Velocity Comp Regulatory News (VEL)

28 Mar 2007 07:03

Velti PLC28 March 2007 FOR IMMEDIATE RELEASE 28 March 2007 Velti plc RESULTS FOR 2006: SUBSTANTIAL PROFIT GROWTH Financial Highlights • Revenue grew 122 per cent to €10.8 million (2005: €4.9 million). • EBITDA grew 125 per cent to €4.3 million (2005: €1.9 million). • Profit before tax grew 152 per cent to €2.7 million (2005: €1.1 million). • Profit after tax and minorities grew 209 per cent to €2.2 million (2005: €0.7 million). • Earnings per share grew 129 per cent to 8.7 eurocents (3.8 eurocents in 2005). Operational Highlights • Won key new contracts from Vodafone, TIM Hellas. • Launched operations in the UK market and opened a new office in New York. • Managed a very successful mobile commerce program for Argos in the UK. • Launched a mobile music community and m-ticketing program for Orange in the UK • Signed a significant new contract for providing real time traffic information over mobile phones. • Signed a major contract with Cosmote for mobile content management and operation Product Development • Launched version 3.0 of Mobile Marketing Platform for Advertising Agencies and Operators. • Launched version 4.0 of Mobile Messaging, Content Aggregation and Syndication Platforms. Successful IPO in May 2006 • Raised €12.5 million net of costs to support company growth. • Improved company profile has had positive effect on revenue cycle. On outlook, David Mann, Chairman, stated: "In 2007 Velti will maintain its primary focus of providing mobile contentsolutions for mobile operators, advertising agencies and media groups. The Boardsees excellent prospects for delivering a further year of very strong growth." Alexandros Moukas, Chief Executive Officer added: "We are delighted to have delivered strong growth across the entire business inour first year as a public company. The geographical expansion in South EasternEurope will focus mainly on Turkey, Romania and Bulgaria. The offices in Londonand New York are also expected to be areas of growth for Velti in 2007 and tolead a more focused push towards mobile marketing and advertising." CONTACTS Velti:Alex Moukas, Chief Executive Officer +44 (0) 20 7633 5000Pantelis Papageorgiou, Finance Director Bankside: +44 (0) 20 7367 8888Simon Bloomfield or Steve Liebmann Oriel Securities: +44 (0) 20 7710 7600Andrew Edwards About Velti Velti is a leading platforms and service provider that enables mobile marketing,content and value added services. Velti works with mobile operators, advertisingagencies and media to deliver value added services. Founded in 2000, Velti has offices in London, New York, Boston and Athens and isalready serving more than 100 corporate customers in 9 countries includingVodafone, Orange, Cosmote, TIM, Q-Telecom, OTE, Turkcell, Verizon / Maxpreps andArgos among others. Velti is a publicly traded company listed on the LondonStock Exchange (AIM). CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REPORT Introduction We are pleased to make our maiden preliminary results announcement for the yearended 31 December 2006, since Velti's Initial Public Offering on AIM in May2006. 2006 has been a successful year for Velti in terms of delivering strongfinancial results, the quantity and quality of its customers, productdevelopment and strategic positioning. Results and Financial Position During 2006 Velti's revenue grew by 122 per cent to €10.8 million (2005: €4.9million), profit before tax rose by 152 per cent to €2.7 million (2005: €1.1million) and profit after tax and minorities increased by 209 per cent to €2.2million (2005: €0.7million). Basic earnings per share were 8.7 eurocents (2005:3.8 eurocents). At the time of the IPO, €12.5 million after costs was raised in new equity,enabling Velti to fund its rapid growth and the associated increase in workingcapital and investment in the Company's technology infrastructure. Year end netcash was €4.0 million (2005: net borrowings of €1.9 million). Market and Positioning Velti's primary focus is on providing mobile services to mobile operators,advertising agencies, media groups and other large enterprises (the Company doesnot sell directly to the end consumer). It enables its customers to monetise themobile channel and run effective mobile advertising and marketing campaigns.Today, Velti is the leading mobile services platform operator in its geographicregion with presence in Greece, Turkey, Bulgaria, Romania, Cyprus, Armenia,Bosnia, the USA and UK. The mobile services market is rapidly evolving. Velti, by being at theintersection of operators, advertising agencies and media (content owners), isuniquely positioned to benefit from these evolving business models. From aninitial novelty niche market with expensive content aimed at early adopters, themarket is forecast to follow other media markets in becoming a massive, brandmarketing and advertising sponsored medium. Initial Public Offering The Company successfully completed its IPO on AIM in early May. The managementand employees retain a significant shareholding in the company and the IPO hasenabled the company to diversify its investor base by attracting a number ofgood quality UK institutional investors. The IPO successfully delivered its principal aims, making Velti awell-capitalised business and enabling it to complete two acquisitions duringthe past 8 months. The non-financial benefits of public company status haveincluded the ability to attract great talent (numbering now more than 180 people, including more than 110 technology staff) and exceptionally strong non-executive members of the Board. Acquisitions In the UK, Velti has launched its UK office and acquired the assets of DigitalRum, a leading and award winning mobile promotions provider. Since the year end,Velti has acquired M-Telecom, the leading independent mobile value addedservices and mobile marketing provider in Bulgaria with an estimated marketshare of approximately 40 per cent. Both acquisitions are profitable and areexpected to be earnings per share enhancing on a fully diluted basis. Strategy and Business Development Investment in our data centres and product development infrastructure has been amajor feature of the past two years, resulting in significant revenue growth in2006 and laying the foundation for continued growth in 2007. Over the next yearcapital expenditure is expected to reduce to less than 18 per cent of totalrevenue, significantly enhancing future free cash flow. As a result, we expectour business model to generate positive free cash flows in 2007. The Company's core strategy is to increase repeat business and revenuevisibility, to expand its presence in South East European markets and toposition itself in the UK and the US as a service provider aimed at deliveringmobile marketing and advertising solutions. We expect these markets to growsignificantly in the coming years. Carefully targeted acquisitions are expectedto contribute to this strategy for expansion. London and New York Offices Velti's experience in enabling the mobile channel for advertising agencies,media and enterprises is driving its increasing presence in the US and UKmarkets. The establishment and expansion of the London office and the opening ofa New York office are spearheading Velti's activities in the mobile marketingmarket in these countries where strong growth is expected in the next few years.These are primarily sales and business development offices with all theimplementation and the operation of the actual work run out of the company'scommon data centre in Greece. New Mobile Services Platforms In late 2006 Velti has launched its latest version of its mobile servicesplatform that enables both mobile marketing and advertising capabilities. Thisplatform leverages the newly developed innovative solutions for services thatare expected to become increasingly important over the next few years includingmobile user generated content, mobile communities, location based services,virtual world branded mobile solutions and proximity marketing. Further detailsare provided in the Operational Review below. Customers Repeat business from major mobile operators, advertising agencies and mediagroups has been an important contributor to revenue in 2006. Business from keycustomers, Vodafone Greece and TIM Hellas, increased while new key customersincluding Vodafone UK, Orange UK, Argos, Mothercare and Cosmote have been addedto the Company's portfolio. Velti currently services around 100 corporate customers (2005: 50 customers)while Velti's largest customer contributed in 2006 14 per cent to its revenues(2005: more than 25 per cent). Outlook In 2007 Velti will maintain its primary focus of providing mobile contentsolutions for mobile operators, advertising agencies and media groups. Thegeographical expansion in South Eastern Europe will focus mainly on Greece,Turkey, Romania and Bulgaria. The offices in London and New York are alsoexpected to be areas of growth for Velti in 2007 and to lead a more focused pushtowards mobile marketing and advertising. The Board sees excellent prospects for delivering a further year of very stronggrowth. David Mann Alexandros MoukasNon-Executive Chairman Chief Executive Officer OPERATIONAL REVIEW Key accomplishments in 2006 Expansion in existing clients In 2006, Velti has pushed forward on its mission to provide state of the artsolutions for mobile operator value added services platforms. The Company hasdeveloped mission critical systems for content management, multi-channel contentdelivery, multi-channel messaging delivery and these systems have been extendedwith new features added for established clients such as Vodafone and TIM. Mostof the third party media and content providers that provide on-portal servicesin these operators are doing so through Velti systems. New features have beenadded such as integration with mobile TV, ringback tones, advanced security andservice bundling capabilities and integration with search engines such as Googlemobile. Other existing Velti clients include smaller operators like Armentel andQ-Telecom. These operators have smaller capital expenditure budgets and Velti'sbusiness model has been adapted to provide full managed services on arevenue-share basis. These clients have also used Velti as a provider of brandenhancement and mobile marketing solutions with impressive results. We are building campaign cases where brand enhancement activities surpass aremarkable 11 per cent in subscriber-base participation and generate continuoususer participation and dialogue on average every three days. Such brandingactivities also result in additional prepay customer acquisition for theseoperators. Other major enterprise customers that generated significant business in 2006include CYTA (mobile operator in Cyprus), Intralot (top-three global supplier ofgaming and transaction processing systems), and major South Eastern Europeanbanks (National Bank of Greece, ATE Bank and Eurobank EFG).Expansion in new clients In 2006 Velti became a provider of choice for content management and operationfor Cosmote, an operator part of the OTE Group which has presence in seven SouthEastern European countries and more than 10 million subscribers. Integration ofVelti systems with the operator's new mobile service delivery platform isprogressing well. Through its subsidiary M-point, Velti has also made a strong push into locationbased services with navigation and traffic alert systems for Vodafone, TIM andCosmote. In addition, the Company was awarded a major contract for providingcross-operator traffic alert information. Velti was a key integrator in Turkcell's (Turkey's largest mobile operator)service delivery platform providing services for content rendering andadaptation for different devices.Significant business developments followed the acquisition of the assets ofDigital Rum, a leading and award winning mobile promotions provider in the UK.Following the acquisition, VeltidR, the UK subsidiary of the Company, signedcontracts with Orange UK, Vodafone UK, Argos and others. Velti is expanding thecapabilities of the London office in order to service its existing clients andto acquire new clients. Velti will be significantly increasing its presence in the mobile marketing andadvertising space primarily through its New York and London offices. The overallevolution of the company depends as much in the global developments in this areaas it does in regional development. Other key accomplishments In the area of product development, Velti has completed its Mobile Marketingplatform - a first of its kind worldwide to bring under the same umbrella,mobile 'above the line' activities (WAP banner ads, SMS advertising), 'below theline' activities (loyalty and branding programs, on pack promotions) andmultichannel media content delivery.The Company has achieved connectivity for provision of value added services forall the major Greek, Cypriot, Bulgarian, Armenian, UK and US operators, while connectivity with Turkish and Romanian operators is planned for second quarter of2007. Product Development Product development in 2006 has focused on two complementary activities. The first is the continuous expansion of the mobile services portfolio. In thisdirection, the Company has developed innovative solutions in services that aregoing to become increasingly important over the next few years including mobileuser generated content, mobile communities, location based services, virtualworld branded mobile solutions and proximity marketing. The second is the development of the next generation of the platform that makesthese services, and traditional mobile services, easily consumable andaddressable by large organisations. Velti's platform allows operators,advertising agencies and media groups to quickly launch, market and supportmobile services through advertising budgets. While the end result and businesspartner goals vary significantly, Velti's platform provides automated servicecreation, launch and delivery to bring launch timeframes for such services downto hours instead of weeks or months - which has been the norm in the industry. The platform provides integrated budget and goal planning, execution andmonitoring capabilities so each major player that partners with Velti can have afull solution and technology capability. The Mobile Market The last year has confirmed our views on the mobile value added market as afield that is far from saturation and will continue to experience strong growthin the future. The market in the region is also poised to grow faster because ofthe lower mobile penetration, which however is going to reach northern Europeanlevels in the next few years. The enablement of the mobile value added services channel for all thesecompanies remains a task that requires significant technology expertise andmanaged services capabilities. New capabilities, such as location basedservices, proximity marketing, user generated mobile video and media, are addedevery month within the world of mobile value added services. Velti is focusing on generating repeatable revenue from established andprofitable services while investing in new service and geographic expansion todrive future growth. The Company has managed to establish repeatable andincreasing streams of revenue growth from the provision of technology platformsand supporting managed services to operators thus achieving strong visibilityand profitability. Business Model Velti has the platforms, the operational capability and the staff to provideflexible solutions to its customers. Currently, mobile operators need to launchas many new services as possible with reduced capital investments andadvertising agencies have started exploring scalable ways of integrating themobile into their campaigns, Velti provides flexible alternatives to theplatform licensing model, by offering a complete outsourcing solution. Businessmodels where Velti provides managed services and is embedding itself in therevenue sharing chain are truly scalable and flexible. Mobile Services Platform The mobile future is going to be about the ability to deliver in hours a set ofactivities comprising a complete user experience - in addition to the automationof a commoditised activity (such as mobile banner ad management or WAP sitecreation). We continue to innovate in terms of new mobile services,infrastructure planning and management platforms needed for advertisingagencies, operators and media. Our platforms provide a full lifecycle management including planning, executionand monitoring. We have streamlined and automated more than 60 mobile marketingactivities from WAP site creation, banner ad management, on-pack promotiontemplates for FMCGs, to branding and loyalty solutions for mobile operatorclubs. We have added new activities such as proximity marketing, user generatedcontent and location based services, introducing them gradually to our mobileoperator and advertising agency partners. We believe that it is these kinds ofapplications that make the mobile different and useful, rather than consideringthe device a mini web browser with banner ads. Currently the state of mobile advertising has been limited to enabling mobilesearch and placement of WAP banner ads inventory across operator and third partyportals. This has led to a variety of marketplaces or one-off deployments atoperators with minimal traction and volume, disparate standards and capabilitiesand has added more complexity rather than ability to drive volumes. Velti's platform enables 'above the line' activities in a way that can addressall the existing operator portal and third party mobile advertising marketplacesmaking them suitable for an ad agency to drive volume easily and transparently.'Below the line' activities are also important as they provide differentialmarketing capabilities to ad agencies that go beyond commoditised, low marginbanner ad buying. FINANCIAL REVIEW In the financial year ended 31 December 2006 revenue reached €10.8 million,posting an increase of 122 per cent compared with 2005 (€4.9 million). Theincrease in revenue was fuelled by organic growth in both the Telco andnon-Telco segments which in turn was pinpointed by repeat business with existingclients and by an expanding client base. Operating expenses excluding depreciation, amortisation and the cost of shareawards (€0.07 million) were €6.44 million representing an increase of 117 percent compared with 2005 (€3.0 million) in support of the increase in revenue.Depreciation and amortisation reached an amount of €1.3 million (€0.5 million in2005) reflecting the significant product development and infrastructure projectsundertaken both in 2005 and 2006. Operating profit increased by 119 per cent to€3.0 million (€1.4 million in 2005) which despite the increase of 141 per centin the depreciation and amortisation charge, delivered an operating margin of 28per cent, on a par with 2005. The net interest charge for the year was €0.2 million, a decrease of €0.1million reflecting the strengthening of the net cash position to €4.0 million(net debt of €1.9 million in 2005). Profit before tax for 2006 was €2.7 million representing an increase of 152 percent over 2005 (€1.1 million). The taxation charge for the year, inclusive of adeferred tax expense of (€0.5 million) was €0.6 million (€0.4 million in 2005)(calculated at an effective tax rate of 22 per cent (33 per cent in 2005). Basicearnings per share were €0.087 (€0.038 in 2005). The balance sheet at 31 December 2006 was substantially strengthened as a resultof raising €12.5 million net, by floating on AIM in May 2006. The funds raisedfrom the IPO were used during the year to repay €2.6 million of high coupondebt, to fund increased working capital requirements that resulted from therobust growth in revenue and to finance the product development efforts and theinvestment in Group's infrastructure. Total assets were €22.1 million at 31 December 2006 (2005: €8.0 million). Of thetotal assets, €7.2 million were held in non-current assets, €9.0 million wereheld in trade debtors and prepayments and €5.9 million were cash and cashequivalents. Equity increased by €15.3 million to €16.3 million and totalliabilities decreased by €1.3 million to €5.8 million. Consistent with our strategy, as stated during our IPO, in 2006, significanteffort and capital were committed mainly to the development of the common datacentre and of the mobile marketing platform. Out of total capital expenditureincurred in the year, approximately €1.3 million were spent in development ofthe next versions of the mobile services platforms that have been released andare already live at customers, €2 million were spent in software licences andoutsourced products for the data centre and €0.8 were spent in data centreequipment. The company has brought forward capital expenditure earmarked for2007 into 2006, to accelerate the implementation of its data centre investmentplan in order to facilitate the increased needs of its customers. Capitalexpenditure in 2007 will be less than originally projected, and no more than 18per cent of revenues. Accounts receivable and prepayments increased by €6.3 million primarily becauseof four large, long-term mobile development projects, worth €4.2 million, whosepayment terms are based either on key milestones of delivery or completion.Payment for €3.2 million of these projects is expected in 2007 and the balancein 2008. The company expects an improvement in 2007 receivables and thereforeworking capital because of a higher contribution of mobile services as opposedto mobile integration projects in its revenue mix. Net cash outflow from operations was €0.7 million while free cash outflow fromoperations was €6.6 million reflecting the significant investments in productdevelopment and infrastructure. At 31 December 2006, net cash was €4.0 millioncompared to a net debt position of €1.9 million at 31 December 2005. We expectthe company to generate positive free cash flows in 2007. CONSOLIDATED INCOME STATEMENT Note Year ended 31 Year ended 31 December 2006 December 2005 •'000 •'000 Revenue 10,816 4,884Cost of revenue (3,907) (1,892) Gross profit 6,909 2,992 Other income 25 - Selling expenses (1,974) (537) Administrative expenses (1,947) (1,077) Other expenses (4) (7) Operating profit 3,009 1,371 Finance expense, net (169) (282)Share of loss of associates (108) (6) Profit before tax 2,732 1,083Tax (603) (356)Profit after tax 2,129 727 Minority interest 117 - Profit after minority 2,246 727interest Basic earnings per share 4 8.7 3.8(in Eurocents):Fully diluted earnings per 4 8.5 3.8share (in Eurocents): CONSOLIDATED BALANCE SHEET Note 31 December 31 December 2006 2005 •' 000 •' 000ASSETSNon -current assetsProperty, plant and equipment 1,342 307Intangible assets 4,841 1,773Investment in associates 448 1Goodwill 599 -Deferred tax assets - 228 7,230 2,309Current assetsReceivables and prepayments 8,968 3,231Available for sale investment 27 26Cash and cash equivalents 5,867 2,467 14,862 5,724Total assets 22,092 8,033 EQUITYShare capital 2,125 1,375Share premium account 11,613 -Share based payment reserve 66 -Merger reserve 1,071 1,071Accumulated profit / (losses) 741 (1,481)Total shareholders' equity 15,616 965Minority interest 663 -Total equity 16,279 965 LIABILITIESNon-current liabilitiesBorrowings 3 750 2,431Retirement benefit obligations 102 64Deferred tax liability 229 - 1,081 2,495Current liabilitiesTrade and other payables 3,565 1,921Deferred Income - 666Current income tax liabilities 86 40Borrowings 3 1,081 1,946 4,732 4,573Total liabilities 5,813 7,068Total equity and liabilities 22,092 8,033 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share based Share Share payment Minority Merger Retained Capital Premium reserve Interests Reserve Earnings Total •'000 •'000 •'000 •'000 •'000 •'000 •'000 Balance at 1,238 - - 1,025 (2,122) 14131 December 2004Share options exercised 137 - - - 85 - 222Transfer to - - - (39) 39 -retained earningsDeferred tax adjustment - - - - - 18 18Share issue expenses - - - - - (143) (143)Net profit for the year - - - - - 727 727Balance at 1,375 - - - 1,071 (1,481) 96531 December 2005Minority interest - - - 780 - - 780Deferred tax adjustment (24) (24)Share capital increase 750 11,771 - - - - 12,521Share based payment - - 66 - - - 66reserveShare issue expenses - (158) - - - (158)Net profit for the year - - - (117) - 2,246 2,129Balance at 2,125 11,613 66 663 1,071 741 16,27931 December 2006 CONSOLIDATED CASH FLOW STATEMENT Note Year ended Year ended 31 December 31 December 2006 2005 •'000 •'000Cash flows from operating activitiesCash generated from operations 7 (713) 899Interest paid (348) (243)Tax paid (178) (255) Net cash (used in)/generated from operatingactivities (1,239) 401 Cash flows from investing activitiesPurchase of property, plant and equipment (1,181) (230)Purchase of intangible assets (3,747) (1,987)Purchase of non available-for sale (556) -investmentsDisposal of available-for sale investments - 31Interest received 148 6Government grants received - 1,250 Net cash used in investing activities (5,336) (930) Cash flows from financing activitiesNet proceeds from issue of ordinary shares 12,521 222Long-term borrowings (1,681) -Borrowings (865) 2,675Finance lease payments - (15) Net cash from financing activities 9,975 2,882 Increase in cash and cash equivalents 3,400 2,353Movement in cash and cash equivalentsAt beginning of year 2,467 114Increase 3,400 2,353At end of year 5,867 2,467 Notes The financial information in this announcement does not constitute statutoryaccounts as defined in section 240 of the Companies Act 1985. Financialinformation for the previous financial year ended 31 December 2005 has beenderived from the financial statements of Velti SA. The auditors have indicatedthat they intend to give an unqualified report, and will not contain anystatement under section 237(2) or (3) of the Companies Act 1985, on thestatutory financial statements for the year ended 31 December 2006. Copies ofthe Company's report and financial statements will be sent to shareholdersshortly and will be available at the registered office of the company: 110Cannon Street, London, EC4N 6AR, United Kingdom 1. General information Velti plc was incorporated 2 September 2005 (as Brightmanner plc) in the UnitedKingdom under the Companies Act 1985. Velti plc had not traded in the period to31 December 2005. On 9 March 2006, the company changed name from Brightmannerplc to Velti plc. The nature of the Group's operations and its main activitiesare described in the Chairman and Chief Executive's report. 2. Group reorganisation Prior to 20 April 2006, Velti SA was the parent Company of the Group. On 20April 2006, pursuant to a group reorganisation in preparation for a proposedInitial Public Offering , 19,019,335 shares of 5 pence each were issued by theCompany (being Velti plc) and were allotted and issued, all credited as fullypaid, to the shareholders of Velti SA in consideration for the entire issuedshare capital of Velti SA. The Company thereby became the holding company of theGroup. The Group resulting from the group reorganisation is regarded as a continuingentity. Accordingly, the consolidated financial information for the year ended31 December 2006, together with the comparative figures, has been prepared as ifthe current Group structure had been in existence throughout the years presentedby using the principles of merger accounting. On 26 April 2006, the Company adopted the Velti plc Share Incentive Plan, whichwill provide share based incentives to employees. This will not exceed 10 percent of the Company's ordinary share capital, over three years. On 3 May 2006, 10,000,000 ordinary shares of 5 pence were allotted at a premiumof 95 pence per share, pursuant to the initial Public Offering. 3. Borrowings 31 December 2006 31 December 2005 •'000 •'000CurrentCurrent portion of long-term debt(within 1 year) 750 427Short-term loans 1,081 1,519 1,831 1,946Non - currentLong-term portion of long-term debt - 1,286Long-term loans - 1,145 - 2,431Total borrowings 1,831 4,377 The current portion of long term debt will be repaid in 2007 in 3 instalments:a) €150,000 on 31 January 2007, €300,000 on 30 April 2007 and c) €300,000 on 30September 2007. 4. Earnings per share 31 December 2006 31 December 2005 •'000 •'000Profit attributable to equity holders ofthe Company 2,246 727Weighted average number of ordinaryshares in issue 25,721,472 19,091,335Basic earnings per share (• per share) 0.087 0.038Fully diluted earnings per share (• pershare) 0.085 0.038 The potentially dilutive instruments on issue are 810,000 shares. 5. Share capital The Company's issued share capital consists of 29,091,335 ordinary shares of 5pence each. The ordinary shares confer voting rights as well as the right to thecompany's assets upon liquidation. Prior to 20 April 2006, Velti SA was the parent company of the Group. On 20April 2006, pursuant to a group reorganisation in preparation for the proposedInitial Public Offering, 19,019,335 shares of 5 pence each were issued by theCompany (being Velti plc) and were allotted and issued, all credited as fullypaid, to the shareholders of Velti SA in consideration for the entire issuedshare capital of Velti SA. The Company thereby became the holding company of theGroup. Deferred shares award plan The Group adopted a share incentive plan on 26 April 2006. Under this Plan, anyemployed director or any employee of the Group is eligible to receive awardsunder the plan. The Deferred Shares Award (DSA) entitles the participant toacquire shares when the DSA vests by paying an amount of no less than thenominal value per share. The vesting period is 2 years. Deferred shares areforfeited if the participant leaves the Group before the DSA vests. The awards outstanding at 31 December 2006 had a weighted average exercise priceof €0,07, and a weighted average remaining contractual life of 18 months. Awardswere granted on 12 September 2006 and on 8 November 2006. The aggregate of theestimated fair values of the awards granted on those dates is €450,000. In the year ended 31 December 2006 the Group recognised total expense of €66,000in respect of awards granted in the year. 6. Subsidiaries Velti plc owns 100 per cent of the share capital of Velti SA and 100 per cent ofthe share capital of Velti DR Limited. Velti SA owns 79.51 per cent of VeltiNorth America Inc (formally Retaine Inc) and 99.99 per cent of the share capitalof Velti Center for Innovation SA ("VCI"). In turn, VCI has a 50 per centholding in M-Point SA and a 45 per cent holding in N Squared SA which areconsolidated on the basis of majority control of the Board of Directors of thosecompanies. Subsidiaries are consolidated from the date on which control is transferred tothe Group. They are de-consolidated from the date that control ceases. 7. Cash (used in) / generated from operations Year ended Year ended 31 December 31 December 2006 2005 •'000 •'000 Net profit 2,129 727Adjustments for:Tax expense 603 356Interest income (148) (6)Interest expense 348 290Depreciation 151 69Amortisation of intangible assets 1,153 473Recognition of grants (666) (584)Post-retirement benefits - 28Share of loss of asscociates 108 6Non cash expenses 347Fair value gain on available-for-sale investment - (2) 4,025 1,357 Changes in working capital:Receivables and prepayments (6,274) (648)Trade and other payables 1,497 195Pensions and other post-retirement obligations 39 (5) (4,738) (458) Cash (used in) / generated from operations (713) 899 8. Post balance sheet event On 22 March 2007, the Company acquired the entire share capital of Rekanak Ltd,the sole shareholder of M-Telecom OOD ("M-Telecom"), a leading mobile valueadded services provider in Bulgaria. The total consideration shall range between€1,010,000 and €2,560,000 depending on M-Telecom achieving certain profitabilitytargets for 2007 and 2008. The consideration will be satisfied a) partially incash at acquisition date, by a payment of €480,000, and b) the remaining in cashor Velti shares (at the Company's discretion) in two instalments, payable at 30April 2008 and at 30 May 2009. This information is provided by RNS The company news service from the London Stock Exchange