Interim Results

RNS Number:7070J
Elitel Telecom S.p.A.
29 September 2006

Immediate Release                                             
29 September 2006



                             Elitel Telecom S.p.A.

          Interim results for the six months period ended 30 June 2006


29 September 2006 - Elitel Telecom S.P.A. ("Elitel" or the "Group"); (AIM: ETM),
the independent Italian telecom services provider, is pleased to announce its
interim financial results for the six months period ended 30 June 2006.

Highlights:

* Revenues increased 61% to Euro101.4 million (2005:  Euro63.0 million)
* Gross profit increased 24% to Euro15.5 million (2005:  Euro12.4 million)
* EBITDA, excluding exceptional items, of Euro4.1 million (2005: loss Euro1.0 million)
* Loss from operations Euro6.0 million (2005:  Euro5.6 million)
* VoIP end users growth of 22%, as at 30 June 2006 11,356 end users (31 December 
  2005: 9,285)
* More investments in VoIP and wholesale international services
* Launch of international pre-paid calling card
* Acquisitions strategy for strengthening the existing business


For further information, please contact:

Elitel Telecom S.p.A                                         [phone]
Federico d'Este (Chief Executive)
Nicolo Zanchi (Group Corporate Development Officer and Investor Relation)

Buchanan Communications                                  [phone]
Mark Edwards / Isabel Podda

Charles Stanley Securities                               [phone]
Russell Cook/Freddy Crossley


Commenting on the Financial Results, Federico d'Este, Chief Executive Officer,
said: "During the first half of 2006 Elitel has strengthened its competitive
position in the fixed line market demonstrated by the 61% growth in turnover.
The Group has launched new services in particular in the wholesale area with the
introduction of the pre paid cards and the signing of agreements with Angelo
Costa and Sisal for the distribution of the cards. In addition, we have
witnessed wider adoption of VoIP services which continues to represent an
important opportunity to strengthen Elitel's position in the SME and SOHO
markets. Our investment focus remains the further improvement of our network in
order to meet continued traffic growth, to strengthen the international routes
and to launch new services based on our VoIP platform. We have also completed
some very exciting acquisitions in the last few months that strengthen our
position in the Italian market through the purchases of Alpikom, Telecontatto
and BNS in addition to the agreements signed with C-Factory, for the launch of
www.zaap.it, and with FON Wireless."


About Elitel 

Elitel is an independent Italian fixed line telecommunications group. It
provides a broad range of voice, data and broadband services, including voice-
over IP ('VoIP'), to both businesses and residential customers. The Group also
provides wholesale telecommunications services to other carriers, international
call services specifically for the Italian ethnic market and telecommunications
services to premium content providers. Elitel's network, which covers the whole
of Italy, is based on interconnection agreements and access through the leasing
of lines from carriers including Telecom Italia and other international
carriers. By 30 June 2006 the Group's own fixed line customer base comprised
more of 73,000 business customers; 226,000 residential customers and more of
11,300 VoIP end users. In February 2006, Elitel (www.eliteltelecom.com)
successfully floated on AIM, part of the London Stock Exchange, raising #8.0
million (Euro12 million) to fund the expansion of the Group.


Chairman's statement 

I am pleased to announce Elitel's interim results, for the six months period to 
30 June 2006.


Operating Performance 

During the first half of 2006 the Group has further strengthened its competitive
position in the Italian telecoms sector as one of the largest independent
telecommunication companies in Italy. Elitel has continued to develop its
customer base in a number of important areas including, in particular, VoIP with
the priority to provide high quality services and maximising cross-selling
opportunities for VoIP and other services. The Group has also focused on the
provision of services such as the international pre-paid calling cards to the
ethnic market and the extension of the premium activities. Since our flotation
on AIM in February the Group has completed  and announced three acquisitions and
a number of other investments with various third parties that the Board
anticipates will each contribute to the continuing success of the Group.


Financial Performance

Elitel achieved a 61% growth in turnover to Euro101.4 million for the first six
months of 2006 as compared to the same period of 2005. This is due primarily to
an improved performance by the core fixed line business of the Small Business
and Residential ("SBR") division and, in particular, to the contribution of new
business lines, such as Elitel's Premium Services and the significant growth of
the Wholesale division. The operating loss of Euro6.0 million included the
following items:

                                         Eurom
Amortisation, depreciation and leasing  4.0
Write-down of trade receivables         3.7
Other extraordinary items               2.4
                                        
                                       10.1
                                        

The extraordinary items relate to a variety of one-off expenses.  These include
start up costs for the launch of our pre paid cards during the first half and
also charges incurred by the SBR business unit in connection with costs arising
from claims made in the Striscia la Notizia television programme, which is
referred to below. On 20 February 2006 Elitel Telecom S.p.A. was admitted to
trading on AIM following a placing of 6,173,800 new ordinary shares at a placing
price of #1.30 (Euro1.90) per share. The gross proceeds of the placing amounted to
#8.0 million (Euro11.7 million). Part of the placing was funded by existing
creditors through the conversion of part of their receivables. The net proceeds,
after the expenses of the placing and the amounts funded through debt
conversion, amounted to #5.2 million (Euro7.5 million).  As at 30 June 2006 the
Group had cash of Euro1.4m.


Employees and Board of Directors 

Elitel has a team of professional and dedicated managers and employees which is
reflected in the significant growth achieved in the last years. The Board would
like to thank all our staff for their efforts during the period. During the
period the board of Directors was enlarged through the appointments of Philip
Parker and Ezio Ravaccia, two new independent Non Executive directors. We would
like to welcome them both and express our gratitude for the contribution they
are already bringing to the Group


Outlook 

The current financial year has started well, with growth across each of
our divisions during the first eight months compared to last year, despite
increasing competition in certain of our markets. While the Wholesale and
Premium Services divisions have faced more challenging conditions, progress from
our Call Centre activities and the SBR division are in line with management
expectations.  While sales across the Group remain in line with market
forecasts, the Board believe that, given the issues related to Striscia la
Notizia and the pressure on profits resulting from the start up of new business
and from the need to respond to competitors' new offers, profits for the current
year will be lower than anticipated. Both the acquisitions and the agreements
signed will strengthen Elitel's position and complement the range or services
the Group offers with a particular focus on new technologies and markets such as
the WiFi and the mobile content. The Italian telecoms market is expected to
undergo further restructuring and evolution over the coming months and years, as
evidenced by recent announcements by the incumbent Telecom Italia.  The Elitel
Board remain confident that the Group will continue to take advantage of the
opportunities which these changes in the market offer. The Board is exploring
further opportunities to enhance its product offering for its customers and, in
particular, with convergence of Broadband, fixed line and mobile services. 
Furthermore Elitel intends to build on the success of its VoIP products with a
range of further bundled services for its business customers. The Board looks
forward to reporting further significant progress during 2006.


Elserino Piol
Chairman



Chief Executive's Review


Introduction 

Elitel has continued to make good progress in the first half of 2006 with
significant growth in revenues and the consolidation of our core- business. The
performance of our Premium Service are exceeding expectations. We are continuing
to consolidate our existing customer base within the SBR and the Large Account
business units. We have been particularly pleased with the continuing success of
Elitel's VoIP services launched in 2004, which had attracted more than 11,000
end users by the end of June.

Operational Review
Small Business and Residential

Divisional Highlights:

* Revenues up 13.4% to Euro28.7 million (2005: Euro25.3 million)
* Operating profit of Euro10.0 million; margin 34.9% (Euro2005: 8.3 million)
* Number of customers increase to 295,643 (December 2005: 242,845; June 2005: 
  174,312)
* VoIP end users increased to 5,955 (December 2005: 5,132; June 2005: 2,773)

The SBR division has continued to strengthen its position in its market despite
increased competition and margin pressure within the CPS (Carrier Pre-selection)
business. Margins have increased to 35% (2005: 33%) and the division has
continued to upgrade its offering to its existing customer base with the VoIP
service, in particular targeting small business customers.
During the first half of 2006 the Group has been targeted by a television
broadcast called Striscia la Notizia. The allegations made in the programme
concerning certain of Elitel SBR's practices were completely unwarranted but the
Group has incurred significant costs in order to rebut these allegations and to
maintain its public reputation.

Large Account

Divisional Highlights:

* Revenues up 18.3% to Euro11.3 million (2005: Euro9.5 million)
* Operating profit of Euro2.6 million; margin 23.1% (2005: Euro2.5 million)
* Number of customers increased to 2,369 (December 2005: 2,274; June 2005: 2,175)
* VoIP end users increased to 5,401 (December 2005: 4,153; June 2005: 1,682)

The Large Account division has consolidated its market share. Despite the
pricing pressure due to increased competition, the results have been
satisfactory in terms of contribution to the gross margin. The number of
customers increased, particularly our VoIP end users. The VoIP services still
represent an important opportunity to enlarge market share in the future. The
value added and consultancy services approach to clients is proving successful
and future investments in unbundling and WiMAX will have a further positive
influence on the business unit. Furthermore the division has strengthened its
sales team with the recruitment of new key staff with extensive experience in
the telecommunications sector.

VAS and Multimedia

Divisional Highlights:

* Revenues up 815% to Euro28.9 million (2005: Euro3.2 million)
* Operating profit of Euro2.4 million; margin 8.2% (December 2005: 4.3 million; 
  June 2005: 0.5 million)
* Premium services were operating for the whole of the period with positive 
  results

Our Premium Services were launched in April 2005 with a European focus. The
results have shown that the business unit can perform well and a first step
towards the exploitation of strategic opportunities in mobile premium services
was achieved through the joint venture with C-Factory. The customer base for
multimedia services continues to grow in line with expectations.

Wholesale

Divisional Highlights:

* Revenues up 38.0% to Euro24.4 million (2005: Euro17.7 million)
* Operating profit of Euro0.4 million; margin 1.5% (2005: Euro1.5 million)
* Investment in the Digitalk platform to meet traffic growth
* Launch of the pre-paid calling card services

The growth in turnover during the first half of 2006 has produced a different
mix in terms of margins. The growth in our lower margin ethnic market business
has more than compensated for the anticipated decrease in the higher margin
fixed mobile traffic. The launch of pre paid cards was also linked to lower
margin due to the start up costs of such activity and to the marketing costs
related to entering a very competitive market. Further development in the
prepaid cards business was achieved in May, when Elitel signed agreements with
Angelo Costa S.p.A., the Italian partner of Western Union in Italy, and Sisal
S.p.A., an Italian gaming and lottery provider with more than 18,000 outlets
throughout Italy, for the sale and co-brand of Elitel's pre-paid calling cards.

Call Centre

Divisional Highlights:

* Revenues up 10.9% to Euro7.9 million (2005: Euro7.2 million)
* Operating profit of Euro2.7 million; margin 34.1% (2005: Euro2.9 million)
* New customers acquired throughout the first half of 2006
* Acquisition of Telecontatto (not consolidated in June results)

The division performed in line with expectations in terms of turnover and margin
contribution. The division has developed its customer base and has acquired a
number of significant new clients in the ICT, Food and Beverage, Fashion and
Utilities sectors.
During the period AMI' Sicilia has been rebranded as "OneCall", we have opened a
new call centre in Brescia and we have acquired a new company called
Telecontatto with call centres in Milan and Turin. Identifying appropriately
qualified and experienced call centre workers remains a challenge for the
business, although the number of call centre workers had increased to 2,000
(with Telecontatto) by the period end. Further growth in this area is
anticipated.


Acquisitions a development

Since May Elitel has completed three acquisitions that have strengthed its
business and helped in further developing its activities. 
Within the Call Centre business unit, in May, Elitel has acquired Telecontatto
S.r.l., ("Telecontatto") a call centre operator with its activities based in
Milan and Turin, generating revenues of Euro4.7m in the year to 31 December 2005
and producing EBITDA of Euro470,000, with a focus on major national and multi-
national clients primarily in the automotive and retail sectors. 
Under the terms of the acquisition agreement Elitel has acquired an initial
stake of 52% in Telecontatto for a cash consideration of Euro156,000 and it will
acquire the remaining 48% for up to Euro144,000 payable in cash or shares on or
before 31 October 2006. In the Large Accounts business unit Elitel has made two
acquisitions: the data centre branch of Blixer Net Services S.r.l., and Alpikom
S.p.A. 
The agreement for the rent of the data centre branch of Blixer Net Services
S.r.l. ("BNS"), which was signed at the beginning of July, includes an option to
acquire the branch for a final cash payment of up to Euro2.0 million, less the
amounts already paid as rental, at any time from 2011 until 2016. BNS Data
Centre branch generated revenues of Euro1.92million in the year ended 31 December
2005, including sales to Elitel of approximately Euro0.58 million. The
incorporation of the BNS business with Elitel, strengthens Elitel's integrated
voice and data offering through the utilisation of BNS' client base in 'housing
& hosting' services coupled with the use of their data centre in Bergamo.  The
addition of a third data centre and of a team of dedicated professionals will
enhance Elitel's capability of servicing its existing data clients while
offering a wider number of services to its voice clients. BNS is owned by Gengar
Servicos de Consultoria Limitada, which is wholly owned by Kiwi II, Elitel's
majority shareholder. In July Elitel also acquired a 54.8% interest in the
issued share capital of Alpikom S.p.A. ("Alpikom") for a total cash
consideration of Euro2.9 million. Elitel has also been granted an option to acquire
a further 38.5% interest in July 2009 for a further cash consideration of Euro2.3
million.  Alpikom's shareholders have also been granted a put option to sell a
38.5% shareholding to Elitel in July 2009 for a cash consideration of Euro1.8
million.  The maximum consideration payable for an aggregate 93.3% shareholding
will be Euro5.2 million. Alpikom S.p.A. is a regional telecom operator based in
Trentino - Alto Adige, in north eastern Italy, providing both voice and data
services generating revenues of Euro7.0 million in the year to 31 December 2005 and
an operating profit of Euro972,000. Alpikom offers voice and data services both to
residential and business clients in the Trentino - Alto Adige region.  It has a
particularly strong relationship with the local government given its original
shareholding. Alpikom has also developed a data centre in Trento that will
strengthen Elitel's housing & hosting offering.  Alpikom's clients comprise
banks, industrial and commercial clients, as well as local public agencies and
government. In the Value Added Services business unit Elitel has signed a joint
venture agreement with C-Factory, a leading Italian mobile content provider, for
offering mobile users a web-based information and entertainment service platform
based on a range of proprietary multimedia content All Media S.r.l., is 55%
owned by Elitel and C-Factory who owns the remaining 45%. Content will be
delivered through a new web portal www.zaap.it, offering a range of proprietary
content including mini-cartoons, video ringtones, screen savers and sound
effects, via the web and to the customer's mobile.  Elitel will provide
connectivity via premium rate telephone numbers and will also manage billing
services, while C-Factory will undertake content creation and will be
responsible for the promotion and marketing of the project.


Change of Registered Address

Elitel announces that it has moved its registered office to via Virgilio Maroso
50, 00142 Rome. The Group retains its main operative office in via Mecenate 90,
20138 Milan.


Outlook

Elitel has continued to experience steady growth in turnover and profitability
since the start of the year. In terms of marketing activities two new offerings
for the SBR division have been recently launched: "Tariffa 10+", "Special zero"
and "Risparmio canone", all of which are generating significant commercial
interest. The new VoIP offer "Elitel Futura Digit", for those clients with an
existing switchboard, has been launched and reaction from the market has been
very positive.
The development of our VoIP technology remains a key driver for the Group's
development. The Group is also exploring the development of its services to
offer both fixed and mobile telephony services to its clients as a single
product, enabling Elitel to strengthen and extend further its market position.
Preliminary discussions have been initiated with a number of mobile operators
with a view to entering into reseller agreements which would enable Elitel to
offer both fixed and mobile telephony services to its clients issuing one single
invoice.  Elitel believes that this will enhance the Group's market position
while providing a higher level of customer service and increasing customer
spend.
New developments are also envisaged in the VAS market, with the possibility to
move the group's role from the one of simple carrier to the one of content and
services aggregator. The partnership with C-Factory was a first step in this
direction. In the WiFi sector, where we expect significant growth over the next
few months, we are continuing to test new technologies in cooperation with a
specialist product partner. Meanwhile we have launched Elitel's integrated,
dual-mode phone that allows customers to use the Elitel VoIP service wherever a
Wi-Fi network is available as well as working as a GSM phone with mobile
tariffs. We have also signed a memorandum of understanding with FON, one of the
largest WiFi Hotspot community that  provides worldwide Internet access to
70,000 members of its virtual community (known as "Foneros") by making use of
spare bandwidth from customers' broadband connections. The agreement with FON
represents a further step towards convergence of Elitel's fixed-mobile services.
Finally, the Unbundling of the Local Loop across Italy remains an important
project for the country and for Elitel. We have identified some 30 sites, which
are currently under evaluation, where we anticipate establishing local networks
together with our technology suppliers. This will be an important development
for Elitel during 2007.


Federico D'Este
Chief Executive



Consolidated income statements

                          Six months ended    Year ended      Six months ended
                                30/06/2006    31/12/2005            30/06/2005
                                     Euro'000         Euro'000                 Euro'000

Revenue                            101,365       154,672                62,960
Cost of sales                      (85,911)     (126,256)              (50,525)
                                                 
Gross profit                        15,454        28,416                12,435
                                                 
Personnel expenses                  (7,371)      (15,122)               (7,120)
Sales and marketing
expenses                            (3,610)       (5,108)               (2,410)
Other operating expenses
(net)                              (10,412)      (19,641)               (8,408)
Restructuring costs                    (48)         (266)                 (167)
                                                 
                                   (21,441)      (40,137)              (18,105)
                                                 
Loss from operations                (5,987)      (11,721)               (5,670)
                                                 
Investment income                      192           479                   137
Long term debt
restructuring                       (1,027)       (2,096)               (1,091)
Finance costs                         (319)         (717)                 (301)
                                                 
Loss before tax                     (7,141)      (14,055)               (6,925)
                                                 
Income tax credit /
(charge)                              (760)        4,291                  (771)
                                                 
Net loss for the year
attributable to equity
holders of the parent               (7,901)       (9,764)               (7,696)


Basic and diluted earnings
per share (euro)                     (0.22)        (0.46)                (7.98)




Consolidated balance sheets

                              Six months ended   Year ended   Six months ended
                                    30/06/2006   31/12/2005         30/06/2005
                                         Euro'000        Euro'000              Euro'000
ASSETS
Non-current assets
Property, plant and
equipment                                8,911        9,385              9,535
Goodwill                                53,825       53,825             53,825
Trademarks                                  75           74                 74
Other intangible assets                  1,508        1,234                871
Investments                              8,698        8,365             10,362
Deferred tax assets                     18,625       19,015             12,992
                                                    
Total non current assets                91,642       91,898             87,659
                                                    
Current assets
Trade and other receivables             71,379       69,445             57,308
Non trade receivables                   28,299       23,380             15,220
Cash and cash equivalents                1,447          632              3,061
                                                    
Total current assets                   101,125       93,457             75,589
                                                    
Total assets                           192,767      185,355            163,248

EQUITY AND LIABILITIES
Equity
Issued capital                           1,904        1,244                964
Share premium                           43,227       35,702              9,874
Shareholders grants                          -           73             22,362
Retained losses                        (21,048)     (13,169)           (11,139)
                                                    
Total equity attributable
to equity holders                       24,083       23,850             22,061
of the parent
                                                    
Non-current liabilities
Interest-bearing loans and
borrowings                              48,737       49,124             54,049
Employee benefits                        2,500        2,433              2,406
Provisions                               2,149        2,167              2,175
Deferred tax liabilities                 4,468        4,412              3,921
Other liabilities                            -        2,000                  -
                                                    
Total non-current
liabilities                             57,854       60,136             62,551
                                                    
Current liabilities
Current portion of
interest-bearing loans                   9,114        9,182              6,493
and borrowings
Bank overdrafts                          2,560          950              2,766
Trade and other payables                98,082       90,589             68,783
Income tax payable                       1,074          648                594
                                                    
Total current liabilities              110,830      101,369             78,636
                                                    
Total equity and
liabilities                            192,767      185,355            163,248




Consolidated statements of changes in equity

                   Share       Share     Shareholders'      Retained     
                 capital     premium            grants        losses     Total
                   Euro'000       Euro'000             Euro'000         Euro'000     Euro'000

Balance at 1
January 2005         964       9,874            16,612        (3,450)   24,000
Net loss for
the period             -           -                 -        (7,696)   (7,696)
Consolidation
and IFRS
application            -           -                 -             7         7
Loss coverage          -           -             5,750             -     5,750
                                                   
Balance at 30
June 2005            964       9,874            22,362       (11,139)   22,061
Net loss for
the period             -           -                 -        (2,068)   (2,068)
Consolidation
and IFRS
application            -           -                 -            38        38
Loss coverage        280      25,828           (22,289)            -     3,819
                                                   
Balance at 31
December 2005      1,244      35,702                73       (13,169)   23,850
Net loss for
the period             -           -                 -        (7,901)   (7,901)
Consolidation
and IFRS
application            -           -               (73)           22       (51)
Increase in
share capital        660       7,525                 -             -     8,185
                                                   
Balance at 30
June 2006          1,904      43,227                 -       (21,048)   24,083




Consolidated statements of cash flows

                           Six months ended    Year ended     Six months ended
                                 30/06/2006    31/12/2005           30/06/2005
                                      Euro'000         Euro'000                Euro'000
OPERATING ACTIVITIES
Cash generated from
operations                           (5,344)       (2,280)              (2,505)
Income taxes paid                      (426)         (761)                (290)
Interest paid                          (319)         (717)                (300)
                                                  
CASH FLOWS FROM OPERATING            (6,089)       (3,758)              (3,095)
ACTIVITIES
                                                  
INVESTING ACTIVITIES
Interest received                       161           468                  130
Proceeds on disposal of
trading investments                       -         2,685                  688
Proceeds on disposal of
property, plant and
equipment                                 -           126                    -
Purchase of property, plant
and equipment                        (1,521)       (4,132)              (1,168)
Purchase of trading
investments                            (177)            -                    -
Purchase of intangible
assets                                 (775)       (1,378)                (343)
Acquisition of subsidiary              (156)            -                    -
                                                  
CASH FLOWS FROM INVESTING            (2,468)       (2,231)                (693)
ACTIVITIES
                                                  
FINANCING ACTIVITIES
Repayment of borrowings                (455)       (2,488)                (252)
Proceeds on issue of share
capital and shareholders
commitments                           8,185         9,569                5,750
                                                  
CASH FLOWS FROM FINANCING             7,730         7,081                5,498
ACTIVITIES
                                                  
NET INCREASE/(DECREASE) IN
CASH AND CASH EQUIVALENTS              (827)        1,092                1,710
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR                   (318)       (1,421)              (1,421)
Effect of foreign exchange
rate changes                             32            11                    6
                                                  
CASH AND CASH EQUIVALENTS
AT END OF YEAR                       (1,113)         (318)                 295




Notes

1. General

The financial information set out above does not constitute the Group's interim
financial statement for the six months period ended 30 June 2006 but is derived
from it. The interim financial statement will be available to investors upon
request to be addressed to either the Group or Charles Stanley.
The auditors have performed a limited review on the interim financial statements
and they have expressed their opinion without qualifications.
The financial information set out above has been prepared on the basis of the
accounting policies as set out in the Group's consolidated accounts as at and
for the year ended 31 December 2005.


2. Segmental information

Business segments

Elitel Telecom S.p.A. supplies a wide range of telecommunications operator
services on the fixed line telephony market, including internet protocol ('IP')
related services (Voice over Internet Protocol ('VoIP'), internet services,
voice services, multimedia, and call centres).

For management purposes, the Group is organised into five principal business 
units:

* Small business and residential (SBR)
* Large account (LA)
* Wholesale (WHL)
* Call centres (CC)
* Value added services (VAS)

The small business and retail unit provides services to both small corporate
clients and private users. The large account unit trades with larger
corporations. Both units offer services across the following business streams:
Voice over Internet Protocol, fixed line telephony and data transfer, and
internet related services. The wholesale unit delivers wholesale services to
other telecommunications operators and phone centres. It also trades in prepaid
cards which are distributed primarily through phone centres. The call centre
business unit relates to the activity of the Telework S.r.l. and OneCall S.r.l.
subsidiary companies wile the new acquisition, Telecontatto S.r.l., was not
consolidated since it was acquired in June 2006 and therefore not material for
the six months results. All three companies provide call centre services for
both the group and third party customers.
The value added services unit supplies connectivity to content providers
(premium market) as well as developing multimedia and value added services for
the corporate market, including premium access numbers and multimedia services
(television, audio visual). These business units are the basis on which the
Group reports its primary segmental information.



Segmental information about these business units is presented below:

Six months ended 30      SBR        LA       WHL       CC       VAS      Total
June 2006
                       Euro'000     Euro'000     Euro'000    Euro'000     Euro'000      Euro'000

Revenue               28,713    11,269    24,454    7,991    28,938    101,365

There is no
inter-segment
trading
Result
Segment result        10,044     2,602       375    2,728     2,358     18,107
                                        
Unallocated expenses
   Operating lease                                                        (820)
   expense
   Amortisation and                                                     (1,833)
   depreciation
                                                                      
Gross profit                                                            15,454
Other unallocated
expenses                                                               (21,441)
                                                                      
Loss from operations                                                    (5,987)
Investment income                                                          192
Long term debt
restructuring                                                           (1,027)
Finance costs                                                             (319)
                                                                      
Loss before tax                                                         (7,141)
Income tax credit                                                         (760)
                                                                      
Net loss for the                                                        (7,901)


3. Interest-bearing loans and borrowings

                           Six months ended    Year ended     Six months ended
                                 30/06/2006    31/12/2005           30/06/2005
                                      Euro'000         Euro'000                Euro'000
Non-current liabilities
Trade payable (reclassified
into loans)                          46,468        46,328               50,857
Secured bank loans                      263           525                  613
Finance lease liabilities               118           157                  198
Unsecured bank facilities             1,887         2,114                2,381
                                                  
                                     48,736        49,124               54,049

Current liabilities
Trade payable (reclassified
into loans)                           6,792         6,420                3,276
Secured bank loans                      350           639                  953
Finance lease liabilities                80            96                  158
Unsecured bank facilities             1,893         2,027                2,106
                                                  
                                      9,115         9,182                6,493



4. Earnings per share

Basic earnings per share

The calculation of basic earnings per share for the six months period ended 30
June 2006 and 30 June 2005 and for the year ended 31 December 2005 have been
determined as the net loss attributable to ordinary shareholders divided by the
weighted average number of ordinary shares.


                                           Six months        Year   Six months
                                                ended       ended        ended
                                           30/06/2006  31/12/2005   30/06/2005
                                                        
Net loss attributable to ordinary
shareholders
Euro'000
Net loss attributable to
ordinary                                       (7,901)    (9,764)       (7,696)
shareholders

Number of ordinary shares
in thousand of shares
Issued ordinary shares at
the beginning of                               24,886        964           964
the year (nominal value 1 euro)
Issued on 8 July 2005                               -        178             -
Issued on 16 November 2005                          -        102             -
Issued on 16 February 2006                      7,018          -             -
Issued on 20 February 2006
in connection                                   6,174          -             -
with the IPO on AIM
                                                        
Issued ordinary shares at
period end                                     38,078      1,244           964
                                                        
Share split: from 1.00Euro per
share to 0.05Euro per share
resolved upon on 28
November 2005                                  38,078     24,886
                                                        
Weighted average number of ordinary
shares
in thousand of shares
Issued ordinary shares at
the beginning of                               24,886        964           964
the year (nominal value 1 euro)
Effect of shares issued on
8 July 2005                                         -         89             -
Effect of shares issued on
16 November 2005                                    -         13             -
Issued on 16 February 2006                      6,172          -             -
Issued on 20 February 2006
in connection                                   5,311          -             -
with the IPO on AIM
                                                        
Weighted average number of
ordinary                                       36,369      1,066           964
shares at period end
                                                        
Weighted average number of
ordinary                                       36,369     21,303        19,271
shares after the split
                                                        
Basic earnings per share at
period end                                      (0.22)     (0.46)        (0.40)
(euro)



Diluted earnings per share

Diluted earnings per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period adjusted for the effects of all potentially
dilutive shares. The only potentially dilutive shares during the periods were
share warrants and stock option outstanding. Both these warrants and stock
options are at present anti-dilutive as they would decrease the loss per share.
They have therefore been excluded from the diluted loss per share calculation in
accordance with the requirements of International Accounting Standard 33
"Earnings per share". There is therefore no difference between the basic loss
per share figures and the diluted loss per share figures.


5. Availability of Reports

Copies of the Group's Interim Financial Report and Account will be sent to
shareholders. Copies will also be available from the Group's operative office at
Via Mecenate 90, 20138 Milan and from the Group's Nominated Adviser, Charles
Stanley Securities, 25 Luke Street, London EC2A 4AR.




                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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