviewed the customer relationshipsand video library for impairment by reference to their fair values less costs tosell and compared the result against their carrying values. In determining thefair values of contract relationships with its customers, the Group applied thediscount rate of 23% to the estimated future net earnings; in determining thefair value of the video library, the Group used estimated replacement cost. The impairment review of the goodwill in the audio visual business wasundertaken by reference to its 'value in use'; the audio visual business formsits own CGU within the Group and the net present value test was performed onthat CGU. Impairment: the following calculations arise under the policy described in note3(g) above Video library: although the video library had not been used to the levelanticipated during the first half of 2007, sustained increased use is expectedfor the future and management concluded that its fair value less cost to sellexceeded its amortised carrying value of £110,000 at 30 June 2007 and noimpairment charge was required. This remains the case at 31 December 2007 whenthe amortised carrying value was £104,375. Customer relationships: the fair value less costs to sell of customerrelationships at 30 June 2007 was £152,875 which compared with an amortisedcarrying value of £344,000 resulted in an impairment charge of £191,125. At 31December 2007 the amortised carrying value of £73,505 is considered to be notless than the fair value less costs to sell and no further impairment charge hasbeen made. Goodwill: The net present value calculation for goodwill at 30 June 2007indicated a recoverable amount of £199,300 compared with £1,063,400 atacquisition date, resulting in an impairment charge of £864,100. No furtherimpairment charge is assessed at 31 December 2007. 15 Subsidiary companies The following companies are wholly owned subsidiaries whose ultimate parentcompany is Immedia Broadcasting Plc: Name Registered number Country of incorporation Shareholding Immedia Broadcast Limited 03873102 England & Wales 100%Immedia Broadcasting Trustees Limited 04552356 England & Wales 100%The Cube Group of Companies Limited 03845864 England & Wales 100%Cube Music Limited 03822694 England & Wales 100%Immedia Group Limited (1) 06336935 England & Wales 100% (1) Incorporated 8 August 2007 At 31 December 2006 the Company held 100% of the ordinary share capital ofImmedia Broadcast Limited and of The Cube Group of Companies Limited (bothincorporated in England and Wales). On 31 December 2007 the Company transferred its ownership of 100% of theordinary share capital of The Cube Group of Companies Limited to ImmediaBroadcast Limited. On 31 December 2007 The Company owned 100% of the ordinaryshare capital of Immedia Group Limited. At 31 December 2007 and 31 December 2006, Immedia Broadcast Limited also held100% of the ordinary share capital of Immedia Broadcasting Trustees Limited (atrust holding company) (incorporated in England and Wales). At 31 December 2007 and 31 December 2006, The Cube Group of Companies Limitedheld 100% of the ordinary share capital of Cube Music Limited (incorporated inEngland and Wales). 16 Trade and other receivables 2007 2006 £ £ Trade receivables 593,250 1,009,127Amounts owed by subsidiary undertakings - -Other debtors 82,725 53,169 675,975 1,062,296 At 31 December 2007 trade receivables are shown after a provision for impairmentof £15,218 (31 December 2006: £111,154) arising from disputed charges. £84,500of the 2006 provision for impairment was released in 2007 following recovery ofa disputed debt. All debts are due within one year. At 31 December the totals of trade receivables past due, net of provision forimpairment, were as follows: 2007 2006 £ £Up to 3 months past due 344,084 506,772Over 3 months past due 58,847 413 402,931 507,185 17 Cash and cash equivalents 2007 2006 £ £ Bank balances 1,143 3,887Call deposits 660,702 242,260Cash and cash equivalents 661,845 246,147 Bank overdrafts used for cash management purposes (note 19) - (3,352)Cash and cash equivalents in the statement of cash flows 661,845 242,795 18 Capital and reserves The Group's objective when managing its capital structure is to minimise thecost of capital while maintaining adequate capital to protect against volatilityin earnings and net asset values. The strategy is designed to maximiseshareholder return over the long term. The relative proportion of debt to equitywill be adjusted over the medium term depending on the cost of debt compared toequity and the level of uncertainty facing the industry and the Group. Reconciliation of movement in capital and reserves Share capital 2007 2006 £ £Authorised36,000,000 Ordinary shares of 10 pence each 3,600,000 3,600,000 Allotted, called up and fully paid14,556,844 (2006: 13,340,563) Ordinary shares of 10 pence each 1,455,684 1,334,056 Movements in yearAt beginning of year 1,334,056 1,173,897Conversion of convertible debt instruments - (3,106)1,632,653 Ordinary shares of 10 pence each issued (a) - 163,2651,216,281 Ordinary shares of 10 pence each issued (b) 121,628 - 1,455,684 1,334,056 (a)These shares were issued at 20.0 pence each. (b) These shares were issued at 15.0 pence each. There are no restrictions on the transfer of shares in Immedia Broadcasting Plc. All shares carry equal voting rights. Employee share options (including Directors) are outstanding as follows: Option scheme Date of grant Number of shares Option price per shareImmedia EMI Share Option Scheme 27 Jan 2003 10,000 3.75 penceImmedia EMI Share Option Scheme 29 Oct 2003 35,000 20 penceImmedia EMI Share Option Scheme 11 Dec 2003 90,000 110 pence Options granted to employees under the Immedia EMI Share Option Scheme areexercisable at any time between 12 December 2003 and their expiry on the tenthanniversary of the date of grant. Directors' share options are outstanding as follows: Number of options during the year Exercise Market price Date from Expiry date price at date of which exercise exercisable At start Granted Exercised At end of of year yearT Brookes 20,000 - - 20,000 20 p n/a 12 Dec 2003 28 Oct 2013 90,000 - - 90,000 110 p n/a 12 Dec 2003 10 Dec 2013 At 31 December 2007 the EBT held 213,500 shares in Immedia Broadcasting Plc intrust for employees against the future exercise of options granted under theImmedia EMI Share Option Scheme (2006: 213,500 shares). All options vestedbefore the adoption date of IFRS 2 so there was no impact on its adoption. Share premium and reserves Reserves as at 31 December Share premium Shares to be Merger reserve Retained2007 account issued earnings £ £ £ £At 1 January 2007 3,525,727 237,175 2,245,333 (5,430,069)Retained loss for the year - - - (1,282,660)1,216,281 Ordinary sharesof 10 pence each issued in year 60,814 (237,175) - -At 31 December 2007 3,586,541 - 2,245,333 (6,712,729) Reserves as at 31 December2006 At 1 January 2006 3,390,411 - 2,245,333 (5,130,032)Retained loss for the year - - - (314,912)Released on repayment of (27,949) - - -convertible debtinstrumentsNew shares issued 163,265 - - -Conditional shares pending - 237,175 - -issueProceeds from exercise of - - - 14,875share options At 31 December 2006 3,525,727 237,175 2,245,333 (5,430,069) 19 Loans and borrowings 2007 2006 £ £Non-current liabilitiesUnsecured bank loans - 3,187 - 3,187 Current liabilitiesBank overdrafts - 3,352Current portion of unsecured bank loans - 10,917Current portion of finance lease liabilities - 4,778 - 19,047 Unsecured bank loans were repaid in full during 2007. Finance leases wererepaid in full during 2007. 20 Deferred tax liabilities Recognised deferred tax liabilities are attributable to the following: 2007 2006 £ £Intangible assets 12,480 85,230Tax value of loss carry-forwards - - 12,480 85,230 The movements in deferred tax during the year were as follows: 2007 2006 £ £At beginning of year 85,230 115,480Reversal of temporary differences (note 10) (72,750) (30,250) At end of year 12,480 85,230 The deferred tax asset arising in respect of temporary differences betweencapital allowances and depreciation of £254,000 (2006: asset of £270,000) hasbeen added to (2006: added to) accumulated trading losses. The residual tradinglosses create a potential deferred tax asset of £755,000 (2006: £611,000) whichhas not been recognised due to the uncertainty of the timing of its eventualcrystallisation. 21 Trade and other payables 2007 2006 £ £CurrentTrade payables due to related parties 3,848 8,760Other trade payables 737,937 645,118Other taxation and social security 144,547 125,684Non-trade payables and accrued expenses 530,594 455,303 1,416,926 1,234,865 Included within Other trade payables is £23,500 (2006: £nil) expected to besettled in more than 12 months. Included within Non-trade payables and accrued expenses are uninvoiced chargesfor servicing, maintenance and licencing costs, plus accruals for legal andprofessional fees. 22 Financial instruments At 31 December 2007 the Group had repaid all its borrowings (overdrafts, bankloans, finance leases) and the following disclosures apply to the positionextant before its borrowings were repaid. There are no differences between thedisclosures given here for the Group and those required for its parent company. Treasury The Group's financial instruments comprise borrowings, cash and liquidresources, and trade debtors and creditors, the principal risk arising fromwhich is interest rate risk, which the Board has reviewed and manages throughits policies summarised below. The Group maintains a policy of not trading infinancial instruments. This policy has remained unchanged since the beginning ofthe year. Interest rate risk The Group finances its operations through a finance leases and bank borrowings.The Group borrows at both fixed and floating rates of interest. During 2007 allfinance leases and bank borrowings were repaid and there was no interest raterisk at 31 December 2007. Liquidity risk Short-term flexibility is achieved by use of overdraft facilities. There was noborrowing on overdraft facilities at 31 December 2007. Foreign currency risk All trading in the UK and the EEA was denominated in sterling. The Group has nomaterial financial exposure to foreign exchange gains and losses on monetaryassets and liabilities at the year end and does not hedge any of its tradingactivities. Credit risk The Group is not subject to significant credit risk with its exposure beinglimited to a number of multinational blue chip customers. Policies aremaintained to ensure the Group makes credit sales only to customers with anappropriate credit rating. 22 Financial instruments (continued) Market risks The risks the Group faces are similar to those faced by other small companiesservicing larger business within the UK retail sector. Primary risks are in theeconomic cycle (e.g. the adverse effect of a downturn in consumer spendingleading to reduced marketing expenditure amongst clients), and competition (fromothers in an already crowded media marketplace). These risks are balanced against the relative financial resilience of theGroup's blue chip clients, the innovative and high quality services the Groupprovides to those clients, and the methods it uses to protect its position inthe market. Fair values There is no difference between the carrying amounts and the fair values of theGroup's IAS 39 categories of financial instruments. Interest rate bank currency profile of financial instruments at year end Financial liabilities (in comparative year only) The Group's financial liabilities consist of bank loans, finance leases and bank overdrafts. Their fair value is estimated as carrying value where the cash is repayable on demand. 2007 2006 £ £Fixed rate liabilitiesSterling bank loans: repayable in 2007 (i) - 10,917Sterling finance leases: repayable in 2007 (ii) - 4,778 Repayable within one year or less: - 15,695 Repayable more than one year not more than two years: Sterling bank loan: repayable originally in 2008 (iii) - 3,187 - 18,882 (i) Comprised two loans on which interest was fixed at 8.7% and at 9.35%. (ii) Comprised two leases on which interest was fixed at 10.1%. (iii) Comprised one loan on which interest was fixed at 8.7%. Floating rate liabilitiesSterling overdraft - 3,352 The facility is repayable on demand and bears interest at rates based on The Royal Bank of Scotland Plc base rate plus 3%. Borrowing facilities The Group had nil borrowings at 31 December 2007. (At 31 December 2006borrowings, which were for Cube Music Limited, consisted of two bank loans underthe DTI Small Companies Loan Guarantee scheme and a £25,000 overdraft facility(all with The Royal Bank of Scotland Plc) and two finance leases (with LombardAsset Finance). Security for the bank loans and overdraft facility is bydebenture on the assets of Cube Music Limited). At 31 December 2007 there were no undrawn committed borrowing facilities (2006:none). Financial assetsThe Group's financial assets consist of cash and cash equivalents which comprise cash balances and short-term call deposits. The fair value is estimated as carrying value where the cash is repayable on demand. 2007 2006 £ £Sterling cash and cash equivalents 661,845 246,147 23 Equity reconciliation 2007 2006 £ £Opening shareholders' funds 1,912,222 1,679,609Loss for the financial year after taxation (1,282,660) (314,912)New shares issued 182,442 326,530Conditional shares pending issue (237,175) 237,175Proceeds from exercise of share options - 14,875Released on repayment of Other loan under FRS 25 - (31,055) Closing shareholders' funds 574,829 1,912,222 24 Related party disclosures BBME Media Group Limited (BBME), a company controlled by Bruno Brookes, owns1,150,000 shares in the Company. There were no transactions between BBME andthe Immedia Broadcasting group in 2007 (2006: £nil). Morchard Bishop & Co, an accountancy practice controlled by CharlesBarker-Benfield, contracts with Immedia Broadcasting Plc to provide accountancyservices to the Group. During the year to 31 December 2007 Immedia BroadcastLimited paid £57,923 (2006: £46,622) to Morchard Bishop & Co in respect of feesfor Charles Barker-Benfield. Immedia Broadcasting Plc and its subsidiary companies: During the year to 31 December 2007 Immedia Broadcasting Plc completed thefollowing transactions with its subsidiary companies: With Immedia Broadcast Limited: ·; transfer of investment in The Cube Group of Companies Limited at net book value of £789,450; ·; recharge of management charges totalling £214,335 (2006: £nil). With the Immedia Broadcasting Employee Benefit Trust: ·; loan interest charge of £2,604 (2006: £2,256). 25 Commitments (a) Annual commitments under non-cancellable operating leases are as follows: 2007 2006 Land and Other Land and Other buildings buildings £ £ £ £Operating leases which expire: Within one year 26,244 - - - In two to five years inclusive 60,800 - 101,030 - 87,044 - 101,030 - (b) Capital commitments There were no unprovided capital commitments outstanding at 31 December 2007(2006: £nil). 26 Pension schemes The Group operates a defined contribution pension scheme (the Immedia BroadcastLimited Stakeholder Pension Scheme) with Allied Dunbar Assurance Plc which isopen to all employees to join. There were no contributions paid or payable bythe Group to the scheme during the year (2006: £nil) and there were nooutstanding or prepaid contributions at either the beginning or the end of thecurrent or previous financial years. The Group also operates a defined contribution pension scheme (the ImmediaBroadcast Limited Retirement Benefit Scheme) which currently has two members.This scheme is closed to new members. There were no contributions paid orpayable by the Group to the scheme during the year (2006: £nil) and there wereno outstanding or prepaid contributions at either the beginning or the end ofthe current or previous financial years. 27 Explanation of transition to adopted IFRSs As stated in note 2, these are the Group's first consolidated financialstatements prepared in accordance with Adopted IFRSs. The accounting policies set out in note 3 have been applied in preparing thefinancial statements for the year ended 31 December 2007, the comparativeinformation presented for the year to 31 December 2006, and in the preparationof an opening IFRS balance sheet at 1 January 2006 (the Group's date oftransition). In preparing its opening IFRS balance sheet, the Group has adjusted amountsreported previously in financial statements prepared in accordance with its oldbasis of accounting (UK GAAP). An explanation of how the transition from UKGAAP to Adopted IFRSs has affected the Group's financial position, financialperformance and cash flows is set out in the following tables and notes thataccompany the tables. (i) Reconciliation of equity from UK GAAP to adopted IFRSs at 1 January 2006 UK GAAP Adjustment IFRS £ £ £AssetsProperty, plant and equipment 1,155,712 1,155,712Intangible assets 36,637 36,637Total non-current assets 1,192,349 - 1,192,349 Current assetsInventories - - -Trade and other receivables 666,713 - 666,713Prepayments for current assets 199,709 - 199,709Cash and cash equivalents 831,864 - 831,864Total current assets 1,698,286 - 1,698,286Total assets 2,890,635 - 2,890,635 EquityShare capital 1,173,897 - 1,173,897Share premium 3,390,411 - 3,390,411Shares to be issued - - -Merger reserve 2,245,333 - 2,245,333Retained losses (5,130,032) - (5,130,032)Total equity 1,679,609 - 1,679,609 LiabilitiesLoans and borrowings - - -Deferred taxation - - -Total non-current liabilities - - - Loans and borrowings 188,367 - 188,367Trade and other payables 814,590 - 814,590Deferred income 208,069 - 208,069Total current liabilities 1,211,026 - 1,211,026Total liabilities 1,211,026 - 1,211,026Total equity and liabilities 2,890,635 - 2,890,635 There are no adjustments from UK GAAP to Adopted IFRSs at 1 January 2006. (ii) Reconciliation of equity from UK GAAP to adopted IFRSs at 31 December 2006 UK GAAP Adjustment IFRS £ £ £AssetsProperty, plant and equipment 561,687 561,687Intangible assets 1,658,216 1,557 1,659,773Total non-current assets 2,219,903 1,557 2,221,460 Current assetsInventories 2,409 - 2,409Trade and other receivables 1,062,296 - 1,062,296Prepayments for current assets 167,138 - 167,138Cash and cash equivalents 246,147 - 246,147Total current assets 1,477,990 - 1,477,990Total assets 3,697,893 1,557 3,699,450 EquityShare capital 1,334,056 - 1,334,056Share premium 3,525,727 - 3,525,727Shares to be issued 237,175 - 237,175Merger reserve 2,245,333 - 2,245,333Retained losses (5,346,396) (83,673) (5,430,069)Total equity 1,995,895 (83,673) 1,912,222 LiabilitiesLoans and borrowings 3,187 - 3,187Deferred taxation - 85,230 85,230Total non-current liabilities 3,187 85,230 88,417 Loans and borrowings 19,047 - 19,047Trade and other payables 1,234,865 - 1,234,865Deferred income 444,899 - 444,899Total current liabilities 1,698,811 - 1,698,811Total liabilities 1,701,998 85,230 1,787,228Total equity and liabilities 3,697,893 1,557 3,699,450 The adjustment arises following the reclassification of part of the goodwillarising on the Cube acquisition under UK GAAP into two new intangible assets ofcustomer relationships and the acquired video library on which deferred taxationof £115,480 is provided. The original goodwill amortisation charge is reversed(credit £37,327) and a recalculated amortisation charge of £151,250 is made onthe new intangible assets (see note 14), against which deferred taxation of£30,250 is released. The net adjustment to equity is £83,673 and the netdeferred taxation provided is £85,230. (iii) Reconciliation of loss for the year to 31 December 2006 UK GAAP Adjustment IFRS £ £ £Continuing operationsRevenue 4,472,225 - 4,472,225Cost of sales (1,958,973) - (1,958,973)Gross profit 2,513,252 - 2,513,252 Administrative expenses (2,762,852) (113,923) (2,876,775) Results from operating activities (249,600) (113,923) (363,523) Finance income 21,428 - 21,428Finance expenses (17,555) - (17,555)Net finance income 3,873 - 3,873 (Loss) before income tax (245,727) (113,923) (359,650) Income tax credit 14,488 30,250 44,738 (Loss) for the year (231,239) (83,673) (314,912) The adjustment is explained in note 27 (ii) above. (iv) Reconciliation of cash flows for the year to 31 December 2006. Apart from the normal reclassifications into the IFRS format, there are noadjustments to the cash flows previously reported under UK GAAP for the year to31 December 2006 in the transition to Adopted IFRSs. ENDFR SSFFWUSASEEI