Mineral & Fin Regulatory News (MAFL)

1 Jun 2007 07:01

Upstream Marketing and Comms Inc.01 June 2007 Upstream Marketing and Communications Inc. ("Upstream" or "the Company") Preliminary Results Upstream, the AIM-listed Asia Pacific-focused corporate and marketing communications services network, announces its audited preliminary results for the year ended 31 December 2006. Highlights of 2006 • Completion of the reverse acquisition of UAL by Raven Capital Limited ("Raven") in October 2006 and change of the Company's name to Upstream Marketing and Communications Inc. ("Upstream") • Landmark year of progress for Upstream Asia Limited ("UAL"), with strong growth in operating income and investment for future expansion that is already starting to yield returns. • The acquisition has enabled Upstream to enter the fast growing Asia Pacific corporate and marketing communications services sector. UAL's key activity is the provision of marketing and communication services to clients in the technology, corporate & financial, and consumer & travel industries. • Appointment of Shahed Mahmood (Non-Executive Chairman), David Ketchum (CEO) and Jane McGuire Ketchum (Non-Executive Director) to the Board following completion of the acquisition and Ajay Kejriwal as Finance Director on 17 January 2007. Graham Butt and Joanna Barrett continue to act as Non-Executive Directors. Results 2006• In accordance with International Financial Reporting Standards, the acquisition of UAL by Upstream has been accounted for as a reverse acquisition. The results for the year ended 31 December 2006 comprise: • the results for UAL for the year ended 31 December 2006; and • the results of Upstream for the period from 16 October 2006, the date on which the reverse acquisition completed, to 31 December 2006. • Comparative figures for the year ended 31 December 2005 comprise only those of UAL. • The Group demonstrated strong revenue growth in 2006 : • UAL revenue amounted to US$2.693 million (2005: US$1.996 million) • Offices in China and Taiwan experienced particularly strong growth in the period • Shanghai revenue up 190%; Beijing: 46%; Taiwan: 74% • The loss from operations for the year before the write off of goodwillarising on the reverse acquisition was US$89,000 (2005: profit of US$37,000)which was in line with expectations and reflected the increased investmentin high quality staff as the year progressed. • After the write off of goodwill arising from the reverse acquisition ofUS$10.783 million the loss before taxation for the year was US$10.872million (2005: profit of US$37,000). • Upstream raised £150,000 on 13 January 2006 through a placing of13,300,000 Ordinary Shares. A further £500,000 was raised by way of aplacing of 2,500,000 new Ordinary Shares at 20p at the time of the reverseacquisition. Current Trading and Outlook • The Asia Pacific economies continue to grow, with activity stimulated byChina's accession to World Trade Organisation and the upcoming 2008 BeijingOlympics and 2010 Shanghai World Expo. • Demand for corporate and marketing communications services remains strong,driven by rising consumer spending, the desire of multinational companies toexpand their business in the region, and Asia-based companies seeking to goglobal. • The Group's strong regional management and unique portfolio of marketing,business development, and financial resources mean that the Group is wellpositioned to drive growth in the network's offices throughout the region atan above market rate. • Several key appointments have been made since completion of the reverseacquisition, which the Directors are confident will enable the Group topitch for, and win, larger and more profitable contracts and retainers. • Assignments from many new clients have been added to the Upstream rosterand include: Bayer Levitra, Burger King, China Telecom, ESPN, JP Morgan,Sony, and Yellow Pages. • The Group's strategy of seeking appropriate acquisitions is proceedingwell. One acquisition has been completed, of Macro Consulting, andmanagement believes that further acquisitions will be completed over thecourse of 2007. Acquisitions are expected to be a material part of thegrowth envisaged for 2007. • The growth in the first quarter 2007 revenue over that of the equivalentperiod in 2006 has been 30% David Ketchum, Chief Executive of Upstream, said: "Our strategy has been to build solid foundations for success. The growth of the network capabilities and revenue in 2006 is a strong platform for our 2007 performance, which is expected to accelerate through the year. We are very encouraged by the Group's pipeline of new business, and the buoyancy in the Asia Pacific economies, and we have invested to build a world class management team and assure we have the right capabilities in place to deliver profitable growth for shareholders. The consumer & travel and corporate & financial sectors are showing particular promise, as is our business in China." Enquiries: Ajay Kejriwal m: + 44(0)7957 488104 John Bick m: + 44(0)7917 649362 www.aboutupstream.com Chairman's and Chief Executive's report The Board is pleased to report Upstream's audited results for the year ended 31 December 2006. On 16 October 2006 the Company completed its reverse acquisition of UpstreamAsia Limited ("UAL"), and the Company's name was changed to Upstream Marketingand Communications Inc. ("Upstream"). The Directors believe that the Group'sfocus on delivering corporate and marketing communications services in the AsiaPacific region presents an excellent opportunity for profitable and sustainablegrowth. Demand for corporate and marketing communications services remainsstrong driven by rising consumer spending, the desire of multinational companiesto expand their business in the region, and Asia-based companies seeking tospread their message to the global market place. UAL is a full service marketing and corporate communications network positioned to assist companies make the most of business opportunities in the Asia Pacific region, with offices in Beijing, Hong Kong, Shanghai, Singapore, Sydney, Taipei and Tokyo, as well as regional and global affiliates. In the months following the reverse acquisition, the Group has made significant progress in executing its business plan to drive organic revenue growth and identify strategic acquisition targets. The acquisition of UAL by Upstream has been accounted for as a reverse acquisition, under International Financial Reporting Standards. In accordance with this accounting policy the results of the Group for the year ended 31 December 2006 therefore comprise the results for UAL for the 12 months ended 31 December 2006 together with the results of Upstream from the period from 16 October 2006, the date on which the reverse acquisition completed, to 31 December 2006. For comparative purposes the results for the year ended 31 December 2005 comprise only those of UAL. For the year ended 31 December 2006 revenue amounted to US$2.693 million (2005:US$1.996 million). The loss from operations for the year before the write off ofgoodwill arising from the reverse acquisition was US$89,000 (2005: profit ofUS$37,000), which reflected the continued investment in high quality staff asthe year progressed. After the write off of goodwill arising from the reverseacquisition amounting to US$10.783 million, the loss before taxation for theyear was US$10.872 million (2005: profit of US$37,000) which was in line withexpectations. The Group experienced strong growth in revenue throughout the year with thetotal revenue for the final quarter of the year representing a 36% increase overthat achieved in the first quarter. The offices in China experiencedparticularly strong growth. The PR market in China is estimated to be growing at30% a year (source: PRC Embassy), and the Group's offices are comfortablyexceeding this rate, with the Beijing office achieving revenue growth during theyear of 46% and Shanghai 190%. Taiwan was also strong, with a 64% increase inrevenue over the year. Management believes that this revenue trend will continue throughout the currentfinancial year with performance indicators showing continued growth in the firstquarter of 2007, with the revenue for this period representing a 30% increaseover the same period in the prior year . This improvement is primarily due tothe organic growth achieved by various country units. The Company's primary objective in the prior year was to build solid foundations for future growth in the business. The Directors believe that the expansion of the Company's network capabilities and growth in revenue in 2006 will provide a strong platform for its performance in 2007, which is expected to accelerate throughout the year. The Group's strong regional management and portfolio of marketing, businessdevelopment, and financial resources are well positioned to drive growth in thenetwork's offices throughout the region. The balance of centralized services andfinancial control together with wholly-owned highly localized and motivatedoperations throughout the Asia-Pacific region is proving to be a powerfulbusiness model and point of competitive advantage. We are very encouraged by the Group's pipeline of new business, and the buoyancy in the Asia Pacific economies, and have invested to build a world class management team to ensure we have the right capabilities in place to deliver profitable growth for shareholders. The consumer & travel and corporate & financial sectors are showing particular promise, as is our business in China. Leaders in their fields have been recruited as managing directors for the Company's Hong Kong and Beijing operations, further enhancing the strong regional management team. These appointments have already started to have a positive impact on the Group in the current financial year with a number new business wins from blue chip international clients and Asian leaders such as Burger King, China Telecom, JP Morgan. We believe that this growth will gather momentum as the year progresses. In late 2006, the Group established a new subsidiary Media Services Asia to manage and exploit the growing opportunities in digital marketing online news release distribution services. A global distribution deal with leading international news release distribution service MarketWire has opened new revenue opportunities that are now being exploited. In China, one of the network's focus markets, the Group continued to make progress in expanding its operations, client base and revenue with Upstream being named one of China's 10 Most Prominent Public Relations Agencies of 2007 by influential Chinese business newspaper Fortune Times. Acquisitions On 29 March 2007, Upstream completed its first acquisition of its affiliateMacro Consulting (now re-named Upstream Australia), for a maximum aggregateconsideration of £800,000 to be satisfied by the issue of up to 4 million newordinary shares in Upstream. The initial tranche of 1 million shares was issuedto the vendors following completion of the acquisition with the remaining threepotential future tranches of 1 million shares each, becoming payable on theachievement of specific performance targets from 2007 to 2009. Upstream has a solid pipeline of boutique and medium-sized acquisition targetsin strategic sectors for the Group such as public relations, branding anddesign, digital marketing, and video production under consideration. TheDirector's intend to make acquisitions which have a sound commercial basis,where there is a clear financial benefit to shareholders and where management ofthe target company is strongly incentivised to grow their business within theenlarged group. It is the Company's intention that acquisitions will provide a significantsource of the Group's growth for 2007 and beyond. Finances and Share Issues As at 31 December 2006 Upstream had net cash of US$307,000 and the total number of ordinary shares in issue was 133,541,670. Board Changes Following completion of the reverse acquisition in October 2007, Shahed Mahmood (Non-Executive Chairman), David Ketchum (CEO) and Jane McGuire Ketchum (Non-Executive Director) were appointed to the Board. Graham Butt and Joanna Barrett continue to act as Non-Executive Directors. On 17 January 2007, Ajay Kejriwal was named Finance Director of the Company. Current Trading and Outlook The Asia Pacific economies continue to grow, with activity stimulated by China'saccession to World Trade Organisation and the upcoming 2008 Beijing Olympics and2010 Shanghai World Expo. Demand for corporate and marketing communications services remains strong,driven by rising consumer spending, the desire of multinational companies toexpand their business in the region, and Asia-based companies seeking to goglobal. The Directors believe that the Group's strong regional management and uniqueportfolio of marketing, business development and financial resources mean thatthe Group is well positioned to drive growth in the network's offices throughoutthe region at an above market rate. Several key appointments have been made since completion of the reverseacquisition which the Directors are confident will enable the Group to pitchfor, and win, larger and more profitable contracts and retainers. Assignments from many new clients have been added to the Upstream roster andinclude Bayer Levitra, Burger King, China Telecom, ESPN, JP Morgan, Sony, andYellow Pages. The Group's strategy of seeking appropriate acquisitions is proceeding well,with the first acquisition, that of Macro Consulting, having been completed inMarch 2007. The Directors are confident that further acquisitions will becompleted over the course of 2007 in line with this strategy with acquisitionsexpected to form a material part of the growth envisaged for the year. Inaddition, the Group continues to experience encouraging organic growth with therevenue for the first quarter of 2007 representing a 30% improvement over thatof the equivalent period in 2006. David Ketchum, Chief Executive Shahed Mahmood, Chairman1 June 2007 1 June 2007 www.aboutupstream.com Consolidated income statement Continuing operations Note 2006 2005 US$'000 US$'000 Revenue 2,693 1,996 Other income 170 30 --------- ---------Total income 2,863 2,026 Other operating expenses (2,952) (1,989) --------- ---------(Loss)/profit from operations prior to write off of (89) 37 goodwill Write off of goodwill (10,783) - --------- ---------(Loss)/profit from operations and (loss)/ profit (10,872) 37 before taxation Taxation expense 3 - 9 --------- ---------(Loss)/profit for the year (10,872) 28 --------- --------- (Loss)/earnings per share for profit US cents US Cents attributable to the equity holders of the Company during the year - Basic 4 (11.51) 0.04 --------- --------- Consolidated balance sheet 2006 2005 US$'000 US$'000 ASSETS Non-current assets Property, plant and equipment 88 35 ----------- ----------- 88 35 ----------- -----------Current assets Trade and other receivables 612 562 Cash and cash equivalents 307 104 ----------- ----------- 919 666 ----------- -----------Total assets 1,007 701 ----------- ----------- LIABILITIES Current liabilities Trade and other payables 602 609 Deferred income 26 - Current tax provision 3 9 ----------- -----------Total liabilities 631 618 ----------- ----------- EQUITY Share capital 617 16 Reserves (241) 67 ----------- -----------Equity attributable to equity holders 376 83 of the Company and total equity ----------- -----------Total equity and liabilities 1,007 701 ----------- ----------- Consolidated statement of changes in equity Share Share Capital Foreign Profit Total capital premium reserve exchange and loss equity reserve account US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 At 1 January 2005 16 136 - (10) (96) 46 Exchange difference on consolidation - - - 9 - 9 Profit for the year - - - - 28 28 ------ ------ ------ ------ ------- -------At 31 December 2005 and 1 January 2006 16 136 - (1) (68) 83 ------ ------ ------ ------ ------- -------Exchange difference on consolidation - - - 14 - 14 Loss for the year - - - - (10,872) (10,872) ------ ------ ------ ------ ------- -------Total recognised income and expense for the year - - - 14 (10,872) (10,858) Issue of new shares prior to reverse acquisition 2 159 - - - 161 Issue of new shares on reverse acquisition 106 3,700 - - - 3,806 Share issue costs - (9) - - - (9) Adjustment on reverse acquisition 493 153 6,547 - - 7,193 ------ ------ ------ ------ ------- ------- At 31 December 2006 617 4,139 6,547 13 (10,940) 376 ------ ------ ------ ------ ------- ------- The capital reserve movement of US$6,547,000 arises on the reverse acquisitionof Upstream Asia Limited. Consolidated cash flow statement 2006 2005 US$'000 US$'000 Operating activities (Loss)/profit after taxation (10,872) 28 Adjustments for: Interest income (3) - Depreciation of property, plant and equipment 37 25 Write off of goodwill 10,783 - --------- --------- Operating cashflow before working capital changes (55) 53 Decrease/(increase) in trade and other receivables 29 (197) (Decrease)/increase in trade and other payables (90) 160 Increase in deferred income 26 - --------- ---------Cash (used from)/generated by operations (90) 16 Tax paid (10) (9) --------- ---------Net cash (outflow)/inflow used in operating (100) 7 activities --------- --------- Investing activities Interest received 3 - Purchases of property, plant and equipment (89) (31) Reverse acquisition expenses (730) - Cash acquired on reverse acquisition 95 - --------- --------- Net cash outflow from investing activities (721) (31) Financing activities Issue of shares 928 - Expenses in connection with shares issue (9) - --------- ---------Net cash inflow from financing activities 919 - --------- --------- Net increase/(decrease) in cash and cash equivalents 98 (24) Cash and cash equivalents as at 1 January 104 125 Effect of exchange rate fluctuations 105 3 --------- ---------Cash and cash equivalents as at 31 December 307 104 ========= ========= Notes to the preliminary announcement 1. GENERAL INFORMATION The preliminary announcement has been prepared in accordance with applicableaccounting standards and under the historical cost convention. The Company wasincorporated as a Corporation in the Cayman Islands which does not prescribe theadoption of any particular accounting framework. The Board has therefore adoptedInternational Financial Reporting Standards (IFRS) issued by the InternationalAccounting Standards Board. The principal accounting policies of the Group areset out in the Group's 2006 annual report and financial statements. 2. SEGMENTAL INFORMATION (a) Primary reporting format - business segment: As defined under International Accounting Standard 14 (IAS14), the only materialbusiness segment the Group has is that of marketing and public relations. (b) Secondary reporting format - geographical segment: Under the definitions contained in IAS 14, the only material geographic segmentthat the Group operates in is Asia. 3. TAXATION EXPENSE 2006 2005 US$'000 US$'000 Current year income tax charge - 9 ---------- ---------- The income tax charge for the year have been calculated at the rates prevailingin the relevant jurisdictions. A reconciliation of the tax expense to the (loss)/profit before taxation usingthe statutory rates for the countries in which the Company and its subsidiariesare domiciled to the tax expense at the effective tax rates, and areconciliation of the statutory tax rates to the effective tax rates, are asfollows : 2006 2005 US$'000 % US$'000 % (Loss)/profit before taxation (10,872) 37 -------- -------- -------- -------- Tax at the domestic income tax (1,903) (17.5) 23 62.2 rates Income not subject to tax - (7) (18.9) Expenses not deductible for tax (primarily 1,889 17.4 6 16.2 goodwill written off) Tax effect of unrecognised tax 14 0.1 (13) (35.1) losses -------- -------- -------- --------Current year income tax charge - - 9 24.4 -------- -------- -------- -------- The Group has unrelieved tax losses of approximately $170,000, the utilisationof which is uncertain and consequently no deferred tax asset has beenrecognised. 4. EARNINGS PER SHARE (a) Basic earnings per share The calculation of basic earnings per share is based on the loss attributable toequity holders of the parent company of US$10,872,000 (2005: profit ofUS$28,000) and the weighted average number of ordinary shares in issue duringthe year of 94,479,385 (2005 : 79,675,002). (b) Diluted earnings per share There are no potentially dilutive instruments in issue. 5. POST BALANCE SHEET EVENTS On 29 March 2007 the Group acquired Macro Consulting, a full service publicrelations company, for a total maximum consideration of approximately US$1.5million satisfied by the issue of up to 4 million ordinary shares in the Companyat an agreed price of 20p per share. The shares will be issued in four tranchesfrom the date of acquisition through to 2009 dependent on achieving certainperformance targets. If the maximum consideration shares are issued, theconsideration shares will represent approximately 3% of the enlarged sharecapital of the Company. In the financial year ended 31 December 2006 Macro Consulting achieved a pre-taxprofit of approximately US$90,000 and had net assets of approximately US$80,000at that date. 6. PUBLICATION OF NON STATUTORY ACCOUNTS The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The consolidated balance sheet at 31 December 2006 and the consolidated incomestatement, consolidated statement of changes in equity, consolidated cash flowstatement and associated notes for the year then ended have been extracted fromthe Group's 2006 statutory financial statements upon which the auditors opinionis unqualified and does include any statement under Section 237 of the CompaniesAct 1985. The annual report for the year ended 31 December 2006 will be sent toshareholders shortly. This information is provided by RNS The company news service from the London Stock Exchange