Last checked at 31 Mar 2015 07:00
Mobile Streams plc. Registered in England & Wales No. 03696108
31 March 2015
Interim Results
Mobile Streams plc ("Mobile Streams" or the "Company") (AIM: MOS) updates its shareholders on its unaudited interim results for the six months ended 31 December 2014:
· Revenues of £18.5m (£27.0m for the 6 months ended 31 December 2013). All revenue is from continuing operations
· Mobile Internet revenues were £18.1m (6 months ended 31 December 2013: £25.8m)
· EBITDA* of £313k (6 months ended 31 December 2013: £1.2m)
· Post-tax loss of £302k (6 months to 31 December 2013: £706k profit)
· £3.2m of cash and cash equivalents at 31 December 2014 (30 June 2014: £3.0m), with no debt. £0.9m of the Company's cash and cash equivalents were located in Argentina, compared to £3.2m as at 31 December 2013
The sudden devaluation of the Argentinean Peso in January 2014 presented operational challenges in Argentina which significantly reduced our reported revenues and profits but which we have now confronted. Our strategy to offer our mobile internet services in large emerging markets is progressing. We have continued to make progress in Brazil during the period where services can now be billed and marketed to consumers on all four major Brazilian mobile carriers and active subscribers now exceed 35,000**.
With limited opportunities in the formerly core regions of the U.S. and Europe caused by the high penetration of Apple and mobile operator billing partnerships with Google Play, the decision was taken to expand the Company's operations beyond the core Latin America region and invest in India and Africa; two regions with relatively nascent smartphone markets and large populations.
In India, we instigated discussions with the top three mobile operators in the country to utilise their carrier billing services and we expect to launch mobile internet services towards the end of the current financial year. We have also signed agreements with two gaming partners who work with local phone manufacturers in India.
In Africa, the initial focus has been on the countries which we believe have the greatest potential: Nigeria, Kenya and Ghana. In January 2015, we signed an agreement to provide apps and games for a Nigerian mobile operator. Additionally, we extended our agreement with an existing partner to provide all of our mobile content on another Nigerian mobile operator's platform. We have also signed a strategic agreement to distribute mobile content for mobile internet services in Africa, developing our data intelligence of consumer habits and trends in the region.
These results are in line with the Board´s expectations as communicated to the market. We remain excited about opportunities to grow our presence during financial year 2015, particularly in Brazil and India.
* Earnings before interest, tax, depreciation, amortization and share compensation.
** Active Subscribers are defined as customers who have paid to use one of the Company's Mobile Internet services in the past two months.
OPERATING REVIEW
Mobile Internet
During the period, we continued to invest in our mobile internet subscription services, in particular in our core Latin American markets of Argentina, Mexico, Colombia and Brazil. Additionally, we started investigating how we can launch these services in new emerging markets such as India and Africa.
Mobile Operators
The Mobile Operator segment continued its gradual decline in revenues over the period as the Company continued to execute its strategy of building services on the open Mobile Internet. Consumers tend to buy less content from Operator managed content services as they upgrade from traditional mobile devices to smartphones and tablets.
FINANCIAL REVIEW
For the 6 months ended 31 December 2014.
Gross profit for the six month period ended 31 December 2014 was £5.0m (2013: £8.1m). Gross margin was 26.9%, down from 30.1% in 2013.
Mobile Internet revenue has decreased by 30.2% to £18.0m (2013: £25.8m). The cost of sales on Mobile Internet revenue is much higher than on Operator revenue due to marketing costs resulting in a lower overall Gross profit margin.
The Group recorded a loss after tax of £302k for the 6 months ended 31 December 2014 (2013: profit £706k), generating a loss per share of 0.814 pence per share (2013: 1.924 pence earnings per share).
Adjusted loss per share (excluding depreciation, amortisation, impairments and share compensation expense) was 0.461 pence per share (2013: 2.408 pence adjusted earnings per share).
Cash and cash equivalents
Argentina, where the majority of the Company´s cash was held at the end of 2013, has imposed strict rules for companies with the purpose of greater control over the foreign exchange market. The company relocated cash during 2014 and the proportion of its cash in Argentina was down to 28% by 31 December 2014. The remaining cash in Argentina is the working capital needed for normal operations.
CONSOLIDATED INCOME STATEMENT | |||||||
Unaudited | Unaudited | Audited | |||||
6 months ended 31 December 2014 | 6 months ended 31 December 2013 | 12 months ended 30June 2014 | |||||
£000's | £000's | £000's | |||||
Revenue | 18,488 | 26,992 | 48,572 | ||||
Cost of sales | (13,519) | (18,863) | (34,344) | ||||
Gross profit | 4,969 | 8,129 | 14,228 | ||||
Selling and marketing costs | (2,884) | (4,070) | (7,871) | ||||
Administrative expenses ** | (1,903) | (3,079) | (6,361) | ||||
Operating profit | 182 | 980 | (4) | ||||
Profit on Liquidation of Subsidiary | - | 44 | - | ||||
Finance income | 26 | 93 | 170 | ||||
Finance expense | - | (1) | (13) | ||||
Profit before tax | 208 | 1,116 | 153 | ||||
Tax expense | (510) | (410) | (713) | ||||
(Loss)/Profit for the period | (302) | 706 | (560) | ||||
Attributable to: | |||||||
Attributable to equity shareholders of Mobile Streams Plc | (302) | 706 | (560) | ||||
Earning Per Share | |||||||
Pence per share | Pence per share | Pence per share | |||||
Basic (loss)/earnings per share | (0.814) | 1.924 | (1.517) | ||||
Diluted (loss)/earnings per share | (0.814) | 1.865 | (1.517) | ||||
* *Administrative expenses include depreciation, amortisation, impairment and share based compensation | |||||||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | |||||||
Unaudited | Unaudited | Audited | |||||
6 months ended 31 December 2014 | 6 months ended 31 December 2013 | 12 months ended 30 June 2014 | |||||
£000's | £000's | £000's | |||||
(Loss)/profit for the period | (302) | 706 | (560) | ||||
Exchange differences on translating foreign operations | 70 | (768) | (1,347) | ||||
Disposal of subsidiary | - | (151) | - | ||||
Total comprehensive loss for the period | (232) | (213) | (1,907) | ||||
Total comprehensive (loss)/income for the period attributable to: | |||||||
Equity shareholders of Mobile Streams plc | (232) | (213) | (1,907) | ||||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | ||||||||
Unaudited | Unaudited | Audited | ||||||
6 months ended 31 December 2014 | 6 months ended 31 December 2013 | 12 months ended 30 June2014 | ||||||
£000's | £000's | £000's | ||||||
Assets | ||||||||
Non- Current | ||||||||
Goodwill | - | 380 | - | |||||
Intangible assets | 1 | 1 | - | |||||
Property, plant and equipment | 127 | 130 | 107 | |||||
Deferred tax asset | - | 150 | 260 | |||||
128 | 661 | 367 | ||||||
Current | ||||||||
Trade and other receivables | 5,188 | 6,777 | 6,494 | |||||
Cash and cash equivalents | 3,238 | 4,633 | 2,964 | |||||
8,426 | 11,410 | 9,458 | ||||||
Total assets | 8,554 | 12,071 | 9,825 | |||||
Equity | ||||||||
Equity attributable to equity holders of Mobile Streams Plc | ||||||||
Called up share capital | 74 | 74 | 74 | |||||
Share Premium | 10,579 | 10,579 | 10,579 | |||||
Translation reserve | (1,971) | (1,614) | (2,041) | |||||
Retained earnings | (6,334) | (4,880) | (6,135) | |||||
Total equity | 2,348 | 4,159 | 2,477 | |||||
Liabilities | ||||||||
Current | ||||||||
Trade and other payables | 4,299 | 5,450 | 5,680 | |||||
Current tax liabilities | 1,907 | 2,461 | 1,668 | |||||
6,206 | 7,911 | 7,348 | ||||||
Total liabilities | 6,206 | 7,911 | 7,348 | |||||
Total equity and liabilities | 8,554 | 12,071 | 9,825 | |||||
CONSOLIDATED CASH FLOW STATEMENT | |||||
Unaudited | Unaudited | Audited | |||
6 months ended 31 December 2014 | 6 months ended 31 December 2013 | 12 months ended 30 June 2014 | |||
£000's | £000's | £000's | |||
Operating activities | |||||
Profit before taxation | 208 | 1,116 | 153 | ||
Adjustments: | |||||
Profit on Liquidation of Subsidiary | - | (44) | - | ||
Shared based payments | 103 | 165 | 327 | ||
Depreciation | 28 | 13 | 36 | ||
Impairments | - | - | 380 | ||
Interest received | - | - | (170) | ||
Changes in Trade and other receivables | 1,306 | 1,644 | 1,926 | ||
Changes in Trade and other payables | (1,381) | 60 | (50) | ||
Disposal of Subsidiary | - | - | (15) | ||
Tax Paid | (271) | (481) | (493) | ||
Total cash utilised in operating activities | (8) | 2,473 | 2,094 | ||
Investing Activities | |||||
Additions to property, plant and equipment | - | (118) | (118) | ||
Interest paid | - | (1) | - | ||
Interest received | 26 | 93 | 170 | ||
Net Cash used in investing activities | 26 | (26) | 52 | ||
Issue of share capital (net of expenses paid) | - | - | 110 | ||
Net Cash used in investing activities | - | - | 110 | ||
Net change in cash and cash equivalents | 18 | 2,447 | 2,257 | ||
Cash and cash equivalents at beginning of period | 2,964 | 2,851 | 2,851 | ||
Exchange gain/(loss) on cash and cash equivalents | 257 | (665) | (2,144) | ||
Cash and cash equivalents, end of period | 3,238 | 4,633 | 2,964 | ||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| |||||||
Called up share capital | Share premium | Translation reserve | Merger reserve | Retained earnings | Total Equity | ||
£000's | £000's | £000's | £000's | £000's | £000's | ||
Balance at 1 July 2013 | 73 | 10,357 | (695) | 153 | (6,055) | 3,833 | |
Exercise of Share Options | 1 | 222 | - | - | - | 223 | |
Credit for share based payments | - | - | - | - | 165 | 165 | |
Disposal of subsidiary | - | - | (153) | 153 | - | ||
Transactions with owners | 1 | 222 | - | (153) | 318 | 388 | |
Disposal of subsidiary | - | - | (151) | - | 151 | - | |
Profit/(loss) for the 6 months ended 31 December 2013 | - | - | - | - | 706 | 706 | |
Exchange differences on translating foreign operations | - | - | (768) | - | - | (768) | |
Total comprehensive income for the period | - | - | (919) | - | 857 | (62) | |
Balance at 31 December 2013 | 74 | 10,579 | (1,614) | - | (4,880) | 4,159 | |
Balance at 1 January 2014 | 74 | 10,579 | (1,614) | - | (4,880) | 4,159 | |
Transactions with owners | - | - | - | - | - | - | |
Disposal of subsidiary | - | - | 1 | (1) | - | ||
Loss for the 6 months ended 30 June 2014 | - | - | - | - | (1,254) | (1,254) | |
Exchange differences on translating foreign operations | - | - | (428) | - | - | (428) | |
Total comprehensive income for the period | - | - | (427) | - | (1,255) | (1,682) | |
Balance at 1 July 2014 | 74 | 10,579 | (2,041) | - | (6,135) | 2,477 | |
Credit for share based payments | - | - | - | - | 103 | 103 | |
Transactions with owners | - | - | - | - | 103 | 103 | |
Profit/(loss) for the 6 months ended 31 December 2014 | - | - | - | - | (302) | (302) | |
Exchange differences on translating foreign operations | - | - | 70 | - | 70 | ||
Total comprehensive income for the period | - | - | 70 | - | (302) | (232) | |
Balance at 31 December 2014 | 74 | 10,579 | (1,971) | - | (6,334) | 2,348 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The interim results of Mobile Streams PLC are prepared in accordance with the requirements of IAS 34 Interim Financial Reporting as adopted by the EU and prepared in accordance with the accounting policies set out in the last financial statements for the 12 months ended 30 June 2014.
The interim results, which are not audited, do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.
The comparative financial information for the 12 months ended 30 June 2014 has been extracted from the statutory accounts for that period. In addition, the financial information for the 6 months ended 31 December 2013 has been extracted from the unaudited Interim results. The full audited accounts of the Group for the 12 months ended 30 June 2014 were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and have been delivered to the Registrar of Companies.
The auditor's report on these financial statements was unqualified and did not contain statements under S498(2) or S498(3) of the Companies Act 2006.
2. SEGMENT REPORTING
As at 31 December 2014, the Group was organised into 4 geographical segments: Europe, North America, Latin America, and Asia Pacific. Revenues were from external customers only and generated from three principal business activities: the sale of mobile content through MNO's (Mobile Operator sales), the sale of mobile content over the internet (Mobile Internet sales) and the provision of consulting and technical services (Other Service Fees).
All operations are continuing and all inter-segment transfers are priced and carried out at arm's length.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) | |||||||||||
The segmental results for the 6 months ended 31 December 2014 were as follows: | |||||||||||
£000's | Europe | Asia | North America | Latin America | Group | ||||||
Mobile operator sales | 9 | 92 | 18 | 284 | 403 | ||||||
Mobile internet sales | - | - | 26 | 18,035 | 18,061 | ||||||
Other service fees | 15 | - | 1 | 8 | 24 | ||||||
Total Revenue | 24 | 92 | 45 | 18,327 | 18,488 | ||||||
Cost of sales | (11) | (65) | (26) | (13,417) | (13,519) | ||||||
Gross profit | 13 | 27 | 19 | 4,910 | 4,969 | ||||||
Operating expenses | (277) | (130) | (90) | (4,159) | (4,656) | ||||||
EBITDA* | (264) | (103) | (71) | 751 | 313 | ||||||
Depreciation, amortisation | - | - | (1) | (27) | (28) | ||||||
Share based compensation | (103) | - | - | - | (103) | ||||||
Revenue/expense intercompany | 619 | - | - | (619) | - | ||||||
Finance income | 2 | - | 1 | 23 | 26 | ||||||
Profit/(Loss) before tax | 254 | (103) | (71) | 128 | 208 | ||||||
Income tax expense | - | - | (7) | (503) | (510) | ||||||
Profit/(Loss) after tax | 254 | (103) | (78) | (375) | (302) | ||||||
*Calculated as profit before tax, interest, amortization, depreciation, share compensation expense and impairment of assets. | |||||||||||
|
| ||||||||||
| |||||||||||
The segmental results for the year ended 30 June 2014 were as follows: |
| ||||||||||
£000's | Europe | Asia Pacific | North America | Latin America | Group |
| |||||
Mobile operator sales | 66 | 368 | 230 | 1,258 | 1,922 |
| |||||
Mobile internet sales | 5 | - | 250 | 46,353 | 46,608 |
| |||||
Other service fees | 30 | 3 | 3 | 6 | 42 |
| |||||
Total revenue | 101 | 371 | 483 | 47,617 | 48,572 |
| |||||
Cost of sales | (28) | (223) | (236) | (33,857) | (34,344) |
| |||||
Gross profit | 73 | 148 | 247 | 13,760 | 14,228 |
| |||||
Operating expenses | (513) | (303) | 3 | (12,675) | (13,488) |
| |||||
EBITDA* | (440) | (155) | 250 | 1,085 | 740 |
| |||||
Depreciation, amortisation | (380) | (1) | (6) | (29) | (416) |
| |||||
Share compensation expense | - | - | - | (328) | (328) |
| |||||
Finance income/(expense) | - | - | - | 157 | 157 |
| |||||
Profit before tax | (820) | (156) | 244 | 885 | 153 |
| |||||
Taxation | - | - | - | (713) | (713) |
| |||||
Profit/(Loss) after tax | (820) | (156) | 244 | 172 | (560) |
| |||||
| |||||||||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) | |||||
The segmental results for the 6 months ended 31 December 2013 were as follows: | |||||
£000's | Europe | Asia | North America | Latin America | Group |
Mobile operator sales | 31 | 222 | 49 | 871 | 1,173 |
Mobile internet sales | 4 | - | 162 | 25,642 | 25,808 |
Other service fees | 3 | 2 | - | 6 | 11 |
Total Revenue | 38 | 224 | 211 | 26,519 | 26,992 |
Cost of sales | (31) | (175) | (175) | (18,482) | (18,863) |
Gross profit | 7 | 49 | 36 | 8,037 | 8,129 |
Operating expenses | 100 | (168) | 271 | (7,173) | (6,970) |
EBITDA* | 107 | (119) | 307 | 864 | 1,159 |
Depreciation, amortisation | - | (1) | (4) | (9) | (14) |
Share based compensation | (165) | - | - | - | (165) |
Profit on Liquidation of Subsidiary | 44 | - | - | - | 44 |
Finance expense | - | (1) | - | 93 | 92 |
Profit/(Loss) before tax | (14) | (121) | 303 | 948 | 1,116 |
Income tax expense | - | - | - | (410) | (410) |
Profit/(Loss) after tax | (14) | (121) | 303 | 538 | 706 |
The segmental assets at 6 months ended 31 December 2014 were as follows: | ||||||
£000's | Europe | Asia | North America | Latin America | Consol | Group |
Non current fixed assets | ||||||
Property, plant & equipment | - | - | 1 | 126 | - | 127 |
Intangible assets | - | - | 1 | - | - | 1 |
Goodwill | - | - | - | - | - | - |
Deferred tax | - | - | - | - | - | - |
Current assets | 1,397 | 98 | 638 | 6,293 | - | 8,426 |
Cash and cash equivalent | 1,317 | 12 | 560 | 1,349 | - | 3,238 |
Accounts receivable | 18 | 49 | 8 | 988 | - | 1,063 |
Accrued receivable | 17 | 4 | 43 | 1,391 | - | 1,455 |
Prepayments | 4 | 11 | 10 | 1,636 | - | 1,661 |
Minimum guarantees and advances | - | - | 14 | - | 14 | |
Other assets | 41 | 22 | 17 | 915 | - | 995 |
TOTAL ASSETS | 1,397 | 98 | 640 | 6,419 | - | 8,554 |
Current liabilities | (437) | (193) | (296) | (5,280) | - | (6,206) |
Trade Payables | (36) | (59) | (46) | (1,428) | - | (1,569) |
Accrued content costs | (30) | (222) | (245) | (690) | - | (1,187) |
Other accrued liabilities | (378) | 105 | (15) | (1,016) | - | (1,304) |
Other payables | 7 | (17) | 10 | (239) | - | (239) |
Corporate income tax payable | - | - | - | (1,907) | - | (1,907) |
TOTAL LIABILITIES | (437) | (193) | (296) | (5,280) | - | (6,206) |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The segmental assets at 6 months ended 30 June 2014 were as follows: | ||||||
£000's | Europe | Asia | North America | Latin America | Consol | Total |
Non current fixed assets | ||||||
Property, plant & equipment | - | 1 | - | 106 | - | 107 |
Deferred tax | - | - | - | 260 | - | 260 |
Current assets | 800 | 122 | 259 | 8,277 | - | 9,458 |
Cash at bank and in hand | 698 | 53 | 95 | 2,118 | - | 2,964 |
Accounts receivable | 27 | 34 | 7 | 4,274 | - | 4,342 |
Accrued receivable | 17 | 3 | 131 | 1,071 | - | 1,222 |
Prepayments | 12 | 12 | 9 | 485 | - | 518 |
Minimum guarantees and advances | - | - | - | 14 | - | 14 |
Other assets | 46 | 20 | 17 | 315 | - | 398 |
TOTAL ASSETS | 800 | 123 | 259 | 8,643 | - | 9,825 |
Current liabilities | (474) | (266) | (332) | (6,276) | - | (7,348) |
Trade Payables | (26) | (85) | (44) | (1,904) | - | (2,059) |
Accrued content costs | (30) | (243) | (281) | (596) | - | (1,150) |
Other accrued liabilities | (411) | 75 | (16) | (1,667) | - | (2,019) |
Other payables | (7) | (13) | 9 | (441) | - | (452) |
Corporate income tax payable | - | - | - | (1,668) | - | (1,668) |
TOTAL LIABILITIES | (474) | (266) | (332) | (6,276) | - | (7,348) |
The segmental assets at 6 months ended 31 December 2013 were as follows: | ||||||
£000's | Europe | Asia | North America | Latin America | Consol | Group |
Non current fixed assets | ||||||
Property, plant & equipment | - | - | 3 | 127 | - | 130 |
Intangible assets | - | 1 | - | 1 | ||
Goodwill | - | - | - | - | 380 | 380 |
Deferred tax | - | - | - | 150 | - | 150 |
Current assets | 415 | 102 | 418 | 10,475 | - | 11,410 |
Cash and cash equivalent | 328 | 42 | 269 | 3,994 | - | 4,633 |
Accounts receivable | 4 | 10 | 7 | 3,069 | - | 3,090 |
Accrued receivable | 13 | 21 | 118 | 2,359 | - | 2,511 |
Prepayments | 11 | 11 | 9 | 351 | - | 382 |
Other assets | 59 | 18 | 15 | 702 | - | 794 |
TOTAL ASSETS | 415 | 102 | 422 | 10,751 | 380 | 12,070 |
Current liabilities | (260) | (337) | (550) | (6,764) | - | (7,911) |
Trade Payables | (41) | (134) | (56) | (616) | - | (847) |
Accrued content costs | (43) | (241) | (476) | (619) | - | (1,379) |
Other accrued liabilities | (218) | 51 | (27) | (2,604) | - | (2,798) |
Other payables | 42 | (13) | 9 | (464) | - | (426) |
Corporate income tax payable | - | - | - | (2,461) | - | (2,461) |
TOTAL LIABILITIES | (260) | (337) | (550) | (6,764) | - | (7,911) |
3. EARNINGS PER SHARE | ||||
Earnings per share | ||||
Earnings per share is calculated by dividing the(loss)/profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period. | ||||
Unaudited | Unaudited | Audited | ||
6 months ended 31 December 2014 | 6 months ended 31 December 2013 | 12 months ended 30 June 2014 | ||
(Loss)/profit for the period (£000's) | (302) | 706 | (560) | |
Loss earnings per share (pence): | ||||
Basic | (0.814) | 1.924 | (1.517) | |
Diluted | (0.814) | 1.865 | (1.517) | |
Adjusted earnings per share | ||||
Adjusted earnings per share is calculated to reflect the underlying profitability of the business by excluding non-cash charges for depreciation, amortisation, impairments and share compensation charges. | ||||
6 months ended 31 December 2014 | 6 months ended 31 December 2013 | 12 months ended 30 June 2014 | ||
£000's | £000's | £000's | ||
(Loss)/profit for the period | (302) | 706 | (560) | |
Add back: share compensation expense | 103 | 165 | 328 | |
Add back: impairment of intangibles and goodwill | - | - | 380 | |
Add back: depreciation and amortisation | 28 | 13 | 36 | |
Adjusted (Loss)/profit for the period | (171) | 884 | 184 | |
Pence per share | Pence per share | Pence per share | ||
Adjusted (loss)/earnings per share | (0.461) | 2.408 | 0.499 | |
Adjusted diluted (loss)/earnings per share | (0.461) | 2.336 | 0.479 | |
Weighted average number of shares | ||||
| ||||
6 months ended 31 December 2014 | 6 months ended 31 December 2013 | 12 months ended 30 June 2014 | ||
Basic | 37,075,083 | 36,711,489 | 36,908,888 | |
Exercisable share options | 1,463,763 | 1,144,630 | 1,502,963 | |
Diluted | 38,538,846 | 37,856,119 | 38,411,851 | |
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Diluted (loss)/earnings per share is calculated adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has only one category of ordinary shares.
The adjusted EPS has been calculated to reflect the underlying profitability of the business by excluding non-cash charges for depreciation, amortisation, impairments and share compensation charges.
4. PROVISIONS
The Company maintains a provision of £340,000 against a possible tax liability as was reported in our last annual report and accounts.
5. GOING CONCERN
The Group had cash balances of £3.2m (including short-term investments of£1.4m) at 31 December 2014 (30 June 2014: £3.0m) and no borrowings. Having reviewed cash flow forecasts and budgets for a year ahead the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future.
As at 31 December 2014, £0.9m (including short-term investments of£0.2m) of the Group's cash balance was held in Argentina. The Argentine Peso has remained relatively stable since the end of the last reported audited statements (30 June 2014) although we cannot predict future movements in the currency and the impact on our financial performance.
In order to strengthen the parent company balance sheet and have cash reserves in a range of less volatile currencies, the Group has stepped up the repatriation of funds from Argentina during 2014. As a result of these actions, around 72% of the Group's cash is now located outside of Argentina.
The risk is also mitigated by the launch of similar businesses in Colombia, Mexico and Brazil where the cross border transfers of funds are not restricted.
6. FOREIGN CURRENCY TRANSLATION (a) Presentational currency
The consolidated and parent company financial statements are presented in British pounds: the functional currency of the parent entity is also British pounds.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date the transaction occurs. Any exchange gains or losses resulting from these transactions and from the translation of monetary assets and liabilities at the balance sheet date are reported in the income statement.
Foreign currency balances are translated at the balance sheet date using exchange rates prevailing at the period end.(c) Group companies
The financial results and position of all group entities that have a functional currency different from the presentational currency of the Group are translated into the presentational currency as follows:
i- assets and liabilities for each balance sheet are translated at the closing exchange rate at the date of the balance sheet
ii - income and expenses for each income statement are translated at average exchange rates (unless it is not a reasonable approximation to the exchange rate at the date of transaction)
iii- all resulting exchange differences are recognised as a separate component of equity (cumulative translation reserve)
The exchange rates used in respect of Argentinean pesos are the official published exchange rates.