NPT.L Regulatory News (NPT)

28 Feb 2006 07:02

Stream Group PLC28 February 2006 Stream Group plc ("Stream" or the "Group") Preliminary results for the year ended 31 December 2005 Stream provides consumer information, entertainment content and applications via mobile and fixed line telephony HIGHLIGHTS • 32% growth in underlying profit before tax (on a like for like basis) • Profit before tax £2.0m (2004: £1.9m) • MChex platform fully operational • Mobileworkflow performing well • Good progress made with EGET gaming partnership • Dividend up 14% to 0.8p per share (2004: 0.7p per share) Gordon Robson, Executive Chairman, said, "Stream continues to achieve impressive growth in underlying profitabilitywhilst showing real progress in becoming an integral part of the emerging globalmarketplace. Successful internet products and services will move onto mobile and the handheldtelephone device will increasingly offer "Internet To Go"." Enquiries: Stream Group plc Tel: 020 7299 2880Gordon Robson, Executive ChairmanPat Greene, Finance Director Flagship GroupToby Mitchenall Tel: 020 7886 8459 Chairman's Statement Introduction I am pleased to report that the Group profit before tax for the year ended 31stDecember 2005 was 5% greater than 2004, despite the operating losses of MChexLimited which was acquired in January 2005 to enable Stream to participate inmobile banking. In a like for like comparison with 2004, i.e. without the additional costs ofoperating MChex, profit before tax in 2005 would have been £2.6m (2004: £1.9m)showing underlying growth of 32%. This performance, which is substantially UKbased, is a very strong result in a highly competitive market. Results and Dividend During the year ended 31st December 2005, Group turnover was £13.2m (2004:£13.8m) with profit before tax for the year at £2.0m (2004: £1.9m). In light of the strong underlying performance of the Group, the directorsrecommend the payment of a final dividend of 0.8p per share in respect of theyear ended 31st December 2005. The dividend will be paid on 28th April 2006 toshareholders on record on 31st March 2006. Operating Overview Stream's mobile business has continued to grow during 2005 with profitabilitysignificantly enhanced at the gross margin level. This has been achieved bybuilding on a strong base of consumers to whom we have marketed new andinnovative services. Our dating and chat business is particularly strong as wetake advantage of new mobile technologies which are being adopted by consumers.In excess of 20 million consumers in the UK now have "camera phones" and Streamis particularly benefiting from this high and increasing penetration ofsophisticated mobile phones by offering picture chat and dating services. Mobileworkflow ("MWF"), the acquisition we completed in August 2005, securedadditional technology and applications for the Group, which have enhanced theuser experience of our portfolio of products. Through MWF we are continuing todevelop applications which will be key to the future growth of our mobileproducts and services and the exploitation of the many opportunities arisingfrom the increased capabilities of the 3G networks and growing penetration ofever more sophisticated handsets. This increase in technical complexity raises the barriers to entry and alsoplaces more emphasis on having the appropriate in-house technical capabilities.Stream is particularly well placed as we have extremely strong technicalexpertise which gives us a clear advantage in ensuring we remain at theforefront of market developments. The acquisition of MChex was completed in January of 2005. MChex operates a carrier-grade mobile delivery and billing platform and has contracts which enable itto participate in the mobile banking sector. In 2004, we announced our intention to make further headway into the mobilegambling sector which we strongly believe will be a significant revenue sourcefor the mobile industry. In October 2005, Stream signed an agreement with("EGET") European Game & Entertainment Technology Ltd Ab of Finland which willgive Stream a strong position in the emerging Mobile Gaming market. EGET is atechnical development company in the field of on-line and mobile gamingapplications. Stream is partnering with EGET which combines EGET's proventechnical expertise with Stream's extensive knowledge and marketing expertise inthe mobile world. In November 2005, we launched mobile poker in conjunction with"The Poker Channel" on Sky Television. During Q1 of 2006 we plan to launchmobile bingo and other gaming products will follow during the course of 2006. We continue to distribute and market mobile services in Spain and Germany butthe UK remains our main focus in Europe. In the US we launched our SMS chatservice under a contract with the American Idol television series. Stream hasestablished relationships with US partners with a view to launching further chatand dating services. Stream's fixed line business continued to deliver sustainable revenue and profitfor the Group, focussing on psychic and astrological services. The market for the supply of these services is competitive, however Stream LiveServices (SLS) continues to be the UK's market leader providing its services tomany of the leading publishers and other blue chip media partners. In addition,SLS markets its services directly to the consumer via a monthly magazine mailedto a database of circa. 90,000 registered customers. SLS continues to develop its offering with a portfolio of specifically designedmobile applications. In addition SLS is expanding its online operations underthecircle.com which gives a wider global exposure with telephony accessestablished in the US and Australia. Strategy Stream continues to focus on becoming an integral part of the emerging globalmarketplace with emphasis on securing key strategic involvement in the mobileworld and creating a clearly differentiated position for the Company. The acquisition of, and ongoing investment in, MChex demonstrates our belief inthe future of mobile banking and positions Stream well for the future. The combined strength of EGET's gaming development expertise with our mobiledevelopment and marketing experience promises to create a suite of mobile gamingapplications that have the potential to be marketed globally. The MWF acquisition secures the technical capabilities to ensure Stream takesfull advantage of the emerging technologies which will be key to the futuregrowth of our mobile products and services. Dating and chat telephony services have been successful for more than twentyyears. Their continued success and popularity has been achieved throughutilising improved telephony capabilities including picture messaging to enhancethe user experience and will continue to achieve increased popularity with thepenetration of video enabled handsets. As successful Internet services and products move on to mobile, the handheldtelephone device will increasingly offer "Internet To Go". Consumers will usePCs at home and in the office, and mobile phones when out and about. Summary Stream continues to achieve impressive growth in underlying profitability whilstremaining firmly on track with the 'roadmap' outlined a year ago for securing anintegral position in sectors with long term potential including mobile banking,gaming and dating. Gordon RobsonExecutive Chairman27 February 2006 Consolidated profit and loss accountfor the year ended 31 December 2005 Year ended 31 December 2005 Year ended (Unaudited) 31 December Continuing 2004 Note Operations Acquisitions Total (Audited) £000 £000 £000 £000 Restated* Turnover 1 12,358 868 13,226 13,785Cost of sales (5,810) (524) (6,334) (7,264) -------- --------- -------- --------Gross profit 6,548 344 6,892 6,521Administrative expenses (4,160) (885) (5,045) (4,743) -------- --------- -------- --------Operating profit / (loss) 1 2,388 (541) 1,847 1,778 ======== ========= Interest receivable 176 162 -------- --------Profit on ordinary activities 2,023 1,940before taxationTax on profit on ordinary 2 (596) (492)activities -------- --------Profit on ordinary activities 1,427 1,448after taxationDividends 3, 6 (416) - ======== ========Profit for the year retained 1,011 1,448for equity shareholders ======== ======== Earnings per share 4Basic 2.39p 2.45pDiluted 2.19p 2.37p ======== ======== The profit and loss account contains all recognised gains and losses for theyear and the preceding year. There is no difference between the profit on ordinary activities before taxationand the retained profit for the financial year stated above, and theirhistorical cost equivalents. * See note 6. Consolidated balance sheetas at 31 December 2005 As at As at 31 December 31 December 2005 2004 Note (Unaudited) (Audited) £000 £000 Restated*Fixed assetsIntangible assets 5,323 -Tangible assets 239 101 --------- --------- 5,562 101 --------- --------- Current assetsDebtors 3,160 1,755Cash at bank and in hand 3,198 5,350 --------- --------- 6,358 7,105 Creditors: amounts falling due within one year (1,962) (2,018) --------- ---------Net current assets 4,396 5,087 --------- ---------Total assets less current liabilities 9,958 5,188 Provisions for liabilities (3,450) - --------- ---------Net assets 6,508 5,188 ========= ========= Capital and reservesCalled up share capital 5 3,013 2,973Share premium account 6 2,792 2,752Merger reserve 6 (925) (1,154)Own shares held by employee benefit trust 6 (9) (9)Profit and loss account 6 1,637 626 --------- ---------Equity shareholders' funds 6,508 5,188 ========= ========= * See note 6. Consolidated cash flow statementfor the year ended 31 December 2005 2005 2004 Note (Unaudited) (Audited) £000 £000 Net cash inflow from operating activities 7 876 2,218 Returns on investments and servicing of finance 7 177 155Taxation paid (806) (127)Capital expenditure and financial investment 7 (224) (48)Acquisitions 7 (1,818) -Equity dividends paid (416) - -------- --------Net cash (outflow) / inflow before financing (2,211) 2,198 Financing 7 59 58 -------- -------- (Decrease) / increase in cash in the period (2,152) 2,256 ======== ======== Reconciliation of net cash to movement in netfunds Movement in net funds in the period (2,152) 2,256 Net funds at the start of the period 5,350 3,094 -------- --------Net funds at the end of the period 3,198 5,350 ======== ======== Reconciliation of movements in equity shareholders' fundsFor the year ended 31 December 2005 Year ended Year ended 31 December 31 December 2005 2004 (Unaudited) (Audited) £000 £000 Restated* Profit for the year 1,427 1,448Dividends (416) - --------- --------Profit for the year retained for equity shareholders 1,011 1,448New share capital subscribed for cash 59 58Nominal value of shares issued for acquisition of 21 -subsidiariesShare premium on shares issued for acquisition of 229 -subsidiariesShare compensation expense - 1 --------- --------Net movement in equity shareholders' funds 1,320 1,507 --------- -------- Opening equity shareholders' funds:As previously reported 4,772 3,681Prior year adjustment (See note 6) 416 - --------- --------As restated 5,188 3,681 --------- -------- Closing equity shareholders' funds 6,508 5,188 ========= ======== * See note 6. Notes to the preliminary results 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 and net assets by class ofbusiness would be seriously prejudicial to the interests of the Group. UK Rest of the Total worldSegmental analysis 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 Turnover by origin anddestinationFixed line telephony 5,750 5,815 254 522 6,004 6,337Mobile telephony: - Continuing 6,255 7,097 99 351 6,354 7,448 operations - Acquisitions: MChex 356 - 137 - 493 - LtdMobileworkflow Ltd 375 - - - 375 - ------- ------- ------- ------- ------- ------- 12,736 12,912 490 873 13,226 13,785 ======= ======= ======= ======= ======= =======Operating profit / (loss) - Continuing 2,359 1,738 29 40 2,388 1,778 operations ------- ------- ------- ------- ------- ------- - Acquisitions: MChex (650) - 36 - (614) - LtdMobileworkflow Ltd 73 - - - 73 - ------- ------- ------- ------- ------- ------- (577) - 36 - (541) - ------- ------- ------- ------- ------- ------- 1,782 1,738 65 40 1,847 1,778Interest received 176 162 - - 176 162 ------- ------- ------- ------- ------- -------Profit before tax 1,958 1,900 65 40 2,023 1,940 ======= ======= ======= ======= ======= =======Net assets 6,508 5,188 - - 6,508 5,188 ======= ======= ======= ======= ======= ======= Profit before tax is not materially different from the operating profit / (loss)of the acquired entities. 2. Tax on profit on ordinary activities Unaudited Audited 2005 2004The taxation charge for the year comprises: £'000 £'000 Current tax:UK corporation tax on the profit for the year at 30% 630 465Adjustment in respect of prior years (82) (109) -------- -------Total current tax 548 356 Deferred tax 48 136 -------- -------Total tax charge 596 492 ======== ======= The tax assessed in the period is lower (2004: lower) than the standard rate ofcorporation tax in the UK of 30% (2004:30%) primarily due to the disallowance ofcertain expenditure for tax purposes offset by adjustments in respect of theprior year. A deferred tax asset estimated at £136,000 (2004: £82,000) arising from excesscapital allowances has been recognised. The directors consider that there issufficient certainty regarding the timing of suitable future taxable profitsagainst which these allowances will be claimed. 3. Dividends A maiden dividend of 0.7p per share in respect of the year ended 31 December2004, amounting to £416,000, was approved by shareholders at the Annual GeneralMeeting held on 15 April 2005 and was paid on 22 April 2005. The directors recommend the payment of a dividend of 0.8p per share in respectof the year ended 31 December 2005, amounting to £482,000. The dividend will bepaid on 28 April 2006 to shareholders on the register on 31 March 2006. 4. Earnings per share 2005 2004 (Unaudited) (Audited) £000 £000 Profit attributable to shareholders 1,427 1,448 --------- ------- Number Number Weighted average number of shares in issue 59,586,149 59,204,000Dilutive effects of contingent consideration 2,960,885 -Dilution effects of share options 2,329,427 1,786,179Dilution effects of employee share schemes 198,941 213,567 --------- -------Diluted weighted average number of shares in issue 65,075,402 61,203,746 --------- ------- Basic earnings per share 2.39p 2.45pDiluted earnings per share 2.19p 2.37p ========= ======= Basic earnings per share is calculated on the results attributable to ordinaryshareholders divided by the weighted average number of shares in issue duringthe period excluding those held by Stream Trustees Limited which are treated ascancelled. Diluted earnings per share calculations reflect the dilutive effect of employeeshare schemes and share option schemes. 5. Share capital 2005 2004 (Unaudited) (Audited) £000 £000 As at 1 January 2,973 2,963Shares issued 40 10 --------- -------As at 31 December 3,013 2,973 ========= ======= During the year, the Company issued 377,932 ordinary shares of 5p each, at aprice of 15.5p per share, on the exercise of share options and 410,982 ordinaryshares of 5p each at 60.83p each as part of the consideration for theacquisition of Mobileworkflow Limited. 6. Reserves Own shares Share held by Profit premium Merger employee and loss account reserve benefit account trust £000 £000 £000 £000 RestatedAt 31 December 2004:As previously reported 2,752 (1,154) (9) 210Prior year adjustment - - - 416 --------- --------- -------- -------As restated 2,752 - - 626Shares issued (see note 5) 40 229 - -Retained profit for the year - - - 1,011 --------- --------- -------- -------As at 31 December 2005 2,792 (925) (9) 1,637 ========= ========= ======== ======= The final dividend in respect of the year ended 31 December 2004 was previouslytreated as a liability in 2004 and accordingly included within currentliabilities. Following the adoption of Financial Reporting Standard 21, "Eventsafter the balance sheet date", the treatment of proposed dividends has beenchanged. As the 2004 dividend was subject to ratification at the Annual GeneralMeeting after the year end, it is no longer permitted to classify it as aliability at 31 December 2004 and a prior year adjustment has been made toreverse it. 7. Cash flows 2005 2004 (Unaudited) (Audited) £000 £000Net cash flow from operating activitiesOperating profit 1,847 1,778Depreciation of tangible fixed assets 117 314Amortisation of goodwill 231 -Share compensation expense - 1(Increase) / decrease in debtors (1,312) 112(Decrease) / increase in creditors (7) 13 ---------- ------- 876 2,218 ---------- -------Returns on investments and servicing of financeInterest received 177 155 ---------- ------- Capital expenditure and financial investmentPurchase of tangible fixed assets (224) (48) ---------- ------- AcquisitionsPurchase of subsidiary undertakings (2,007) -Less: Cash acquired with subsidiaries 189 - ---------- ------- (1,818) - ---------- ------- FinancingIssue of ordinary shares 59 58 ---------- ------- 8. Basis of preparation The figures for the year ended 31 December 2005 are unaudited. The figures forthe years ended 31 December 2005 and 2004 do not constitute statutory accountswithin the meaning of Section 240 (5) of the Companies Act 1985. The figures forthe year ended 2004 are extracts from the full financial statements delivered tothe Registrar of Companies. The report of the auditors on those financialstatements was unqualified and contained no statements under either Section 237(2) or 237 (3) of the Companies Act 1985. The preliminary results have beenprepared under the historical cost convention and in accordance with the Group'saccounting policies as set out in the financial statements for the year ended 31December 2004 except for the adoption of Financial Reporting Standard 21,"Events after the balance sheet date". The impact of this change in accountingpolicy has been detailed in note 6. This statement was approved by the board of directors on 27 February 2006. 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