2 Jun 2015 07:00
2 June 2015
Cellcast plc
("Cellcast", "the Group" or "the Company")
Audited Results for the year ended 31 December 2014
The Board of Cellcast plc (AIM: CLTV) announces the Company's audited results for the year ended 31 December 2014. A full copy of the annual report and accounts, along with a notice of the Group's annual general meeting, to be held at Unit 22, Cochran Close, Crownhill Industrial Estate, Milton Keynes, MK8 0AJ on 25 June 2015 at 11 a.m., has been posted to shareholders and will shortly be available from the company's website, www.cellcast.tv.
Highlights
· Group operating revenues from core operations of £12.2 million (2013: £14.5 million)
· Gross profit increased to £4.2 million (2013 gross loss: £0.13 million) primarily from inflow of one off sale of channel management contract (for £3million)
· Net profit after exceptional revenue from sale of channel Management contract amounts to £2.9 million (2013: loss of 2.5 million)
· Profit per share of 3.8p (2013: loss per share of 3.3p)
· Main operations successfully relocated to Milton Keynes
Andrew Wilson, Chief executive Officer of Cellcast, commented:
"During the year revenue from our core services continued to decline, with customer numbers and gross margins coming under increasing pressure. To counter this, we have been pursuing a cost review programme, including our relocation to Milton Keynes and the renegotiation of our bandwidth commitments. Going forward, the Board has also been looking at diversification opportunities into other digital content sectors to leverage our skills and experience in interactive broadcasting and mobile transaction services."
For further information:
Cellcast plc | 020 3376 9420 |
Andrew Wilson, Chief Executive | |
Allenby Capital Limited (Nominated Adviser and Broker) | 0203 328 5656 |
Nick Naylor / James Reeve |
Chief Executive's statement
2014 Results
The Group's operating revenues from interactive broadcasting activities in the UK amounted to £12.2 million, a decrease of 16% on 2013. The Group enjoyed exceptional additional revenue of £3 million as a result of the sale of a long term channel management contract.
Cost of sales went down by 30%, from £15.7 million in 2013 to £10.9 million in 2014, due to the Group's successful relocation of its operation to Milton Keynes and the renegotiation of the Group's bandwidth costs. The Group also benefited from a significant retrospective reduction in bandwidth costs relating to the previous 12 months.
As a result of these costs reductions, but primarily of the disposal of a key channel management contract for £3 million (2013: £1 million), the group's gross profit amounted to £4.2 million in 2014 (2013: loss of £0.1 million).
General and administrative costs decreased by 6%, from £838,000 to £789,000. Approximately 50% (2013: 40%) of these costs were personnel costs.
Overseas new business development costs were relatively minimal in 2014, at £42,000, compared to £1,131,000 in the previous year.
Amortisation and depreciation expenses for 2014 were £126,000, 67% less than in 2013, and are predominantly accounted for by the amortisation of the group's capitalised development costs, which at 31 December 2014 had a net book value of £54,000 (2013: -£80,000).
After taking into account the net interest costs, the total profit for 2014 was £2.9 million (2013: loss of £2.5 million). 2014 profit per share was 3.8p (2013: loss per share of 3.3p).
Funding and investments
On 30 May 2014, the Group entered into a joint venture with the principals of the Atlas Group of Companies, whereby it agreed to invest £1 million for a 49% equity interest in Euro TV SA to focus on the development of a multi-platform gaming business using certain intellectual property and other proprietary rights and technologies. Following a review of strategy it was subsequently decided that resources would be better employed in alternative investment ventures and therefore trading in the joint venture did not commence and was wound up on 6 March 2015, with the investment sum of £1 million being recovered in full by the Company.
This investment is further described in note 12 below.
At 31 December 2014, the group had a net cash balance of £598,000 (2013: £404,000).
Post Balance Sheet Event
As highlighted above, on 6 March 2015, the Euro TV joint venture was cancelled by mutual agreement between the Group and Atlas Group of Companies.
Half a million pounds of the cash at bank as at 31 December 2014 was ring fenced for a potential investment to acquire a stake in a new venture. The activity of the joint venture will be to explore new overseas opportunities in the gaming and gambling sector.
Outlook
Through 2014, revenues continued to decline as new customer acquisition rates continued to be impacted by the Electronic Programme Guide (EPG) changes on Freeview in 2012. These declines are unlikely to be reversed in current markets so the sustainability of the existing business significantly depends on the Group's ability to compensate for any further revenue decline by matched cost savings, or by identification of new revenue streams.
As announced in the course of the year it is the Group's intention to look at diversification opportunities into other digital content sectors that leverage its skills and experience in interactive broadcasting and mobile transaction services. Over the past few months the Group has been developing partnerships with companies who have experience in the gaming and gambling sector with a view to cross selling products to the Group's existing database in the UK and exploring new opportunities in undeveloped international markets. Time to market has been longer than previously anticipated and announced but various applications and services are now in testing with a view to launch in the third quarter of 2015.
Consolidated statement of comprehensive income
For the year ended 31 December
Note | 2014 | 2013 | ||||||
£ | £ | |||||||
Revenue | ||||||||
Interactive broadcast | 12,159,775 | 14,499,328 | ||||||
Channel management | 2,980,000 | 1,045,000 | ||||||
Total revenue | 1 | 15,139,775 | 15,544,328 | |||||
Cost of sales | 5 | (10,933,554) | (15,680,450) | |||||
Gross profit / (loss) | 4,206,221 | (136,122) | ||||||
Operating costs and expenses: | ||||||||
General and administrative | (789,395) | (837,950) | ||||||
TV exploration in overseas countries, new ventures and one-off regulatory costs | 5 | (42,252) | (1,131,215) | |||||
Exceptional costs | 5 | (302,109) | - | |||||
Amortisation & depreciation | (126,177) | (377,470) | ||||||
Total operating costs and expenses |
| (1,259,933) | (2,346,635) | |||||
Operating profit / (loss) | 2,946,288 | (2,482,757) | ||||||
Interest receivable & similar income | - | 448 | ||||||
Interest payable and similar charges | 4 | (8,441) | (8,641) | |||||
Profit / (loss) before tax | 3 | 2,937,847 | (2,490,950) | |||||
Taxation | 6 | - | - | |||||
Profit / (loss) for the year and total comprehensive income attributable to owners of the parent | 2,937,847 | (2,490,950) | ||||||
Profit / (loss) per share attributable to owners of the parent | ||||||||
Basic & diluted (pence) | 7 | 3.8p | (3.3)p | |||||
| ||||||||
All revenue derives from continuing operations.Consolidated statement of financial position
As at 31 December
Assets | Note | 2014 £ | 2013 £ | ||
Non-current assets | |||||
Intangible assets | 8 | 215,351 | 132,298 | ||
Property, plant and equipment | 9 | 245,977 | 284,512 | ||
Investments | 10 | 202,627 | 202,627 | ||
663,955 | 619,437 | ||||
Current assets | |||||
Investments Trade and other receivables | 12 13 | 1,000,000 1,473,932 | - 2,072,670 | ||
Cash and cash equivalents | 597,670 | 404,153 | |||
3,071,602 | 2,476,823 | ||||
Non-current assets classified as held for sale | 11 | - | 170,000 | ||
Total assets | 3,735,557 | 3,266,260 | |||
Capital and reserves | |||||
Called up share capital | 2,285,398 | 2,285,398 | |||
Share premium account | 5,533,626 | 5,533,626 | |||
Merger reserve | 1,300,395 | 1,300,395 | |||
Warrant Reserve | 13,702 | 13,702 | |||
Retained earnings | (7,951,477) | (10,889,324) | |||
Equity attributable to owners of the parent | 1,181,644 | (1,756,203) | |||
Liabilities | |||||
Non-current liabilities | 14 | 585,000 | - | ||
Current liabilities | |||||
Trade and other payables | 15 | 1,968,913 | 5,022,463 | ||
Total liabilities | 2,553,913 | 5,022,463 | |||
Total equity and liabilities | 3,735,557 | 3,266,260 | |||
Consolidated statement of changes in equity for the year ended 31 December 2014
Amounts attributable to the owners of the parent | ||||||||
Share Capital |
Share Premium |
Merger Reserve |
Warrant Reserve |
Retained Earnings |
Total |
| ||
£ | £ | £ | £ | £ | £ |
| ||
Balance at 1 January 2014 | 2,285,398 | 5,533,626 | 1,300,395 | 13,702 | (10,889,324) | (1,756,203) |
| |
Profit for the year and total comprehensive income | - | - | - | - | 2,937,847 | 2,937,847 |
| |
Balance at 31 December 2014 | 2,285,398 | 5,533,626 | 1,300,395 | 13,702 | (7,951,477) | 1,181,644 |
| |
Consolidated statement of changes in equity for the year ended 31 December 2013
Amounts attributable to the owners of the parent | ||||||||
Share Capital |
Share Premium |
Merger Reserve |
Warrant Reserve |
Retained Earnings |
Total |
| ||
£ | £ | £ | £ | £ | £ |
| ||
Balance at 1 January 2013 | 2,285,398 | 5,533,626 | 1,300,395 | 13,702 | (8,398,374) | 734,747 |
| |
Loss for the year and total comprehensive income | - | - | - | - | (2,490,950) | (2,490,950) |
| |
Balance at 31 December 2013 | 2,285,398 | 5,533,626 | 1,300,395 | 13,702 | (10,889,324) | (1,756,203) |
| |
Consolidated statement of cash flows
For the year ended 31 December
2014 | 2013 | |||
£ | £ | |||
Net cash inflow from operations | 16a | 1,242,653 | 22,133 | |
Interest received | - | 448 | ||
Net cash inflow from operating activities | 1,242,653 | 22,581 | ||
Net cash outflow from investing activities | 16b | (1,040,695) | (350,039) | |
Net cash used in financing activities | 16c | (8,441) | (8,641) | |
Net increase/(decrease) in cash and cash equivalents | 193,517 | (336,099) | ||
Cash and cash equivalents at beginning of year | 404,153 | 740,252 | ||
Cash and cash equivalents at end of year | 16d | 597,670 | 404,153 |
Notes to the consolidated financial statements
Basis of preparation
The financial information of the Group set out in this statement does not constitute "statutory accounts" for the purposes of Section 435 of the Companies Act 2006. The financial information for the year ended 31 December 2014 has been extracted from the Group's audited financial statements which were approved by the Board of directors on 1 June 2015 and will be delivered to the Registrar of Companies for England and Wales in due course. The report of the auditor on these financial statements is unqualified, did not include any references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRSs') as adopted by the European Union, this announcement does not itself contain sufficient information to comply with those IFRSs. This financial information has been prepared in accordance with the accounting policies set out in the 31 December 2014 report and financial statements.
Going concern
During the year ended 31 December 2014, the group recorded a profit of £2,938,000. The group had net cash of £598,000 as at 31 December 2014 and it had net current assets of £1,103,000. Subsequent to the year end the joint venture entered into in the year was cancelled resulting in further cash of £1,000,000 being received post year end.
The directors have carefully considered whether or not it is appropriate to adopt the going concern basis in preparing the 2014 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.
After making enquiries, the Directors have concluded that the group has 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 financial statements
1. Segmental reporting
The group's revenues are almost entirely in the UK from broadcasting related activities on Sky, Freeview and Freesat channels.
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.
The group has three significant telecom aggregators, generating 67% of the group's television and broadcast revenue. The three telecom aggregators contribute £6,080,318, £1,300,595, and £709,734 of the group's total revenue (2013: 70% representing £5,923,117, £3,544,962, and £1,362,728).
Revenue is further split below between revenue generated by:
2014 | 2013 | |
£ | £ | |
Interactive broadcasting | 12,159,775 | 14,499,228 |
Channel sales and rental | 2,980,000 | 1,045,000 |
15,139,775 | 15,544,228 |
In the year to 31 December 2014 there was a sale of a channel for £2.98 million. The prior year's income was in relation to the rental of this channel.
2. Staff costs
2014 | 2013 | |
£ | £ | |
Wages and salaries (including directors) | 1,010,300 | 1,168,103 |
Social security costs | 207,447 | 246,654 |
Other pension costs | 70,990 | 80,990 |
1,288,737 | 1,495,748 |
Staff costs of £325,769 (2013: £406,857) are included in general and administrative expenses and £962,968 (2013: £1,088,891) are included in cost of sales.
Average monthly number of employees by activity (including directors):
2014 | 2013 | |
Production | 10 | 12 |
Technical | 8 | 13 |
Management | 4 | 4 |
Administration | 3 | 4 |
25 | 33 |
2014 | 2013 | |
Key management:
| £ | £ |
Salaries and other short-term employee benefits | 352,359 | 326,856 |
Post employment benefits | 70,000 | 80,000 |
422,359 | 406,856 |
3. Profit / (loss) before tax
Profit / (loss) before tax is stated after charging: | 2014 | 2013 |
£ | £ | |
Depreciation - owned assets | 79,230 | 66,954 |
Licences amortisation | 21,468 | 45,226 |
Amortisation of development costs | 25,479 | 265,290 |
Auditor's remuneration - statutory audit of parent and consolidated accounts | 27,000 | 27,000 |
Other services supplied pursuant to legislation: Interim review | 5,000 | 5,000 |
4. Interest payable and similar charges
2014 | 2013 | |
£ | £ | |
Bank charges and interest paid | 8,441 | 8,641 |
5. TV exploration in overseas countries and exceptional items
Expenditure of £42,252 (2013: £1,131,215) was incurred in exploring an overseas opportunity in South America. This venture was not successful and therefore this amount has been shown as an exceptional item. Legal action is being pursued to recover this amount but no amount has been recognised as at 31 December 2014.
In 2014 exceptional costs of £302,109 were incurred being one-off legal fees related to the channel management agreement.
During the year ended 31 December 2014 management renegotiated the group's position with a number of suppliers in the light of the decline in revenues. This resulted in a reduction of the on-going trading cost base of the group and a renegotiation of trade creditor and payments terms, creating a credit in the year to £1.349 million which has been recognised within cost of sales.
6. Taxation
2014 | 2013 | |
£ | £ | |
Current tax charge | - | - |
Factors affecting the tax charge for the year
2014 | 2013 | |
£ | £ | |
Profit / (loss) on ordinary activities before taxation | 2,937,847 | (2,490,950) |
Group profit / (loss) on ordinary activities before taxation multiplied by the effective standard rate of UK corporation tax of 21.5% (2013: 23.25%) | 631,637 | (579,146) |
Effects of: | ||
Non-deductible expenses | 69,241 | 79,795 |
(Utilisation of) / carried forward losses | (700,878) | 499,351 |
Tax charge | - | - |
At 31 December 2014, the group had estimated tax trading losses of £2.5 million (2013: £6.0 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.
7. Profit / (loss) per share
The calculations of adjusted basic and diluted losses per ordinary share are based on the following results:
2014 | 2013 | |
£ | £ | |
Profit / (loss) for the financial year | 2,937,847 | (2,490,950) |
Weighted average number of ordinary shares | 76,471,557 | 76,471,557 |
Basic and diluted loss per share (pence) | 3.8p | (3.3)p |
There was no dilutive effect from the issued share options and warrants. The total potential number of dilutive ordinary shares at the year end was 12,783,699 (2013: 12,783,699).
8. Intangible assets
Licences | Development Costs | Total | |
£ | £ | £ | |
Cost | |||
At 1 January 2013 | 651,761 | 2,673,714 | 3,325,475 |
Additions | - | 19,002 | 19,002 |
At 31 December 2013 | 651,761 | 2,692,716 | 3,344,477 |
Transfer from assets held for sale (note 11) | 130,000 | - | 130,000 |
At 31 December 2014 | 781,761 | 2,692,716 | 3,474,477 |
Amortisation | |||
At 1 January 2013 | 554,312 | 2,347,351 | 2,901,663 |
Charge for the year | 45,226 | 265,290 | 310,516 |
At 31 December 2013 | 599,538 | 2,612,641 | 3,212,179 |
Charge for the year | 21,468 | 25,479 | 46,947 |
At 31 December 2014 | 621,006 | 2,638,120 | 3,259,126 |
Net book value at 31 December 2014 | 160,755 | 54,596 | 215,351 |
Net book value at 31 December 2013 | 52,223 | 80,075 | 132,298 |
Net book value at 1 January 2013 | 97,449 | 326,363 | 423,812 |
9. Property, plant & equipment
Broadcasting equipment | ||||||
£ | ||||||
Cost | ||||||
At 1 January 2013 | 1,720,447 | |||||
Additions | 178,746 | |||||
At 31 December 2013 | 1,899,193 | |||||
Additions | 40,695 | |||||
At 31 December 2014 | 1,939,888 | |||||
Depreciation | ||||||
At 1 January 2013 | 1,547,727 | |||||
Charge for the year | 66,954 | |||||
At 31 December 2013 | 1,614,681 | |||||
Charge for the year | 79,230 | |||||
At 31 December 2014 | 1,693,911 | |||||
Net book value at 31 December 2014 | 245,977 | |||||
Net book value at 31 December 2013 | 284,512 | |||||
Net book value at 1 January 2013 | 172,720 | |||||
10. Non-current investments
At 31 December 2014 Cellcast plc owned 100% of the issued share capital in Cellcast UK Limited, a company incorporated in the UK whose principal business was television and broadcasting. At 31 December 2014, Cellcast UK owned the following other interests:
Company | Country of incorporation
| Class | Shares and voting rights held % | Type of holding | Principal business |
Cellcast TV SA
| Argentina | Ordinary | 51% | Subsidiary | Dormant |
Cellcast International Limited
| United Kingdom | Ordinary | 100% | Subsidiary | Dormant |
Sumo TV Limited | United Kingdom | Ordinary | 100% | Subsidiary | Dormant |
The group has an 18% holding in Cellcast Middle East Limited, a company incorporated in Lebanon. While its principal activities remains in television and broadcasting it continues to be loss making and the results have not been included as the group has no further funding commitment.
At 31 December 2014, the Group still had a 35% holding in 2Giraffes LLP. 2Giraffes LLP is a large 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.
2014 | 2013 | ||
£ | £ | ||
Brought forward | 202,627 | - | |
Additions | - | 202,627 | |
At 31 December | 202,627 | 202,627 |
11. Non-current assets held for sale
As at 31 December 2013, £170,000 of intangible assets had been classified as non-current assets held for sale as management were committed to a plan to sell them at the reporting date and they were being actively marketed at a price which was considered to be reasonable.
In August 2014, the group started operating on this channel and consequently it was reclassified as an Intangible Assets at a value of £130,000 as management have decided to use the asset for the foreseeable future. The asset has been impaired to its recoverable value.
2014 | 2013 | ||
£ | £ | ||
Asset held for sale brought forward | 170,000 | - | |
Classified as non-current asset held for sale | - | 170,000 | |
Impairment | (40,000) | - | |
Reclassified as intangible asset | (130,000) | - | |
At 31 December | - | 170,000 |
12. Current asset investments
On 30 May 2014, the group entered into a joint venture to invest in Euro TV SA, a company incorporated in the British Virgin Islands. Under the joint venture, the group invested £1 million for a 49% equity interest in Euro TV SA which is a joint venture between Cellcast UK Limited and the owners of the remaining 51%, being the principles of the Atlas Group of Companies, to focus on the development of a multi-platform gaming business using certain intellectual property and other proprietary rights and technologies. Following a review of strategy it was subsequently decided that resources would be better employed in alternative investment ventures and therefore the joint venture did not commence trading and was wound up on 6 March 2015 with the investment sum of £1million being recovered in full by the company
The investment is classified as current as there was an expectation at the balance sheet date, although not formally confirmed, that the joint venture would be cancelled post year end (See note 17).
Company
Euro TV SA | Country of incorporation
British Virgin Islands | class
Ordinary | Shares and voting rights held %
49% | Type of holding
Joint venture | Principal business
Development of multigame platforming |
2014 | 2013 | ||
£ | £ | ||
Brought forward | - | - | |
Additions | 1,000,000 | - | |
At 31 December | 1,000,000 | - |
13. Trade and other receivables
2014 | 2013 | ||
£ | £ | ||
Trade receivables | 405,386 | 456,982 | |
Other receivables | 142,338 | 174,826 | |
Prepayments and accrued income | 926,208 | 1,440,862 | |
1,473,932 | 2,072,670 |
14. Non-current liabilities
2014 | 2013 | ||
£ | £ | ||
Trade payables | 585,000 | - | |
585,000 | - |
Non-current trade payables fall due in equal instalments over 6 years to October 2020.
15. Trade and other payables
2014 | 2013 | ||
£ | £ | ||
Trade payables | 834,476 | 3,744,070 | |
Other taxes & social security | 403,125 | 258,152 | |
Other payables | 326,810 | 326,810 | |
Accruals | 404,502 | 693,431 | |
1,968,913 | 5,022,463 | ||
Credit payment profile in days | 59 days | 83 days |
The credit payment profile in days calculation excludes the long term trade payables days which is contractually due over one year as including this long term element would skewer the trade payable days.
16. Cash flows
2014 | 2013 | ||
£ | £ | ||
a | Reconciliation of net loss before tax to net cash outflow from operating activities | ||
Profit/(loss) before tax | 2,937,847 | (2,490,950) | |
Interest receivable and similar income | - | (448) | |
Interest payable and similar charges | 8,441 | 8,641 | |
Amortisation and depreciation Impairment of assets held for sale | 126,177 40,000 | 377,470 - | |
Decrease in trade and other receivables | 598,738 | 986,516 | |
(Decrease) / increase in trade and other payables | (2,468,550) | 1,140,904 | |
Net cash inflow from operating activities | 1,242,653 | 22,133 | |
b | Cash flow from investing activities | ||
2014 £ | 2013 £ | ||
Proceeds on sale of assets held for sale | - | 123,200 | |
Purchase of property, plant and equipment | (40,695) | (178,746) | |
Purchase of assets held for sale | - | (72,864) | |
Purchase of intangible assets | - | (19,002) | |
Purchase of investments | (1,000,000) | (202,627) | |
Net cash outflow from investing activities | (1,040,695) | (350,039) | |
|
| ||
c | Cash flow from financing activities | ||
2014 | 2013 | ||
£ | £ | ||
Interest paid | (8,441) | (8,641) | |
Net cash used in financing activities | (8,441) | (8,641) | |
| |||
d | Cash and cash equivalents | 2014 £ | 2013 £ |
Cash at bank | 597,670 | 404,153 | |
Cash and cash equivalents at end of year | 597,670 | 404,153 | |
17. Events after the reporting period
On 30 May 2014, the group entered into a joint venture with the principals of the Atlas Group of Companies, whereby Cellcast agreed to invest £1 million for a 49% equity interest in Euro TV SA.
On 6 March 2015, the joint venture was cancelled by mutual agreement. The funds were returned to the group.
Half a million pounds of the cash at bank as at 31 December 2014 was ring fenced for a potential investment to acquire a stake in a new venture. The activity of the joint venture will be to explore new overseas opportunities in the gaming and gambling sector.