VITA.L Regulatory News (VITA)

28 Sep 2007 07:03

Cellcast plc28 September 2007 Cellcast plc (the "Company") Interim Results for the six months ended 30 June 2007 Highlights for the period • Revenues increased to £11.4 million - up 18.5% on the same period in 2006 • Reduced loss at EBITDA level of £980,000 compared to £1.6 million in the first six months of 2006 • UK operations achieve sustained profitability • Continued roll out of Cellcast formats and technology to international markets Post period highlights • Reorganisation and recapitalisation of Asian businesses into Cellcast Asia Holdings • Injection of $5.25 million into Cellcast Asia Holdings, by leading private equity house, Canaan Partners providing post-money valuation of $13.5 million, valuing Cellcast's 37.5% share holding at $5.1 million against a cost of $1.4 million. • SUMO.tv achieves significant growth in web traffic and TV revenues, and developing co-venture opportunities accelerating the distribution timetable Julian Paul, Chairman of Cellcast plc, commented: "With the UK business achieving operating profitability (before SUMO.tv costs), the enhanced shareholding and deconsolidation of our Asian interests, andthe potential to spin-off SUMO.tv, the outlook is much improved. The company is focussing on improvements in gross margin, EBITDA and cash flow rather than the headline revenue numbers. Our growth strategy is to leverage our expertise, successful formats and proprietary technology to multiply co-ventures with strategic media partners worldwide." For further information:Cellcast plcAndrew Wilson, CEO Tel: +44 (0) 20 7190 0300andrew@cellcast.tv www.cellcast.tv HB CorporateEdward Hutton / Rachel Kane Tel: +44 (0) 20 7510 8600e.hutton@hbcorporate.co.uk www.hbcorporate.co.uk Media enquiries:Threadneedle CommunicationsGraham Herring / Josh Royston Tel: +44 (0) 20 7936 9605graham.herring@threadneedlepr.co.uk CHAIRMAN'S STATEMENT These interim statements for the six months ended 30 June 2007 are the firstthat the company has prepared under International Financial Reporting Standards("IFRS") and include reconciliations to the previously reported numbers preparedunder UK GAAP, as well as a comprehensive restatement of the company's currentaccounting policies. The numbers reported for 31 December 2006 have been auditedunder UK GAAP but not under IFRS. The major reconciling item between UK GAAP andIFRS is the capitalisation of development costs relating to SUMO.tv, which hadpreviously been expensed. This is discussed in more detail below. Interim Results Revenues for the six months to 30 June 2007 of £11.4 million were up 18.5% onthe same period in 2006. These numbers are unaffected by the move to IFRS. Thegeographic mix however has changed significantly. In the six months to 30 June2006, UK revenues accounted for 75% of the total with Western Europe 23%. In thecurrent period, the UK was 49% of the total, with Latin America accounting for39% and Western Europe less than 1%. The company reports a loss for the periodat the EBITDA level of £980,000 (operating loss of £1,731,000, less depreciationand amortisation of £235,000, minority interest share of overseas losses of£23,000 and IFRS2 share option charge of £493,000), compared to £1.6 million inthe first six months of 2006. Encouragingly, as a result of cost cuttinginitiatives following the 2006 Sky EPG reorganisation, the UK operationsreturned to profitability, with an operating profit before allocation of centraloverheads of £670,000 against a loss for the same period the previous year of£590,000. In view of the loss for the period, no dividend is proposed (2006 - £ nil). SUMO.tv As previously indicated, the company has been seeking to capitalise on thesubstantial investment it has been making over the last year or so in thedevelopment of its multi-platform user-generated content network, SUMO.tv,launched in October 2006. Prior to the adoption of IFRS, development costs forthis project were expensed under UK GAAP. As at 31 December 2006, these costsamounted to £443,000, all incurred in the second half of the year. Between 1January and 30 June 2007, further costs of £664,000 were incurred - a total of£1.1 million. Under IFRS, we are now required to capitalise these developmentcosts (subject to impairment considerations) and accordingly the restated incomestatements reflect this. The web traffic and TV revenues are increasing quarter by quarter, which haspositioned SUMO.tv as one of the global leaders in the video sharing space. TheSUMO.tv website is now visited by over 3.5 million users per month and is nowaround number 4,000 of all websites globally (according to industry standardAlexa ratings, exceeding that of a number of much better capitalised companiesin the video sharing space). This rapid traction has enabled the company to opendiscussions with various overseas parties to licence its programming andtechnology. The activity is reaching a level of maturity which creates a windowof opportunity to attract financial as well as strategic partners. Discussionsare in progress with a number of parties to co-venture the further developmentof the SUMO.tv project which will remove the need for further funding byCellcast and will deconsolidate its business. We will report back toshareholders on material developments in this regard. Subsequent event - Cellcast Asia During the first half of 2007, Cellcast invested further funds in its Asianoperations to gain better exposure in the market and demonstrate the efficacy ofits proprietary participation tv solutions to key strategic telecoms andbroadcast partners. This impacted the short-term profitability of Cellcast'sinternational operations but enabled the company to create the right operatingplatform to pave the way for a large private equity investment. On 21 August, wereported that we had concluded a reorganisation and recapitalisation of ourAsian businesses through the creation of a new holding company, Cellcast AsiaHoldings, into which we transferred our 100% holding in Cellcast InteractiveIndia Pvt Limited and 50% holding in Cellcast SEA Limited. At the same time,Canaan Partners, a leading private equity house, injected $5.25 million into thenew holding company, which now has a post-money valuation of $13.5 million.Cellcast's fully diluted 37.5% shareholding is thus valued at around $5.1million (£2.6 million), compared to an investment cost of £700,000. Goingforward, Cellcast Asia Holdings will assume its own costs which were previouslyfunded by Cellcast, and Cellcast's interest in Cellcast Asia Holdings will beequity-accounted rather than consolidated. We regard this as a very positivedevelopment as we have a strong equity partner in this venture, which we will nolonger have to fund and absorb costs but where we have the opportunity toparticipate in the future upside. Funding As indicated above, the company has carried the costs and funding of bothSUMO.tv and Cellcast India in anticipation of a strategic spin-off of thesecomponents of our business. This has put a strain on our cash resources, andconsequently during the period under review, we have raised additionalconvertible loan funds. The total amount drawn to date is £1.5 million. Wecurrently have undrawn facilities of a further £1.5 million, and the directorsbelieve that this is sufficient to meet the company's funding requirements forthe foreseeable future. Current trading In the statement accompanying the 2006 full-year results, we stated that ouractivities in South America had strong revenue and earnings potential in 2007,and stated that in the first quarter of 2007 we saw significant increasedrevenues and profitability in our South American operations. However, the highvolume of telecom traffic we were generating in Brazil created unforeseenproblems at a technical infrastructure level that made our output unsustainableand forced a retrenchment of our media exposure. As a result of the currentprocess of resolving telecom network traffic termination issues (which we expectto complete in the last quarter of this year) we do not expect to generateprofits from Brazil in the second half of 2007. However, we look forward to therestoration and expansion of traffic and revenues in the first half of next yearin a market that has already proven highly responsive to Cellcast formats andapplications. After a successful reorganisation, repositioning and cost reduction programme,the UK business continues to trade well. We are now expanding beyond televisionby getting more traction on the web and mobile services which shouldsubstantially improve the profitability of this operation. Capitalising on its large portfolio of interactive TV formats and proprietarytechnology, the company is working on TV projects in Europe, Middle East andSouth America. For each of these projects the company is partnering with localbroadcasters to limit the financial exposure. The management of these projectswill be undertaken from the UK where an international project management teamhas been assembled. Outlook With the restoration to operating profitability of the UK operations before theSUMO.tv costs, the reorganisation and deconsolidation of our Asian interests andthe potential to spin-off the SUMO.tv activity, the outlook is much improved.The company is focussing on improvements in gross margin, EBITDA and cash flowrather than the headline revenue numbers. Our strategy is focussed on leverageof our expertise, formats and proprietary technology to co-venture with partnersthat have access to funds or media properties in the UK and overseas. Theefficacy of this strategy is demonstrated by the successful spin off of ourIndian operations. With our core technology and formats now proven we lookforward to increased revenues and profitability through this licensing drivenmodel. Julian PaulChairman 28 September 2007 CONSOLIDATED INCOME STATEMENTS Unaudited Unaudited Unaudited 6 Months 6 Months ended Year to ended 30 June 2007 30 June 2006 31 December 2006 £ £ £ REVENUE 11,396,273 9,612,554 21,977,972Cost of sales (10,024,157) (8,791,962) (17,768,179)GROSS PROFIT 1,372,116 820,592 4,209,793Operating costs andexpenses:General and administrative (2,409,008) (2,560,487) (6,786,705)Depreciation and (234,831) (285,368) (575,159)amortisationIFRS 2 charge -share option (492,708) (160,515) (298,895)expenseTotal operating costs and (3,136,547) (3,006,370) (7,660,759)expenses OPERATING LOSS (1,764,431) (2,185,778) (3,450,966) Interest receivable 2,122 22,103 32,217Interest payable and (7,634) (935) (6,872)similar chargesLOSS ON ORDINARY ACTIVITIES (1,769,943) (2,164,610) (3,425,621)BEFORE TAXATIONTaxation - - 64,798LOSS ON ORDINARY ACTIVITIES (1,769,943) (2,164,610) (3,360,823)AFTER TAXATION Attributable to:Equity Holders of the (1,747,000) (2,022,758) (3,330,139)companyMinority interest (22,943) (141,852) (30,684) (1,769,943) (2,164,610) (3,360,823) LOSS PER SHAREBasic and dilluted (3.3p) (7.1p) (10.2)p Note: The operating loss for the period arises from the Group's continuingoperations CONSOLIDATED BALANCE SHEETS Unaudited Unaudited Unaudited 30 June 2007 30 June 2006 31 December 2006 £ £ £ASSETSNON-CURRENT ASSETSIntangible assets- Development costs 1,763,857 604,444 1,099,404Investments 4,933 4,933 4,933Property, plant and equipment 951,540 1,064,200 1,108,507Deferred tax 84,698 84,698 2,805,028 1,673,577 2,297,542 CURRENT ASSETSWork in progress 38,984Trade and other receivables 3,480,259 4,239,185 6,997,017Cash and cash equivalents 134,310 221,382 135,677 3,614,569 4,460,567 7,171,678TOTAL ASSETS 6,419,597 6,134,144 9,469,220 LIABILITIESNon currentFinance Leases 51,147 55,672 70,202CurrentTrade and other payables 4,519,092 4,107,459 7,242,564TOTAL LIABILITIES 4,570,239 4,163,131 7,312,766 NET ASSETS 1,849,358 1,971,013 2,156,454 CAPITAL AND RESERVESCalled up share capital 1,726,656 850,407 1,331,619Share premium account 5,317,756 4,038,676 4,775,743Merger reserve 1,300,395 1,300,395 1,300,395Retained earnings (6,499,907) (4,076,613) (5,245,614)Translation reserve 58,085 24,995Attributable to equity holders of 1,902,985 2,112,865 2,187,138the companyMinority interest in equity (53,627) (141,852) (30,684)TOTAL EQUITY 1,849,358 1,971,013 2,156,454 CONSOLIDATED CASH FLOW STATEMENTS Unaudited Unaudited Unaudited 6 Months 6 Months Year to ended ended 31 December 30 June 2007 30 June 2006 2006 £ £ £Cash inflows/(outflows) from operating activitiesCash used from operations (157,424) (2,167,333) (2,874,382)Taxation 70,097Interest received 2,122 22,103 32,217Net cash outflow from operating (155,302) (2,145,230) (2,772,068)activities Cash outflows from investingactivitiesPurchase of property, plant and (73,391) (271,979) (563,451)equipmentPurchase of intangible assets (664,453) (56,654) (581,747)Net cash outflow from investing (737,844) (328,633) (1,145,198)activities Cash inflow/(outflow) from financing activitiesCapital element of finance leases (21,298) (17,519) (43,798)Interest paid (7,634) (935) (6,872)Proceeds from the issue of share 1,000,000 1,283,220capitalIssue costs paid (62,951) (64,940)Net cash inflow/(outflow) from 908,117 (18,454) 1,167,610financing activities Increase/(decrease) in cash in the 14,971 (2,492,317) (2,749,656)period RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 1 Cash flow from operating activities Unaudited Unaudited Unaudited 6 Months 6 Months ended Year to ended 30 June 2007 30 June 2006 31 December 2006 £ £ £ Operating loss (1,764,431) (2,185,778) (3,450,966)Depreciation of property plant and 202,028 278,117 479,306equipmentAmortisation intangible 32,803 7,251 95,853assetsShare option charge 492,708 160,515 298,895Increase in work in 38,984 (38,984)progressDecrease /(increase) in trade and other 3,516,758 (1,460,917) (4,218,750)receivablesIncrease/(decrease) in trade and other (2,676,274) 1,033,479 3,960,264payablesNet cash outflow from operating (157,424) (2,167,333) (2,874,382)activities 2 Analysis of net funds 1 January Cashflow Other non-cash 30 June 2007 2007 changes Cash at bank and in hand 135,677 (1,367) 134,310Bank overdrafts (189,153) 16,338 (172,815) (53,476) 14,971 (38,505)Finance leases (132,665) 21,298 (111,367)Net funds (186,141) 36,269 (149,872) 3 Reconciliation of net cash flow to movement indebt Unaudited Unaudited Unaudited 6 Months 6 Months ended Year to ended 30 June 2007 30 June 2006 31 December 2006 £ £ £ (Reduction) / increase in cash in the 14,971 (2,492,317) (2,749,656)periodFinance lease 21,298 17,519 43,798 MOVEMENT IN NET FUNDS IN THE PERIOD 36,269 (2,474,798) (2,705,858)New Finance lease (155,227) (167,719)Opening net funds (186,141) 2,687,436 2,687,436Closing net (debts) / (149,872) 57,411 (186,141)funds STATEMENT OF CHANGES IN EQUITY As at 30 June Share Share Merger Cumulative Retained Shareholders Minority Total2007 Capital Premium Reserve Translation Earnings Funds interest ReservesBalance at 1 1,331,619 4,775,743 1,300,395 24,995 (5,245,614) 2,187,138 (30,684) 2,156,454January 2007Loss for the (1,747,000) (1,747,000) (22,943) (1,769,943)periodExchange 33,090 33,090 33,090translationTotal 33,090 (1,747,000) (1,713,910) (22,943) (1,736,853)recognisedgain / lossesfor the yearShare based 492,708 492,708 492,708payment chargeProceeds of 395,037 604,963 1,000,000 1,000,000shares issuedShare issue (62,951) (62,951) (62,951)costsBalance at 30 1,726,656 5,317,755 1,300,395 58,085 (6,499,906) 1,902,985 (53,627) 1,849,358June 2007 As at 31 December Share Share Merger Cumulative Retained Shareholders Minority Total2006 Capital Premium Reserve Translation Earnings Funds interest ReservesBalance at 1 850,407 4,038,676 1,300,395 (2,214,370) 3,975,108 3,975,108January 2006Loss for the (3,330,139) (3,330,139) (30,684) (3,360,823)periodExchange 24,995 24,995 24,995translationTotal recognised 24,995 (3,330,139) (3,305,144) (30,684) (3,335,828)gain / lossesfor the yearShare based 298,895 298,895 298,895payment chargeProceeds of 481,212 802,007 1,283,219 1,283,219shares issuedShare issue (64,940) (64,940) (64,940)costsBalance at 31 1,331,619 4,775,743 1,300,395 24,995 (5,245,614) 2,187,138 (30,684) 2,156,454December 2006 As at 30 June Share Share Merger Cumulative Retained Shareholder Minority Total2006 Capital Premium Reserve Translation Earnings Funds interest ReservesBalance at 1 850,407 4,038,676 1,300,395 (2,214,370) 3,975,108 3,975,108January 2006Loss for the (2,022,758) (2,022,758) (141,852) (2,164,610)periodExchangetranslationTotal recognised (2,022,758) (2,022,758) (141,852) (2,164,610)gain / lossesfor the yearShare based 160,515 160,515 160,515payment chargeProceeds ofshares issuedShare issuecostsBalance at 30 850,407 4,038,676 1,300,395 (4,076,613) 2,112,865 (141,852) 1,971,013June 2006 ACCOUNTING POLICIES Basis of preparation These interim financial statements were approved by the directors on 28September 2007.From January 1 2007, the Group has adopted International Financial ReportingStandards ("IFRS") and the IFRIC interpretations in the preparation of itsconsolidated financial statements. The financial statements have been preparedunder the historical cost basis. Information on the impact on accountingpolicies and financial results resulting from the conversion from UK GenerallyAccepted Accounting Principles ("UK GAAP") to IFRS is provided later in thisreport. Prior to 2007, the Group prepared its audited financial statements and unauditedinterim financial statements under UK GAAP. From 1 January 2007, the Group isrequired to prepare annual consolidated financial statements in accordance withIFRS as adopted by the European Union. As the 2007 annual financial statementswill include comparatives for 2006, the Group's date of transition to IFRS is 1January 2006 with the 2006 comparatives restated to IFRS. Accordingly thefinancial information for the six months to 30 June 2006 has been restated topresent the comparative information in accordance with IFRS based on thetransition date of 1 January 2006. The accounting policies applied in these unaudited financial statements is thosethat the Group expects to apply in its annual financial statements for the yearended 31 December 2007, which will be prepared in accordance with IFRS, andthose parts of the Companies Act 1985 that remain applicable to companiesreporting under IFRS. This interim report does not constitute statutory accounts of the Group withinthe meaning of section 240 of the Companies Act 1985. Statutory accounts for theyear ended 31 December 2006, which were prepared under UK generally acceptedaccounting principles (UK GAAP), have been filed with the Registrar ofCompanies. The auditors' report on those accounts was unqualified and did notcontain any statement under section 237 (2) or (3) of the Companies Act 1985.The unaudited results for the year ended 31 December 2006 disclosed in thisreport are an abridged version of the company's Annual Report and Accountsadjusted for the transition to IFRS. They do not constitute the FinancialStatements for that period. At the date of authorisation of this interim financial statement the followingStandards and Interpretations which have not been applied in these financialstatements were in issue but not yet effective: International Financial Reporting Standards ("IFRS") •IFRS 7 "Financial Instruments: Disclosures" •IFRS 8 "Operating Segments" International Financial Reporting Interpretations Committee ("IFRIC") •IFRIC 11 "IFRS 2: Group and Treasury Share Transactions" •IFRIC 12 "Service Concession Arrangements" •IFRIC 13 "Customer loyalty programmes" •IFRIC 14 "IAS 19 - The limit on a defined benefit scheme asset, minimum funding requirement and their interaction" Amendments to existing standards Amendment to IAS 1 "Presentation of Financial Statements" - Capital disclosuresAmendments to IAS 19 "Employee Benefits" - Actuarial Gains and Losses, Group Plans and DisclosuresAmendments to IAS 21 "The Effects of Changes in Foreign Exchange Rates" - Net Investments in Foreign Operation.Amendments to IAS 39 "Financial Instruments: Recognition and Measurement"- Cash flow hedge accounting of forecast intra-group transactions, The Fair Value Option.Amendments to IAS 39 "Financial Instruments: Recognition and Measurement" and IFRS 4 "Insurance Contracts"Amendments to IFRS 1 "First-time adoption of International Financial Reporting Standards" The directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the Group when the relevant standards come into effect for commencing on or after 1 January 2008. 1 Principal Accounting Policies of the Group This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRSs in issue that either areendorsed by the EU and effective (or available for early adoption) at 30 June2007 or are expected to be endorsed and effective (or available for earlyadoption) at 31 December 2007, the Group's first annual reporting under IFRS.Based on these adopted and unadopted IFRSs, the directors have made assumptionsabout the accounting policies expected to be applied, which are as set outbelow, when the first annual IFRS financial statements are prepared for the yearending 31 December 2007. The adopted IFRS that will be effective (or available for early adoption) in theannual financial statements for the year ending 31 December 2007 are stillsubject to change and to additional interpretations and therefore cannot bedetermined with certainty. Accordingly, the accounting policies for the annualperiod will be determined finally only when the annual financial statements areprepared for the year ending 31 December 2007. Transitional arrangements The Group has taken the following optional exemptions contained in IFRS 1'First-time Adoption of International Financial Reporting Standards' inpreparing the Group's balance sheet on transition to IFRS at 1 January 2006: Cumulative translation differences - the cumulative translation differences forall foreign subsidiaries have been set to zero at 1 January 2006 and exchangedifferences arising prior to this date will not be recycled to the incomestatement. Business combinations - the Group has elected not to apply IFRS-3 BusinessCombinations retrospectively to past business combinations (businesscombinations that occurred before the date of transition to IFRS). Based on the above exemptions there are no transitional adjustments to the 1January 2006 opening balance sheet. A UK GAAP to IFRS reconciliation for thecomparative periods is included in this interim statement in Note 5. Basis of consolidation The consolidated income statement and balance sheet include the financialstatements of the company and its subsidiary undertakings made up to 31 December2006. Acquisitions of subsidiaries are dealt with by the acquisition method ofaccounting except for those qualifying as group reconstructions where mergeraccounting is permitted. Research and Development Expenditure on research activities is recognised as an expense in the period inwhich it is incurred. An internally generated intangible asset arising from the Group's computersoftware development initiative is recognised only if all of the followingconditions are met: • An asset is created that can be identified • It is probable that the asset created will generate future economic benefits • The development cost of the asset can be measured reliably Development costs meeting these criteria are capitalised and amortised on astraight-line basis over their useful lives once the related software product isavailable for use. Share-based paymentThe group operates executive and employee share schemes. For all grants of shareoptions, the fair value as at the date of grant is calculated using an optionpricing model and the corresponding expense is recognised over the vestingperiod. The expense is recognised as a staff cost and the associated credit entry ismade against equity. Intangible assets Intangible assets purchased separately, such as software licenses that do notform an integral part of related hardware, are capitalised at cost and amortisedover their useful economic life. Intangible assets acquired through a businesscombination such as customer contracts and intellectual property are initiallymeasured at fair value and amortised over their estimated useful economic life. Tangible fixed assets and depreciation Tangible fixed assets other than freehold land are stated at cost lessdepreciation. Depreciation is provided at rates calculated to write off the costless estimated residual value of each asset over its expected useful life, asfollows: Broadcasting equipment 20% to 50% straight lineComputers, fixtures and fittings 20% to 50% straight line Leasing and hire purchase commitments Assets held under finance leases and hire purchase contracts are capitalised inthe balance sheet and depreciated over their estimated useful economic lives.The interest element of leasing payments represents a constant proportion of thecapital balance outstanding and is charged to the profit and loss account overthe period of the lease. All other leases are regarded as operating leases andthe payments made under them are charged to the profit and loss account on astraight line basis over the lease term. Investments Fixed asset investments are stated at cost less provision for diminution invalue. Borrowing costs Borrowing costs are recognised as an expense in the period when they areincurred. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Group reviews the carrying amounts of itstangible and intangible assets to determine whether there is any indication thatthose assets have suffered an impairment loss. If any such indication exists,the recoverable amount of the asset is estimated in order to determine theextent of the impairment loss (if any). Where the asset does not generate cashflows that are independent from other assets, the Group estimates therecoverable amount of the cash generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value inuse. In assessing value in use, the estimated future cash flows are discountedto their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to theasset for which the estimates of future cash flows have been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. An impairment lossis recognised as an expense immediately, unless the relevant asset is carried ata revalued amount, in which case the impairment loss is treated as a revaluationdecrease. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of an impairmentloss is recognised as income immediately, unless the relevant asset is carriedat a revalued amount, in which case the reversal of the impairment loss istreated as a revaluation increase. Financial instruments The following policies for financial instruments have been applied in thepreparation of the Group's interim financial statements. Financial assets andfinancial liabilities are recognised on the Group's balance sheet when the Groupbecomes a party to the contractual provisions of the instrument. Cash and cash equivalents For the purpose of preparation of the cash flow statement, cash and cashequivalents includes cash at bank and in hand, and short term deposits with anoriginal maturity period of three months or less. Trade and other receivables Trade and other receivables do not carry any interest and are stated at theirnominal value as reduced by appropriate allowances for estimated irrecoverableamounts. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Deferred taxation Deferred tax is recognised in respect of all timing differences that haveoriginated but not reversed at the balance sheet date where transactions orevents that resulted in an obligation to pay more tax in the future or a rightto pay less tax in the future have occurred at the balance sheet date. Timingdifferences are differences between the group's taxable profits and its resultsas stated in the financial statements that arise from the inclusion of gains orlosses in tax assessments in periods different from those in which they arerecognised in the financial statements. Deferred tax is measured at the average tax rates that are expected to apply inthe periods in which timing differences are expected to reverse, based on taxrates and laws that have been enacted or substantially enacted by the balancesheet date. Deferred tax is measured on a non-discounted basis. Foreign currencies The accounting policy on foreign currencies, in compliance with IAS 21,additionally includes the following: The income statement and balance sheet of foreign operations and foreignentities are translated into the functional currency (£ sterling) onconsolidation at the average rates for the period and the rates prevailing atthe balance sheet dates respectively. Exchange gains and losses arising on thetranslation of the Group's net investment in foreign operations and foreignentities, are recognised as a separate component of shareholders' equity. Ondisposal of foreign operations and foreign entities, the cumulative translationdifferences are recycled to the income statement and recognised as part of thegain or loss on disposal. The most important foreign currency for the Group is the US dollar. The relevantexchange rates for this and other currencies to sterling were: +-----------------+----------------+------------------+------------------+|Currency | 30 June 2007 | 30 June 2006 | 31 December 2006 |+-----------------+----------------+------------------+------------------+|US $ | 2.0064| 1.8163| 1.9600|+-----------------+----------------+------------------+------------------+|Euro | | 1.44000| 1.4600|| | 1.4856| | |+-----------------+----------------+------------------+------------------+|Hong Kong $ | 15.6885| 14.1088| 15.6600|| | | | |+-----------------+----------------+------------------+------------------+ Revenue Recognition Revenue is measured at the consideration received or receivable and representsamounts receivable for services provided in the normal course of business, netof discounts, VAT and other sales-related taxes. 2 Loss per shareBasic loss per share is based on the loss on ordinary activities after taxationand on the following weighted average number of shares in issue. Shares in issue 30 June 2007 30 June 2006 31 December 20061 January 2007 44,387,300 28,346,900 28,346,900Issue of shares in the year 17,580,274 16,040,40030 June 2007 61,967,547 28,346,900 44,387,300Adjustments:Weighted Shares 53,405,602 28,346,900 32,609,687 As a result of the loss incurred in the period ended 30 June 2007 there is nodilutive effect from the issue of share options. 3 Segmental reporting Unaudited Unaudited Unaudited 30 June 2007 30 June 2006 31 December 2006 £ £ £REVENUEUK 5,631,624 7,198,237 12,900,563Rest of Europe 600,000 2,196,240 6,889,485Asia 764,690 218,077 1,019,629South America 4,399,959 1,168,295 Total 11,396,273 9,612,554 21,977,972 COST OF SALESUK 4,421,355 6,605,534 12,745,472Rest of Europe 500,000 1,864,849 2,891,623Asia 1,020,183 321,579 1,117,728South America 4,082,618 1,013,356 Total 10,024,157 8,791,962 17,768,179 GROSS PROFITUK 1,210,268 592,703 155,091Rest of Europe 100,000 331,391 3,997,862Asia (255,493) (103,502) (98,099)South America 317,341 154,939 Total 1,372,116 820,592 4,209,793 OPERATING LOSSUK (127,748) (1,302,481) (2,091,118)Rest of Europe 116,862Asia (629,558) (306,194) (592,982)South America (279,586) (131,220) (9,674)Non SegmentalDepreciation and amortisation (234,831) (285,368) (575,159)IFRS 2 charge -share option (492,708) (160,515) (298,895)expense Total (1,764,431) (2,185,778) (3,450,966) TOTAL ASSETSUK 4,533,134 5,772,789 4,618,949Rest of Europe 130,430 1,815 2,868,974Asia 867,840 359,540 878,346South America 803,495 1,018,253Non SegmentalDeferred tax 84,698 84,698 Total 6,419,597 6,134,144 9,469,220 Unaudited Unaudited Unaudited 30 June 30 June 2006 31 December 2007 2006 £ £ £ TOTAL LIABILITIESUK 2,662,682 3,476,499 2,591,040Rest of Europe 1,815 2,736,732Asia 979,144 684,817 957,806South America 928,413 1,027,188 Total 4,570,239 4,163,131 7,312,766 CAPITAL EXPENDITURE -INTANGIBLEUK 664,453 13,256 136,886Rest of Europe 1,815Asia 41,583 1,507South America Total 664,453 56,654 138,393 CAPITAL EXPENDITURE - TANGIBLEUK 48,538 427,206 411,806Rest of Europe 1,910Asia 24,853 47,137South America 102,598 Total 73,391 427,206 563,451 DEPRECIATION AND AMORTISATIONUK 221,930 285,368 549,461Rest of Europe 95Asia 12,901 24,350South America 1,253 Total 234,831 285,368 575,159 4 Financial Instruments FacilityThe group currently has an overdraft facility of £150,000, bearing interest of2% over base rate up to £50,000 and 3% over base rate above this amount. Headstart convertible LoanIn January 2007, the company entered into a convertible loan agreement of up to£1 million with the Headstart Funds. The facility was available for a term oftwo years, with interest payable at a rate of 8 per cent per annum. Headstarthad the option to convert any part of the loan which is outstanding into equityat any time for a period of 360 days from the date that the relevant tranche ofthe loan was made available. Headstart was issued with five year warrants inrespect of 1,000,000 Ordinary Shares of 3 pence each at an exercise price of 8pence per share. The company also issued 355,555 new Ordinary Shares of 3 pence each to Headstartat a price of 8 pence per share as part of the arrangement. By 16 May 2007, thecompany had fully drawn down the £1 million facility, and converted the proceedsinto Ordinary Shares of 3 pence each. 5 Capital and reserves Shares issued During the period ending 30 June 2007 17,580,274 ordinary shares were issued at3 pence each. Cumulative translation reserve The translation reserve comprises all foreign exchange differences arising fromthe translation of the financial statements of operations that do not have asterling functional currency. Exchange differences are classified as equity andtransferred to the Group's translation reserve. Such translation differences arerecognised in the income statement in the period in which the operation isdisposed of. 6 Explanation of Transition to IFRS As required by IFRS 1, the impact of the transition from UK GAAP to IFRS isexplained below.The accounting policies set out above have been applied consistently to allperiods presented in this interim financial information and in preparing anopening IFRS balance sheet at 1 January 2006 for the purposes of the transitionto IFRS. IAS 1 - Presentation of Financial Statements. The form and presentation of theUK GAAP financial statements has been changed to be in compliance with IAS 1.IAS 7 - Cash Flow Statements. The IFRS Cash Flow Statement, prepared under IAS7, presents cash flows in three categories; cash flows from operatingactivities, cash flows from investing activities and cash flows from financingactivities. Other than the reclassification of cash flow into the new disclosurecategories, there are no significant differences between the Group's Cash FlowStatement under UK GAAP and IFRS. Consequently, no cash flow reconciliations areprovided. Purchases of tangible fixed assets under UK GAAP have beenreclassified to purchases of intangible assets and purchases of property, plantand equipment under IFRS. No reconciliation between UK GAAP and IFRS has been made in respect of the 1January 2006 balance sheet, as there was no difference between the two formats. (a) Translation reservesThe translation reserve results from exchange gains and losses arising from thetranslation of the Group's net investments in its overseas operatingsubsidiaries. The foreign exchange impact of translating foreign operationssince 1 January 2006 is reflected in the restated income statements. (b) Share option expenseThe share option expense is realised in accordance with the company accountingpolicies. (c) Amortisation of intangiblesThe intangible assets acquired have been amortised in accordance of IFRS 38 asstated in company's policy on intangible assets. RECONCILIATION OF UK GAAP TO IFRSSix months ended 30 June 2006 Consolidated Income Statement UK IFRS Restated GAAP Adjustment £ £ £ REVENUE 9,612,554 9,612,554Cost of sales (8,791,962) (8,791,962)GROSS PROFIT 820,592 820,592Operating costs and expenses:General and administrative (2,560,487) (2,560,487)Depreciation and amortisation (285,368) (285,368)IFRS 2 charge -share option expense (160,515) (160,515)Total operating costs and expenses (3,006,370) (3,006,370) OPERATING LOSS (2,185,778) (2,185,778) Interest receivable 22,103 22,103Interest payable and similar charges (935) (935)LOSS ON ORDINARY ACTIVITIES BEFORE (2,164,610) (2,164,610)TAXATIONTaxationLOSS ON ORDINARY ACTIVITIES AFTER TAXATION (2,164,610) (2,164,610) Attributable to:Equity Holders of the company (2,022,758) (2,022,758)Minority interest (141,852) (141,852)LOSS FOR THE PERIOD (2,164,610) (2,164,610) LOSS PER SHAREBasic (7.1)p (7.1)p RECONCILIATION OF UK GAAP TO IFRSSix months ended 30 June 2006 Consolidated Balance Sheet IFRS UK GAAP Adjustment Restated £ £ £ASSETSNON-CURRENT ASSETSIntangible assets- Development costs 604,444 604,444Investments 4,933 4,933Property, plant and equipment 1,064,200 1,064,200Deferred tax 604,444 604,444Total non-current assets 1,673,577 1,673,577 CURRENT ASSETSWork in ProgressTrade and other receivables 4,239,185 4,239,185Cash and cash equivalents 221,382 221,382 4,460,567 4,460,567TOTAL ASSETS 6,134,144 6,134,144 LIABILITIESNon currentFinance lease 55,672 55,672CurrentTrade and other payables 4,107,459 4,107,459TOTAL LIABILITIES 4,163,013 4,163,013 NET ASSETS 1,971,013 1,971,013 CAPITAL AND RESERVESCalled up share capital 850,407 850,407Share premium account 4,038,676 4,038,676Merger reserve 1,300,395 1,300,395Retained earnings (4,076,613) (4,076,613)Translation reserveAttributable to equity holders 2,112,865 2,112,865of the companyMinority Interest (141,852) (141,852)TOTAL EQUITY 1,971,013 1,971,013 RECONCILIATION OF UK GAAP TO IFRSYear ended 31 December 2006 Consolidated Income Statement UK IFRS Restated GAAP Adjustment £ £ £ REVENUE 21,977,972 21,977,972Cost of sales (18,211,533) 443,354 (17,768,179)GROSS PROFIT 3,766,439 443,354 4,209,793Operating costs and expenses:General and administrative (6,786,705) (6,786,705)Depreciation and amortisation (575,159) (575,159)IFRS 2 charge -share option expense (298,895) (298,895)Total operating costs and expenses (7,660,759) (7,660,759) OPERATING LOSS (3,894,320) 443,354 (3,450,966) Interest receivable 32,217 32,217Interest payable and similar charges (6,872) (6,872)LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (3,868,975) 443,354 (3,425,621)Taxation 64,798 64,798LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (3,804,177) 443,354 (3,360,823) Attributable to:Equity Holders of the company (3,773,493) 443,354 (3,330,139)Minority interest (30,684) (30,684)LOSS FOR THE PERIOD (3,804,177) 443,354 (3,360,823) LOSS PER SHAREBasic and dilluted (11.6)p (10.2)p RECONCILIATION OF UK GAAP TO IFRSYear ended 31 December 2006 Consolidated Balance Sheet UK IFRS Restated GAAP Adjustment £ £ £ASSETSNON-CURRENT ASSETSIntangible assets- Development costs 656,050 443,354 1,099,404Investments 4,933 4,933Property, plant and equipment 1,108,507 1,108,507Deferred tax 84,698 84,698 1,854,188 443,354 2,297,542 CURRENT ASSETSWork in progress 38,984 38,984Trade and other receivables 6,997,017 6,997,017Cash and cash equivalents 135,677 135,677 7,171,678 7,171,678TOTAL ASSETS 9,025,866 443,354 9,469,220 LIABILITIESNon currentFinance Leases 70,202 70,202CurrentTrade and other payables 7,267,559 (24,995) 7,242,564TOTAL LIABILITIES 7,337,761 (24,995) 7,312,766 NET ASSETS 1,688,105 468,349 2,156,454 CAPITAL AND RESERVESCalled up share capital 1,331,619 1,331,619Share premium account 4,775,743 4,775,743Merger reserve 1,300,395 1,300,395Retained earnings (5,688,968) 443,354 (5,245,614)Translation reserve 24,995 24,995Attributable to equity holders of the company 1,718,789 468,349 2,187,138Minority interest in equity (30,684) (30,684)TOTAL EQUITY 1,688,105 468,349 2,156,454 Notes: The deferred tax was included within debtors in the last published report andhave now been separately disclosed. Prior to the adoption of IFRS, the development costs amounting to £443,354 wereexpensed under UK GAAP. Under IFRS, the Company is required to capitalise thesecosts (subject to impairment considerations) and accordingly the restated incomestatements reflect this. 7 Subsequent events Cellcast Asia Holdings Limited ("CAH")In August 2007, a new intermediate holding company, Cellcast Asia Holdings wasestablished, into which the Company injected its 100% holding in CellcastInteractive India Pvt Limited and its 50% holding in Cellcast SEA Limited. Atthe same time, CAH conditionally agreed to issue US$5.25 million of Series APreferred Stock to Canaan Partners, a global venture capital firm. Post newmoney the Preferred Stock issue values CAH at US$13.5 million.The Company now owns 37.5% of the fully diluted share capital of CAH. CanaanPartners own 38.9% with the remaining shares being held by a trust whichadministers share option plans for existing and future employees of CellcastIndia. Additional loan facilityOn 2 July 2007, the Company entered into a secured convertible loan agreement ofup to £2 million with the Headstart Funds. The facility, which is secured bycharges over available assets of the Company, is available for a term of twoyears, with interest payable at a rate of 9 per cent per annum. The firsttranche of £500,000 was drawn down on 4 July 2007.Headstart has the option to convert any part of the loan which is outstandinginto equity at any time for a period of 360 days from the date that tranche ofthe loan was made available at 95 per cent of the lowest bid price of theCompany's shares during the 15 trading days preceding the conversiondate. Unless previously repaid or converted, each tranche is repayable not laterthan 360 days after draw down. This information is provided by RNS The company news service from the London Stock Exchange