NPT.L Regulatory News (NPT)

28 Sep 2005 07:01

Stream Group PLC28 September 2005 Stream Group plc Interim results For the six months ended 30 June 2005 Stream provides consumer information and entertainment content and applications via mobile and fixed line telephony channels. Highlights • First half profit before tax £0.82m in line with expectations • Underlying profits up 33% to £1.21m (2004 £0.91m) • 10 year agreement (5 exclusive) with mobileATM* for mobile banking • Agreement with Ladbrokes to develop mobile games Gordon Robson, Executive Chairman, said, "The consumer success stories of the internet will be the future success storiesof mobile as consumers will increasingly use their mobiles as "Internet to Go". I am therefore delighted to report that our commitment to becoming an integralpart of the future of mobile remains firmly on track." Enquiries: Stream Group plc Tel: 020 7725 0300 Gordon Robson, Executive ChairmanPat Greene, Finance Director Flagship Group Tel: 020 7886 8442 David Butcher Chairman's Statement Introduction I am pleased to report a solid performance for the six months to 30 June 2005generating a profit before tax of £0.82m (2004: £0.91m) which is in line withour expectations. This result has been achieved despite incurring £0.4m ofadditional budgeted costs of operating the MChex platform, a carrier-gradem-commerce platform acquired in January. MChex has a 10 year agreement with mobileATM*, (a joint venture between MorsePLC and LINK, the operator of the UK ATM network) to provide mobile bankingservices, with several banks expecting to launch by the end of 2005. We are in addition progressing our strategy of moving into the emerging mobilegaming sector. I am therefore delighted to report that our commitment tobecoming an integral part of the future of mobile remains firmly on track. Interim results Turnover in the period was down by 6% to £6.1m (2004: £6.4m) due to MChexintegration issues as described below. In the six months to 30 June 2005 theGroup profit before tax was £0.82m (2004: £0.91m) reflecting the absorption ofthe cost of running the MChex platform. Cashflow from operating activities remained positive in the period while therewere significant outflows in respect of the acquisition of MChex (£0.9m) and thepayment of the dividend (£0.4m) leaving a cash balance at 30 June 2005 of £4.1m(2004 £5.4m). The profit for the period equates to 0.88p per share on a diluted basis (2004:1.04p per share). Operating Review In my previous statement to shareholders I said that Stream had to forge astrategy which would give the company a strong long term position in theemerging mobile market. Although we continue to be successful in this area, the current "ringtone"market is in gradual decline as consumers move to buy "realtones", (real musicclips). The record companies and other music groups will gradually dominate thisnew market as customer demand is for music by original artists. Two sectors weidentified as being integral to the future of mobile are mobile banking/payments and mobile gaming/betting. In order to ensure a solid future in thesesectors we are securing partnerships with key players. The MChex acquisition brought Stream a long term partnership with the UK banksvia mobileATM*. The launch of mobileATM* in the UK has been delayed until theend of this year at which time Stream will commence its period of exclusivityunder the 10 year partnership to handle the delivery of UK mobile banking andpayment transactions. Our move into the emerging mobile gaming / betting market began earlier thisyear when we signed an agreement with Ladbrokes to develop games on theirbehalf. The first of these initiatives with Ladbrokes will launch during thefinal quarter of this year. In addition, we expect to make further announcementsregarding Stream's progress in this sector over the coming months. This marketis still in the early stages of growth with international industry analystsforecasting that mobile gaming will follow the success of internet gaming andgenerate revenues in excess $19 bn by 2009. The acquisition of Mobileworkflow ("MWF") in August secures essential mobiletechnical skills which will be particularly valuable in our banking and gamblingbusinesses. The MWF platform extends the Group's technical capabilities in theareas of MMS, 3gp and Java, including interactive java and billing from javaapplications and enhances our portfolio of applications in these areas. Wecontinue to pursue an active M&A strategy and anticipate being able to makefurther announcements during the coming months. Our psychic/astrology business continues to perform consistently with highermargin credit card sales now accounting for 27% of revenue. We have beensteadily growing our USA sales through a combination of direct marketing andpartner activity. Customers in the USA call a local 1-800 freefone number whichconnects them to our sales team in the UK and then onto a UK psychic. The integration of the MChex mobile platform gave rise to delivery issues withsome of the mobile network operators which have also hampered the development ofthird party aggregation traffic and has prevented us from reducing the operatingloss of the business as quickly as planned. The fact that our first half profitperformance is in line with our expectations demonstrates the strength of theunderlying business. However, our prudent approach combined with the potentialimpact of the MChex integration issues during Q3 of 2005 causes us to believethat our full year performance may not be in line with current marketexpectations Outlook As GPRS and 3G become the primary delivery channels of mobile content, consumerswill increasingly use their mobiles as "Internet to Go". The consumer successstories of the internet will be the future success stories of mobile. It is forthis reason that Stream has chosen to focus primarily on mobile banking /payments and mobile gaming / betting. Despite the delayed launches of mobile banking and our initiatives withLadbrokes until Q3 this year, Stream is firmly on course to securing a solidfuture in the global mobile industry. The directors have total confidence in the Group's prospects and look forward toupdating shareholders on developments as we continue to implement our strategyover the coming months. Gordon RobsonExecutive Chairman28 September 2005 Consolidated profit and loss accountfor the six months ended 30 June 2005 Six months ended 30 June 2005 Six months (Unaudited) ended Year ended 30 June 31 December Continuing 2004 2004 Note operations Acquisitions Total (Unaudited) (Audited) £000 £000 £000 £000 £000 Restated Turnover 5,856 210 6,066 6,440 13,785 Cost of sales (2,549) (218) (2,767) (3,321) (7,264) Gross profit / (loss) 3,307 (8) 3,299 3,119 6,521 Administrative expenses (2,195) (387) (2,582) (2,265) (4,743) Operating profit /(loss) 1,112 (395) 717 854 1,778 Interest receivable 99 58 162 Profit on ordinaryactivitiesbeforetaxation 816 912 1,940 Tax on profit on ordinaryactivities 2 (269) (279) (492) Profit on ordinaryactivities after taxation 547 633 1,448 Dividends 3, 6 (416) - - Profit for the periodretainedfor equityshareholders 131 633 1,448 Earnings per 4share Basic 0.92p 1.07p 2.45p Diluted 0.88p 1.04p 2.37p Consolidated balance sheetas at 30 June 2005 As at As at As at 30 June 30 June 31 December 2005 2004 2004 Note (Unaudited) (Unaudited) (Audited) £000 £000 £000 Restated Fixed assets Intangible assets 1,569 - - Tangible assets 131 243 101 1,700 243 101 Current assets Debtors 2,655 2,675 1,755 Cash at bank and in hand 4,124 3,635 5,350 6,779 6,310 7,105 Creditors: amounts falling due within one year (2,660) (2,179) (2,018) Net current assets 4,119 4,131 5,087 Total assets less current liabilities 5,819 4,374 5,188 Creditors: amounts falling due after more than one year (500) - - Net assets 5,319 4,374 5,188 Capital and reserves Called up share capital 5 2,973 2,973 2,973Share premium account 6 2,752 2,752 2,752Merger reserve 6 (1,154) (1,154) (1,154)Own shares held by employee benefit trust (9) (8) (9) Profit and loss account 6 757 (189) 626Equity shareholders' funds 5,319 4,374 5,188 Consolidated cash flow statementfor the six months ended 30 June 2005 Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 Note (Unaudited) (Unaudited) (Audited) £000 £000 £000 Net cash inflow from operating activities 7 59 456 2,218Returns on investments and servicing of finance 7 99 58 155Taxation paid - - (127) Capital expenditure and financial investment 7 (68) (31) (48)Acquisitions 7 (900) - -Equity dividends paid (416) - - Net cash flow before financing (1,226) 483 2,198 Financing 7 - 58 58 (Decrease) / increase in cash in the period (1,226) 541 2,256 Reconciliation of net cash tomovement in net funds Movement in net funds in the period (1,226) 541 2,256 Net funds at the start of the period 5,350 3,094 3,094 Net funds at the end of the period 4,124 3,635 5,350 Reconciliation of movements in equity shareholders' fundsFor the six months ended 30 June 2005 Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 (Unaudited) (Unaudited) (Audited) £000 £000 £000 (Restated) Opening equity shareholders' funds: As previously reported 4,772 3,681 3,681Prior year adjustment 416 - -As restated 5,188 3,681 3,681 Profit for financial period 547 633 1,448Dividends (416) - -New share capital subscribed for cash - 58 58Share compensation expense - 2 1Net movement in equity shareholders' funds 131 693 1,507 Closing equity shareholders' funds 5,319 4,374 5,188 Notes to the interim report 1 Basis of preparation This interim report, which has been neither audited nor reviewed by theCompany's auditors, was approved by the board of directors on 27 September 2005and has been prepared following the accounting policies set out in the Group's2004 annual report and accounts except for the adoption of Financial ReportingStandard 21, "Events after the balance sheet date". The impact of this change inaccounting policy has been detailed in note 6. The 2004 annual report andaccounts received an unqualified auditors' report and has been filed with theRegistrar of Companies. 2 Taxation Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Current taxation 269 110 356Deferred tax charge - 169 136 269 279 492 The tax assessed in the period is higher (2004: higher) than the standard rateof corporation tax in the UK of 30% (2004:30%) primarily due to the disallowanceof certain expenditure for tax purposes. A deferred tax asset estimated at £82,000 (2004: £50,000) 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 The directors do not recommend the payment of an interim dividend. The decision with regard to the payment of a final dividend in respect of theyear ending 31 December 2005 will be taken once the results for that period areagreed. 4 Earnings per share Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Profit attributable to shareholders 547 633 1,448 Number Number Number Weighted average number of shares in issue 59,274,240 59,059,199 59,204,000Dilution effects of share options 2,548,549 1,665,989 1,786,179Dilution effects of employee share schemes 189,666 311,520 213,567Diluted weighted average number of shares in issue 62,012,455 61,036,708 61,203,746 Basic earnings per share 0.92p 1.07p 2.45pDiluted earnings per share 0.88p 1.04p 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 Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Balance at beginning of period 2,973 2,963 2,963Issue of shares - 10 10Balance at end of period 2,973 2,973 2,973 6 Reserves Own shares Share Profit held by premium Merger and loss employee account reserve account benefit trust £000 £000 £000 £000 Restated At 31 December 2004: As previously reported 2,752 (1,154) 210 (9)Prior year adjustment - - 416 -As restated 2,752 - 626 -Retained profit for the period - - 131 -As at 30 June 2005 2,752 (1,154) 757 (9) The proposed final dividend in respect of the year ended 31 December 2004 waspreviously treated as a liability in 2004 and accordingly included withincurrent liabilities. Following the adoption of Financial Reporting Standard 21,"Events after the balance sheet date", the treatment of proposed dividends hasbeen changed. As the 2004 dividend was subject to ratification at the AnnualGeneral Meeting after the year end, it is no longer permitted to classify it asa liability at 31 December 2004 and a prior year adjustment has been made toreverse it. 7 Cash flows Six months Six months Year ended ended ended 30 June 30 June 31 December 2005 2004 2004 (Unaudited) (Unaudited) (Audited) £000 £000 £000 Net cash flow from operating activities Operating profit 717 854 1,778Depreciation of tangible fixed assets 60 155 314Amortisation of goodwill 68 - -Share compensation expense - 2 1(Increase) / decrease in debtors (725) (847) 112(Decrease) / increase in creditors (61) 292 13 59 456 2,218 Returns on investments and servicing offinance Interest received 99 58 155 Capital expenditure and financial investment Purchase of tangible fixed assets (68) (31) (48) Acquisitions Purchase of subsidiary undertaking (900) - - Financing Issue of ordinary shares - - 58 8 Interim statement A copy of this statement will be sent to shareholders. Additional copies areavailable on request from the Company's registered office: 130 Wigmore Street,London W1U 3SB. * Please note that mobileATM is a registered trademark. This information is provided by RNS The company news service from the London Stock Exchange