Last checked at 23 Sep 2008 11:20
Upstream Marketing and Communications Inc.
("Upstream" or "the Company")
Interim Results
For the six month period ended 30 June 2008
Interim Statement
23 September 2008, Upstream Marketing and Communications Inc. (AIM: UPS) announces its interim results for the six month period ended 30 June 2008.
HIGHLIGHTS
Revenues up 47% to $2.90 million (2007: $1.97 million)
Net profit of $333,000 (2007: loss of $730,000) primarily attributable to the profit on the sale of Media Services Asia for $350,000 cash
Balance sheet strengthened
Upstream Australia successfully integrated.
CHAIRMAN'S STATEMENT
The Board is pleased to report Upstream's unaudited results for the six months ended 30 June 2008. The Group made its first-ever net profit of $333,000 (2007: loss of $730,000).
Revenues for the period were $2.90 million, up 47% over the level recorded in the same period in 2007 of $1.97 million. The increase in revenue is largely attributable to new client assignments gained from business development efforts In addition, the Group saw other income increase due to profit arising from the sale of the Group's Media Services Asia subsidiary for $350,000 in May 2008, which also strengthened the Group's balance sheet.
During the first half of 2008, the Group's business in China strengthened in the lead up to the Beijing Olympics. With the new Upstream China leadership put in place in November 2006, the foundation for growth has been put in place. The business in Hong Kong grew while remaining profitable and Singapore performed to expectations. Upstream Australia contributed revenue for all six months of the current period, whereas in 2007 only two months of Australian revenue were recognized as the acquisition of that business unit was only completed in April 2007. Upstream Australia is now fully integrated into the Group.
Looking ahead to future trading conditions, there is uncertainty about the impact of the global economic slowdown. Many of Upstream's clients are headquartered in the US and Europe, and it remains to be seen whether they will continue to invest in the higher growth markets in Asia Pacific, or will curtail spending through the anticipated difficult period. Under either scenario, Management is confident that Upstream is well positioned for continuous operation and business development.
David Ketchum, Chief Executive Shahed Mahmood, Chairman
23 September 2008 23 September 2008
www.aboutupstream.com
| Upstream Marketing & Communications Inc. Consolidated Income Statement For the six months ended 30 June 2008 |
| Six month period ended 30 June 2008 Unaudited US$'000 | Six month period ended 30 June 2007 Unaudited US$'000 | Year ended 31 December 2007 Audited US$'000 | ||
| Continuing operations | ||||
| Turnover | 2,904 | 1,973 | 5,514 | |
| Material cost of sales | - | - | (901) | |
| Revenue | 2,904 | 1,973 | 4,613 | |
| Other income | 380 | 18 | 65 | |
| Total income | 3,284 | 1,991 | 4,678 | |
| Operating expenses | (2,899) | (2,498) | (4,992) | |
| Operating profit/(loss) prior to share based payment charge | 385 | (507) | (314) | |
| Share based payment charge | (54) | (220) | (329) | |
| Profit/(loss) for the period from operations before tax | 331 | (727) | (643) | |
| Tax credit/(expense) | 4 | 2 | (3) | - |
| Net profit/(loss) for the period | 333 | (730) | (643) | |
| US cents | US cents | US cents | ||
| Earnings/(loss) per ordinary share | 5 | |||
| - Basic | 0.2 | (0.5) | (0.5) | |
| - Diluted | 0.2 | (0.5) | (0.5) |
| Consolidated Statement of Changes in Equity Six months ended 30 June 2008 |
|
Share capital and shares to be issued* |
Share premium |
Capital reserve |
Foreign exchange reserve |
Profit and loss account |
Total equity | ||
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | ||
| At 1 January 2007 | 617 | 4,139 | 6,547 | 13 | (10,940) | 376 | |
| Exchange difference on consolidation | - | - | - | (5) | - | (5) | |
| Loss for the year | - | - | - | - | (643) | (643) | |
| Total recognised income and expense for the year | - | - | - | (5) | (643) | (648) | |
| Share issue | 118 | 104 | - | - | - | 222 | |
| Cost of share issue | - | (67) | - | - | - | (67) | |
| Foreign exchange | |||||||
| Share based payments | 10 | 209 | - | - | 110 | 329 | |
| At 31 December 2007(Audited) |
745 | 4,385 |
6,547 | 8 | (11,473) | 212 | |
| Exchange difference on consolidation |
- |
- |
- |
7 |
- |
7 | |
| Profit for the period | - | - | - | - | 333 | 333 | |
| Total recognised income and expense for the period | - | - | - | 7 | 333 | 340 | |
| Share issue | 4 | 53 | - | - | - | 57 | |
| Decrease of shares to be issue |
(57) | - |
- | - | - | (57) | |
| Share based payments | - | - | - | - | 54 | 54 | |
| At 30 June 2008(Unaudited) | 692 | 4,438 | 6,547 | 15 | (11,086) | 606 | |
*Share capital and shares to be issued at 30 June 2008 includes an amount of US$56,191 (1 January 2007:US$nil; 31 December 2007:US$113,145) in connection with shares to be issued as part of the deferred consideration for the acquisition of Upstream Australia (formerly Macro Consulting Pty Limited).
| Consolidated Balance Sheet As at 30 June 2008 |
| Note | 30 June 2008 Unaudited US$'000 | 30 June 2007 Unaudited US$'000 | 31 December 2007 Audited US$'000 | |
| Assets | ||||
| Non current assets | ||||
| Property, plant and equipment | 162 | 123 | 180 | |
| Goodwill | 170 | 454 | 198 | |
| 332 | 577 | 378 | ||
| Current | ||||
| Trade and other receivables | 6 | 2,571 | 1,081 | 1,092 |
| Cash and cash equivalents | 548 | - | 264 | |
| 3,119 | 1,081 | 1,356 | ||
| Total assets | 3,451 | 1,658 | 1,734 | |
| Liabilities | ||||
| Current | ||||
| Bank overdraft | - | 78 | - | |
| Trade and other payables | 7 | 1,733 | 1,011 | 1,404 |
| Deferred income | 1,021 | 31 | 55 | |
| Current tax provision | 23 | 24 | 25 | |
| Bank loan | 22 | - | - | |
| 2,799 | 1,144 | 1,484 | ||
| Non-current liabilities | ||||
| Deferred tax provision | 30 | - | 38 | |
| Bank loan | 16 | - | - | |
| 46 | - | 38 | ||
| Total liabilities | 2,845 | 1,144 | 1,522 | |
| Equity | ||||
| Share capital and shares to be issued | 9 | 692 | 632 | 745 |
| Reserves | (86) | (118) | (533) | |
| Total equity | 606 | 514 | 212 | |
| Total equity and liabilities | 3,451 | 1,658 | 1,734 |
| Consolidated Cash Flow Statement For the six months ended 30 June 2008 |
| Six month period ended 30 June 2008 Unaudited US$'000 |
Six month period ended 30 June 2007 Unaudited US$'000 |
Year ended 31 December 2007 Audited US$'000 | ||
| Operating activities | ||||
| Profit/(loss) before taxation | 331 | (727) | (643) | |
| Adjustments for: | ||||
| Finance income | - | - | (3) | |
| Finance costs | 12 | - | 18 | |
| Profit on disposal of intangible assets | (350) | - | - | |
| Depreciation of property, plant and equipment | 38 | 14 | 60 | |
| Share based expenses | 54 | 220 | 329 | |
| Amortisation of intangibles | 28 | - | 41 | |
| Operating cashflow before working capital changes | 113 | (493) | (198) | |
| Increase in trade and other receivables | (1,479) | (469) | (275) | |
| Increase in trade and other payables | 329 | 409 | 579 | |
| Increase in deferred income | 966 | 5 | 29 | |
| Cash (used from)/generated by operations | (71) | (548) | 135 | |
| Tax received/(paid) | (8) | 18 | (7) | |
| Net cash (outflow)/inflow used in operating activities | (79) | (530) | 128 | |
| Investing activities | ||||
| Acquisition of subsidiary | - | (24) | - | |
| Finance income | - | - | 3 | |
| Purchases of property, plant and equipment | (20) | (49) | (124) | |
| Proceeds from sale of intangible assets | 350 | - | - | |
| Reverse acquisition expenses | - | - | (27) | |
| Cash acquired on acquisition | - | - | 67 | |
| Net cash inflow/(outflow) from investing activities | 330 | (73) | (81) | |
| Financing activities | ||||
| Finance costs | (12) | - | (18) | |
| New bank loan | 45 | - | - | |
| Repayment of bank loan | (7) | - | - | |
| Expenses in connection with shares issue | - | - | (67) | |
| Net cash inflow/ (outflow) from financing activities | 26 | - | (85) | |
| Net increase/(decrease) in cash and equivalents | 277 | (603) | (38) | |
| Cash and cash equivalents brought forward | 264 | 307 | 307 | |
| Effect of exchange rate fluctuations | 7 | 218 | (5) | |
| Cash and cash equivalents carried forward | 548 | (78) | 264 | |
Notes to the Interim Report
For the six months ended 30 June 2008
1 general information
The information for the period ended 30 June 2008 does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The figures for the year ended 31 December 2007 have been extracted from the 2007 statutory financial statements prepared under International Financial Reporting Standards (IFRS). The auditors' report on those accounts was unqualified and did not contain a statement under section 237(2) of the Companies Act 1985. The interim financial statements have been neither audited or reviewed by the Group's auditors.
2 BASIS OF PREPARATION
The Company was incorporated as a Corporation in the Cayman Islands which does not prescribe the adoption of any particular accounting framework. The Board have resolved that the Company will follow International Financial Reporting Standards as adopted by the European Union ( IFRSs) when preparing its annual financial statements.
The principal accounting policies of the Group remain unchanged from those set out in the Group's 2007 annual report.
3 segmental reporting
(a) By business segment (primary segment):
As defined under International Accounting Standard 14 (IAS14), the only material business segment the Group has is that of marketing and public relations.
(b) By geographical segment (secondary segment):
Under the definitions contained in IAS 14, the only material geographic segment that the Group operates in is the Asia-Pacific region.
4 tax (CREDIT)/EXPENSE
| Six month period ended 30 June 2008 Unaudited US$'000 | Six month period ended 30 June 2007 Unaudited US$'000 | Year ended 31 December 2007 Audited US$'000 | |
| Current period income tax charge | 6 | 3 | 12 |
| Deferred tax credit | (8) | - | (12) |
| Actual tax (credit)/expense | (2) | 3 | - |
The relationship between the expected tax expense at 17.5% and the tax expense actually recognised in the income statement can be reconciled as follows:
| Six month period ended 30 June 2008 Unaudited US$'000 | Six month period ended 30 June 2007 Unaudited US$'000 | Year ended 31 December 2007 Audited US$'000 | |
| Profit/(loss) for the period before taxation | 331 | (727) | (643) |
| Expected tax expense/(credit) | 58 | (124) | (113) |
| Losses (utilised)/not recognised as deferred tax asset | (52) | 127 | 125 |
| Actual tax expense | 6 | 3 | 12 |
5 EARNINGS/(LOSS) per share
The calculation of the basic earnings/(loss) per share is based on the net profit for the period of US$333,000 (period ended 30 June 2007 : loss US$730,000; year ended 31 December 2007 : loss US$643,000) divided by the weighted average number of shares in issue during the period of 136,972,994 (period ended 30 June 2007 : 134,298,962; year ended 31 December 2007 : 135,376,825).
The diluted earnings per share is based on a weighted average number of shares in issue of 136,972,994 for the period ended 30 June 2008. The impact of the share options and warrants is anti-dilutive for the period ended 30 June 2007 and the year ended 31 December 2007.
6 trade and other receivables
| 30 June 2008 Unaudited US$'000 | 30 June 2007 Unaudited US$'000 | 31 December 2007 Audited US$'000 | |
| Trade and other receivables, gross | 2,303 | 818 | 978 |
| Impairment of trade and other receivables | - | (9) | (39) |
| Trade and other receivables, net | 2,303 | 809 | 939 |
| Other receivables | 71 | 51 | 11 |
| Deposits and prepayments | 197 | 221 | 142 |
| 2,571 | 1,081 | 1,092 |
Trade and other receivables are usually due within 30 - 60 days and do not bear any effective interest rate.
The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.
7 trade and other payables
| 30 June 2008 Unaudited US$'000 | 30 June 2007 Unaudited US$'000 | 31 December 2007 Audited US$'000 | |
| Trade and other payables | 466 | 642 | 572 |
| Other payables and accrued charges | 1,166 | 188 | 533 |
| Amounts due to directors | 101 | 181 | 299 |
| 1,733 | 1,011 | 1,404 |
The fair value of trade and other payables is considered by management to be a reasonable approximation of their fair value.
8 deferred tax assets and liabilities
Deferred tax liabilities recognized can be summarized as follows:
| 30 June 2008 Unaudited US$'000 | 30 June 2007 Unaudited US$'000 | 31 December 2007 Audited US$'000 | |
| At beginning of period | 38 | - | - |
| Arising on acquisition | - | - | 50 |
| Credited to income statement | (8) | - | (12) |
| At end of period | 30 | - | 38 |
9 share capital
| 30 June 2008 Unaudited US$'000 | 30 June 2007 Unaudited US$'000 | 31 December 2007 Unaudited US$'000 | |
| Authorised | |||
| 4,000,000,000 ordinary shares of 0.25p | 18,470 | 18,470 | 18,470 |
| Allotted, issued and fully paid | |||
| 137,401,194 (30 June 2007:136,544,795, 31 December 2007:136,544,794) ordinary shares of 0.25p | 636 | 632 | 632 |
Issues in period
On 11 April 2008, 856,400 shares were issued to the vendors of Upstream Australia (formerly Macro Consulting Pty Limited) as the first tranche of deferred consideration payable in respect of the acquisition of Upstream Australia by the Company, following the achievement of certain performance criteria by Upstream Australia for its financial year ended 31 December 2007. The difference between the nominal value and issue price of US$52,735 was transferred to the share premium account.
Share options
The Group has adopted an employee Share Option Scheme in order to incentivise key management and staff. The fair value of options granted was determined using Black-Scholes valuation models. Significant inputs into the calculations were as follows:
41% - 47% volatility based on expected share price (ascertained by reference to historic share prices of both the Company and comparable listed companies)
share price of between 7p and 2p per share at date of grant of options
exercise price of between 20p and 2p per share
a risk free interest rate of 2.78%
0% dividend yield
estimated options lives of three years.
At 30 June 2008, the Group had the following options outstanding:
| Date of grant | Dates first exercisable |
Exercise price |
Market price at date of issue |
Number |
Fair value |
| 5 July 2007 | 3 years from date of grant | 20p | 7p | 6,750,000 | 0.311p |
| 5 July 2007 | 3 years from date of grant | 7p | 7p | 6,677,084 | 2.159p |
| 19 December 2007 | 3 years from date of grant | 2p | 2p | 250,000 | 0.617p |
| 13,677,084 |
During the period, employee share-based expense of US$54,175 (period ended 30 June 2007 : US$nil, year ended 31 December 2007:US$110,000) has been included in the income statement following the adoption of IFRS 2 Share Based Payments. No liabilities were recognized due to share-based payment transactions.