IME.L Regulatory News (IME)

28 Sep 2007 10:01

Immedia Broadcasting plc28 September 2007 28 September 2007 IMMEDIA BROADCASTING PLC INTERIM RESULTS Immedia Broadcasting PLC, the UK's leading provider of live, tailored in-storeradio and TV, today announces its interim results for the six months to 30 June2007. Operational Highlights • Good underlying growth at EBITDA level • New contract announced today with SPAR to provide subscription radio to 1,500 stores currently receiving the service for another 3 years, and the opportunity to extend the paid-for subscription service per store to up to a further 1,000 stores across the UK • £1.0 million impairment charge taken against Cube intangible assets • Integration of Cube under one unique Immedia brand now complete • Successful roll-out of HSBC Live! continuing and currently broadcasting to 940 branches in the UK • IKEA Live! and Lloyds Pharmacy Live! continuing to perform well Financial Highlights 6 months to 30 6 months to 30 June 2007 June 2006Revenue £ 2,015,345 £2,294,464Underlying revenue 1 £ 1,910,116 £ 1,677,273 Operating (loss)/profit £ (1,109,326) £ 125,138Underlying operating (loss) 1 £ (142,104) £ (296,952) Impairment charge on intangible assets £ (1,017,000) - (Loss)/profit before tax £ (1,104,517) £128,595 Profit before interest, tax, depreciation, amortisation and £ 206,633 £ 658,409impairment charges (EBITDA)Underlying EBITDA 1 £ 133,404 £ 45,378 Basic (loss)/earnings per share £ (8.04)p £0.99p Cash and cash equivalents £ 489,951 £ 421,122 1 The underlying data excludes the exceptional contribution from Vitus Apotek in 2006 and Alphyra in 2007 and the impairment charge against Cube intangible assets in 2007. Bruno Brookes, Chief Executive of Immedia, said: "In what has been a challenging six months, Immedia has delivered goodunderlying growth at the EBITDA level and we have made solid progress as a newlyintegrated company. The performance of our subscription radio stations duringthe last six months has been encouraging and the appointment of a new Sales andMarketing Director will help to further develop our client base. We are delighted that SPAR have signed a contract for Immedia to providesubscription radio to up to 1,500 of their stores for another 3 years, with theoption to add up to another 1,000 across the UK. SPAR'S transition from a "freeto retail" to a subscription client demonstrates the business benefits thatImmedia provides. We believe that the development of innovative products, along with a healthypipeline of opportunities both with current and prospective clients, will allowus to continue to build on the good progress made in the last six months." Immedia Broadcasting PlcBruno Brookes - Chief Executive +44 (0) 1635 572 800 Hudson SandlerSandrine Gallien / Amy Faulconbridge +44 (0) 20 7796 4133 Daniel Stewart & Company PlcPaul Shackleton / Stewart Dick +44(0) 20 7776 6550 Chief Executive's Review Note: 2006 comparatives refer to the 6 months ended 30 June 2006 unless otherwise stated I am pleased to present our results for the six months ended 30 June 2007 and toreport on Immedia's progress during the half-year. Results In what has been a challenging six months for the retail market, Immedia hasmaintained its market position well. Whilst the headline numbers might implythe business has not progressed, the reality is a more positive story. Afteradjusting for the one-off contribution of Vitus Apotek and Alphyra in 2006 and2007 respectively, underlying EBITDA increased to £133,404 (2006: £45,378),while the underlying operating loss before impairment charges decreased to£142,104 (2006: loss £296,952). Cube's performance during the past six months has remained below ourexpectations and we have addressed areas where underperformance has beensignificant. While current clients provide ongoing revenue streams, thedevelopment of new business has been significantly behind our initial forecastsand a contract with an existing customer has not been renewed. As a result,there will be a £1.017 million write down against the carrying value of the Cubeintangible assets to reflect these lower levels of contribution to overall Groupperformance. We are pleased with the performance of our Immedia subscription radio stationsthrough which we have achieved good growth. The Immedia product continues tosuccessfully engage businesses in the benefits of enhanced communications withcustomers and staff. Costs have been tightly managed and the Group continues to be cash generative,with £489,951 of cash in the bank (31 December 2006: £242,795). Subscription Radio In June 2007, we announced a new contract with HSBC Bank plc following thesuccessful launch and roll-out of HSBC Live! in 2005. We are now providing HSBCLive! to 940 branches across the UK. Our relationship with IKEA continues to progress well and we are delighted thatIKEA Live! has rolled-out as planned and is now broadcast to 19 stores acrossthe UK. Lloyds Pharmacy Live! is still operating well and we are excited aboutdeveloping our relationship with them through the broadening of Immedia'soffering. We are delighted to announce that since the period end, Spar have signed a newsubscription agreement with us to provide Spar Live! to the existing 1,500 Sparstores that currently broadcast the station for another 3 years, with the optionto add up to another 1,000 across the UK. Under the new contract, Immedia willbroadcast live, in-store radio on a paid-for, monthly subscription basis. Thetransition of SPAR from a "free to retail" to a subscription model demonstratesthe attractions of our subscription offer and we look forward to developing ourexcellent relationship with the SPAR team. We are currently trialling other radio stations and have secured the provisionof tailored content to a range of first class brands, including BHS Home, Tammyand Lex. Integration of Cube We are pleased to confirm that the integration of Cube into Immedia is nowcomplete. In what has been a challenging time for Cube, we believe itsintegration has been an important step forward. Cube continues to provide highquality in-store programmes and promotions to clients such as Burberry, TopShopand TopMan. RadioVision and new product launch Trials of RadioVision, our combination of live radio synchronized with tailoredvideo content with a major brand have progressed well. We have recently launched a similar product, called HQTV, designed for smallerbusinesses. It allows companies to tailor-make a TV offering by integratinglive TV feeds such as news, weather and travel information along with companynews and messages. Although it is still early days, we have received muchinterest from potential purchasers from a range of sectors and look forward todeveloping this new offering. People We recently announced the departure of our Chief Operating Officer, Fiona Ryder,due to personal reasons. Fiona's duties will be shared amongst the Directorsnow that the integration of Cube has been fully completed. We wish Fiona wellfor the future. We are delighted to announce the appointment of a new Sales and MarketingDirector, Amy Cosslett. Amy has over 13 years' experience in the media industryacross a range of channels, such as Hello! Magazine, the Ministry of Sound andMTV. Her breadth of knowledge will be an invaluable asset to Immedia and welook forward to developing our client base over the next twelve months. Outlook Immedia has delivered underlying growth at the EBITDA level and continues to becash generative. We have recruited new staff to further promote Immedia'sbroadened offer and are working well as a newly integrated company now that weoperate under one unique brand. We are delighted that Spar has signed a new subscription contract to continue tobroadcast Spar Live! and the development of our subscription stations has beenvery encouraging. We believe that the development of innovative products, along with a healthypipeline of opportunities both with current and prospective clients, will allowus to continue to build on the good progress made in the last six months." Bruno BrookesChief Executive28 September 2007 Consolidated Balance Sheet Note Unaudited Unaudited as at as at As at 30 June 07 30 June 06 31 Dec 06 £ £ £ AssetsProperty, plant and equipment 7 367,709 867,865 561,687Intangible assets 8 408,910 2,234,752 1,574,543Total non-current assets 776,619 3,102,617 2,136,230 Current assetsInventories - work in progress - - 2,409Trade and other receivables 9 628,792 1,267,694 1,062,296Prepayments for current assets 163,892 193,399 167,138Cash and cash equivalents 10 489,951 481,487 246,147Total current assets 1,282,635 1,942,580 1,477,990Total assets 2,059,254 5,045,197 3,614,220 EquityShare capital 11 1,455,684 1,334,831 1,334,056Share premium 11 3,586,541 3,532,696 3,525,727Shares to be issued 11 - 305,306 237,175Merger reserve 11 2,245,333 2,245,333 2,245,333Retained losses 11 (6,534,586) (5,001,437) (5,430,069)Total equity 752,972 2,416,729 1,912,222 LiabilitiesLoans and borrowings 12 - 232,071 3,187Total non-current liabilities - 232,071 3,187 Loans and borrowings 12 9,196 603,851 19,047Trade and other payables 13 1,196,836 1,380,796 1,234,865Deferred income 100,250 411,750 444,899Total current liabilities 1,306,282 2,396,397 1,698,811Total liabilities 1,306,282 2,628,468 1,701,998Total equity and liabilities 2,059,254 5,045,197 3,614,220 Consolidated income statement Note Unaudited Unaudited Half year to Half Year to Year Ended 30 June 07 30 June 06 31 Dec 06 £ £ £ Continuing operationsRevenue 2,015,345 2,294,464 4,472,225Cost of sales (862,955) (780,034) (1,958,973) Gross profit 1,152,390 1,514,430 2,513,252 Administrative expenses (1,244,716) (1,389,292) (2,846,525)Impairment charge, intangible assets (1,017,000) - - Operating (loss)/profit (1,109,326) 125,138 (333,273) Finance income 5,933 14,951 21,428Finance expenses (1,124) (11,494) (17,555)Net finance income 4,809 3,457 3,873 (Loss)/profit before income tax (1,104,517) 128,595 (329,400) Income tax credit 6 - - 14,488 (Loss)/profit for the period (1,104,517) 128,595 (314,912) Continuing operationsBasic (loss)/earnings per share 14 (8.04)p 0.99p (2.54)pDiluted (loss)/earnings per share 14 (8.04)p 0.98p (2.54)p There were no gains or losses for the current or comparative periods other thanthose reported in the consolidated income statement. Consolidated statement of cash flows Note Unaudited Unaudited Half Year to Half Year to Year Ended 30 June 07 30 June 06 31 Dec 06 £ £ £ Cash flows from operating activities (Loss)/profit for the period (1,104,517) 128,595 (314,912)Adjustments for:Depreciation 185,921 501,069 819,054Amortisation of intangible assets 93,900 32,202 121,000Impairment losses on intangible assets, net ofamortisation adjustment in 2006 1,017,000 - 36,637Loss on sale of property, plant and equipment 19,137 - -Income tax (credit) - - (14,488)subtotal 211,441 661,866 647,291 Change in inventories 2,409 - (2,409)Change in trade and other receivables 380,335 (403,333) (197,935)Change in prepayments 56,415 30,847 57,108Change in trade and other payables (42,838) 244,354 118,748Change in deferred income (344,649) 203,682 224,954subtotal 51,672 75,550 200,466 Interest paid (1,124) (11,494) (17,555)Income tax paid - - (1,882)Net cash from operating activities 261,989 725,922 828,320 Cash flows from investing activitiesInterest received 5,933 14,951 21,428Proceeds from sale of property, plant andequipment 1,753 - - Acquisition of subsidiary, net of cash acquired* - (1,543,376) (1,076,733) Acquisition of property, plant and equipment (12,833) (143,700) (200,894) Net cash used in investing activities (5,147) (1,672,125) (1,256,199) * See note 12 Consolidated statement of cash flows continued Note Unaudited Unaudited Half Year to Half Year to Year Ended 30 June 07 30 June 06 31 Dec 06 £ £ £ Proceeds from exercise of share options - - 14,875New Other loans 700,000 -Repayment of borrowings (7,124) (164,539) (171,133)Payment of finance lease liabilities (2,562) - (4,932) Net cash from (used in) financing activities (9,686) 535,461 (161,190) Net increase (decrease) in cash and cashequivalents 247,156 (410,742) (589,069) Cash and cash equivalents at beginning of period 242,795 831,864 831,864 Cash and cash equivalents at end of period 489,951 421,122 242,795 Notes to the consolidated financial statements 1. Reporting entity Immedia Broadcasting plc (the "Company") is a company domiciled in the UnitedKingdom. The address of the Company's registered office is 8-10 New FetterLane, London EC4A 1RS. The consolidated financial statements of the Company asat and for the six months ended 30 June 2007 comprise the Company and itssubsidiaries (together referred to as the "Group"). The Group primarily isinvolved in marketing and communication services through radio and screen basedmedia. 2. Basis of preparation These accounts for the six months ended 30 June 2007 and the IFRS transitioninformation are unaudited. (a) Statement of compliance The AIM Rules require that the next annual consolidated financial statements ofthe company, for the year ending 31 December 2007, be prepared in accordancewith International Financial Reporting Standards (IFRSs) as adopted by the EU("adopted IFRSs"). This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRSs in issue that either areendorsed by the EU and effective (or available for early adoption) at 31December 2007 or are expected to be endorsed and effective (or available forearly adoption) at 31 December 2007, the Group's first annual reporting date atwhich it is required to use adopted IFRSs. Based on these adopted and unadoptedIFRSs, the directors have made assumptions about the accounting policiesexpected to be applied, which are as set out in note 3 below, when the firstannual IFRS financial statements are prepared for the year ending 31 December2007. In particular, the directors have assumed that the following IFRSs issued by theInternational Accounting Standards Board and IFRIC Interpretations issued by theInternational Financial Reporting Interpretations Committee will be adopted bythe EU in sufficient time that they will be available for use in the annual IFRSfinancial statements for the year ending 31 December 2007: IFRS 8 'OperatingSegments'. In addition, the adopted IFRSs that will be effective (or available for earlyadoption) in the annual financial statements for the year ending 31 December2007 are still subject to change and to additional interpretations and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period will be determined finally only when the annual financialstatements are prepared for the year ending 31 December 2007. The financial statements were approved by the Board of Directors on 27 September2007. (b) Basis of measurement The consolidated financial statements have been prepared on the historical costbasis. (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 5 business combinations (impairment tests); Note 9 trade and other receivables (review and provisions against doubtfuldebts). 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) SubsidiariesSubsidiaries 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) Transactions eliminated on consolidationIntra-group balances and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financialstatements. (iii) MergerOn 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 byFRS 6 acquisitions and mergers. (b) Property plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulateddepreciation and impairment losses. The cost of property, plant and equipmentat 1 January 2006, the date of transition to IFRSs, was determined by referenceto its fair value at that date. 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) Depreciation Depreciation is recognised as an expense in profit or loss on a straight-linebasis over the estimated useful lives of each part of an item of property, plantand equipment. Leased assets are depreciated over the shorter of the lease termand their useful lives. The estimated useful lives for the current and comparative periods are asfollows: Plant and machinery - 3 yearsFixtures and fittings - 3 to 5 yearsNetwork equipment - 5 years Depreciation methods, useful lives and residual values are reassessed at thereporting date. (c) Intangible assets (i) GoodwillGoodwill arises on the acquisition of subsidiaries. Acquisitions prior to 1 January 2006As 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.Goodwill, which under IFRSs is not amortised, is tested annually for impairment. (ii) AmortisationAmortisation is recognised as an expense in profit or loss on a straight-linebasis over the estimated useful lives of intangible assets, other than goodwill,from the date that they are available for use. The estimated useful lives forthe current and comparative periods are as follows: Customer relationships 2 to 3 yearsVideo 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) 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 andfinished goods cost is taken as production cost, which includes an appropriateproportion of attributable overheads. (f) Impairment Non-financial assets The carrying amounts of the Group's non-financial assets, other than inventoriesand deferred tax assets, are reviewed at each reporting date to determinewhether there is any indication of impairment. If any such indication existsthen the asset's recoverable amount is estimated. For goodwill and intangibleassets that have indefinite lives or that are not yet available for use,recoverable amount is estimated at each reporting date. 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. (g) Revenue Revenue from services rendered is recognised in proportion to the stage ofcompletion of the transaction at the reporting date. Airtime revenue isrecognised on the date of broadcast. Sponsorship and promotions revenue arerecognised over the life of the contract. (h) 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. (i) 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. (j) Income tax expense Income tax expense comprises current and deferred tax. (k) 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. 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. (ii) Intangible assets The fair value of intangible assets is based on the discounted cash flowsexpected to be derived from the use and eventual sale of the assets. (ii) Trade and other receivables The fair value of trade and other receivables is estimated as the present valueof future cash flows, discounted at the market rate of interest at the reportingdate. 5. Acquisitions of subsidiaries Business combinationOn 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 the following effect on the Group's assets and liabilities on acquisition date: Pre acquisition Fair value Recognised values carrying amounts adjustments on acquisition £ £ £Net assets acquiredProperty plant and equipment 69,520 1 69,521Intangible assets 362,000 215,400 577,400Trade 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) Net identifiable assets and liabilities 511,131 215,401 726,532 Goodwill on acquisition 1,063,410 Consideration paid, satisfied in cash and shares* 1,789,942Cash acquired (204,236) Net outflow 1,585,706 * Includes professional fees of £218,775 and stamp duty £12,195. 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 percentto the estimated future net earnings; in determining the fair value of the videolibrary the Group used estimated replacement cost. 6. Income tax credit in the income statement Note Unaudited Unaudited Half Year to Half Year to Year Ended 30 June 07 30 June 06 31 Dec 06 £ £ £ Current tax (credit)Current period - - -Adjustment for prior periods - - (14,488) - - (14,488) The current tax charge for the period is based on an effective rate of 19.75%. The deferred tax asset arising in respect of timing differences between capitalallowances and depreciation of £261,000 (31 December 2006: £270,000) has beenadded to (2006 added to) accumulated trading losses. The residual tradinglosses create a deferred tax asset of £618,000 (31 December 2006 £611,000) whichhas not been recognised due to the uncertainty of the timing of its eventualcrystallisation. 7. Property, plant and equipment Plant and Fixtures and Network Total equipment fittings equipment £ £ £ £ 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 - (6,375) (351,873) (358,248) At 1 January 2007 675,740 335,620 2,192,517 3,203,877Additions - 8,089 4,744 12,833Disposals - - (30,569) (30,569) At 30 June 2007 675,740 343,709 2,166,692 3,186,141 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 - (2,125) (310,737) (312,862) At 1 January 2007 593,453 245,832 1,802,905 2,642,190Charge for period 33,732 32,994 119,195 185,921On disposals - - (9,679) (9,679) At 30 June 2007 627,185 278,826 1,912,421 2,818,432 Carrying amountsUnaudited at 30 June 2007 48,555 64,883 254,271 367,709 At 31 December 2006 82,287 89,788 389,612 561,687 At 1 January 2006 174,049 92,079 889,584 1,155,712 8. Intangible assets Customer Video Goodwill Total relationships library £ £ £ £ Cost or valuationAt 1 January 2006 - - 109,900 109,900Acquisition (i) 472,400 105,000 1,118,143 1,695,543At 31 December 2006 472,400 105,000 1,228,043 1,805,443Adjustment (ii) - - (54,733) (54,733)At 30 June 2007 472,400 105,000 1,173,310 1,750,710 Amortisation and impairment lossesAt 1 January 2006 - - 73,263 73,263Charge for period 114,200 6,800 - 121,000Impairment losses - - 36,637 36,637At 31 December 2006 114,200 6,800 109,900 230,900Charge for period 88,600 5,300 - 93,900Impairment losses (iii) 152,900 - 864,100 1,017,000At 30 June 2007 355,700 12,100 974,000 1,341,800 Carrying amountsUnaudited at 30 June 2007 116,700 92,900 199,310 408,910 At 31 December 2006 358,200 98,200 1,118,143 1,574,543 At 1 January 2006 - - 36,637 36,637 (i) Under IFRS 3 'Business Combinations', the Group has recognised at fair valueat the acquisition date of 8 May 2006, the identifiable intangible assets ofcontract relationships with customers and the video library and separated thesefrom other intangible benefits which cannot be recognised as intangible assetsunder IFRS (the residual purchased goodwill). The customer relationships and video library intangibles are amortised over theperiod of their economic lives (see note 3(c)(ii) above). Goodwill is notamortised but is subject to annual impairment testing (see note 3(f) above). (ii) The adjustment to the cost of goodwill in the period to 30 June 2007 arisesfrom the change in 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. (iii) The impairment losses on customer relationships in the period to 30 June2007 arise from the non-renewal of a significant contract and consequentreduction in the level of projected future earnings. The impairment losses ongoodwill in the same period arise from the lower projected future value of theCube cash generating unit (see note 3 (f) above). 9. Trade and other receivables Unaudited Unaudited as at as at As at 30 June 07 30 June 06 31 Dec 06 £ £ £ Trade and other receivables 628,792 1,267,694 1,062,296 628,792 1,267,694 1,062,296 As 30 June 2007 trade receivables are shown net of an allowance for doubtfuldebts of £91,733 (31 December 2006: £111,154) arising from disputed charges. 10. Cash and cash equivalents Unaudited Unaudited as at as at As at 30 June 07 30 June 06 31 Dec 06 £ £ £ Bank balances 8,218 115,516 3,887Call deposits 481,733 365,971 242,260Cash and cash equivalents 489,951 481,487 246,147Bank overdrafts used for cash management purposes (see - (60,365) (3,352)note 12)Cash and cash equivalents in the statement of cash flows 489,951 421,122 242,795 11. Capital and reserves Reconciliation of movement in capital and reserves Share capital Unaudited Unaudited as at as at As at 30 June 07 30 June 06 £ 31 Dec 06 £ £ Authorised36,000,000 Ordinary shares of 10 pence each 3,600,000 3,600,000 3,600,000 Allotted, called up and fully paid14,556,844 Ordinary shares of 10 pence each 1,455,684 1,334,831 1,334,056 Movements in periodAt beginning of period 1,334,056 1,173,897 1,173,897Shares classified as liabilities repaid - - (3,106) 1,216,281Ordinary shares of 10 pence each issued in period(2006: 1,632,653 Ordinary shares of 10 pence each) 121,628 160,934 163,265 At end of period 1,455,684 1,334,831 1,334,056 Share Premium and Reserves Reserves as at 30 June 2007 Share premium Shares to be Merger reserve Profit account issued & loss account £ £ £ £ At 1 January 2007 3,525,727 237,175 2,245,333 (5,430,069)Retained loss for the period - - - (1,104,517)1,216,281Ordinary shares of 10 pence eachissued in period 60,814 (237,175) - -At 30 June 2007 3,586,541 - 2,245,333 (6,534,586) Reserves as at 31 December 2006 At 1 January 2006 3,390,411 - 2,245,333 (5,130,032)Retained loss for the year - - - (314,912)Released on repayment of Other loan (27,949) - - -New shares issued 163,265 - - -Conditional shares pending issue - 237,175 - -Proceeds from exercise of share options - - - 14,875At 31 December 2006 3,525,727 237,175 2,245,333 (5,430,069) 12. Loans and borrowings Unaudited Unaudited as at as at As at 30 June 07 30 June 06 31 Dec 06 £ £ £Non-current liabilitiesUnsecured bank loans - 6,980 3,187Unsecured Other loans - 225,000 -Finance lease liabilities - 91 - - 232,071 3,187 Current liabilitiesBank overdrafts - 60,365 3,352Current portion of unsecured bank loans 6,980 14,250 10,917Current portion of Other loans - 522,139 -Current portion of finance lease liabilities 2,216 7,097 4,778 9,196 603,851 19,047 Non-current unsecured bank loans at 30 June 2006 comprised £6,980 for two DTIloans granted to The Cube Group of Companies Limited under the Small Firms LoanGuarantee Scheme bearing interest at LIBOR plus 2.5% and repayable on a monthlybasis up to 31 August 2008. Non-current unsecured Other loans at 30 June 2006 comprised £225,000* ofdeferred consideration for the acquisition of The Cube Group of CompaniesLimited repayable on 31 October 2007 and bearing interest at a fixed rate of 8%per annum. Current unsecured Other loans at 30 June 2006 comprised £475,000 in relation tothe acquisition of The Cube Group of Companies Limited (repayable in instalmentsof £250,000 on 31 October 2006 and £225,000* on 30 April 2007 and bearinginterest at a fixed rate of 8% per annum) and £50,000 for an unsecuredconvertible loan from Horrocks Guardian Limited, bearing interest at a fixedrate of 8% per annum and repaid on 19 September 2006. The carrying value of theHorrocks Guardian loan was included at £47,139 following revaluation under IAS39. * These two amounts of £225,000 were subsequently removed from liabilities inthe Group's financial statements as at 31 December 2006 when post acquisitionperformance conditions precedent to their payment had not been met. 13. Trade and other payables Unaudited Unaudited as at as at As at 30 June 07 30 June 06 31 Dec 06 £ £ £ Trade payables due to related parties 14,939 12,269 8,760Other trade payables 420,670 746,163 645,118Other taxation & social security 145,969 128,328 125,684Non-trade payables and accrued expenses 615,258 494,036 455,303 1,196,836 1,380,796 1,234,865 14. (Loss)/earnings per share The (loss)/earnings per share is based on the loss after tax of £1,104,517 (30June 2006: earnings of £128,595; 31 December 2006: loss of £314,912) divided bythe weighted average number of Ordinary shares in issue in each of the relevantperiods; 30 June 2007: 13,743,276 shares (30 June 2006: 12,969,563 shares; 31December 2006: 12,388,742 shares). The diluted (loss)/earnings per share is based on 13,750,938 shares for theperiod to June 2007. For 30 June 2007 and 31 December 2006, the diluted basicloss per share is stated as the same amount as basic as there is no dilutiveeffect from the current outstanding share options. 15. Explanation of transition to Adopted IFRSs As stated in note 1, these are the Group's first consolidated financialstatements prepared in accordance with Adopted IFRSs. The accounting policies set out in note 1 have been applied in preparing thefinancial statements for the period ended 30 June 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 - - -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 30 June 2006 UK GAAP Adjustment IFRS £ £ £ AssetsProperty, plant and equipment 867,865 - 867,865Intangible assets 2,234,752 - 2,234,752Total non-current assets 3,102,617 - 3,102,617 Current assetsInventories - - -Trade and other receivables 1,267,694 - 1,267,694Prepayments for current assets 193,399 - 193,399Cash and cash equivalents 481,487 - 481,487Total current assets 1,942,580 - 1,942,580Total assets 5,045,197 - 5,045,197 EquityShare capital 1,334,831 - 1,334,831Share premium 3,532,696 - 3,532,696Shares to be issued 305,306 - 305,306Merger reserve 2,245,333 - 2,245,333Retained losses (5,001,437) - (5,001,437)Total equity 2,416,729 - 2,416,729 LiabilitiesLoans and borrowings 232,071 - 232,071Total non-current liabilities 232,071 - 232,071 Loans and borrowings 603,851 - 603,851Trade and other payables 1,380,796 - 1,380,796Deferred income 411,750 - 411,750Total current liabilities 2,396,397 - 2,396,397Total liabilities 2,628,468 - 2,628,468Total equity and liabilities 5,045,197 - 5,045,197 The goodwill amortisation under UK GAAP and the intangible asset amortisationunder IFRS were not materially different at 30 June 2006 and therefore noadjustments from UK GAAP to Adopted IFRSs have been recognised. (iii) 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 (83,673) 1,574,543Total non-current assets 2,219,903 (83,673) 2,136,230 Current assetsInventories 2,409 - 2,409Trade and other receivables 1,009,127 - 1,009,127Prepayments for current assets 220,307 - 220,307Cash and cash equivalents 242,795 - 242,795Total current assets 1,474,638 - 1,474,638Total assets 3,694,541 (83,673) 3,610,868 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 - 3,187Total non-current liabilities 3,187 - 3,187 Loans and borrowings 15,695 - 15,695Trade and other payables 1,234,865 - 1,234,865Deferred income 444,899 - 444,899Total current liabilities 1,695,459 - 1,695,459Total liabilities 1,698,646 - 1,698,646Total equity and liabilities 3,694,541 (83,673) 3,610,868 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. The original goodwillamortisation charge is reversed (credit £37,327) and a recalculated amortisationcharge of £121,000 is made on the new intangible assets (see note 8). The netadjustment is £83,673. (iv) 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) (83,673) (2,846,525) Results from operating activities (249,600) (83,673) (333,273) Finance income 21,428 - 21,428Finance expenses (17,555) - (17,555)Net finance income 3,873 - 3,873 (Loss)/profit before income tax (245,727) (83,673) (329,400) Income tax credit 14,488 - 14,488 (Loss)/profit for the period (231,239) (83,673) (314,912) The adjustment is explained in note 15 (iii) above. (v) Reconciliation of cash flows for the year to 31 December 2006. There are no adjustments to the cash flows previously reported under UK GAAP forthe six months to 30 June 2006 or for the year to 31 December 2006 in thetransition to Adopted IFRSs. This information is provided by RNS The company news service from the London Stock Exchange