Interim Results

RNS Number:1968E
Teleunit S.p.A
21 September 2007


                                                               21 September 2007

                                  Teleunit SpA
             INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007

Teleunit S.p.A., ("Teleunit" or "the Group"; stock code: TLU), the Italian
telecom services provider, has announced its financial results for the six
months ended 30 June 2007.

Summary:

  * Revenue increased 13% to Euro45.4 million (H1 2006: Euro40.1 million)

  * Gross profit up 54% to Euro11.3 million; gross margin up 7 points to 25%
    (H1 2006: Euro7.3 million; margin 18%)

  * Consolidated net loss of Euro0.8 million (H1 2006: net loss of Euro3.6
    million)

  * ADSL VoIP customers up 28% since year-end 2006 to 4800; 40% year-on-year
    increase in new contracts

  * Teleunit's Mobile Content Services division successfully incorporated
    into Neomobile, a wholly owned subsidiary of Teleunit

  * Neomobile global subscriber base of over 800,000 at period end; launch
    of services in Spain under brand "Dindo"


Commenting on the financial results, Gianfranco Cimica, Chief Executive Officer
of Teleunit S.p.A, said:

"I am pleased to report on a much improved first half of 2007 compared with
H12006. Over the past two years Teleunit has undergone a number of fundamental
changes, including a corporate restructuring, penetration of new and challenging
international markets, and fast growth in its core businesses. Despite the short
term impact of these on the Group's operations and financials, Teleunit is now
exhibiting a positive trend - VoIP customer numbers are in constant growth, the
Premium Access services is displaying further consolidation, and Neomobile is
growing rapidly into new and dynamic markets."


About Teleunit SpA

Based in Perugia in Central Italy, Teleunit is a telecom services provider to
both business and residential customers throughout Italy. The Group operates in
three distinct sectors: voice and data services (providing fixed line voice and
data, wholesale, and wireless services to customers across Italy) and premium
access services. Through its wholly owned subsidiary, Neomobile SpA, Teleunit is
also an active player in the Mobile Content D2C arena. The Group is looking to
expand its operations selectively in Italy and internationally. Teleunit listed
on AIM in May 2004, the first Italian company to complete a primary listing in
London. For more information, please visit the website: http://ir.teleunit.it.

For further information, please contact:

Gianfranco Cimica, Chief Executive Officer, Teleunit SpA     00 39 075 528 3939

Oliver Rigby, Daniel Stewart & Company Plc                   020 7776 6550


                        Chief Executive Officer's Review

The Teleunit Group is now structured as three demarcated businesses, comprising
two internal operating segments and one wholly owned subsidiary, addressing
three distinctive client bases: the Voice and Data Services segment supplies
connectivity to business and residential customers and to switched and
switchless resellers and operators across Italy; the Premium Access segment
caters to service centres based in Italy and abroad who in turn supply services
to end users through Teleunit's numberings and technical infrastructure. The
Group's Mobile Content Services division has now become Neomobile, a separately
incorporated company owned 100% by Teleunit, supplying content directly to
wireless consumers in three countries. Historical reliance on the Premium Access
business, which in H12006 accounted for 75% of Group turnover, is moving towards
a more balanced revenue distribution, with Premium Access now accounting for 65%
of total Group revenue (Neomobile 21%; Voice and Data services 14%). We expect
this trend to continue, as Neomobile seeks out new international opportunities
and ADSL VoIP customer numbers continue to grow.

The results obtained in the first semester of 2007 are indicative of the
benefits the Group has gained from past rationalisations. Operational stability
has allowed for a focus on optimising the business and growing its key revenue
drivers. Customer retention initiatives implemented last year, in particular in
the Voice and Data Services division, are leading to reduced Customer
Pre-Selection ("CPS") churn and growing division revenue - organic CPS churn has
been reduced by 1% to 3% and the Voice and Data Services division has generated
turnover Euro1.0 million higher than in the previous half year. Cost-cutting
initiatives of H22006 have helped in raising gross margin from 18% to 25%
year-on-year and in stabilizing overheads leading to a positive H12007 EBITDA of
Euro2.6 million versus an EBITDA loss of Euro0.8 million in H12006. Last year's focus
on strengthening the technical and administrative departments has allowed our
core businesses to concentrate on increasing the productivity of existing
revenue streams, and to optimise our contractual relationships with suppliers.
Gross margins across all business segments have increased. Not including
amortisation and depreciation expenses allocated to cost of sales (note 2) VDS
margin has increased from 29% to 33%, PA from 12% to 14% and Neomobile from 78%
to 80%.

Extensive capital expenditure over the past few years has led to a scalable
business with a well-dimensioned and modular network infrastructure. No
significant further investments were required in the period under review other
than Euro1.3 million related mainly to the purchase of Customer Premises Equipment
("CPE") in line with growth in our ADSL VoIP customer base. The Group has funded
the business from cash generated, and Euro2.0 million was used to repay current and
longer term interest-bearing loans and borrowings.

Teleunit has continued to give high priority to conservative cash management,
maintaining appropriate levels of liquidity to support ongoing operations.
Teleunit's debt is predominantly long term with a weighted average maturity
period of c. 4 years. The Group has available Euro10 million of unutilised credit
facilities which can be drawn down if required.

As reported in the FY2006 results, the Group has overdue trade receivables from
Telecom Italia. At period end these amounted to Euro12.2 million euros (inclusive
of VAT). These receivables have been subject to comprehensive discussions and,
despite an overwhelming legal and contractual case in favour of Teleunit, remain
unpaid. It is not exceptional in the Italian market for Telecom Italia to abuse
its market dominance to the detriment of smaller operators, many of which are in
the same situation as Teleunit. Stronger legal measures have been taken and
management continues to anticipate recovery of these receivables. Current
provisions for doubtful accounts receivable are deemed satisfactory.

Operational Review:

Voice and Data Services (VDS):
Operational stability in 2007 has led to a strong semester for the Voice and
Data Services division. Turnover increased to Euro6.3 million representing an 18%
rise on the comparative figure for the previous year (H12006: Euro5.4 million). Not
including amortisation and depreciation charges allocated to cost of sales,
segment gross profit increased 38% year-on-year from Euro1.5 million to Euro2.1
million on a gross margin up 4 points to 33%.

The rise in revenues can be attributed to a strong contribution from wholesale
services. Improved operational clarity allowed for a focus on strengthening
relationships with customers generating high levels of international
higher-margin traffic and on consolidating the customer retention activities
initiated in the latter part of H12006. This has led to traffic volumes in
excess of pre-2006 levels. Optimisation of the network platform was supported by
an across the board renegotiating of supplier contracts leading to lower
termination costs. These lower costs have in turn been key to supporting segment
margins.

In the first half of 2007, our flagship ADSL VoIP offering, Tria, has continued
to be received well by our sales agencies and by our target market, leading to
2,683 new contracts generated in H12007. This represents a 40% increase on the
1,916 contracts generated in the comparable period last year. A sequential 28%
rise in active clients (clients actively being billed on a monthly basis) saw
our ADSL VoIP customer base increase from 3,750 at year-end 2006 to 4,800 as at
June 30 2007. We expect the large number of new contracts generated in the
period to build on our growing active customer base in H22007.

Predicted organic losses in our CPS customer base was compensated by new ADSL
VoIP customers in the period under review. Owing to dedicated retention
initiatives implemented in H22006, month on month CPS churn has been reduced
from 4% to 3%, with the trend showing good progress. In the future we would
expect to deliver a proportionate rise in revenue.

The rise in division margin can be attributed largely to the popularity of our
"bundled" ADSL VoIP packages - customers are given the possibility of prepaying
fixed-line, mobile, or international traffic bundles at highly competitive per
minute prices. On the other hand and as mentioned above, contractual
renegotiation with wholesale suppliers have secured lower termination costs and
also contributed to bolstering the division's gross margin.
Premium Access Services:
Divisional H12007 revenues came in at Euro29.4 million and were stable compared
with the previous half-year (H12006: Euro29.6 million). Divisional gross margin
however has increased from 11% in H12006 to 13% in H12007 leading to a gross
profit figure Euro0.5 million greater year-on-year.

Higher margins have been achieved by diversifying our customer base through
various marketing initiatives aimed at acquiring a larger number of small
service centres. This has allowed us to negotiate more favourable revenue
sharing arrangements, therein allowing us to further consolidate relationships
with larger clients by offering them higher remuneration packages. As a result
of this strategy, our client mix is now also geared so as to obtain a much
improved risk profile.

Teleunit's proprietary premium access platform provides an optimum micro-payment
solution for the growing number of services delivered by ASPs (Application
Service Providers). To date a large proportion of Teleunit's customers are ASP's
and offer services ranging from Infotainment (gossip, news, horoscopes, travel
services and gambling services) to more traditional Entertainment & Community
services (games, chat services, mobile applications). Micro-payment methods are
gaining increased popularity as an alternative to credit cards, with payment
being channelled through premium access number providers such as Teleunit. The
dominant trend over the past decade has seen ASPs constantly roll-out new
services to meet cutting edge technological developments. The innovative
hardware and software applications continually brought to market have led to
increased demand by end users for better and more complex services, and demand
by service centres for more evolved billing platforms. Overall, market demand
remains robust and Teleunit, as one of the top three players in the Italian
Premium Access market, is positioned well to further exploit this market.

NEOMOBILE SpA:

The strong results obtained by Neomobile in this first semester further
emphasise the solid growth trend exhibited over the past 3 years. Revenues have
increased by 91% to Euro9.6 million from Euro5.0 million in H12006. Gross profit has
increased by 94% from Euro3.9 million in H12006 to Euro7.6 million H12007, supported
by a gross margin up 1% to 79% (H12006: 78%). Our active subscriber base,
600,000 strong at year-end 2006 grew by 33% to over 800,000 at period end,
representing an average month-on-month compounded rate of growth of over 5
percent.

The first six months of 2007 have been vital to the evolution of Teleunit's
mobile content offering. A solid infrastructural and organisational foundation
has been established to spur forthcoming growth: as announced in the July 13th
trading statement, the Mobile Content Services division was, at the end of
February 2007, separately incorporated as Neomobile SpA, a wholly owned
subsidiary of the Teleunit Group. In any D2C (Direct to Consumer) market, brand
awareness and marketing clarity are paramount to driving customer interaction.
Neomobile is now free to focus on these vital commercial aspects, while still
benefiting from the administrative and financial control support provided by its
parent company.

Neomobile has equally taken steps to reinforce its international portfolio and
operational position: a new brand, "VIPMobile", has been launched in Italy to
complement its existing brand "Dindo", our subscription-based business model has
proved successful in Turkey with the local brand Dito Mito performing well, the
Company expanded its operations into Spain, and took further steps towards
becoming a vertically integrated structure, managing all aspects from content
aggregation to delivery.

In January 2007, the new brand VIPMobile was launched in Italy, aimed at
acquiring a more mature customer base by tapping into the social drivers of this
alternative target - celebrity testimonials promote the brand, with content
categories and ad design specifically tailored to older customers. Parallel
deployment of the two brands ("Dindo and VIPMobile") has had the effect of
mitigating overall churn and of reducing portfolio risk by diversifying
Neomobile's global product offerings. An emphasis on web and WAP deployment of
this brand has added to the extensive mobile content know-how that Neomobile has
acquired over the years, and contributed to shaping the marketing strategy
deployed in Spain. We expect strong contributions from these channels that to
date have shown good potential for further growth.

In Turkey, Dito Mito has continued to gain popularity among its target audience.
The advertising campaigns required to reach this level of approval had up to
year-end 2006 been cash-intensive for Neomobile - however shortly thereafter the
business broke even and is contributing actively to the Company's bottom line.
Dito Mito continues to acquire market share and, as per the Italian business,
now stands as one of the top three mobile content providers in Turkey.

In line with Neomobile's strategy for internationalisation, operations in Spain
were launched in the latter half of the period. In addition to traditional print
and television marketing, the brand has also been diffused through web and WAP
advertising channels. This has allowed for universal market coverage in line
with the agreements brokered with all of Spain's Mobile Network Operators for
our proprietary cross-operator shortcode 5033. Although it is too early to give
the market any firm indications on the Spanish business, initial KPIs are
positive and the business is expected to contribute greatly to Neomobile's top
line from 2008 onwards.

Lastly, Neomobile's new content delivery platform, operational since January
2007 has led to lower costs and contributed to raising margins to present
levels. Reduced reliance on third party content enablers has mitigated the risks
of outsourcing, led to a more effective control of central costs, and provides
the Company with the necessary independence needed to execute its strategy of
rapid internationalisation.

After just 3 years in the industry, Neomobile has now become a multinational
company, with offices on-site in Rome, Istanbul and Madrid supporting its local
operations. Although it is premature to announce any further international
launches, management is actively evaluating additional countries, and I look
forward on updating the market on related developments shortly.

Outlook:
Revenue growth since period-end inspires confidence for the full year. Premium
Access revenues in each of the months of July and August were double those of
June. Notwithstanding the seasonal decline in new ADSL VoIP customer
acquisitions historically evidenced in the months of July and August, the number
has increased bringing the active customer base to over 5,000 at the end of
August - we expect acquisition rates to grow at a faster pace leading up to
year-end. As noted above, Neomobile continues to deliver exceptional growth and
the strategy of internationalisation is being successfully implemented. As at
the end of July, after only one month from its launch, Neomobile had 10,000
active subscribers in Spain and we expect this number to grow substantially.

Whilst weight has been placed on growing existing businesses, the Group has also
been developing new services in house that are expected to contribute to the
Group's top line and, in particular, help bolster the profitability of the Voice
and Data Services division going forward. I look forward to announcing
developments to the market in due course.

Gianfranco Cimica                                          21 September 2007
Chief Executive Officer
Teleunit SpA


INCOME STATEMENT
For the six months ended 30 June 2007

in thousands of euro              Note    Six months Six months           Year
                                             ended        ended          ended
                                           30 June      30 June    31 December  
                                              2007         2006           2006

Sales revenue                        2      45,358       40,057        100,346
Cost of sales                              (34,038)     (32,710)       (80,069)
                                         -----------  -----------     ----------

Gross profit                                11,320        7,347         20,277

Administrative expenses                     (1,528)      (1,158)        (2,647)
Sales and marketing expenses                (6,365)      (4,905)       (10,932)
Other net operating expenses                (3,057)      (3,706)        (7,710)
                                         -----------  -----------     ----------
Total operating expenses                   (10,950)      (9,769)       (21,289)

Profit (loss) from operations        2         370       (2,422)        (1,012)

Share of results of associates
after tax                                        -          103             86
Financing (costs)                             (811)      (1,351)        (2,311)
Financing income                                53          128            311
                                         -----------  -----------     ----------

Profit (loss) before tax                      (388)      (3,542)        (2,926)
Taxation                             3        (382)         (27)           422
                                         -----------  -----------     ----------

Net (loss)/profit for the period              (770)      (3,569)        (2,504)
                                         ===========  ===========     ==========

Basic earnings per share (Euro)         4     (0.0041)     (0.0191)       (0.0134)
Diluted earnings per share (Euro)       4     (0.0041)     (0.0187)       (0.0132)



BALANCE SHEET
As at 30 June 2007

in thousands of euro                           As at      As at          As at
                                             30 June    30 June    31 December
                                                2007       2006           2006

Assets
Property, plant and equipment                 14,072     15,300         14,591
Intangible assets                              3,107      1,376          2,171
Investments in subsidiaries and associates     5,720      5,979          6,029
Other investments                                364        311            375
Deferred tax assets                            1,128        142            820
                                             ---------  ---------    -----------

Total non-current assets                      24,390     23,108         23,986

Trade receivables                             28,761     23,877         26,688
Non-trade receivables                          3,596      4,885          3,707
Cash and cash equivalents                      5,850     14,363         10,950
Assets classified as held for sale                 -      1,305          1,305
Other financial assets                             -         52              -
                                             ---------  ---------    -----------

Total current assets                          38,207     44,482         42,650
                                             ---------  ---------    -----------

TOTAL ASSETS                                  62,597     67,590         66,636
                                             =========  =========    ===========

Equity
Issued capital                                 2,334      2,334          2,334
Reserves                                         447        277            917
Share premium                                 12,542     12,656         12,756
Own shares                                      (214)                     (214)
Retained earnings                              6,724      6,268          6,812
                                            ---------- ----------    -----------

Total Group equity                            21,833     21,535         22,605
Equity attributable to third parties              (3)         -             (3)
Total equity                                  21,830          -         22,602

Liabilities
Interest-bearing loans and borrowings         16,197     19,764         17,660
Employee benefits                                363        261            311
Provisions                                       989        100            378
Deferred tax liabilities                       1,146      1,191          1,173
                                            ---------- ----------    -----------

Total non-current liabilities                 18,695     21,316         19,522

Bank overdrafts                                1,122      9,092          2,956
Interest-bearing loans and borrowings          3,989      4,219          4,575
Trade and other payables                      15,437     10,399         16,151
Income tax payable                             1,524      1,029            830
                                            ---------- ----------    -----------

Total current liabilities                     22,072     24,739         24,512
                                            ---------- ----------    -----------

TOTAL EQUITY AND LIABILITIES                  62,597     67,590         66,636
                                            ========== ==========    ===========


STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2007


           Share Capital   Legal Reserve   Share Premium   Own shares     Retained  Total
in thousands of euro                                                      Earnings

Balance at 1 January
2006               2,334             375          12,542         (114)    11,818   27,069

Profit 2005
allocated              
to reserve             -              92               -            -        (92)       -

Own shares acquired    -               -               -         (100)         -     (100)

Net
profit/(loss) 2006     -               -               -            -     (2,504)  (2,504)

Other                  -               -               -            -         (4)      (4)
                   -------         -------        --------     --------   --------  -------
Balance at 31      2,334             467          12,542         (214)     7,363   22,606
December 2006      =======         =======        ========     ========   ========  =======


Balance at 1 January
2007               2,334             467          12,542         (214)     7,363   22,606

Net
profit/(loss) H1 2007  -               -               -            -       (770)    (770)

Dividend paid          -               -               -            -          -        -

Own shares acquired    -               -               -            -          -        -

Other                  -               -               -            -          -        -
                  --------        --------       ---------    ---------  --------- --------
Balance at 30      2,334             467          12,542         (214)     6,593   21,836
June 2007         ========        ========       =========    =========  ========= ========


STATEMENT OF CASH FLOWS
For the six months ended 30 June 2007

in thousands of euro                            Six months Six months Year to 31
                                                   ended      ended   December
                                                 30 June    30 June
                                                    2007       2006       2006
Operating activities
Net profit/(loss)
for the period                                      (770)    (3,569)     2,504
Adjustments for:
Depreciation and
amortization                                       2,422      1,616      4,071
Employee benefits                                     69         79        181
Deferred tax                                        (335)        27       (669)
Share of results
of associates
after tax                                              -          -        (86)
Losses from disposal of assets                                               -
Other                                                621       (103)       267
                                                 ---------   --------  ---------

                                                   2,007     (1,950)     1,260
                                                 ---------   --------  ---------

(Increase)/Decrease
in trade receivables                             (2,073)      (497)    (3,308)

(Increase)/Decrease in non-trade
receivables                                          111     (1,017)        88

Increase in trade
and other payables
and income tax                                        87      1,128      7,178

Income tax paid                                      (17)      (171)      (589)

Retirement
benefits payment                                    (102)       (25)       (77)

Other                                                  -          3          -
                                                 ---------   --------  ---------

Cash flow from
operating
activities                                            13     (2,529)     4,552
                                                 =========   ========  =========

Cash flow from investing activities

Purchase of
property, plant
and equipment                                     (1,315)    (2,625)    (3,823)

Proceeds from sale
of fixed assets                                    1,305          -          -

Purchase of
intangible assets                                 (1,529)      (111)    (1,458)

(Purchase)/Sale of
investments in
associates                                           309       (114)      (183)

Purchase of other
investments                                            -         (3)         -

(Purchase)/Sale of monetary collective                 -          -          -
investment funds

Loan to associates                                     -          -          -
                                                ----------  --------- ----------

Cash flows from
investing
activities                                        (1,230)    (2,853)    (5,464)
                                                ==========  ========= ==========

Financing activities

Proceeds from loans and
borrowings                                        (2,049)       515     (1,233)

Proceeds from the issue of share capital               -          -          -

Increase in share premium (net of unsubscribed         -          -          -
amount)
Payment of transaction costs                           -          -          -

Purchase of own shares                                 -       (100)      (100)

Dividends paid                                         -     (1,860)    (1,859)
                                                ---------- ---------- ----------

Cash
flow/(outflow)
from financing
activities                                        (2,049)    (1,445)    (3,192)
                                                ========== ========== ==========

Net increase/(decrease) in cash and cash
equivalents                                       (3,266)    (6,827)    (4,104)

Cash and cash
equivalents (net of overdrafts)                     
at 1 January                                        7,994     12,098     12,098

Cash and cash
equivalents (net
of overdrafts)                                     
at period end                                      4,728      5,271      7,994


NOTES TO THE FINANCIAL STATEMENTS

1.      Basis of preparation

(a) Statement of compliance

The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) and its interpretation adopted by the
International Accounting Standards Board (IASB).
The financial statements derive from the books of account of the company,
prepared in accordance with Italian GAAP to which appropriate adjustments have
been applied.

(b) Basis of preparation

The financial statements are presented in thousands of euro and have been
prepared on the historical cost basis except for derivative financial
instruments and employee benefit obligations, which are stated at their fair
value.

The preparation of financial statements in conformity with IFRS requires
management to make judgments, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgments
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.

The accounting policies have been applied consistently to all periods presented
in these financial statements. This decision has been taken by management on the
premise of better presentation and more accurate classification of elements
contained in the income statements.

2.      Segmental Information
The following tables provide gross profit information regarding these main
business segments:

in thousands of euro                            H1 2007
                             VDS        PA    NeoMo   Unallocated        TOTAL

Sales                      6,343    29,371    9,644             -       45,358
Cost of sales             (5,896)  (25,635)  (2,054)       *(453)      (34,038)
                           -------   -------   ------     --------- ------------

Gross profit                 447     3,736    7,590          (453)      11,320
Operating expenses             -         -        -             -      (10,950)
                           -------   -------   ------     --------- ------------

Profit from operations         -         -        -             -          370

Amortisation and
depreciation:
-- Included in CoS         1,671       253      110           170        2,204
-- Included in Op. Ex.         -         -        -             -          218
TOTAL Amort & Dep              -         -        -             -        2,422

EBITDA                         -         -        -             -        2,792
                                                                         =======

* Euro 283,000 relates to operational personnel expenses allocated to cost of sales


In thousands of euro                               H1 2006
                              VDS        PA      MCS   Unallocated            TOTAL

Sales                       5,370    29,644    5,043             -           40,057
Cost of sales              (4,870)  (26,430)  (1,123)         (287)          (7,347)
                            -------   -------   ------     ---------     ------------
                                ===       ===      ===           ===              ===
Gross profit                  500     3,214    3,920          (287)           7,347
Operating expenses              -         -        -             -           (9,769)
                            -------   -------   ------     ---------     ------------

Profit from operations          -         -        -             -           (2,422)

Amortisation and
depreciation:
-- Included in CoS          1,041       199        3           171            1,414
-- Included in Op. Ex.          -         -        -             -              202
TOTAL Amort & Dep               -         -        -             -            1,616

EBITDA                          -         -        -             -             (807)
                                                                              =======

* Euro 116,000 relates to operational personnel expenses allocated to cost of sales

3.      Taxation

Two taxes are applicable to the company:

   * Corporate income tax (IRES) at the rate of 33%
   * Regional tax (IRAP) at the rate of 4.25% for Teleunit and 5,25% for
     Neomobile

The difference in tax rates arises from the different basis for the two taxes.
Although Teleunit reported a loss in the first half of 2007, and therefore
registered a deferred tax income charge of Euro388,000, Neomobile had taxable
income. The net effect is that the Group registered a current tax expense for
the period in the amount of Euro382,000.

4.      Earnings per share

4.1 Basic earnings per share

The calculation of basic earnings per share for the six months ended 30 June
2007 and 2006 have been determined as net profit/(loss) attributable to ordinary
shareholders divided by the weighted average number of ordinary shares for each
period.
Net profit attributable to ordinary shareholders
                                                    Six months      Six months
                                                         ended           ended
                                                       30 June         30 June
in thousands of euro                                      2007            2006

Net profit (loss) attributable to ordinary
shareholders                                              (770)         (3,569)

4.2 Diluted earnings per share

Diluted earnings per share are calculated by dividing the profit for the period
attributable to shareholders of the Company by the weighted average number of
ordinary shares outstanding during the period adjusted for the effects of all
potentially dilutive shares (e.g. employees stock options).
Weighted average number of ordinary shares

                                                       Six months   Six months
                                                            ended        ended
                                                          30 June      30 June
in thousand of shares                                        2007         2006

Issued ordinary shares at the beginning (0.0125 Euro per
share)                                                    185,944      186,744
Effect of shares purchased to be cancelled                      -         (327)

Weighted average number of ordinary shares                185,944      186,417
in euro

Basic (loss)/earnings per share                          (0.00414)    (0.01915)

Weighted average number of ordinary shares (diluted)

in thousands of shares                                Six months    Six months
                                                           ended         ended
                                                         30 June       30 June
                                                            2007          2006
                                                             ===           ===

Issued ordinary shares at 31 December                    185,944       186,744
Effect of shares purchased to be cancelled                     -          (327)
Effect of shares option agreements                         2,241         4,253
Weighted average number of ordinary shares (diluted)
at 30 June                                               188,185       190,671
Diluted earnings per share                              (0.00409)     (0.01872)


5. Credit risk

Management has a credit policy in place and the exposure to credit risk is
monitored on an ongoing basis. Under this policy, investments are made only in
liquid securities or financial assets.

At the balance sheet date of 30th June 2007 the only material concentration of
credit risk was with Telecom Italia S.p.A. ("Telecom Italia"), the main client
of the Group.

The potential credit risk at balance sheet date amounted to Euro10,617,947 (VAT
excl. Includes income accruals) Euro12,224,833 (VAT incl.):

As reported in the FY2006 Results, negotiations have been underway with Telecom
Italia to together reconcile the contested amount of outstanding receivables,
the aim of which was to facilitate the possibility of an extra-judicial
settlement between the parties. These negotiations were to culminate on a
deadline on which Telecom Italia would provide a clear indication on eventual
repayment of these receivables. However after a series of meetings, on the 6th
of September Telecom Italia communicated formally to Teleunit that negotiations
were to be discontinued.

As previously reported, Teleunit's legal team mounted a case against Telecom
Italia as a contingent measure to an extra-judicial agreement not being reached.
Throughout the aforementioned negotiations related judicial activities had been
temporarily suspended. Following Telecom Italia's retreat, judicial proceedings
were systematically reinstated at the Rome Tribunal aimed at recovering credits
owed (including VAT) and related contractual interest.

In addition to these judicial proceedings, Teleunit has now also filed antitrust
proceedings with the Court of Appeal of Milan ("Corte di Appello di Milano")
aimed at recovering damages caused to Teleunit from 2004 to date on the grounds
of Telecom Italia's repeated abuse of it's dominant position. A case has also
been filed with the AGCOM (Italian Telecoms regulator) who has recently been
successful in ruling against Telecom Italia on behalf of operators in a similar
position to Teleunit. We have entrusted these new actions to Bird & Bird, a
legal firm specialized in the Telecommunications market who has a strong track
record of winning cases against Telecom Italia for infractions of this nature.
Furthermore Telecom Italia has had to already pay two antitrust fines amounting
to Euro135 million for anti-competitive behaviour. Due to Telecom Italia's
recidivism, the latest fine was far larger than the one imposed on another
Operator for similar reasons.

Management and the Board strongly reaffirm the absolute legitimacy of Teleunit's
claims against Telecom Italia, as per Italian law and AGCOM rulings, the last of
which was made on the 7th of August. As such we have not altered the provision
against this credit risk that currently stands at Euro944,874.

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

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IR EADNEAFDXEFE