VITA.L Regulatory News (VITA)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014

14 May 2019

Cellcast plc

("Cellcast", the "group" or the "Company")

Final Results

Key points

· Group operating revenues of £11.3 million (2017: £12.0 million), comprising:

o core interactive broadcast revenue of £10.9 million (2017: £11.3 million); and

o technical services and consulting to overseas gaming and lottery operators of £395,000 (2017: £660,000)

· Cost of sales were £11.0 million (2017: £11.2 million)

· Gross profit of £0.3 million (2017: £0.8 million)

· Loss for the year was £250,000 (2017: loss of £645,000 which included, inter alia, the Lexinta impairment)

· Net cash balance at 31 December 2018 of £0.7 million (31 December 2017: £1.1 million)

· Loss per share of 0.3p (2017: loss per share of 0.8p)

· Board is undertaking a review as to the prospects for the group going forward

Mike Neville, Chairman of Cellcast, commented:

"We continued to see the gradual decline in the core interactive broadcast business that we have witnessed for the past few years. This has continued in 2019 year to date. In addition, due to the adverse effect of a new taxation rate for the group's clients in Kenya, we also saw reduced fees for our technical and consultancy services to overseas gaming and lottery operators."

"There has therefore been increased focus by the Directors on the long-term viability of the economic model that the group utilises which has prompted the Directors to undertake a review as to the prospects for the group going forward. The Board is currently exploring all options available to the group."

For further information:

Chairman's statement

Cellcast plc (the "group") continued to experience difficult trading conditions in 2018. This is a pattern that has existed over the last several years, with revenues in the core interactive broadcast business continuing to decline and margins being eroded, resulting in continuing losses to the bottom line and a decline in the Company's cash position.

The sectors for the group's core services are being gradually discontinued and, despite a clear focus by the Board on cost savings and related diversification, these are yet to have a material impact on the group. The Board has looked for suitable partners in order to expand and diversify, however, despite numerous attempts, these have not been forthcoming.

As reported in our trading update in November 2018, the latter half of 2018 was particularly difficult, and this has continued into 2019. There has therefore been increased focus by the Directors on the long term viability of the economic model that the group utilises which has prompted the Directors to undertake a review as to the prospects for the group going forward. The Board is currently exploring all options available to the group.

As part of this review, the carrying value of the company's investment in its 100% owned subsidiary undertaking; Cellcast UK Limited, through which the trade of the group is carried out, was undertaken in the year. As a result, an impairment loss of £461,000 (2017: £nil) was recognised in the company to reduce the carrying value of the investment to its expected recoverable amount of £750,000 and an impairment loss of £2,949,000 was recognised against amounts due from Cellcast UK Limited- refer to notes 13 and 16 for further detail. The recoverable amounts were assessed based on the market capitalisation of the group at 31 December 2018.

Mike Neville

Non-Executive Chairman

Chief Executive's statement

The second half of 2018 has proven more challenging than the second half of 2017 for both the core UK business and the East African consultancy service and this has continued into the first quarter of 2019. The consultancy services continue to be impacted by increased taxation and increased regulation of the gaming sector in East Africa.

The group has undertaken a full review of the UK business and the resources allocated to international businesses to see where savings can be made. In the UK, the first of these initiatives has been to make savings in operation and production costs.

2018 Results

Cellcast plc's (the "group's") total operating revenues amounted to £11.3 million in 2018, compared to £12.0 million in 2017, a decrease of 6%.

The group's interactive broadcasting activities in the UK generated £10.9 million of revenue (2017: £11.3 million), which represents a decrease of 4%.

The group's income from the provision of management services and consultancy to overseas gaming and lottery operators generated £395,000 of revenue (2017: £660,000), a decrease of 40%. This reduction is due to the adverse effect of a new taxation rate on the business of the group's clients in Kenya. This resulted in the bonus payments due to the group for 2018 of £265,000, forming part of the service remuneration, not being realised. The group is working to collect monies due to it from its clients in Kenya and expects to receive most of these monies in 2019, although the directors estimate that £293,000 will be recovered more than a year after 31 December 2018.

Cost of sales were down 2% on the previous year. In 2018, they amounted to £11.0 million, compared to £11.2 million in 2017. The group's gross profit amounted to £0.3 million in 2018 compared to £0.8 million in 2017. This decrease is mainly due to the loss of the bonus forming part of the overseas consultancy services.

General and administrative costs decreased by 13%, from £565,000 in 2017 to £489,000 in 2018. These costs exclude the foreign exchange loss of £26,000 in 2018 (2017: loss of £30,000). Approximately 53% of these costs were personnel costs (2017: 58%). Amortisation and depreciation expenses for 2018 were £80,000, a £13,000 decrease on those of 2017 (£93,000).

After taking into account the net interest and tax the total loss for 2018 was £250,000 (2017: loss of £647,000). 2018 earnings per share was negative 0.3p (2017: negative earnings per share of 0.8p). The Strategic report, set out on pages 4 and 5 of this Annual Report and Accounts, gives a more extensive description of the group's operations during the year and technological developments.

The group's total assets have reduced from £3,317,000 at 31 December 2017 to £2,517,000 at 31 December 2018.

The company only result for the year is affected by an impairment loss of £461,000 (2017: £nil) recognised against the carrying value of the company's investment in its 100% subsidiary undertaking; Cellcast UK Limited - refer to note 13 for further detail. A further impairment loss of £2,949,000 has been recognised against amounts due from Cellcast UK Limited - refer to note 16 for further detail. These impairment losses have led to a reduction in the total assets of the company from £4,160,000 at 31 December 2017 to £750,000 at 31 December 2018.

Funding

At 31 December 2018, the group had a net cash balance of £0.7 million (2017: £1.1 million). The decrease was mainly due to the losses incurred during the year. The total assets at 31 December 2018 amounted to £2.5 million, a decrease of £0.8m on the previous year.

Outlook

Unfortunately trading in the first quarter of 2019 has continued the pattern of the second half of 2018 and the group hasn't yet seen an upturn since the trading update announced on 27 November 2018.

With respect to the East African consultancy services, the group is looking to diversify away from gaming activities to support other transactional applications that are not subject to the tax and other regulatory restrictions that have damaged the sector over the last 18 months.

In the core UK business the group has undertaken a further review of the staffing costs and made some adjustments in light of the reduced trading. The decline in revenue is driven by the decline in mobile traffic generated by the core TV business which is impacted by global changes in viewing habits. However, the decline in TV driven revenues has been partially offset by continued growth in our online business. Online revenues grew by 15% in 2018 to £4.5m from £3.9m in 2017. The group is in the process of further optimising its online properties to improve its performance further. This potential is impacted by uncertainty regarding the implementation of the Government's online content verification programmes.

As noted in greater detail in the Chairman's statement on page 1, in light of the decline in the business and its prospects for the future, the Board is currently exploring all options available to the Company and its subsidiary, Cellcast UK Ltd.

Craig Gardiner

Chief Executive Officer

Strategic report

Review of business

The group's main core activity from which it derives the majority of its revenue continues in the production and distribution of participatory television formats across multiple digital platforms in the United Kingdom. However, revenues from online and mobile interaction have increased and now provide a significant income stream. These income streams combined are referred to as 'interactive broadcasting'. Additionally, the group has used its expertise in developing mobile applications and services to provide consultancy services specifically in relation to the use of mobile money. This consultancy income is mainly derived from East Africa which leads the world in the penetration of mobile money.

Further details on the financial performance of the company and group during the year, and of the financial position of the company and group at the reporting date, is given in the Chairman's statement on page 1 and the Chief Executive's statement on pages 2 and 3.

Update on technology

2018 saw an increase in Web revenues as the trend of customers moving away from TV and onto Online platforms continued. The Technology Division focused on improving Web related revenues by developing a number of new products to complement and expand upon the Broadcast offerings. The team continued to develop and utilise our Business Intelligence (BI) and Reporting systems to analyse costs, revenue and profit on all products and make improvements across the board. The Technology Division also continued to build the Technical Services platforms and focused on some key areas: Direct Mobile Operator Integrations, Mobile Payment Solutions across multiple markets and App Development. The team now have a strong platform to allow the group, and partners, to launch products and services in multiple markets quickly and cost efficiently which the group hopes to utilise beyond its existing business partnerships going into 2019 and beyond.

Key Performance Indicators

The directors continue to monitor the performance of the business through various key performance indicators ("KPIs"), of which the principal ones are broadcast revenue, consultancy services revenue, and overall group profitability. These KPIs continue to be monitored along with the compliance record with broadcasting regulations, where there have been no material breaches in the year.

The KPIs show a 4% decline in broadcast revenue and a 40% decrease in revenues generated by its consultancy services, both of which are consistent with previous comments relating to the difficulties experienced by the group in the course of the year.

This decline in revenues has had a direct impact at the operating level, incurring losses of £301,000 in 2018 compared to a profit of £131,000 in 2017.

The group has been working on reducing its costs to compensate for the decline in revenue.

Consolidated statement of comprehensive income

For the year ended 31 December 2018

Consolidated statement of financial position

As at 31 December 2018

Company statement of financial position

As at 31 December 2018

The company's loss and total comprehensive income for the year was £3,410,359 (2017: £nil).

Consolidated statement of changes in equity

For the year ended 31 December 2018

Company statement of changes in equity

For the year ended 31 December 2018

Cellcast plc has not presented its own income statement as permitted by Section 408 of the Companies Act 2006

Consolidated statement of cash flows

For the year ended 31 December 2018

No separate company statement of cash flows is presented as the company holds no cash at 31 December 2018 (2017: £nil).

Notes to the consolidated financial statements

The figures for the years ended 31 December 2018 and 2017 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The figures for the year ended 31 December 2018 have been extracted from the statutory accounts for that year, on which the auditor has issued an unqualified audit report, which have yet to be delivered to the Registrar of Companies. The figures for the year ended 31 December 2017 have been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report. No reference was made to any matter to which the auditor drew attention by way of emphasis and no statement has been made by the auditor under Section 498(2) or (3) of the Companies Act 2006 in respect of either of these sets of accounts. This announcement was approved by the board of directors and authorised for issue on 14 May 2019.

The consolidated and company financial statements for the years ended 31 December 2018 and 2017 have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ('IASB') and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together 'IFRS') as endorsed by the European Union. The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 December 2018 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards ('IFRS').

Accounting policies

The consolidated and company financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value, and in accordance with EU adopted IFRS.

Monetary amounts in these financial statements are rounded to the nearest whole £1, except where otherwise indicated.

Adoption of new and revised standards and interpretations

For the preparation of these financial statements, the following new or amended standards are mandatory for the first time for the financial year beginning 1 January 2018.

· IFRS 9 Financial instruments (effective 1 January 2018)

· IFRS 15 Revenue from contracts with customers (effective 1 January 2018)

· Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions (effective 1 January 2018)

· IFRIC 22 Foreign currency transactions and advance consideration (effective 1 January 2018)

IFRS 9

IFRS 9 'Financial instruments' replaces IAS 39 'Financial Instruments: Recognition and measurement', the adoption of IFRS 9 changes the group's accounting policy for un-quoted equity investments. The group's un-quoted equity investment was previously accounted for at cost less impairment, rather than fair value, using a specific exemption available under IAS 39. Under IFRS 9 there is no such exemption and the investment is required to be measured at fair value. In accordance with IFRS 9, the difference between the IAS 39 carrying value of this investment at the date of initial application of IFRS 9 (1 January 2018) and its fair value under IFRS 9 at that date has been recognised in opening retained earnings in the current year. The group's financial assets (previously classified as loans and receivables) and financial liabilities arising from normal operations, such as trade receivables, amounts owed by group undertakings, trade payables and accruals, continue to be recognised under the amortised cost model and there was no adjustment to amounts previously recognised, on transition to IFRS 9.

IFRS 15

IFRS 15 'Revenue from contracts with customers' replaces IAS 18 'Revenue'. The directors have considered the impact of implementing IFRS 15 and considered the performance obligations in the group's contracts with customers and the basis on which the revenue from those performance obligations should be recognised ('at a point in time' or 'over time'). The resulting accounting policy under IFRS 15 (refer to 'Revenue recognition' accounting policy) does not lead to any adjustment to amounts previously recognised for revenue under IAS 18.

Amendments to IFRS 2 and IFRIC 22

The implementation of the amendments to IFRS 2 and IFRIC 22 above did not result in any adjustments to amounts previously recognised.

Standards issued but not yet effective

The following standards, amendments and interpretations to existing standards have been published but are not effective and have not been early adopted by the group or the company.

· IFRIC 23 Uncertainty over income tax treatments (effective 1 January 2019)

· Annual improvements 2015-2017 cycle

· Amendments to IFRS 9: Prepayment features with Negative Compensation

It is not anticipated that the adoption of the above standards, amendments and interpretations of existing standards will have a material impact on the group or company financial statements in the period of initial application. IFRS 16- 'Leases' is also effective for periods commencing 1 January 2019 and will result in almost all leases being recognised on the statement of financial position by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. This is not expected to have any impact because the group doesn't currently hold any leases.

Going concern

During the year ended 31 December 2018, the group recorded a loss of £250,405. The group had net cash of £698,179 as at 31 December 2018 and it had net current assets of £849,655. 

The directors have carefully considered whether or not it is appropriate to adopt the going concern basis in preparing the 2018 financial statements. The directors have reviewed the group's detailed cash forecast to ensure that the group's current working capital and credit facilities in place are sufficient for the foreseeable future. This assessment is based upon forecasts following the reduction in the revenue of the UK television business together with the continued reduction in operational costs implemented over the year; it also assumes the maintenance of existing relationships with key suppliers. During the prior year, the group made a 100% provision for the funds invested in Lexinta. The failure to recover these has no impact on the day to day business of the group and company, which has sufficient funds for its normal operations.

After making enquiries, the directors have concluded that the group and company have adequate resources to continue trading for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the group and company financial statements.

Revenue recognition

Revenue is recognised at an amount that reflects the consideration to which the group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

The group generates revenue in relation to broadcast related income and the provision of management and consultancy services which is measured at the fair value of the consideration received or receivable net of discounts, VAT and other sales related taxes.

Revenue from broadcast related revenue arises from customers interacting with the group's television shows, the revenue is recognised immediately as the service is provided at the time of the call or SMS/ online interaction.

Revenue generated from the provision of management and consultancy services is recognised on a straight-line basis over the period during which the services are provided.

Accounting judgements and key sources of estimation uncertainty

The directors consider the critical accounting judgements and key sources of estimation uncertainty used in the financial statements and concluded that the main areas are:

· Classification of investments. Management have considered whether the group has significant influence or control in classifying its investments. Details of these judgements are provided in notes 12 and 14.

· The group's equity investment in 2Giraffes LLP (see note 12) is measured at fair value, management have applied judgement in determining that the most appropriate basis for measuring fair value is by using the group's percentage share of net asset value of the investee. Net asset value is considered the most appropriate basis due to the investee's underlying trading performance and perceived value held within the website domain owned by the investee. This fair value basis represents a level 3 valuation methodology in the IFRS 13 hierarchy whereby inputs other than quoted prices that are observable for the asset and observable inputs for the asset have been used.

· Certain of the group's trade receivables due from its Kenyan management and consultancy services' clients are expected to be recovered in more than one year from the reporting date. Management have exercised judgement in estimating this amount at £293,228 based on the current expected payment profile of amounts due. Management have also exercised judgement in determining the full receivable due from these services of £493,228 to be fully recoverable and thus have not recognised any provision for impairment against this receivable. This judgement is based on the on-going relationship with the customer and payment plan in place.

· Management have exercised judgement in determining the recoverable amount of the company's interests in its 100% owned subsidiary undertaking; Cellcast UK Limited. The company's total interests comprising of a fixed asset investment and a group receivable has been calculated using the market capitalisation of the company based on its share price at the reporting date. Management believe this is appropriate because the entire trade of the group is carried out through Cellcast UK Limited. The expected recoverable amount is £750,000 and the company has applied the impairment first to the group receivable (see note 16) with the excess recognised against its investment (see note 13).

These judgements are based on historical experience and various other assumptions that management and the board of directors believe are reasonable under the circumstances and are discussed in more detail in the relevant notes. The group also makes estimates and judgements concerning the future and the resulting estimate may, by definition, vary from the related actual results.

1. Segmental reporting

The group's interactive broadcasting revenues are almost entirely from broadcasting related activities on Sky, Freeview and Freesat channels as well as on webcams and mobile.

The financial information is presented to the executive management team who are responsible for making financial decisions, as one operating unit which operates in one geographical unit. The executive management team make their decisions based upon this information. The executive management team comprises the chief executive officer and the chief financial officer. All non-current assets are in the UK.

The group has three significant telecom aggregators, generating 67% of the group's broadcasting related revenue. The three telecom aggregators contribute £3,449,806, £2,002,032 and £1,829,474 of the group's total revenue (2017: 66% representing £4,239,574, £1,655,082, and £1,577,385).

Revenue is further split below between revenue generated by:

An analysis of the geographical location of the group's revenue is as follows:

Revenue relates to broadcast related income and the provision of management and consultancy services (refer to revenue recognition accounting policy). The broadcast related income arises from customers interacting with the group's television shows, the cash is received at, or shortly after, the point when the service is provided at the time of the call or SMS/ online interaction. Fees for the provision of management and consultancy services are billed monthly on a straight-line basis over the period during which the services are provided. The timing of the satisfaction of the groups' performance obligations is therefore in line with the typical timing of invoicing and payment from customers. As a result, the only balances recognised in respect of the application of IFRS 15 to the group's contracts with customers, as at 31 December 2017 and as at 31 December 2018 were trade receivables and accrued income. There were no impairment provisions or impairment losses recognised on these debtor balances in the current or prior year. As there are no differences in how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors within each of the above revenue streams, no further disaggregation applies.

2. Staff costs

Staff costs of £283,291 (2017: £328,996) are included in general and administrative expenses and £768,458 (2017: £778,792) are included in cost of sales. The parent company staff costs were £nil (2017: £nil).

Average monthly number of employees by activity (including directors):

All employees are employed by the subsidiary.

2. Staff costs (continued)

Key management personnel comprise the statutory directors.

3. Directors' emoluments

In addition to the amounts above, £11,500 was paid to Andrew Wilson during the year in respect of his termination package.

See Note 21 for details of share options granted to the directors.

4. Loss before tax

5. Fair value gains and losses

6. Impairment losses - Group

The impairment loss shown separately on the face of the statement of comprehensive arose in the prior year from a 100% provision against the following assets:

In its prior year interim results to 30 June 2017, announced on 25 September 2017, the group stated it had elected to redeem its investments in the Lexinta Fund. This followed the decision of the fund manager of the Lexinta Fund to liquidate the fund's entire portfolio.

After these interim results were published, the group had not received the balances due at the reporting date and, in light of the ongoing investigation by the Swiss authorities into Lexinta AG (the manager of the Lexinta fund) and Mr Bismark Badilla (the individual fund manager), the Board of Cellcast concluded that it was appropriate to make a provision for 100% of the company's interest in the Lexinta fund in the prior year.

These investments comprised a current asset investment held directly and the group's interest in Global Gaming Limited, a company whose sole activity was to invest in the Lexinta fund. Therefore, in the prior year, an impairment charge of £309,973 was recognised in respect of Other Receivables, being the cash due from the redemption of the investment held directly, £369,427 in respect of amounts due from Global Gaming Limited and £74,958 in respect of the carrying value of the group's investment interest in Global Gaming Limited.

These investments and receivables continue to be provided for in full at 31 December 2018.

7. Finance costs

8. Taxation

At the reporting date, the group had estimated tax trading losses of £1.9 million (2017: £1.5 million) which subject to the agreement of the HM Revenue & Customs and overseas tax authorities, are available to carry forward against future profits of the same trade. No deferred tax asset has been recognised on these losses as timings of future profits are uncertain.

A reduction in the UK corporation tax rate from 20% to 19% and subsequently to 17% was substantively enacted in September 2016 and will take effect from 1 April 2017 and 1 April 2020 respectively.

9. Earnings per share

The calculations of basic and diluted earnings per ordinary share are based on the following results:

There was no dilutive effect from the issued share options because the exercise prices are above market price. The number of share options outstanding at the year-end was 1,050,000 (2017: 2,650,000).

Included within Licences is an individual channel licence with a carrying value of £78,000 (2017: £91,000). The asset will be fully amortised in 6 years (2017: 7 years).

11. Property, plant and equipment

12. Non-current investments - Group

At 31 December 2018, the group had a 35% holding in 2Giraffes LLP. 2Giraffes LLP is a global provider of mobile internet content. This holding is treated as an investment as the group does not have any significant influence on the operations of 2Giraffes LLP.

The un-quoted equity investment held in 2Giraffes LLP is measured at fair value. Fair value has been calculated based on the group's percentage share of the net asset value of the investee. This represents a level 3 valuation in the IFRS 13 hierarchy whereby inputs other than quoted prices that are observable for the asset and observable inputs for the asset have been used.

The directors do not consider that 'significant influence' is exercised by the company over the LLP and therefore, despite the holding of 35%, the investment is not accounted for as an associate undertaking. This is on the basis that a sole member has the remaining 65% holding and the company does not have voting rights.

This investment was previously recognised at cost in accordance with IAS 39 and £88,813 was the IAS 39 carrying value, rather than fair value, as at 31 December 2017. In accordance with the transitional provisions in IFRS 9, the difference between this carrying value and the fair value of £60,634 under IFRS 9 at the date of initial application (1 January 2018) has been recognised in opening retained earnings in the current year. This opening adjustment is shown above as 'aggregate adjustment on adoption of IFRS 9' in the table above.

13. Non-current investments - Company

At 31 December 2018 Cellcast plc directly owned 100% of the issued ordinary share capital in Cellcast UK Limited, a company incorporated in the UK whose principal business was television and broadcasting. The registered office of Cellcast UK Limited is 184 The Terrace, The Dell, Southampton, England, SO15 2BU and the principal place of business is Unit 22, Cochran Close, Crownhill Industrial Estate, Milton Keynes, MK8 0AJ.

During the year, an impairment loss of £461,281 (2017: £nil) was recognised in the company in respect of the shares held in Cellcast UK Limited to reduce the carrying value of the investment to its expected recoverable amount of £750,000.

The impairment review was triggered following a particularly difficult trading period as reported in the group's half yearly November 2018 trading update which has continued in the latter half of 2018 and in to 2019. The accounting judgements and key sources of estimation uncertainty note in accounting policies explains the basis on which the recoverable amount was calculated. This represents a level 1 valuation in the IFRS 13 hierarchy whereby quoted prices that are observable for the asset have been used.

14. Associate

On 26 November 2015 the group acquired 49% of the issued share capital of Global Gaming Limited for a total cost of £4. The directors have assessed that the group has significant influence, but not control over Global Gaming Limited and have accounted for the investment as an associate. Details of the associate undertaking and the movements in the investment in the year are as follows:

In the prior year, at the reporting date the directors considered the group's interest in the associate to be irrecoverable. Therefore, an impairment was recognised in the prior year (see note 6). At the reporting date, the directors continue to consider the group's interest in the associate to be irrecoverable.

At the reporting date, the carrying value of the amount due from the associate stood at £nil (2017: £nil).

15. Current asset investments

In May 2015, the group invested US$ 260,000 (£165,000) in a treasury product managed by the Lexinta Fund. This investment was classified in current assets as the capital and interest generated could only be withdrawn on a yearly basis at the anniversary date of the investment. In the prior year, the group redeemed the investment and re-classified the disposal proceeds due from the Lexinta fund to other receivables, subsequent to this the amount due was provided for in full (refer to note 6 for further details).

In September 2016, the group invested US$ 250,000 (£168,350) in the 'Ventury Fund Inc'. This investment was classified in current assets as the capital and interest generated could only be withdrawn on a yearly basis at the anniversary date of the investment. In the prior year, the group redeemed the investment for £197,103.

16. Trade and other receivables

Following a review of the amounts due by the group undertaking, the directors have considered the projected performance of Cellcast UK Limited and concluded that the full amount was irrecoverable. As a result, an impairment loss of £2,949,078 (2017: £nil) was recognised in the Company only profit or loss account. In the prior year, the directors deemed that it was appropriate to classify the amounts due after more than one year as this reflected the timescale on which recovery was expected to occur. No interest was charged on this balance in the current or prior year.

In calculating the impairment, the company assessed that the group receivable was 'underperforming' and as such the risk of default occurring, and the subsequent impairment calculated, took into consideration all possible default events over the expected life of the receivable ('the lifetime expected credit losses').

17. Non-current liabilities

18. Trade and other payables

The credit payment profile in days calculation excluded the long-term trade payable in the prior year, which was contractually due in over one year from the reporting date, as including this long term element would have skewed the trade payable days.

19. Financial instruments and financial risk management

The group's financial instruments as at 31 December 2018 and 2017 mainly comprise cash and various items arising directly from its operations, such as trade and other receivables and trade and other payables. The main purpose of these financial instruments is to provide working capital for the group. The group's policy is to obtain the highest rate of return on its cash balances and current asset investments, subject to having sufficient resources to manage the business on a day to day basis and not exposing the group to unnecessary risk of default.

(a) Risk management policies

The group's finance function is responsible for procuring the group's capital resources and maintaining an efficient capital structure, together with managing the group's market, liquidity, foreign exchange, interest and credit risk exposures.

All treasury operations are conducted within strict policies and guidelines that have been approved by the directors.

(b) Financial assets and liabilities

The totals for each category of financial instrument, measured in accordance with IFRS 9 as detailed in the accounting policies, are as follows:

In addition to the above, the group also held an un-quoted equity investment which is recognised at fair value under IFRS 9, the fair value at the reporting date was £62k. The carrying value of this investment at 31 December 2017 was £89k measured at cost in accordance with IAS 39 - refer to note 12 for further details.

The carrying value of all financial instruments is not materially different from their fair value. It is, and has been throughout the year, the group's policy that no trading in financial instruments shall be undertaken. Cash and cash equivalents attract floating interest rates. Accordingly, their carrying amounts are considered to approximate to fair value.

(c) Credit risk

Credit risk is the risk that the counterparty will default on its contractual obligations resulting in financial loss to the group. Maximum credit risk at 31 December was as follows:

Before accepting a new customer, the group assesses both the potential customer's credit quality and risk. Customer contracts are drafted to reduce any potential credit risk to the group. Where appropriate the customer's recent financial statements are reviewed. The average credit period given on trade receivables was 45 days (2017: 54 days).

Trade receivables are regularly reviewed for impairment loss. The group did not write off any trade receivables or accrued income during the current or prior year. There were no impairment provisions or impairment losses recognised on trade receivables or accrued income in the current or prior year.

In the prior year, an impairment of £309,973 was recognised in respect of other receivables and an impairment of £369,427 was recognised in respect of amounts due from associates. For more details see note 6.

Ageing of the trade receivables and accrued income is as follows:

The total of the trade receivables which were past due at the reporting date but not impaired was £nil (2017: £nil). Of the total trade receivables and accrued income balance amounting to £1,265,000, £835,000 was collected by 2 May 2019. The directors are confident as to the recoverability of the remaining balance and thus no impairment of the amount has been recognised in the financial statements at 31 December 2018. 

All cash balances are held in established UK financial institutions.

The Group does not hold any collateral as security or any other credit enhancements, nor does it hold any derivatives which mitigate credit risk.

Receivables are considered to be in default when the principal is more than 90 days past due, based on an assessment of past payment practices and the likelihood of such overdue amounts being recovered. Receivables are written off by the Group when there is no reasonable expectation of recovery, such as when the counterparty is known to be going bankrupt, or into liquidation or administration.

The Group calculates lifetime expected credit losses for trade receivables using a portfolio approach. Receivables are grouped based on the credit terms offered and the type of product sold. The probability of default is determined at the year-end based on the aging of the receivables and historical data about default rates on the same basis. That data is adjusted if the Group determines that historical data is not reflective of expected future conditions due to changes in the nature of its customers and how they are affected by external factors such as economic and market conditions.

(d) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

Contractual cash flows relating to the group's financial liabilities are as follows:

The average credit period received on trade payables was 34 days (2017: 49 days).

(e) Interest rate risk

Interest rate risk is the risk that the future cash flows associated with a financial instrument will fluctuate because of changes in market interest rates. The interest rates on cash and cash equivalents are low, such that interest rate risk is minimal.

The only interest-bearing loan was fully repaid in the year. At the reporting date, £nil (2017: £300,000) was included within other payables. The interest rate on this loan was 2% per annum. The impact of a 1% interest rate increase would represent an annual sum of £nil (2017: £3,000).

(f) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises on financial assets and liabilities and investments in associates that are denominated in a currency other than the functional currency of the entity by which they are held.

In the current and prior year, the risk relates to cash balances held of US$165,000 (2017: US$476,000).

At the reporting date the group has no financial assets or liabilities (except bank balances) denominated in a currency other than the functional currency.

(g) Capital management

The group's main objective when managing capital is to protect returns to shareholders by ensuring the group will continue to trade for the foreseeable future.

The group considers its capital to include cash, share capital, share premium, retained earnings, and other equity reserves.

The group has an undrawn overdraft facility with Barclays of up to £150,000 (2017: £150,000).

20. Share capital and reserves

Ordinary shares, which carry no right to fixed income, each carry the right to one vote at general meetings of the company.

The deferred shares of 2p have no voting rights, no rights to dividends and negligible rights on return of capital. They are not listed on any stock exchange.

The share options granted over the shares of the company are set out in note 21.

The nature and the purpose of each reserve in equity is described as follows:

Retained earnings

Cumulative profit and loss net of distribution to owners.

Share premium account

The share premium account represents the premium paid on issue of ordinary shares in excess of their nominal value.

Merger reserve

The merger reserve arises as a result of a group reorganisation where the company acquired Cellcast UK Limited which was accounted for in accordance with merger accounting principles.

Warrant reserve

Warrants represent subscription rights for ordinary shares in Cellcast plc and the warrant reserve represents the fair value of the warrants at the date of issue. All warrants are expired.

21. Share options

The group operates two different share option schemes, an Enterprise Management Incentive (EMI) share option plan and a General share option plan. Options are available to be granted to directors, staff, consultants and independent contractors as part of their remuneration package and they act as an incentive to assist with the future performance of the group.

During the year ended 31 December 2018 the company had share-based payment arrangements, all of which have vested, and expire 10 years after grant as follows:

EMI share option plan

Date of grant 25/07/08 27/10/10

Number granted 1,200,000 450,000

Exercise price £0.03 £0.04

General share option plan

Date of grant 25/07/08 27/10/10

Number granted 400,000 600,000

Exercise price £0.03 £0.04

Options are forfeited if the employee leaves the group before the options are exercised

Further details of share options in issue during the year are as follows:

All of the above share options outstanding at the end of the year are exercisable and have an exercise price of £0.04, with a weighted average remaining contractual life of 1.83 years (2017: 1.40 years).

The following EMI options, save those granted to Mike Neville and Bertrand Folliet which are Unapproved Options, over the ordinary shares of 1 pence each have been granted to the directors and were in place at the reporting date:

2018:

2017:

22. Related party transactions

Group

SMS Media Limited

SMS Media Limited has a common director and beneficial shareholder in Bertrand Folliet. In 2018 management charges totalled £nil (2017: £114,000). The management charges levied by SMS Media in 2017 related to the running cost of the company's office in Hong Kong. It was made up of rent and the employment of local staff. Its purpose was undertaking business development in the Greater China, South East Asia and African regions. This resource had constituted a part of the company since November 2001.

Global Gaming Limited

In 2017 an impairment charge of £369,427 was recognised in respect of amounts owed by Global Gaming Limited, an associate of the company. After provision for impairment no amounts were due from Global Gaming Limited at the reporting date in the current or prior year.

Company

Cellcast UK Limited

At the reporting date £nil (2017: £2,949,078) was due from Cellcast UK Limited, a subsidiary of the company, this amount is net of accumulated impairment charges of £6,749,079 (2017: £3,800,001). During the current year an impairment charge of £2,949,078 (2017: nil) was recognised on amounts due from Cellcast UK Limited- refer to note 16.

23. Cash flows