Cellcast plc
AIM : CLTV

Cellcast plc

April 04, 2006 02:06 ET

Cellcast plc: Preliminary Announcement of Final Results

LONDON, UNITED KINGDOM--(CCNMatthews - April 4, 2006) - Cellcast plc ("Cellcast" or "the Company") (AIM:CLTV), a global interactive digital broadcaster, today presents its maiden preliminary announcement of final results for the year ended 31 December 2005.

Highlights

- Turnover of Pounds Sterling 13.2 million, up 60% on 2004

- Successful listing on AIM in September 2005, raising Pounds Sterling 5 million before expenses

- Launch of four additional channels on the Sky Digital network and bandwidth secured on the fast growing Freeview platform in the UK with launch expected in the near future

- Expansion of operations in Europe and the Middle East

- New ventures established in China, India, Latin America and Eastern Europe

- Significant development of proprietary technology to facilitate distribution of live interactive content across television, broadband and 3G platforms

- Strategic new initiatives in the gaming and gambling sectors

Commenting on the results, Julian Paul, Chairman of Cellcast plc, said: "I am very pleased that these results reveal the strong foundations Cellcast has developed in the UK. Since the Company listed on AIM in September we are now expanding into new global markets and are entering a truly exciting new period."



For further information:

Cellcast plc

Andrew Wilson, Chief Executive Officer Tel: +44 (0) 20 7190 0300
andrew@cellcast.tv

Emmanuelle Guicharnaud,
Chief Financial Officer Tel: +44 (0) 20 7190 0300
emmanuelle@cellcast.tv www.cellcast.com

Daniel Stewart & Company Plc

Marc Young, Corporate Finance Tel: +44 (0) 20 7776 6550
marc.young@danielstewart.co.uk www.danielstewart.co.uk

Media enquiries:
Abchurch

Henry Harrison-Topham / Gareth Mead Tel: +44 (0) 20 7398 7700
henry.ht@abchurch-group.com www.abchurch-group.com


CHAIRMAN'S STATEMENT

I am very pleased to introduce the first Annual Results of Cellcast plc as a public company following Admission to AIM in September 2005.

Admission to AIM

The Company had a successful debut on AIM, raising Pounds Sterling 5 million before expenses and introducing a wide range of new shareholders. I would like to welcome our new shareholders and thank them for supporting the Company. The placing was well received which resulted in the issue being oversubscribed. This meant that we were able to raise more money for the Company than we originally had intended, and it also allowed Atlas Group, which had been an investor for some time, to realise part of its holding. We were delighted with the investor response to the Company and as a consequence now have an excellent institutional shareholder base. The funds raised will enable us to develop our business in line with the strategy set out in the Admission document.

2005 results

I am pleased to report that turnover for the year ended 31 December 2005 was up over 60% to Pounds Sterling 13.2 million, 97% of which was generated in the UK. Performance in this market was very strong, contributing some Pounds Sterling 2.2 million in gross profit and giving us the resources and opportunity to invest for the future in key overseas markets. Start-up losses in the overseas territories of Ukraine, India and Argentina and expensed development costs in those and other territories aggregated some Pounds Sterling 1.4 million. As a consequence, the Group recorded a loss at the EBITDA level of Pounds Sterling 327,000 (2004: Pounds Sterling 460,000) and an operating loss before interest and tax of Pounds Sterling 728,000 (2004: Pounds Sterling 708,000). No dividend is proposed.

Staff tribute

The Company depends critically on the loyalty and commitment of its team, both in the UK and now increasingly overseas, and I wish to put on record the Board's appreciation of their hard work and commitment. Motivation and retention of key staff is vital for the future success of the Company. At the time of Admission to AIM, we put in place share option schemes in the form of an Enterprise Management Incentive Scheme and an Unapproved Share Option Plan. At 31 December 2005, the Company had granted just over 1.4 million share options under these schemes to 48 members of staff other than directors, aggregating 5% of the share capital of the Company.

Outlook

Current year trading in the UK has begun well, with UK generated turnover for the first two months running some 16% ahead of the same period in the prior year. This does not include revenue from any Freeview services, which are expected to flow later in the year. Having spent considerable time and money in 2005 setting the stage for the international expansion of the Group, we anticipate that revenue growth in 2006, mainly in the second half, will come from the activities in India, China, South America and other countries where mobile phone penetration is growing rapidly. We continue to invest in our proprietary technology and in new formats, and, in developing gambling formats and applications, hope to benefit from increased international opportunities arising from deregulation of the gaming industry. There are plenty of profitable opportunities ahead for the Company, as we continue to take advantage of the dramatic changes in the media landscape.

Julian Paul

Chairman

3 April 2006

OPERATING REVIEW

During 2005, Cellcast has focused on three key areas of activity, which together drive revenue growth and uniquely position the Company in the global marketplace for convergent entertainment services.

United Kingdom

Cellcast now broadcasts over 100 hours of live interactive programming each day, which are distributed across eight channels on the Sky Digital platform. We continue to expand our reach in the United Kingdom, through securing bandwidth on Freeview's digital terrestrial platform, via cable networks, consumer broadband services, and mobile network portals.

Increasingly, our programmes facilitate user-generated content and are the conduit for user-to-user experiences that extend participation outside of television transmission times. Interactive content specially formatted for mobile also provides further incremental revenue opportunities.

With our experience of integrating new technologies and new communication channels, and our considerable expertise in the provision of micro-billing solutions, we continue to develop new products and business models that capture the opportunities arising from the current growth of 3G, IPTV, enhanced broadband, video mobile and wireless broadband services.

From our base in one of the world's most competitive digital television markets, we continue to identify, develop and test profitable new interactive applications and formats for worldwide distribution. This extensive portfolio of proven programming lowers the cost of entering new territories and creates the foundation for our continued global expansion.

International expansion

The Company's strong international push in 2005 has proven the scalability of our business model and the competitive benefits of its cost-effective deployment. Our extensive range of interactive applications and programmes can now be customised to fit any transmission schedule, for broadcasters of all sizes, from small cable and satellite channels to major terrestrials.

During the past year we have enhanced our position in Europe and developing markets with distribution deals and partnerships with established broadcasters and media companies in India, South America, China, Europe and the Middle East.

Through our new subsidiary, Cellcast India Interactive, we partnered with the Essel Group to launch India's first live 24-hour interactive gaming channel, PlayTV, offering active viewer involvement to over 47 million cable and DTH households. With 85 million television households, over 65 million mobile phone subscribers growing by 2.5 million users a month, and a sustained rise in consumer spending, India promises to become a leading world market for convergent entertainment services in a very short time.

Our South American roll-out was launched with a showcase interactive game show on Telefe, Argentina's largest terrestrial broadcaster. This was the first step in a regional strategy which simultaneously addresses the Hispanic markets of Central America and the United States. Following the successful entry into Argentina, we launched Ecuador's first participation television show on the country's number one channel TeleAmazonas, and our proven business model is now attracting the strong interest of broadcasters across the continent.

In the Far East, our initial focus has been China, where our new joint venture has national billing agreements with China Mobile and China Unicom. China has the world's largest mobile phone market, with more than 377 million mobile phone subscribers, and its SMS revenues in 2007 are forecast to exceed those of the whole of Western Europe. Our innovative programming on TVS-3, one of the leading entertainment channels in the country's richest province, Guangdong, provides consumers a seamless service extending television to mobile via China Mobile's WAP portal. We will continue to identify new broadcast and media partners in China, and expect to announce further distribution deals in 2006.

We are pursuing commercial discussions with national and regional broadcasters in several Eastern European countries. Our new partnership with STB, one of Ukraine's major broadcasters, is expected to be a springboard for entry into the large Russian market.

In the Middle East, our considerable expertise working with multiple GSM and fixed-line operators and with the particular network infrastructure and technical interface constraints of the region, continues to be in demand from broadcasters. We are the exclusive SMS billing provider to the pan-Arab Future TV network and to all four channels on the region's largest music network, Rotana Television, and provide billing services and interactive screen management to E2 in Cairo, Music Time and Citruss TV in Dubai, and Escape TV in Jordan.

Proprietary Technology

We made a significant step forward this year with the evolution of the proprietary Cellcast Interactive Platform (CIP). The new 'Channel in a Box' architecture means a broadcaster can now play-out via a single system connected to the CIP back office, and have the complete channel, including advertisements, interactively enabled. Cutting edge 3D interactivity is built into the system from the ground up.

In 2006 these upgrades to the CIP will enable us to enhance 3G, podcast and broadcast delivery, and to focus on short form content and enhanced interactive formats for mobile platforms including J2ME, Windows and Symbian.

Outlook for 2006

Cellcast is now firmly established as a leading provider of interactive TV and mobile entertainment. The global market for our programmes and applications continues to expand. The focus over the coming year is our drive into China, the USA, Brazil, India, Mexico, Turkey and Russia, within an overall strategy of building a presence in all markets where mobile penetration is high or growing rapidly.

Our proprietary CIP platform has already proven its ability to facilitate rapid deployment of a growing portfolio of applications into multiple markets, and key platform upgrades during the coming months will allow us to combine 2D and 3D rendering in real time.

We will continue to invest in new formats designed specifically for multi-platform distribution, including 3G and IPTV. Close attention will be paid to user-generated content, and leveraging our established skills to exploit the interactive applications that can be built around this.

A development focus on gaming formats and applications will take advantage of our strong presence on the Sky Digital platform in the UK and the increased international opportunities arising from deregulation in the global gambling industry.



Andrew Wilson Bertrand Folliet
Chief Executive Officer Chief Operating Officer
3 April 2006 3 April 2006

CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2005

2005 2004
Pounds Sterling Pounds Sterling

Turnover 13,186,663 8,197,875

Cost of sales (11,361,484) (6,373,234)
-----------------------------------

Gross profit 1,825,179 1,824,641
-----------------------------------

Administrative expenses:
General 2,152,528 2,284,543
Depreciation & Amortisation 400,908 248,481

-----------------------------------
(2,553,436) (2,533,024)
-----------------------------------

Operating loss (728,257) (708,383)

Loss on disposal of subsidiaries (35,726) -

Interest receivable and similar
income 42,226 2,938
Interest payable and similar
charges (2,683) (894)
-----------------------------------

Loss on ordinary activities
before taxation (724,440) (706,339)

Tax on loss on ordinary activities - (7,053)
-----------------------------------

Loss on ordinary activities
after taxation (724,440) (713,392)

Minority interests - 16,354
-----------------------------------

Loss for the financial year (724,440) (697,038)
-----------------------------------

Loss per share
Basic (3.2) pence (3.3) pence
Diluted (3.2) pence (3.3) pence


There are no recognised gains and losses other than those passing
through the profit and loss account.


CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2005

2005 2004

Pounds Sterling Pounds Sterling

Fixed assets
Intangible assets 611,695 386,667
Tangible assets 858,458 529,919
Investments 4,933 4,933
-----------------------------------

1,475,086 921,519
-----------------------------------

Current assets
Debtors 2,778,267 1,243,135
Cash at bank and in hand 2,696,180 410,706
-----------------------------------

5,474,447 1,653,841

Creditors: amounts falling due
within one year (2,852,147) (2,020,094)

-----------------------------------
Net current assets/(liabilities) 2,622,300 (366,253)
-----------------------------------

Total assets less current
liabilities 4,097,386 555,266

Creditors: amounts falling due
after more than one year (122,278) (273,424)
-----------------------------------

3,975,108 281,842
-----------------------------------

Capital and reserves
Called up share capital 850,407 632,200
Share premium account 4,038,676 -
Merger reserve 1,300,395 1,144,282
Profit and loss account (2,214,370) (1,489,930)
-----------------------------------

Shareholders' funds - equity
interests 3,975,108 286,552
Minority interests - (4,710)
-----------------------------------

3,975,108 281,842
-----------------------------------



CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2005

2005 2004
Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling

Net cash inflow/(outflow)
from operating activities (669,985) 501,441

Returns on investments
and servicing of finance
Interest received 42,226 2,938
Interest paid (2,683) (894)
----------- ---------

Net cash inflow for
returns on investments
and servicing of finance 39,543 2,044

Taxation (7,053) -

Capital Expenditure
Payments to acquire
intangible assets (294,674) (400,000)

Payments to acquire
tangible assets (804,384) (558,127)
----------- ---------

Net cash outflow for
capital expenditure (1,099,058) (958,127)

Acquisitions and
disposals
Purchase of subsidiary
undertakings and other
significant investments - (4,923)
Proceeds on disposal of
subsidiary undertakings 2 -
Cash on disposal of
subsidiary undertakings (212,548) -
----------- ---------

Net cash outflow for
acquisitions and
disposals (212,546) (4,923)

----------- --------

Net cash outflow before
management of liquid
resources and financing (1,949,099) (459,565)

Financing
Issue of ordinary
share capital 5,001,248 730,191
Share issue costs (751,244) -
Capital element of
finance lease contracts (15,364) (5,125)
----------- ---------

Net cash inflow from
financing 4,234,640 725,066
----------- --------

Increase in cash in
the year 2,285,541 265,501
----------- --------


Notes to the consolidated cash flow statement

(a) Reconciliation of operating loss to
net cash outflow from operating activities 2005 2004

Pounds Pounds
Sterling Sterling

Operating loss (728,257) (708,383)
Depreciation of tangible assets 331,262 235,148
Amortisation of intangible assets 69,646 13,333
Loss on disposal of fixed assets 6,638 -
Increase in debtors (2,386,412) (658,897)
Increase in creditors 2,037,138 1,620,240

Net cash inflow/(outflow) from
operating activities (669,985) 501,441


(b) Analysis of net funds 1 January Cashflow Other 31 December
non-
2005 Cash 2005
changes
Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling

Net cash:
Cash at bank and in hand 410,706 2,285,474 - 2,696,180
Bank overdrafts (67) 67 - -
-------------------------------------------

410,639 2,285,541 - 2,696,180
-------------------------------------------

Finance leases (24,108) 15,364 - (8,744)
-------------------------------------------

Net funds 386,531 2,300,905 - 2,687,436
-------------------------------------------


(c) Reconciliation of net
cash flow to movement in net funds 2005 2004
Pounds Pounds
Sterling Sterling

Increase in cash in the year 2,285,541 265,501
Finance lease 15,364 5,125
---------------------------

Change in net funds resulting from
cash flows 2,300,905 270,626
Cash inflow from finance lease - (29,233)
---------------------------

Movement in net funds in the year 2,300,905 241,393
Opening net funds 386,531 145,138
---------------------------

Closing net funds 2,687,436 386,531
---------------------------


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2005


1 Accounting policies

1.1 Accounting convention

The financial statements are prepared under the historical cost convention.

1.2 Compliance with accounting standards

The financial statements are prepared in accordance with applicable accounting standards.

1.3 Basis of consolidation

The consolidated profit and loss account and balance sheet include the financial statements of the company and its subsidiary undertakings made up to 31 December 2005.

Acquisitions of subsidiaries are dealt with by the acquisition method of accounting except for those qualifying as group reconstructions where merger accounting is permitted.

Merger with Cellcast (UK) Limited

On 14 September 2005, Cellcast Plc entered into an agreement with all the shareholders of Cellcast (UK) Limited to merge their respective businesses. The consideration for the purchase of the share capital of Cellcast (UK) Limited was satisfied by the allotment and issue of 21,302,900 ordinary shares of Pounds Sterling 0.03 each in Cellcast Plc, credited as fully paid.

The financial statements have been prepared under the merger accounting rules (the pooling of interests method), as the combining entities within the group were controlled by the same parties both before and after the combination. Accordingly, the financial information for the current period, and for the prior period has been presented as if Cellcast (UK) Limited had been owed by Cellcast Plc throughout the current and comparative accounting periods.

1.4 Going concern

The accounts have been prepared on a going concern basis.

1.5 Turnover

Revenue is measured at the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales related taxes.

1.6 Research and development

Research expenditure is written off to the profit and loss account in the year in which it is incurred. Development expenditure is written off in the same way unless the directors are satisfied as to the technical, commercial and financial viability of individual projects. In this situation, the expenditure is deferred and amortised over the 5 year period during which the company is expected to benefit.

1.7 Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:



Broadcasting equipment 20% to 50% straight line

Computers, Fixtures and fillings 20% to 50% straight line


1.8 Investments

Fixed asset investments are stated at cost less provision for diminution in value.

1.9 Pensions

The Group operates a defined contribution scheme for the benefit of its employees.

Contributions payable are charged to the profit and loss account in the year they are payable.

1.10 Deferred taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that resulted in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Group's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial statements.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

1.11 Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to profit and loss account.

1.12 Leased assets

Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated over their estimated useful economic lives. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the profit and loss account over the period of the lease. All other leases are regarded as operating leases and the payments made under them are charged to the profit and loss account on a straight line basis over the lease term.

1.13 Licences

Licence costs are amortised over their relevant licence period on a straight line basis.

1.14 Share-based payments

The Group operates executive and employee share schemes. For all grants of share options, the fair value as at the date of grant is calculated using an option pricing model and the corresponding expense is recognised over the vesting period. The expense is recognised as a staff cost and the associated credit entry is made against equity.

2 Earnings per share

The calculation of the basic loss per share is based on the loss attributable to ordinary equity shareholders of Pounds Sterling 724,440 (2004: Loss Pounds Sterling 697,038) divided by the weighted average of 22,891,724 (2004: 21,073,333) ordinary shares in issue.

Due to the loss incurred in the year, there is no dilution effect from the issued share options.



3 Reconciliation of movements in
shareholders' funds 2005 2004
Group Pounds Pounds
Sterling Sterling

Loss for the financial year (724,440) (697,038)
Issue of shares 5,001,240 -
Conversion of loans to share capital 163,000 -
Issue costs (751,244) -
-------------------------

Net increase/(depletion) in
shareholders' funds 3,688,556 (697,038)
Opening shareholders' funds 286,552 983,590
-------------------------

Closing shareholders' funds 3,975,108 286,552
-------------------------


4 Financial Information

The financial information set out in this report does not constitute statutory accounts as defined in section 240 of the Companies Act1985. The financial information for the year ended 31 December 2005 is unaudited. Information in respect of the year end 31 December 2004 is extracted from the statutory accounts of Cellcast (UK) Limited for that year as the financial information for the current period, and for the prior period has been presented as if Cellcast (UK) Limited had been owed by Cellcast Plc throughout the current and comparative accounting periods.. The auditors' report on those accounts was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

5 Dividend

The directors are not declaring a dividend.

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