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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Virtue Broadcst | LSE:VTB | London | Ordinary Share | GB0001826071 | ORD 2.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00 | - |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
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RNS Number:9624Y
Virtue Broadcasting PLC
24 May 2004
Embargoed Release: 07:00hrs Monday 24th May 2004
VIRTUE BROADCASTING PLC
("Virtue" or the "Group")
PRELIMINARY RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 31 DECEMBER 2003
Financial Highlights
* Turnover from continuing operations increased by 194% to #2.1
million. Turnover increased by 22% to #2.7 million.
* Operating loss reduced by 78% to #1.7 million.
* Loss per share reduced by 89% to 1.0 pence. Adjusted loss per share
reduced by 75% to 1.3 pence.
* Successfully acquired and integrated a further three companies into
the Group
* Extended the Group's international footprint into Germany, Spain,
Sweden and Switzerland
Mike Neville, Chairman, comments:
"This has been a very busy year for the Group both in terms of business
development and corporate activity. The net result of our efforts has been the
emergence of the Group as one of the key players in the European IP based
corporate communications market. We have a fantastic client base, responsive
product development approach and a strong dedicated team. I am very proud of the
Group's performance to date and look forward to further developments that can be
achieved from our present position".
- ENDS -
For more information contact:
James Ormondroyd, Finance Director
Tel: +44 (0) 20 7785 6000
Email: investorrelations@virtuebroadcasting.com
Andrew Tan, Hansard Communications
Tel: +44 (0) 20 7245 1100
Chairman's Statement
The past year has seen the continued recovery of the telecommunications, media
and technology (TMT) sector, since its rapid decline some 3-4 years ago. Whilst
some companies have either failed or gone into administration, others have
enjoyed their first operating profits, primarily through a focus on cost saving,
creating value add services and achieving economies of scale through sector
consolidation. This recovery has created a renewed interest amongst investors,
both Institutional and Retail, and confidence in the sector is returning. Our
successful placing at the beginning of May, raising #3.1million before expenses,
is testament to this sector's recovery and investor interest.
I am delighted to report that Virtue has managed not only to attract significant
new investment over the past year, but has also succeeded in transforming the
business into possibly the leading Webcasting business in Europe. This has
positioned the company for further aggressive penetration into the high growth,
high margin IP based corporate communications sector.
As announced in June, we divested our UK Media Services division to Interoute
Communications Limited for a gross consideration of approximately #800,000. This
decision was taken to allow us to concentrate resources on the Corporate
Communications market, where we have significant competencies and a solid
history of service delivery, which is reflected in our high quality blue chip
customer base.
We have also successfully consolidated our operations function into one discrete
unit and, as such, Europe is now served from one primary centre. Most
importantly this has provided us with a scalable platform, which delivers
enhanced IP based services to our customers. In summary, we now have one R&D
team, one operational centre and one scalable platform, which allows us to
increase our customer base without a corresponding increase in overheads of the
enlarged group. This will enhance the bottom line of the business through
increasing margins and reducing costs of sales. This centralised strategy for
our core operational unit has already delivered significant benefits to the
enlarged group as a whole and we will continue to leverage our asset base in
order to extract increasing value for the Group. The Board believes that there
are significant opportunities to extend the current products and services
offering by vertically integrating professional service offerings as part of an
ongoing unique service proposition (USP). This should enhance margins, and
create real barriers to entry for competitors.
Our ultimate goal however is to be a key player in the provision of IP based
corporate communications, which encompasses a number of differing strands, all
of which are highly synergistic, and margin enhancing. With our extended
footprint across Europe resulting from the acquisitions of Unit.Net in June of
last year and Kamera in January 2004 we now have the base foundation in terms of
infrastructure and customers from which to deliver these exciting IP based
services. The latest acquisition, of Foroso Communications in Germany, will
accelerate the deployment of IP based Web conferencing to our customer base, and
will allow us to leverage the business to deliver greater value to our
shareholders.
The acquisition of Foroso represents the successful start of the second stage of
the Board's strategy to build Europe's leading online corporate communications
company. The Board shares the view of many leading analysts that the market is
moving toward a single, converged, IP based voice-video-data network, with
research showing that the worldwide Web conferencing market segment is set to
grow by 73% per annum to USD1.1 billion by 2006 (source: The Radicati Group,
Inc. October 2003).
It is primarily due to the high quality of the people at Virtue, that these
acquisitions have been promptly and efficiently transacted and integrated into
the Group allowing us to extract enhanced value from our corporate activity.
Costs have been a continued focus for us during the period under review, as a
result our overall operating cost base for the second half of 2003 was #1.7
million versus a combined #3.2 million of the Group and Unit.Net AG
in the first half of 2003. Our revenues from continuing operations during the
term have increased by 194% to #2.1 million, a clear indication of the speed at
which the business is developing and the reshaping of the business in order to
take advantage of the significant opportunities within the IP sector.
We have had some excellent customer wins during the period that clearly
demonstrate our continued ability to offer and deliver broader solutions to
multi-regional blue chip companies. These customers include Bertlesmann, PC
World, Novartis, Swisscom and many others.
We are now a leading operator in what is a consolidating sector with a growing
number of high quality customers both in the UK and across Europe. Some of these
companies are major multi-nationals, such as UBS, Deutsche Bank, ABB, Deutsche
Post, Holcim and ABN Amro. We are now in a position to increase our focus on
customer needs across a variety of geographical territories, which we believe
will yield major cross-selling opportunities for the Group. Our strategy is one
of retaining and attracting quality customers, which are able to deliver higher
margins to the business.
The Board anticipates further improvements in operating performance from both
existing business and the newly acquired acquisitions, with respect to revenue
and margin. I expect this to be achieved as we extract the value and cost
benefits from our centralised operations and economies of scale.
I believe the Company now has the right focus, market position, technology
offerings and team to deliver our objectives of building the business into a
leading global provider of IP based corporate communications. We believe the
long-term prospects for the business are excellent and we will continue to
create more sustainable and higher margin revenue streams from our products.
This is an exciting time for the Company and the IP based corporate
communications sector and I look forward to updating you on our progress in due
course.
Mike Neville, Chairman
Financial Review
Financial highlights
# thousand 2003 2002 %
Operating results before exceptional items and goodwill amortisation
Turnover from continuing operations 2,070 705 up 194%
Operating loss from continuing operations (1,417) (1,330) up 6%
Group results
Turnover 2,697 2,213 up 22%
Operating loss (1,709) (7,818) down(78)%
Loss per share (1.0)p (9.1)p down(89)%
Loss per share - adjusted (1.3)p (5.3)p down(75)%
Corporate Services Europe
# thousand 2003 2002 %
Turnover 1,644 580 up 183%
Operating expenditure before exceptional items and goodwill amortisation (2,237) (1,051) up 113%
Operating loss before exceptional items and goodwill amortisation (593) (471) up 26%
Exceptional items - operating - (1,111)
Amortisation 15 (150)
Operating loss (578) (1,732) down 67%
Turnover was up by 183% on last year at #1.6 million reflecting a compound rate
of organic growth of 42% per half year since the first half of 2002 and a
contribution of #583,000 from the acquisition of Unit.Net. The organic growth
in turnover experienced during the year was a result of a strong focus on
customer account management, expanding our reseller network, and product
development, which led to an increase in market share.
The performance of the Unit.Net businesses acquired was in line with
expectations following its acquisition out of liquidation. The third quarter was
a difficult period of trading as management initiated a programme of restoring
customer confidence in the Unit.Net operation at the same time as implementing
the post acquisition restructuring programme. We are pleased that the vast
majority of Unit.Net customers have now re-signed contracts with the Group and
the Board anticipates a strong recovery in the Unit.Net revenues in 2004.
Operating expenditure, before goodwill and exceptional items from continuing
operations, increased by 113% to #2.2 million (2002: #1.1 million). The
additional costs comprise: an increase in the average headcount to 39 from 23,
of which 9 were due to the acquisition of Unit.Net; #0.4 million of operating
charges reflecting the cost of operating offices in Madrid, Frankfurt and Zurich
together with additional direct costs of #0.3 million incurred in respect of
service delivery.
The nature of the asset purchase of Unit.Net enabled the Group to implement a
significant saving on acquisition in the operating expense base of the combined
entities, as management were selective in which employees and supplier contracts
were taken over. To illustrate this the combined cost base of both Unit.Net AG
and the Group in the first half of 2003 was #3.2 million, which compared to that
recorded in the second half, #1.7 million, represents an annualised saving of
#3.0 million.
Following the consolidation of Unit.Net, the enlarged group recorded an
operating loss before goodwill and exceptional items of #0.6 million; however,
operating margins improved significantly to -36% compared to -81% in 2002.
Corporate Services Australia
# thousand 2003 2002 %
Turnover 426 125 up 241%
Operating expenditure before goodwill amortisation (514) (271) up 90%
Operating loss before goodwill amortisation (88) (146) down 40%
Amortisation (48) (23)
Operating loss (136) (169) down 20%
Turnover from Corporate Services for the Australian segment was up by 241% on
last year at #426,000. Performance was strong with focus on product improvements
and higher service levels. Operating loss before goodwill amortisation was
reduced by 40% to #88,000, a margin of -21% compared to -117% in 2002 . The
operating margin reflected some local price pressure; however, this was more
than compensated by an increased number of clients and volume of services
delivered. During 2003 the business provided services to 21 of the S&P 200
(2002: 6).
Central expenses
Central expenses, principally the cost of operating the head office function of
the Group, have remained at around 2002 levels being #736,000 (2002: #713,000).
The board is pleased with this achievement in context of the increased European
organisation and level of corporate finance activity.
Discontinued operations
Following the discontinuance of funding to Tornado Entertainment Ltd in October
2002 the Group exited the Media & Entertainment market segment with the disposal
of its remaining UK media services division, Virtue Media Services, on 30 June
2003. The disposal generated cash consideration of #800,000 plus
telecommunication services from the vendor to the value of Euro168,000, over which
the board placed a fair value of #60,000, giving rise to a profit on disposal
after associated costs of #282,000. The results of these businesses up until the
date of closure or disposal are reported under discontinued operations.
Interest
Net interest receivable was #12,000 compared to #145,000 last year, which is in
line with the reduction in net funds experience during 2002 from #7.4m to #1.1m
primarily as a result of the losses and closure costs of Tornado Entertainment
Ltd.
Taxation
The Group had no tax charge for the year due to continuing losses. No deferred
tax asset has been recognised in respect of losses available for carry forward,
of #2.5 million (2002: #4.1 million). Of the brought forward deferred tax asset
#2.0 million was disposed with Virtue Media Services.
Dividend
No interim dividend has been paid and no final dividend will be paid for the
year (2002: nil).
Loss per share
Adjusted loss per share was 1.3 pence (2002: 5.3 pence) and is calculated to
exclude the effect of exceptional items and goodwill amortisation. This
substantial reduction in loss per share relates primarily to the exit of the
Media & Entertainment market segment. The loss per share was 1.0 pence (2002:
9.1 pence).
Pro-forma trading profit and loss account
The Group commenced a consolidation strategy in 2003 culminating in the
acquisition of Unit.Net in July 2003 and Kamera in January 2004 (further details
of which are set out later in this review). In order to provide a benchmark for
future performance the board has presented below an unaudited pro forma summary
trading profit and loss account before exceptional items and goodwill
amortisation to provide illustrative information of the effect of these
transactions as if they had occurred at 1 January 2003.
Continuing operations before exceptional items and amortisation
# thousand As reported Unit.Net Kamera 2003 Pro-forma
pre-acquisition earnings
2003 earnings Earnings
Turnover 2,070 906 1,922 4,898
Operating loss (1,417) (441) (539) (2,397)
Interest 12 6 - 18
Loss before tax (1,405) (435) (539) (2,379)
Taxation - - - -
Loss after tax (1,405) (435) (539) (2,379)
Adjusted loss per share (1.1)p (1.4)p
Weighted average number of shares (million) 124.4 168.6
Cash flow
Analysis of free cash flow (a management measure of operating cash flow before
acquisitions, disposals, dividends and financing) is as follows:
# thousand 2003 2002 % Inc
/(dec)
Cash out flow from operating activities (1,918) (5,364) down(64)%
Capital expenditure (173) (223) down(22)%
Proceeds from asset disposals 4 - -
Net interest received 12 145 down(92)%
Tax paid - - -
Free cash flow (2,075) (5,442) down(62)%
Net funds
The total movements in net funds comprise:
# thousand
Opening net funds 1,104
Free cash flow (2,075)
Acquisitions and disposals 682
Equity dividends -
Issue of new shares 1,673
Closing net funds 1,384
The Group acquired cash balances of #138,000 as part of the Unit.Net acquisition
for which it repaid #88,000 of loans outstanding to its parent and #36,000
transaction expenses respectively.
The cash consideration receivable for the disposal of Virtue Media Services was
#800,000 gross of expenses of #75,000, of which at the balance sheet date the
Group had received #607,000 and had paid #166,000.
The Group received #100,000 from the liquidator of Tornado Entertainment Ltd,
its former subsidiary, in relation to a compromise agreement in connection with
a bank deposit account held at Danske Bank A/S.
In 2003 the Group issued 58 million new ordinary shares in two private placings,
raising #1.7 million after expenses, in order to: provide the Group with working
capital; and strengthen the balance sheet to provide a stronger base to pursue
the group's consolidation strategy.
During the year the Group repaid bank debt outstanding totalling #200,000 and as
at the balance sheet date it had no debt outstanding. The group does not have
any committed facilities (2002: #nil).
Since the balance sheet date, on 5 May 2004, the Company issued a further 95
million new ordinary shares to raise a total of #3.1 million before expenses.
Financial liabilities
Other than short term creditors arising out of the ordinary course of business
the Group's main financial liability is a property lease for its former head
office in Marlow. The property has a rent of #255,500 pa and its earliest
termination date is December 2007. Full provision was made in 2002 for the
residual lease commitments, together with other outgoings less expected rents
under sub-leases for the remaining period of the lease. As at the balance sheet
date the total provision for liabilities under the lease was #469,000.
Treasury policy and financial risk management
The main financial risks faced by the Group are funding risk and credit risk. As
with any growing business there remains uncertainty and risk about the ability
of the Group to achieve its business objectives within its current funding. The
Board continually reviews the funding status of the Group and its exposure to
liquidity risk. The Group controls credit risk by setting credit limits and
following established credit control policies. In a low interest environment the
Group's cash deposits remain at floating rates of interest. The Group does not
enter into derivative transactions.
Going concern
After making enquiries, the directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason, the directors continue to adopt a 'Going
Concern' basis in preparing the Financial Statements
Post balance sheet acquisitions
The Company announced on 27 November 2003 that it had agreed to acquire Kamera
Holdings AB for an aggregate consideration of #2.4 million, which completed on 9
January 2004. This sum comprises cash of #100,000 and a new issue of 43,770,247
0.1p ordinary shares. Kamera provides webcasting and content distribution
services to large corporations in the Nordic market. The unaudited accounts of
Kamera Holding AB show consolidated revenues of #1.9 million and loss before tax
of #0.5 million for the year ended 31 December 2003.
On 12 February 2004 the Company acquired 298,663 shares in its Australian
subsidiary, Virtue Broadcasting Pty Ltd, from Edgewise Solutions Pty Ltd in
consideration of an issue of 1,707,541 new ordinary shares of 0.1 pence each.
The acquisition takes the Group's holding in its Australian subsidiary to 83%
from 63%.
On 6 May 2004 the Company acquired Foroso Communications GmbH a high quality
webconferencing company based in Germany. The Company has paid a total of #0.5
million in cash, deferred consideration of #0.2 million is payable in 2005 and
potentially up to #0.6 million of contingent consideration subject to Foroso
achieving certain conditions including earning either #600,000 profit after
taxation or achieving revenues of #1.0 million from the date of acquisition
until 31 December 2005. The acquisition broadens the Group's product portfolio
enabling it to expand its one-to-many communication solutions into the
few-to-few communications market.
On 14 May 2004 the Group acquired the business assets of Webcom for a net
consideration of approximately #48,000. Webcom supplies end to end IP
communication solutions in the Australian market place and has annualised
turnover of approximately #430,000 based on its unaudited management accounts
for the 9 months to 31 January 2004.
Outlook for 2004
The Board anticipates further improvement in performance for both existing and
acquired businesses, particularly in the revenue performance of the Unit.Net
businesses following their recovery from liquidation and implementation of
operating synergies with Kamera.
Central costs are expected to increase to allow the Board to better manage its
pan-European operations and to assist in the implementation of the Group's
expansionist policy.
As a consequence of the acquisition strategy the Group has an infrastructure and
technology platform capable of delivering significantly higher throughput with
limited additional costs. The Board anticipates that the Group's capital
expenditure in 2004 will not be significantly different from 2003.
Group profit and loss account
for the year ended 31 December 2003
2003 2002 (restated)
Continuing Dis-continued Continuing Dis-continued
operations
# thousands Notes existing acquisition operations Total operations operations Total
Turnover 2 1,487 583 627 2,697 705 1,508 2,213
Net operating expenses 3 (2,757) (763) (886) (4,406) (3,319) (6,712) (10,031)
Operating loss (1,270) (180) (259) (1,709) (2,614) (5,204) (7,818)
Analysed as:
Business performance before
exceptional items and goodwill
amortisation:
Media Services - - (258) (258) - (3,937) (3,937)
Corporate Services (486) (195) - (681) (617) - (617)
Central expenses (736) - - (736) (713) (664) (1,377)
(1,222) (195) (258) (1,675) (1,330) (4,601) (5,931)
Exceptional items - operating 4 - - - - (1,111) (603) (1,714)
Amortisation (48) 15 (1) (34) (173) - (173)
Exceptional items - non-operating
Merger expenses 5 - (280)
Profit/(loss) on sale and 5 383 (1,904)
termination of operations
Loss on ordinary activities before (1,326) (10,002)
interest
Net interest receivable 12 145
Loss on ordinary activities before (1,314) (9,857)
tax
Tax - -
Loss on ordinary activities after (1,314) (9,857)
tax
Equity minority interests 73 64
Loss for the financial year 7 (1,241) (9,793)
Dividends - -
Deficit for the financial year (1,241) (9,793)
Loss per share (pence)
Basic 6 (1.0) (9.1)
Basic - Adjusted 6 (1.3) (5.3)
There were no material recognised gains or losses other than those shown in the
profit and loss account.
There was no difference between the loss before taxation and the retained loss
for the year and their historic cost equivalents.
Balance Sheets
As at the year ended 31 December 2003
Group Company
# thousands 2003 2002 2003 2002
Fixed assets
Positive goodwill 154 202 - -
Negative goodwill (135) - - -
Goodwill 19 202 - -
Other intangible assets - 4 - -
Tangible assets 229 359 4 5
Investments - 64 128 376
248 629 132 381
Current assets
Debtors 1,254 1,610 2,996 988
Cash at bank and in hand 1,384 1,304 1,125 1,318
2,638 2,914 4,121 2,306
Creditors
Amounts falling due within one year (996) (1,680) (798) (436)
Net current assets 1,642 1,234 3,323 1,870
Total assets plus current assets 1,890 1,863 3,455 2,251
Creditors
Amounts falling due after more than one year (3) (9) - -
Provisions for liabilities and charges (538) (878) (533) (811)
Net assets 1,349 976 2,922 1,440
Capital and reserves
Called up share capital 172 114 172 114
Share premium account 13,653 12,038 13,653 12,038
Other reserves 13,060 13,060 16,874 16,874
Profit and loss account (25,593) (24,366) (27,777) (27,586)
Equity shareholders' funds 1,292 846 2,922 1,440
Equity minority interests 57 130 - -
1,349 976 2,922 1,440
Approved by the Board on 24 May 2004.
Mike Neville James Ormondroyd
Chairman Finance Director
Group Cash Flow Statement
for the year ended 31 December 2003
# thousands Notes 2003 2002
Net cash outflow from operating activities 8 (1,918) (5,364)
Returns on investment and servicing of finance
Interest received 21 155
Interest paid (9) (10)
Net cash inflow from returns on investment and servicing of 12 145
finance
Taxation
Corporation tax - -
Capital expenditure and financial investment
Payments to acquire intangible assets (4) -
Payments to acquire tangible assets (169) (223)
Receipts from sales of tangible assets 4 -
Cash outflow from capital expenditure and financial investment (169) (223)
Acquisitions and disposals
Purchase of subsidiary undertakings 14 (64)
Disposal of subsidiary undertakings 568 (657)
Receipt on disposal of Tornado Entertainment Ltd 100 -
Cash inflow/ (outflow) from acquisitions and disposals 682 (721)
Equity Dividends paid to shareholders - -
Cash outflow before use of liquid resources and financing (1,393) (6,163)
Financing
Issue of ordinary shares net of expenses 1,673 20
Repayment of loans (200) -
Cash inflow from financing 1,473 20
Increase/ (decrease) in cash 80 (6,143)
Reconciliation of net cash flow movements in net funds
Net funds at the start of the year 8 1,104 7,447
Increase/ (decrease) in cash 8 80 (6,143)
Decrease in borrowings 8 200 -
Debt in subsidiaries acquired 8 - (200)
Net funds at end of year 8 1,384 1,104
Notes
1 Basis of preparation
The consolidated profit and loss account, consolidated balance sheet,
consolidated cash flow statement, consolidated statement of total recognised
gains and losses and extracts from the notes to the accounts for 2003 and 2002
do not constitute the Group's Annual Report & Accounts. The auditors have made a
report on the Group's statutory accounts for each of the years 2003 and 2002
under section 235 of the Companies Act 1985 which do not contain a statement
under sections 237(2) or (3) of the Companies Act and are unqualified. The
statutory accounts for 2002 have been delivered to the Registrar of Companies
and statutory accounts for 2003 will be filed with the Registrar in due course.
Copies of the Annual Report & Accounts will be posted to shareholders by 31 May
2004. Further copies of this announcement can be downloaded from the website
www.virtuebroadcasting.com or by applications to The Company Secretary, Virtue
Broadcasting Plc, 60-62 Commercial Street, London, E1 6LT.
2 Segmental analysis
Turnover Loss before tax
# thousands 2003 2002 Before After Before After
goodwill & goodwill & goodwill & goodwill &
(restated) exceptional exceptional exceptional exceptional
items items items items
2003 2003 2002 2002
(restated) (restated)
Geographical and Business analysis
Corporate Services Europe 1,644 580 (593) (578) (471) (1,732)
Corporate Services Australasia 426 125 (88) (136) (146) (169)
Loss before central expenses - - (681) (714) (617) (1,901)
Central expenses - - (736) (736) (713) (713)
Continuing operations 2,070 705 (1,417) (1,450) (1,330) (2,614)
Discontinued operations (Europe) 627 1,346 (258) 124 (4,603) (7,110)
Discontinued operations (Americas) - 162 - - 2 2
Merger expenses - - - - - (280)
Interest - - 12 12 145 145
Total 2,697 2,213 (1,663) (1,314) (5,786) (9,857)
Analyses by business are based on the Group's management structure. Turnover
between segments is immaterial. Geographical analysis is based on the territory
in which the order is received. It would not be materially different if based on
the territory in which the customer is located.
Central expenses comprise the cost of combined Group operations, principally the
head office operations of the Group.
3 Net operating expenses
2003 2002 (restated)
Continuing Dis-continued Continuing Dis-continued
operations
# thousands existing acquisition operations Total operations operations Total
Staff costs (1,463) (380) (368) (2,211) (1,099) (2,415) (3,514)
Other operating charges (1,105) (373) (402) (1,880) (850) (2,842) (3,692)
Depreciation (141) (25) (115) (281) (86) (852) (938)
Amortisation (48) 15 (1) (34) (173) - (173)
Exceptional items - - - - (1,111) (603) (1,714)
Total (2,757) (763) (886) (4,406) (3,319) (6,712) (10,031)
4 Exceptional items - operating
2003 2002 (restated)
Continuing Dis-continued Continuing Dis-continued
operations
# thousands existing acquisition operations Total operations Operations Total
Merger integration costs (1) - - - - - 401 401
Restructuring costs (2) - - - - 174 202 376
Impairment of goodwill (3) - - - - 937 - 937
Total - - - - 1,111 603 1,714
(1) Following the merger with Virtue Broadcasting Ltd in 2002 the Group
implemented a reorganisation plan with costs of #401,000. The exceptional charge
represents the cost of redundancies and a UITF 17 charge of #90,000 relating to
a share transfer by a former director.
(2) The costs of #376,000 incurred in 2002 arise from the restructuring of the
business following the integration of Streamway Netcasting Ltd within the Group
and other rationalisation programmes announced during the year. The exceptional
charges represent the cost of redundancies and termination fees of software
license contracts.
(3) Due to market conditions and the strategic repositioning of the Corporate
Services division's products, management reviewed that division's acquired
goodwill for impairment for the period ended 2002. The review indicated that the
carrying value of the acquired goodwill at 31 December 2002 should be impaired
by #937,000 which resulted in an associated operating exceptional impairment
charge being booked in the profit and loss account for the year ending 31
December 2002. This adjustment had no cash impact.
5 Exceptional items - non-operating
# thousands 2003 2002
Merger costs (1) - (280)
(Loss)/profit on sale and termination of
operations:
Danske Bank settlement (2) 100 -
Virtue Media Services Ltd (3) 282 -
Tornado Entertainment Ltd (4) - (1,977)
Virtue Broadcasting Company, Inc. (5) - 73
Profit on disposal of tangible fixed 1 -
assets
Total 383 (2,184)
(1) Expenses of #280,000 were incurred in respect of the merger of the Company
with Virtue Broadcasting Ltd in June 2002.
(2) The Company reached a compromise agreement with the liquidator of Tornado
Entertainment Ltd, its former subsidiary, regarding a claim made by the Company
over a #200,000 bank deposit held by Tornado Entertainment Ltd with Danske Bank
A/S. Under the agreement Danske Bank A/S agreed to release Tornado Entertainment
Ltd from a fixed charge over the deposit supporting a #200,000 loan outstanding
in one of the company's subsidiaries and Tornado Entertainment Ltd agreed to pay
#100,000 to the Company. As a result an exceptional income of #100,000 has been
recorded in the profit and loss account for the year ended 31 December 2003.
(3) In June 2003 the Group disposed of its Media Services division, Virtue Media
Services Ltd, for an aggregate consideration of #860,000 before transaction
expenses which gave rise to an exceptional profit of #282,000. See note 9 for
further information.
(4) In October 2002 the Group's subsidiary Tornado Entertainment Ltd ceased
trading following withdrawal of Group funding support. It was subsequently
placed into liquidation in December 2002. The exceptional loss represents:
#722,000 for the write off of the subsidiary's net assets; #360,000 for
subsequent redundancy costs incurred; and provisions of #895,000 for a vacant
property lease.
(5) In April 2002 the Group disposed of its Canadian subsidiary, Virtue
Broadcasting Company, Inc., to the incumbent management team for #nil
consideration, at the time of disposal the subsidiary had net liabilities of
#91,000. Transaction costs of #18,000 were incurred.
6 Loss per share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in issue
during the year, excluding those held in the employee share trust which are
treated as cancelled. For diluted earnings per share, the weighted average
number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares, being those share options granted to
employees where the exercise price is less than the average market price of the
company's ordinary shares during the year. No diluted earning per share has been
presented as the Group has made losses.
Supplementary basic and diluted EPS have been calculated to exclude the effect
of goodwill amortisation in respect of the subsidiaries and joint ventures
acquired and exceptional items. The adjusted numbers have been provided in order
that the effects of goodwill amortisation and exceptional items on reported
earnings can be fully appreciated.
2003 2002
Earnings Weighted Per Earnings Weighted Per
average no. share average no. share
of shares amount of shares amount
# thousands thousands pence # thousands thousands pence
Basic loss per share
Earnings attributable to ordinary (1,241) 124,373 (1.0) (9,793) 107,437 (9.1)
shareholders
Supplemental loss per share
Basic earnings per share
Effect of exceptional items:
Operating exceptional items - 1,714
Non-operating exceptional items (383) 2,184
Goodwill amortisation 34 173
Basic - adjusted loss per share (1,590) 124,373 (1.3) (5,722) 107,437 (5.3)
There is no material difference between the basic earnings per shares and
diluted earnings per share as the Group has been loss making in both periods.
7 Reconciliation of movement in equity shareholders' funds
Group Company
# thousands 2003 2002 2003 2002
Loss for the financial year (1,241) (9,793) (191) (28,464)
Foreign exchange adjustments 14 33 - -
Share issues net of costs 1,673 616 1,673 2,912
Credit in respect of UITF 17 charge - 90 - 90
Net addition/ (reduction) to shareholders' funds 446 (9,054) 1,482 (25,462)
Opening shareholders' funds 846 9,900 1,440 26,902
Closing shareholders' funds 1,292 846 2,922 1,440
8 Consolidated cash flow
a) Reconciliation of operating profit to net cash flow from
operating activities
# thousands 2003 2002
Group operating loss (1,709) (7,818)
Depreciation 281 938
Amortisation 34 173
Impairment of goodwill - 937
UITF 17 stock option charge - 90
Decrease in debtors 436 467
(Decrease)/ increase in creditors (977) 69
Profit on disposal of fixed assets (1) 22
Merger expenses - (280)
Non-cash transactions 18 38
Net cash outflow from operating activities (1,918) (5,364)
b) Analysis of changes in net debt
# thousands At 1 Jan Cash Acquisitions At 31 Dec
2003 flow (excluding 2003
cash)
Cash in hand or at bank 1,304 80 - 1,384
Debt due within 1 year (200) 200 - -
1,104 280 - 1,384
9 Acquisitions and disposals
a) Acquisition of Unit.Net
On 21 July 2003 the Group acquired the UK, German and Spanish subsidiaries of
Unit.Net A.G. (In Liquidation) ("Unit.Net"), a Swiss based company, together
with certain Swiss based assets, sales contracts, inter-company loans and
employees of Unit.Net. The effective date of the transaction was 1 July 2003.
The Group paid Unit.Net #nil consideration but repaid #88,000 of loans to
Unit.Net. The total adjustments required to the book values of the assets and
liabilities of the companies acquired in order to present the net assets of
those companies at fair values in accordance with group accounting principles
were #104,000, details of which are set out below together with the resultant
amount of goodwill arising.
These purchases have been accounted for as acquisitions. From the date of
acquisition to 31 December 2003 the acquisitions contributed #583,000 to
turnover; #180,000 to loss before interest; and #175,000 to loss after interest.
The Unit.Net companies contributed #309,000 to the group's net operating cash
flows outflows; received #5,000 in respect of interest; and utilised #57,000 for
capital expenditure. The Unit.Net companies recorded a loss after tax of #4.6
million in 2002. The table below sets out management's best estimate of the
combined results of the acquired Unit.Net business from 1 January 2003 to their
acquisition on 1 July 2003:
# thousands 6 months ended
June 2003
Turnover 906
Operating loss (441)
Loss before taxation (435)
Taxation -
Loss attributable to shareholders (435)
Total recognised loss for the period (435)
Book value Fair value Fair value
of of
# thousands
Analysis of assets acquired assets adjustments assets
acquired acquired
Tangible fixed assets 22 - 22
Debtors 454 (33) 421
Cash 138 - 138
Creditors due less than one year (138) (71) (209)
Provisions (1) (98) - (98)
Net assets acquired 378 (104) 274
Goodwill (150)
Consideration 124
Consideration satisfied by:
Acquisition expenses 36
Net loan repayments 88
(1) Included within provisions is an amount of #73,000 relating to restructuring
under taken before the acquisition date.
The book value of assets and liabilities has been taken from the management
accounts of the Unit.Net companies acquired as at 1 July 2003 (the effective
date of acquisition). The fair value adjustments relate to additional provisions
against debtors and an adjustment of #71,000 to deferred income to bring the
acquired business into line with the Group income recognition policy.
b) Net cash outflow in respect of acquisitions
2003 2002
# thousands
Net cash balances acquired 138 6
Acquisition of Unit.Net (124) -
Acquisition of Streamway Netcasting Ltd - (24)
Acquisition of Viewpoint Media Pty Ltd - (46)
14 (64)
c) Disposal of Virtue Media Services UK Ltd
2003
# thousands
Intangible fixed assets 7
Tangible fixed assets 35
Investments 64
Cash 7
Debtors 464
Creditors (155)
Provisions (10)
Exceptional charges 91
503
Profit on disposal 282
Consideration 785
Consideration satisfied by:
Cash consideration (net of transaction expenses of #75,000) 607
Contingent cash consideration 118
Fair value of network services 60
785
Virtue Media Services Ltd contributed a profit of #23,000 (2002: loss of
#948,000) to loss before interest, see note 5 for further information.
10 Post balance sheet events
The Company announced on 27 November 2003 that it had agreed to acquire Kamera
Holdings AB for an aggregate consideration of #2.4 million, which completed on 9
January 2004. This sum comprises cash of #100,000 and a new issue of 43,770,247
0.1p ordinary shares. The unaudited accounts of Kamera Holding AB show
consolidated revenues of #1.9 million and loss before tax of #0.5 million for
the year ended 31 December 2003.
On 12 February 2004 the Company acquired 298,663 shares in its Australian
subsidiary, Virtue Broadcasting Pty Ltd, from Edgewise Solutions Pty Ltd in
consideration of an issue of 1,707,541 new ordinary shares of 0.1 pence each.
The acquisition takes the Group's holding in its Australian subsidiary to 83%
from 63%.
On 5 May 2004, the Company issued 95,422,850 new ordinary shares to raise a
total of #3.1 million before expenses.
On 6 May 2004 the Company acquired Foroso Communications GmbH a high quality
webconferencing company based in Germany. The Company has paid a total of #0.5
million in cash, deferred consideration of #0.2 million is payable in 2005 and
potentially up to #0.6 million of contingent consideration subject to Foroso
achieving certain conditions including earning either #600,000 profit after
taxation or achieving revenues of #1.0 million from the date of acquisition
until 31 December 2005. The acquisition broadens the Group's product portfolio
enabling it to expand its one-to-many communication solutions into the
few-to-few communications market.
On 14 May 2004 the Group acquired the business assets of Webcom for a net
consideration of approximately #48,000. Webcom supplies end to end IP
communication solutions in the Australian market place and has annualised
turnover of #430,000 based on its management accounts for the 9 months to 31
January 2004.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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