NPT.L Regulatory News (NPT)

22 Feb 2005 07:01

Stream Group PLC22 February 2005 Stream Group plc22 February 2005 Stream Group plc ("Stream" or the "Group") Preliminary Results for the Year Ended 31 December 2004 Stream provides consumer information, entertainment content, and applications via mobile and fixed line telephony HIGHLIGHTS • Profit before tax up 73% to £1.9m (2003: £1.1m) • Earnings per share up 24% at 2.45p per share (2003: 1.98p) • Mobile revenues up by 61% to £7.4m (2003: £4.6m*) • Maiden dividend of 0.7p per share proposed • First acquisition announced - strategic move into mobile banking • Working with Ladbrokes on mobile betting applications • US market entry with "American Idol" TV series win * as restated, see note 1 to the preliminary results below Gordon Robson, Executive Chairman, said: "The directors are delighted with the way Stream is developing. We are confidentabout our future which will be a blend of strong organic growth and keystrategic acquisitions. 2004 was another excellent year for Stream which saw the Group firmlyestablished as a leading mobile applications and content company. We secured astrong, profitable position in the UK mobile consumer content market whilstsimultaneously putting in place some key elements which give Stream a firstclass "roadmap" for the coming years." Contacts: Stream Group plc Tel: 020 7725 0300Gordon Robson, Executive ChairmanPat Greene, Finance Director FlagshipAndy Field Tel: 020 7886 8440 Chairman's Statement Introduction I am pleased to report that in 2004 the Group delivered substantial growth withprofits before tax up 73% to £1.9m (2003: £1.1m). In keeping with last year,this profit figure represents a significant improvement on the initial marketexpectations. Stream is now firmly established as a mobile applications and content providerwith mobile services accounting for 54% of turnover in 2004 (2003: 39%*). Thissurge in our mobile activity has driven the strong growth during 2004. Inaddition, we have moved from being primarily a provider of "white label"services for promotional partners (which are typically lower margin) toestablishing a substantial business selling content directly to consumers. Thisis significantly more profitable and has been the key contributor to our profitgrowth. Results and dividend During the year to 31 December 2004, Group turnover increased by 16% to £13.8m(2003: £11.9m*) with profit before tax for the year of £1.9m, up 73% from £1.1min 2003. The directors believe that the Group is in a sound financial position andtherefore are delighted to recommend the payment of a maiden dividend of 0.7pper share in respect of the year ended 31 December 2004. The dividend will bepaid on 22 April 2005 to shareholders on record on 29 March 2005. The directorsare committed to a progressive dividend policy, subject to the fundingrequirements for future growth. Operating review The two key parts of the Group during 2004 were Stream Mobile and Stream LiveServices. Stream Mobile has changed focus from primarily providing "white label" servicesfor media partners, to building a significant direct business marketing contentand services directly to consumers. This strategy has been responsible for bothrevenue and profit growth as direct sales generate greater profitability than"white label" sales. "White label" services, despite being lower margin,substantially reduce risk to profitability, as marketing costs are not incurred,with media partners being responsible for promotion. This approach enables us toestablish which services and content are likely to be most profitable in directmarketing campaigns. It is a well proven approach which we have successfullyadopted, firstly with Stream Live Services and now with Stream Mobile. Stream Live Services (SLS) continues to be a dependable source of sustainablerevenue and profit for the Group, focussing on psychic and astrologicalservices. There were two major developments during 2004. Firstly, we enjoyed tremendoussuccess with our credit card payment facility which now accounts for 18% oftotal sales in this division. Secondly, a significant media contract, which hadpreviously been held directly by SLS, was taken over by another company as partof a contract to handle all of that media group's telephony business. Thepsychic and astrology part of the contract remained with SLS, but on a wholesalebasis, with the turnover being accounted for by the new party. This was the keyreason for the drop in turnover in SLS during 2004. SLS continues to be asignificant contributor to the Group. Talk Telecom continues to be used primarily to handle the Group's own telephonetraffic. The way ahead Whilst we have a successful position in the consumer content market withproducts such as ringtones, wallpapers and pictures etc, Stream's focus is tobecome an integral part of the emerging global marketplace with emphasis onsecuring key strategic involvement in the mobile world and creating a clearlydifferentiated market position for the Company. Mobile banking Our first milestone in achieving this aim was the acquisition of MChex inJanuary of this year. As a result of this acquisition, Stream now has a longterm exclusive contract with mobileATM (a joint venture between Link and Morse)and will be an integral part of the development and growth of mobile banking forthe foreseeable future. The £1.5m cost of MChex has bought Stream a carrier-grade platform which hasbeen built by Morse and approved by Link for mobile banking transactions, andthe additional infrastructure including direct connections to all five UK mobilenetwork operators. At present MChex is incurring losses of circa. £85,000 permonth, however, we aim to reduce that loss during the remainder of 2005 withMChex trading closer to breakeven by the year end. Whilst the monthly losses will be reduced by introducing Stream's own trafficand third party traffic to MChex, shareholders should be aware that the realongoing value of this investment is the 10 year contract (5 years exclusive)which MChex has in place to handle mobileATM traffic. Mobile banking is predicted to be a very significant part of the mobilemarketplace over the coming years and Stream is now firmly established as a keycomponent in this banking revolution. Mobile gaming Stream has been committed to mobile gaming since 2003 when we were granted aBookmaker's Permit. We are currently developing betting games for Ladbrokeswhich we hope to launch in Q2 of this year. Over the coming year we will befocussing on making further headway into the mobile gambling sector which westrongly believe will be a leading revenue source for the mobile industry in thefuture. We anticipate strong revenues and profits to be generated in this sectorin late 2006, early 2007. USA The USA is arguably the largest commercial opportunity in emerging mobilemarkets in the world today. Stream has demonstrated in the past that strongstrategic media relationships are the most effective way to establish a rapidpresence in new markets. Stream has been selected, to operate the SMS "chat" service for the forthcomingseries of American Idol. American Idol is the highest rated non-sports show onAmerican television. Stream also operates SMS chat services for Vodafone in the UK and the iTouchsubsidiary, Movilisto, in Spain. American Idol is a very significant "win" for Stream as it develops its presencein the rapidly emerging US mobile market. This relationship is the first ofseveral which Stream is working to establish with major US partners and mediagroups. Strategy The mass-market ringtone and wallpaper business currently offers a hugeopportunity, and, although this market is increasingly competitive, Stream has asubstantial business in this sector. However, we believe it is important toensure that we also have a strategy in place which gives Stream a strong futurein the developing mobile world. This strategy involves both geographic expansion into key territories, such asthe USA, Central Europe and Asia, and establishing a foothold in businesssectors which we believe will form a major part of mobile revenues in the yearsto come. The directors are delighted with the way Stream is developing. We are confidentabout our future which will be a blend of strong organic growth and keystrategic acquisitions. Summary 2004 was another excellent year for Stream with the Group firmly established asa leading mobile applications and content company. We secured a strong,profitable position in the UK mobile consumer content market whilstsimultaneously putting in place some key elements which give Stream a firstclass "roadmap" for the coming years. WG RobsonExecutive chairman22 February 2005 Consolidated profit and loss accountfor the year ended 31 December 2004 Unaudited Audited Note 2004 2003 £'000 £'000 Restated* Turnover 1 13,785 11,914Cost of sales (7,264) (6,512) ------------------- ----------------Gross profit 6,521 5,402Administrative expenses (4,743) (4,352) ------------------- ----------------Operating profit 1 1,778 1,050 Interest receivable 162 61 ------------------- ----------------Profit on ordinary activities before taxation 1,940 1,111 Tax on profit on ordinary activities 2 (492) 11 ------------------- ----------------Profit on ordinary activities aftertaxation 1,448 1,122 Dividend proposed 3 (416) - ------------------- ---------------- Profit for the year retained for equity shareholders 1,032 1,122 =================== ================Earnings per share 4Basic 2.45p 1.98pDiluted 2.37p 1.88p =================== ================ All activities relate to continuing operations. The profit and loss accountcontains all recognised gains and losses for the year and the preceding year. * See note 1 below. Consolidated balance sheetat 31 December 2004 Note Unaudited Audited 2004 2003 £'000 £'000Fixed assetsTangible assets 101 367 ------------- -------------Current assetsDebtors 1,755 1,996Cash at bank and in hand 5,350 3,094 ------------- ------------- 7,105 5,090Creditors: amounts falling (2,434) (1,776)due within one year ------------- -------------Net current assets 4,671 3,314 ------------- -------------Net assets 1 4,772 3,681 ============= =============Capital and reservesCalled up share capital 2,973 2,963Share premium account 2,752 2,704Merger reserve (1,154) (1,154)Own shares held by employee (9) (10)benefit trustProfit and loss account 210 (822) ------------- -------------Equity shareholders' funds 4,772 3,681 ============= ============= Consolidated cash flow statementfor the year ended 31 December 2004 Unaudited Audited Note 2004 2003 £'000 £'000 Net cash inflow from operating 5 2,218 1,330activities Returns on investments and servicing offinanceInterest received 155 61 Taxation paid (127) - Capital expenditure and financial investmentPurchase of tangible fixed assets (48) (55) ------------- -------------Net cash inflow before financing 2,198 1,336 FinancingIssue of ordinary shares 58 138 ------------- -------------Increase in cash in the year 2,256 1,474 ============= ============= Movement in net funds in the year 2,256 1,474 Net funds at the start of the year 3,094 1,620 ------------- -------------Net funds at the end of the year 5,350 3,094 ============= ============= Notes to the preliminary resultsfor the year ended 31 December 2004 1. Segmental information During the year, the Group operated two principal classes of business, theprovision of end user mobile and fixed line telephony services. The directorsare of the opinion that analysis of operating profit by class of business wouldbe seriously prejudicial to the interests of the Group. UK Rest of the world Total Unaudited Audited Unaudited Audited Unaudited AuditedSegmental 2004 2003 2004 2003 2004 2003analysis £'000 £'000 £'000 £'000 £'000 £'000 Restated Restated Restated TurnoverFixed line 5,815 6,863 522 412 6,337 7,275telephonyMobile 7,097 4,351 351 288 7,448 4,639content ------ ------ ------ ------ ------ ------ 12,912 11,214 873 700 13,785 11,914 ====== ====== ====== ====== ====== ======Operating 1,738 1,190 40 (140) 1,778 1,050profit/(loss) ====== ====== ====== ====== ====== ======Net assets 4,772 3,681 - - 4,772 3,681 ====== ====== ====== ====== ====== ====== As a result of the increase in the proportion of direct business beingtransacted by the Group, Stream has revised its revenue recognition policy so asto account for direct business on a gross basis where the Company acts asprincipal. The impact of this has been to increase revenue and cost of sales in2004 by £1.5m (2003: £1.1m). 2. Tax on profit on ordinary activities Unaudited Audited 2004 2003The taxation charge / (credit) for the year £'000 £'000comprises: Current tax:UK corporation tax on the profit for the year at 30% 465 207Adjustment in respect of prior years (109) - -------------- -------------Total current tax 356 207 Deferred tax 136 (218) -------------- -------------Total tax charge / (credit) 492 (11) ============== ============= 3. Dividend proposed Unaudited Audited 2004 2003 £'000 £'000 Final dividend proposed 416 - ============== ============== The directors recommend the payment of a maiden dividend of 0.7p per share inrespect of the year ended 31 December 2004, amounting to £416,000. The dividendwill be paid on 22 April 2005 to shareholders on the register on 29 March 2005. 4. Earnings per share Unaudited Audited 2004 2003 £'000 £'000 Profit attributable to 1,448 1,122shareholders ================ ============== Number Number Weighted average number of shares in 59,204,000 56,809,951issueDilution effects of share options 1,786,179 2,405,934Dilution effects of employee share 213,567 322,792schemes ---------------- --------------Diluted weighted average number of 61,203,746 59,538,677shares in issue ================ ============== Basic earnings per share 2.45p 1.98pDiluted earnings per share 2.37p 1.88p ================ ============== Basic earnings per share is calculated on the results attributable to ordinaryshares divided by the weighted average number of shares in issue during the yearexcluding those held by Stream Trustees Limited which are treated as cancelled. Diluted earnings per share calculations include additional shares to reflect thedilutive effect of employee share schemes and share option schemes. 5. Net cash inflow from operating activities Unaudited Audited 2004 2003 £'000 £'000 Operating profit 1,778 1,050Depreciation of tangible fixed assets 314 293Share compensation expense 1 16Decrease in debtors 112 194Increase / (decrease) in creditors 13 (223) -------------- ------------- 2,218 1,330 ============== ============= 6. Post balance sheet event On 27 January 2005, the Company acquired the whole of the issued share capitalof MChex Holdings Limited for a maximum total consideration of £1.5m. Atcompletion, £267,197 was paid for the shares together with £482,803 insettlement of debt. The balance of the consideration is payable subject to thelaunch of additional services during 2005. 7. Basis of preparation The figures for the year ended 31 December 2004 are unaudited. The figures forthe years ended 31 December 2004 and 2003 are non-statutory. The figures for theyear ended 2003 are extracts from the full financial statements delivered to theRegistrar of Companies. The report of the auditors on those financial statementswas unqualified and contained no statements under either Section 237 (2) or 237(3) of the Companies Act 1985. The preliminary results have been prepared underthe historical cost convention and in accordance with the Group's accountingpolicies as set out in the financial statements for the year ended 31 December2003 except as noted above. This information is provided by RNS The company news service from the London Stock Exchange