RNS Number:1099D
Virtue Broadcasting PLC
20 September 2004
Immediate Release: 20 September 2004
VIRTUE BROADCASTING PLC
INTERIM REPORT 2004
SIX MONTHS ENDED 30 JUNE 2004 (UNAUDITED)
20 SEPTEMBER 2004
Highlights
- Successful completion of #3.1 million fundraising and
merger with World TV.
- Approximately #900,000 of annualised cost savings
identified.
- Organic growth of the underlying Virtue business generated
29% increase in sales revenues period on period.
- Contract wins with Vodafone, BT, World Economic Forum,
German Ministry of Foreign Affairs and Greenpeace International.
- Central operations unit expanded providing a scalable
platform for delivery of enhanced IP based services to customers.
Mike Neville, Chairman, comments: "This has been a definitive period for the
Group both in terms of business development and corporate activity. Most notably
our recent merger with World TV has put us at the cutting edge of the corporate
communications market delivering high end production services over a centralised
IP Communications platform. 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.
Overall I am pleased to see that we now have an industry leading product mix
with increasing levels of sales revenues. Combined with the substantial cost
savings available to the combined Group and our scalable platform I now believe
we have a business that can continue to grow higher margin revenue streams that
will give us the solid base upon which to bring the business into profitability.
We have a superb client base, a responsive product development approach and a
strong dedicated team. I am extremely pleased with the Group's performance in
the first half of the year and look forward to furthering our position within
this rapidly growing and exciting sector".
- ENDS -
Enquiries:
Virtue Broadcasting Plc - Tel. +44 (0) 20 7785 6000
Mike Neville, Chairman
James Ormondroyd, Finance Director
Hansard Communications - Tel. +44 (0) 20 7245 1100
Andrew Tan
Chairman's Statement
The first six months of 2004 have been an extremely busy time for the Virtue
Broadcasting Plc ('Virtue', 'the Company', or 'the Group') business, which was
dominated by the following issues:
- ensuring that the integration of the acquired businesses
of Unit.Net A.G. ('Unit.Net') and Kamera Holdings AB ('Kamera') is working
effectively and delivering value;
- finalising the successful placing of #3.1 million before
expenses in order to pursue the Group's expansion plans;
- the acquisition of Foroso Communications GmbH ('Foroso')
has given the company the ability to begin to offer genuine fully integrated
Internet Protocol ('IP') based Web conferencing solutions to its customers. In
an economic climate where cost controls are crucial, and the ability for all
personnel to interact with customers and suppliers alike on a flexible and
timely basis are critical, this state of the art application gives the Group a
clear market advantage;
- the surrender of the property lease of the Company's
former head office in Marlow, which will result in an #850,000 net cash saving
over the period until December 2007; and
- the merger with World Television Group Limited ('World
TV'), a leading provider of high end IP based production and consultancy
services, will allow Virtue to deliver a broader suite of services to its
existing customer base, increasing revenue per customer.
The business is now positioned as an integrated provider of IP based Web
conferencing and high end production and consultancy services to its target
audience, where the benefits of scale are obvious, and the ability to drive high
margin services in an IP framework are now a reality.
Virtue's results
As the World TV merger concluded after the end of the half year period, I focus
my review of the half year on the Virtue business as a standalone entity,
assessing the business over which the management team had responsibility.
Elsewhere in this report, and particularly in the Financial Review that follows,
both the statutory (Virtue stand alone) and pro-forma (Virtue and World TV)
financial information has been presented to establish a basis for analysis going
forward.
The table below sets out the first half performance compared to the second half
of last year excluding World TV.
# thousands (Unaudited) (Unaudited) Change
Statutory Pro-forma* %
Six months Six months
to 30.06.04 to 31.12.03
Turnover 2,493 2,269 up 10%
EBITDA (before exceptional items) (665) (1,077) down 38%
EBIT (before exceptional items) (1,124) (1,588) down 29%
EBIT (1,124) (1488) down 24%
Earnings per share - adjusted (0.4)p (0.9)p down 55%
Earnings per share (0.5)p (0.8)p down 38%
* Pro-forma includes Kamera but excludes World TV
Group turnover increased by #224,000 to #2.5 million primarily on the back of an
improved performance in the Unit.Net businesses which was partially offset by
some lost revenues within the Kamera business resulting from a restructuring to
close loss making segments. We have won some excellent customers during the
period who demonstrate our increased ability to offer and deliver broader
solutions to multi-regional blue chip companies. These customers include
Vodafone, BT and Carl Zeiss. We are becoming a leading operator in what is a
consolidating sector with a growing number of high quality customers both in the
UK and across Europe.
EBITDA losses were reduced by #412,000 to #665,000 as a combined result of the
additional turnover together with savings generated through the continued
consolidation of our operational functions into one discrete unit based in
Zurich. Most importantly this has provided us with a scalable platform, capable
of delivering enhanced IP based services to present and future customers. In
essence, we now have a small but highly focused R&D team, one operational centre
and one scalable platform, which will allow us to increase our customer base
without a corresponding increase in overheads. This centralised strategy for our
core operational unit has already delivered significant benefits to the enlarged
Group and we will continue to leverage our asset base in order to extract
increasing value for the Group.
Merger with World TV
Rational and funding
In June 2003 the Board made a strategic decision to concentrate the Group's
resources to address the IP based corporate communications market. We recognised
that consolidation within the sector was quickening and that those organisations
with scale, differentiation and geographical reach, which already have a broad
existing customer base, would be well placed to take advantage of the increased
growth in the vertically integrated corporate communication sector.
The Board identified a distinct need to develop an expanded business offering
for the corporate communications market, which depend upon the provision of a
significant amount of managed services and where the average revenue per
customer is substantially higher compared to webcasting.
The merger with World TV, which completed on 19 August 2004, has created an
entity that delivers an array of corporate communications services including
content creation, content management, webcasting and webconferencing and content
distribution for major corporate and governmental customers worldwide. In
addition, World TV provides Virtue with stability of earnings and clear
opportunities for both cost and revenue synergies. Our strategy is one of
retaining and attracting quality customers, which are able to deliver higher
margins to the business and we are now in a position to increase our focus on
customer needs across a variety of geographical territories. We believe this
will yield major cross-selling opportunities within the enlarged Group.
The cash cost of the merger was #2.1 million of which #1.1 million were merger
expenses. This was funded by the placing of shares in the Company raising #3.1
million before expenses in May 2004. The merger's rationale and attractiveness
were affirmed by shareholders in August 2004 by 99.7% of the votes cast being in
favour of the merger.
Integration update
The integration of the World TV and Virtue businesses has commenced and is
expected to be complete by the end of December 2004. Integration teams have been
established and were consulted before the transaction had completed to assess
requirements for the specific business units and functions to minimise employee
uncertainty and disruption to operations.
We are working to a 100 day integration action plan, in which during the first
30 days we have: merged the UK sales and service delivery teams; appointed the
senior management team; ensured service continuity and commenced consolidation
of web platforms; identified non-contributory overheads; and made the first
combined presentations of the enhanced sales offer to our top customers.
It is primarily due to the high quality of the people within the Group that
these transactions have been promptly and efficiently transacted and integrated
into the Group allowing us to extract enhanced value from our corporate
activity.
Synergy benefits
In the analysis that underpinned the World TV merger, we assumed annualised cost
savings of #380,000 could be achieved from consolidation of IP operations and
reduction in duplicate management positions. I am pleased to report that the
management team have identified annualised cost savings of approximately
#900,000 and I am confident that further benefits will accrue. We forecast that
the one off cost associated with achieving these savings will be #460,000.
Extraordinary general meeting
The Board has convened an extraordinary general meeting of Virtue to be held at
the offices of Brewin Dolphin Securities Limited, 5 Giltspur Street, London at
10 a.m. on 18 October 2004. The notice of the meeting detailing the ordinary and
special business to be conducted is set out in the interim report sent to
shareholders. The purpose of the meeting is twofold:
* Following the merger with World TV your Board believes
that to accurately reflect the changing nature of the Group Virtue should be
renamed World Television Group Plc. This resolution is proposed as resolution 3.
* Resolution 1 is proposed to rationalise the share capital
structure of Virtue and to facilitate the reduction in share capital proposed in
resolution 2.
* Virtue as at 30 June 2004 had an accumulated deficit on
its profit and loss account of #26,745,000. The absence of distributable
profits means that Virtue is currently unable to pay dividends or to make market
purchases of its ordinary shares. Resolution 2, which will be proposed as a
special resolution, would approve:
* the reduction of Virtue's share premium account by
#11,000,000;
* the cancellation of Virtue's capital redemption reserve,
which at the date of this document amounted to #16,874,406;
* the reduction of Virtue's share capital by the
cancellation of 753,299,761 deferred shares of 2.4 pence each, with a total
issued nominal value of #18,079,194.
The reserve produced by the cancellations and reduction, subject to the
protection of creditors, will be available to eliminate the deficit on Virtue's
profit and loss account. The balance arising, again subject to the protection
of creditors, will create a distributable reserve available for dividends or to
fund market purchases of the ordinary shares or for other corporate purposes of
Virtue. Whilst it is envisaged by the Board that the conditions for the payment
of dividends will not arise until some time in the foreseeable future, creating
a new distributable reserve at this time will provide Virtue with added
flexibility.
The reduction of Virtue's share capital requires the approval of shareholders at
the extraordinary general meeting and is conditional upon the approval of the
High Court. Accordingly, as soon as practicable after the passing of the
resolution, Virtue will apply to the High Court for its approval. The Board
anticipates making the application within the next twelve months.
The High Court will be concerned to protect the interests of creditors of Virtue
as at the date on which the cancellation of share premium account becomes
effective (the date on which the order is registered with the Registrar of
Companies). The precise form of creditor protection is for the High Court to
determine and Virtue will take such steps as it thinks appropriate in order to
satisfy the High Court in that regard.
Outlook
The first stage of the Company's turnaround is now complete. The Board is
focused on continuing to drive the key strategic initiatives identified within
the business which, apart from tight cost control, are both organic and
acquisitive growth coupled with highly penetrative strategies designed to ensure
that our core products become part of the fabric of our customers' human and
physical infrastructure. I believe the Company now has the right focus, market
position, technology offerings and a 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 enlarged
Group 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
Basis of preparation of financial information
The unaudited interim financial information has been prepared on the basis of
the accounting policies set out in the annual report & accounts of the Group for
the year ended 31 December 2003.
The interim results for the six months ended 30 June 2004 and 30 June 2003
include both the unaudited UK GAAP statutory results and pro-forma figures
(assuming the results of World TV had been taken through the profit and loss
account from 1 January 2003). The Group merged with World TV on 19 August 2004
and for accounting purposes, due to the merger completing post the interim
balance sheet date, the merger will be consolidated into the statutory accounts
in the year-end annual report & accounts for the year ending 31 December 2004.
Unless indicated to the contrary, all data and commentary in the Financial
Review relate to pro-forma figures. The unaudited UK GAAP statutory financial
statements are set out on page 11 and a reconciliation of these figures and
pro-forma figures has been provided at the end of this report.
Summary consolidated operating results
# thousands (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statutory World TV Pro-forma* Pro-forma* Pro-forma*
Six months Six months Six months Six months 12 months
to 30.06.04 to 30.06.04 to 30.06.04 to 30.06.03 to 31.12.03
Europe 2,293 2,811 5,104 3,169 8,037
Australasia 200 - 200 201 426
Turnover+ 2,493 2,811 5,304 3,370 8,463
Europe (150) 693 543 688 1,589
Australasia (85) - (85) (32) (66)
Corporate expenses (430) (284) (714) (473) (1,250)
EBITDA (pre-exceptionals)+ (665) 409 (256) 183 273
Europe (410) (70) (480) (177) (335)
Australasia (47) - (47) (34) (70)
Corporate expenses (2) - (2) - -
Depreciation and Amortisation+ (459) (70) (529) (211) (405)
Europe (560) 623 63 511 1,254
Australasia (132) - (132) (66) (136)
Central expenses (432) (284) (716) (473) (1,250)
EBIT (pre-exceptionals)+ (1,124) 339 (785) (28) (132)
* Pro-forma includes World Television merger from 01.01.03
+ Excludes discontinuing operation (UK Media Services division)
Turnover
Total turnover increased by #1,935,000, or 57%, to #5,304,000.
European turnover from the Virtue business increased by #1,856,000, or 291%, to
#2,493,000 primarily due to the half year contribution of the acquisitions of:
Unit.Net, which was acquired in July last year; and Kamera, which was acquired
in January 2004 which recorded revenues of #806,000 and #842,000 respectively in
the period.
Trading of the Unit.Net businesses improved in the first half following their
recovery from liquidation, recording an increase of #223,000 or 38% over the
second half of 2003. Trading of the Kamera business was in line with
expectations, with turnover showing a #123,000 reduction from #965,000 in the
same period last year. This was a direct result of a restructuring to close loss
making segments within the Kamera business in order to drive profitability.
Organic growth within the underlying European Virtue business contributed a
further #185,000 or 29% to the remaining Virtue businesses which, although lower
than the rates recorded last year, was a good achievement in light of the
management attention required to manage the corporate activity of the Group.
European turnover from the World TV business increased by #78,000, or 2.9%, to
#2,811,000. Trading was resilient with new business from new and existing
customers of #467,000 replacing revenues earned in the prior period under the "
Towards Freedom" contract, which ended in February 2004. In the period annual
contracts were signed with the World Economic Forum, the United Nations and the
German Ministry of Foreign Affairs to provide IP based webcasting and
programming services. A strategic alliance with CNBC was also formed in this
period to develop sponsored business television programming, the first series of
which went to air in June.
Turnover within the Australian segment was flat at #200,000 including a one
month contribution from the acquired business assets of Webcom and AnnounceTV,
which was result of increased competition and adverse foreign currency
movements. The Board was pleased that during the period Newscorp selected Virtue
Australia to provide critical communication services. The recent acquisitions of
AnnounceTV and Webcom will provide the Australian business with the technical
infrastructure to establish a counterpart to its Zurich datacentre in Sydney.
This will allow the Group to offer its Asia Pacific clients a broader range of
services
EBITDA before exceptional items
EBITDA before exceptional items was #(256,000) compared to #183,000 in the same
period last year.
EBITDA from the European business was #145,000 lower at #543,000; this was
primarily due to the high volume of new business within World TV that had high
initial set up costs, which was replacing revenues under the Towards Freedom
contract. Management expect that these margins should improve as the new
business matures.
EBITDA loss from the Virtue business was flat at #(150,000) compared to #
(145,000) in the same period last year. This was due to the half year impact of
losses within the acquired Unit.Net business being offset by improvements in the
underlying Virtue business and a positive contribution from the recently
acquired Kamera business.
The Board was pleased that the Kamera business made a positive contribution at
the EBITDA level of #41,000, which compared to a pre-acquisition loss of #
(131,000) recorded in the management accounts of Kamera in the same period last
year. This was as a result of restructuring undertaken within the Kamera
business to remove loss making activities. Both the Unit.Net acquired businesses
and the underlying European Virtue businesses narrowed their EBITDA losses from
that recorded in the second half of 2003, due to improvements in revenue
performance. The Unit.Net business reduced its EBITDA loss by #87,000, or 51%,
to #83,000 and the underlying European Virtue business reduced its EBITDA loss
by #28,000, or 21%, to #108,000.
Foroso had a six week contribution to the Group's results during which most of
this time was invested in integration activities. Notwithstanding this, Foroso
contributed #24,000 of revenues and was EBITDA neutral.
EBITDA loss from the Australian segment increased by #53,000 to #85,000,
primarily due to adverse foreign currency movements and an expansion of the
staff base in order to manage the Group's larger technical operations in the
region.
As set out in the 2003 Report & Accounts corporate expenses have increased by
#241,000 to #714,000 compared to the same period last year, although the
corporate expenses are in line with second half of year. The additional overhead
was required to manage better the pan-European operations and support the
Group's expansion policy.
EBIT
EBIT decreased by #(757,000) to #(785,000), as a result of #270,000 additional
goodwill amortisation charges primarily in connection with the acquisition of
Kamera, #241,000 of additional corporate expenses, and lower gross margins in
the World TV business.
Earnings
# thousands (Unaudited) (Unaudited) (Unaudited) Unaudited)
Statutory Pro-forma* Pro-forma* Pro-forma*
Six months Six months Six months 12 months
To 30.06.04 to 30.06.04 to 30.06.03 to 31.12.03
EBIT (pre-exceptionals)+ (1,124) (785) (28) (132)
Discontinued operations - - (266) (259)
Profit on sale or termination of operations - - 290 383
EBIT (1,124) (785) (4) (8)
Net interest and similar items (8) 10 11 17
Tax - (100) (2) (205)
Minority interests 21 21 15 73
Loss for the period (1,111) (854) 20 (123)
Earnings per share (pre-exceptional items and goodwill (0.4)p (0.1)p 0.0p (0.1)p
amortisation)
Earnings per share (0.5)p (0.1)p 0.0p 0.0p
* Pro-forma includes World Television merger from 01.01.03
+ Excludes discontinuing operation (UK Media Services division)
Discontinued operations include the results of the former UK Media Services
division, sold in June 2003. The profit on sale or termination of operations in
2003 relate to the disposal of the UK Media Services division and the
exceptional income arising from the settlement of a claim with the liquidators
of a former subsidiary of #100,000.
The tax charge of #100,000 arises in the pre-merger results of World TV which
are not expected to be eligible for offsetting against Group losses. The charge
represents an effective tax rate of 28% compared to 1% in the same period last
year, as a result of the full utilisation of carried forward tax losses by World
TV in 2003.
Earnings per share was reduced from 0.0p to (0.1)p as a result of an increased
attributable loss.
Dividends
For the immediate future the Board believes that the Group's cash reserves are
better employed in investing in the Group's business in line with its strategy
and therefore no interim dividend will be paid. The Board has taken steps to
restructure the capital base of the Group with a view to providing distributable
reserves in the mid term, further details of which are set out in the Chairman's
report.
The pro-forma cash flow and full profit and loss account for the six month
period to 30 June 2004 show a dividend of #600,000, which relates to a
pre-merger buy back of approximately 15,000,000 ordinary shares in World TV by
that company, which took place in May 2004 at a cost of #600,000.
Cash flow, net funds and financing summary
The table below sets out an analysis of free cash flow (a management measure of
operating cash flow before acquisitions, disposals, dividends and financing):
# thousands (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statutory World TV Pro-forma* Pro-forma* Pro-forma*
Six months Six months Six months Six months 12 months
to 30.06.04 to 30.06.04 to 30.06.04 to 30.06.03 to 31.12.03
Net cash flow from operating activities (1,035) 728 (307) (263) (1,061)
Capital expenditure (92) (58) (150) (190) (312)
Proceeds from asset disposals - - - - 4
Net interest (paid)/received (8) 18 10 11 17
Tax paid - (9) (9) (21) (45)
Free cash flow (1,135) 679 (456) (463) (1,397)
Cash acquired in subsidiaries 319 - 319 - 138
Acquisition of Kamera (186) - (186) - -
Acquisition of Foroso (565) - (565) - -
Acquisition of AnnounceTV (119) - (119) - -
Acquisition of Webcom (59) - (59) - -
Acquisition of Unit.Net - - - - (124)
Disposal of UK Media Services - - - 481 568
Disposal of Tornado Entertainment - - - - 100
Net cash flow before financing (1,745) 679 (1,066) 18 (715)
Issue of shares 2,911 - 2,911 - 1,673
Dividends paid - (600) (600) - -
Capital element of finance lease (23) (4) (27) (35) (51)
payments
Repayment of loans - (6) (6) (10) (219)
Debt acquired with Kamera - - - - -
Cash flow 1,143 69 1,212 (27) 688
Net funds at start of year 1,384 865 2,249 1,291 1,291
Cash flow 1,143 69 1,212 (27) 688
Debt acquired in subsidiaries (172) - (172) - -
Movement in borrowings 23 10 33 45 270
Exchange differences (7) - (7) 41 -
Net funds at end of period 2,371 944 3,315 1,350 2,249
* Pro-forma includes World Television merger from 01.01.03
Free cash outflow was in line with the same period as last year at #456,000,
which is as a result of increased EBITDA losses of #271,000 being offset by
improvements in the working capital position of #227,000, and a reduction of
#40,000 in capital expenditure.
Reconciliation of EBITDA to net cash flow from operating activities
# thousands (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statutory World TV Pro-forma* Pro-forma* Pro-forma*
Six months Six months Six months Six months 12 months
to 30.06.04 to 30.06.04 to 30.06.04 to 30.06.03 to 31.12.03
EBITDA (665) 409 (256) 15 130
(Increase)/decrease in debtors (210) 777 567 810 (205)
Increase in creditors (134) (400) (534) (1,093) (1,007)
Other items (26) (58) (84) 5 21
Net cash flow from operating activities (1,035) 728 (307) (263) (1,061)
* Pro-forma includes World Television merger from 01.01.03
Acquisitions, Merger and Financing
Kamera Holdings AB was acquired on 9 January 2004 for a total consideration of
#2,503,000 comprising shares of #2,317,000 and cash of #186,000 inclusive of
acquisition expenses.
Foroso Communications GmbH was acquired on 6 May 2004 for a total cash
consideration of #565,000 including acquisition expenses plus deferred
consideration of #160,000 which is payable in instalments in November 2004 and
May 2005. The Company agreed to pay up to #600,000 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
period of acquisition until 31 December 2005.
The business assets of Webcom were acquired on 14 May 2004 for a total cash
consideration of #59,000 inclusive of acquisition expenses. The business assets
of AnnounceTV were acquired on 28 May 2004 for a total cash consideration of
#119,000 inclusive of acquisition expenses.
On 19 August 2004 the Company merged with World TV. The merger was effected by
the acquisition by the Company of the entire issued share capital of World TV
for a total consideration excluding transaction expenses of #18.1 million. The
consideration was satisfied by cash of #1.0 million and the issue of 440,800,625
new ordinary shares.
On 5 May 2004 the Company issued 95,422,850 new ordinary shares through a
placing at a price of 3.25 pence per shares, raising a total of #2.9 million
after issue expenses. The table below sets out the application of the net
proceeds:
# thousands
Application of proceeds
Consideration paid for Kamera 186
Consideration paid for Foroso (including deferred consideration) 725
Consideration paid for Webcom and AnnounceTV asset purchases 178
Consideration paid for merger with World TV 1,000
Merger expenses incurred 1,090
Total 3,179
Net proceeds
Net proceeds from May placing 2,911
Cash in hand 268
Total 3,179
Financial liabilities
As set out in the 2003 Report & Accounts the Group's main financial liability
was a property lease for its former head office in Marlow. The property had a
rent of #255,000 per annum and its earliest termination date was December 2007.
The Board is pleased to report that on 22 July 2004 the Company agreed to the
surrender of this lease. Under the agreement the Company made a net cash saving
of #805,000 compared to its obligations under the lease over the next two and a
half years. The Company agreed to pay the landlord a surrender premium of
#495,000 net of VAT in addition to related expenses and reinstatement costs of
#110,000. As part of the settlement the Company will utilise a #318,000 secured
rent deposit held in favour of the landlord which was previously written of in
the Company's 2002 Report & Accounts. In consideration of the surrender premium
the Company will avoid paying approximately #1.4 million of rent, service
charge, lease termination payments, reinstatement costs and running costs. The
Company made full provision for the expected costs arising under the lease in
its 2002 Report & Accounts.
Group profit and loss account
For the half year ended 30 June 2004
# thousands (Unaudited) (Unaudited) (Audited)
Six months Six months 12 months
to 30.06.04 to 30.06.03 to 31.12.03
Turnover
Continuing operations:
- Ongoing 1,627 637 2,070
- Acquisitions 866 - -
Turnover from continuing operations 2,493 637 2,070
Discontinued operations - 627 627
Total turnover 2,493 1,264 2,697
Net operating expenses (3,617) (1,994) (4,406)
Operating loss (1,124) (730) (1709)
Continuing operations:
- Ongoing (845) (464) (1,450)
- Acquisitions (279) - -
Operating loss from continuing operations (1,124) (464) (1,450)
Discontinued operations - (266) (259)
Total operating loss (1,124) (730) (1,709)
Operating loss from continuing operations analysed as:
- Europe (301) (196) (593)
- Australasia (97) (42) (88)
- Corporate expenses (432) (202) (736)
Operating loss before goodwill amortisation from (830) (440) (1,417)
continuing operations
- Goodwill amortisation (294) (24) (33)
Profit on sale or termination of operations - 290 383
Loss before interest and tax (1,124) (440) (1,326)
Interest receivable and similar income 3 16 21
Interest payable and similar charges (11) (5) (9)
Loss before tax (1,132) (429) (1,314)
Tax - - -
Loss after tax (1,132) (429) (1,314)
Equity minority interests 21 15 73
Loss for the period (1,111) (414) (1,241)
Dividends - - -
Retained loss for the period (1,111) (414) (1,241)
Loss per share (pence)
Basic - adjusted (0.4) (0.6) (1.3)
Basic (0.5) (0.4) (1.0)
There were no material recognised gains or losses other than those shown in the
profit and loss account.
Reconciliation of consolidated shareholders' funds
For the half year ended 30 June 2004
# thousands (Unaudited) (Unaudited) (Audited)
Six months Six months 12 months
to 30.06.04 to 30.06.03 to 31.12.03
Loss for the financial period (1,111) (414) (1,241)
Foreign exchange movements (41) 47 14
Share issues net of costs 5,321 - 1,673
Net addition to shareholders' funds 4,169 (367) 446
Opening shareholders' funds 1,292 846 846
Closing shareholders' funds 5,461 479 1,292
Consolidated balance sheets
As at 30 June 2004
# thousands (Unaudited) (Unaudited) (Audited)
at 30.06.04 at 30.06.03 at 31.12.03
Fixed assets
Positive goodwill 3,225 178 154
Negative goodwill (120) - (135)
Goodwill 3,105 178 19
Tangible assets 455 273 229
3,560 451 248
Current assets
Debtors 1,732 794 1,254
Cash at bank and in hand 2,520 851 1,384
4,252 1,645 2,638
Creditors: amounts falling due within one year (1,778) (838) (996)
Net current assets 2,474 807 1,642
Total assets less current liabilities 6,034 1,258 1,890
Creditors: amounts falling due after one year (149) - (3)
Provisions for liabilities and charges (411) (670) (538)
Net assets 5,474 588 1,349
Capital and reserves
Called up share capital 312 114 172
Share premium account 18,834 12,038 13,653
Other reserves 13,060 13,060 13,060
Profit and loss account (26,745) (24,733) (25,593)
Equity shareholders' funds 5,461 479 1,292
Equity minority interests 13 109 57
5,474 588 1,349
Group cash flow statements
For the half year ended 30 June 2004
# thousands (Unaudited) (Unaudited) (Audited)
Six months Six months 12 months
to 30.06.04 to 30.06.03 to 31.12.03
Net cash flow from operating activities (1,035) (875) (1,918)
Returns on investment and servicing of finance
Interest received 3 16 21
Interest paid (11) (5) (9)
(8) 11 12
Taxation paid - - -
Capital expenditure and financial investment
Payments to acquire intangible assets - - (4)
Payments to acquire tangible assets (92) (111) (169)
Receipts from sale of tangible assets - - 4
(92) (111) (169)
Acquisitions and disposals
Purchase of subsidiary undertakings (610) - 14
Disposal of subsidiary undertakings - 481 668
(610) 481 682
Equity dividends paid - - -
Net cash out flow before financing (1,745) (494) (1,393)
Financing
Issue of ordinary shares net of expenses 2,911 - 1,673
Capital element of finance lease payments (23) - -
Repayment of loans - - (200)
2,888 - 1,473
Increase/ (decrease) in cash 1,143 (494) 80
Reconciliation of cash flow movement in net funds
Increase/ (decrease) in cash 1,143 (494) 80
Borrowings acquired with subsidiaries (172) - -
Movement in borrowings 23 - 200
Translation adjustments (7) 41 -
Movement in net funds 987 (453) 280
Net funds at start of year 1,384 1,104 1,104
Net funds at end of year 2,371 651 1,384
Notes to the financial statements
For the half year ended 30 June 2004
Basis of preparation of financial information
The results for the first half of the financial year have not been audited and
are prepared on the basis of accounting policies set out in the Group's 2003
Report & Accounts. The summary of results for the year ended 31 December 2003
does not constitute full financial statements within the meaning of s240 of the
Companies Act. The full financial statements for that year have been reported on
by the Group's auditors and delivered to the Registrar of Companies. The audit
report was unqualified and did not contain a statement under s237(2) or s237(3)
of the Companies Act 1985.
On 26 June 2003 the Group disposed of its UK Media Division, Virtue Media
Services Limited. The results of that business have been classified as
discontinued operations in the profit and loss account to allow the comparison
of continuing and discontinued operations. Kamera Holdings AB and Foroso
Communications GmbH are subsidiary undertakings acquired in this interim period
and are classified as acquisitions within continuing operations. The business
assets of AnnounceTV and Webcom which were acquired in May 2003 have been
integrated in to the Australian business segment. Further details of these
acquisitions are given below. The results of World Television Group Limited are
not included in the financial statements as the merger completed after the
interim balance sheet date.
Foreign currencies
The following exchange rates were used in preparation of the consolidated
financial information:
30.06.04 Average 2004 Average 2003 31.12.03 Average 2003
six months 30.06.03 six months 12 months
Australian Dollar (AUD) 2.6076 2.4685 2.4624 2.5919 2.3716 2.5081
Euros (EUR) 1.4880 1.4867 1.4373 1,4504 1.4172 1.4433
Swedish Kronor (SEK) 13.6359 13.6455 13.2153 13.3155 12.8440 13.1992
Swiss Franc (CHF) 2.2689 2.3069 2.2354 2.1751 2.2098 2.1982
Acquisitions
Kamera Holdings AB
On 9 January 2004 the Company acquired Kamera Holdings AB, a Swedish based
webcasting group, for an aggregate consideration before expenses of #2.4
million. This sum comprised cash of #102,000 and a new issue of 43,770,247
ordinary shares. All but 415,015 of these shares have been issued to date. The
total adjustments required to the book values of the assets and liabilities of
the group acquired in order to present the net assets of those companies at fair
values in accordance with group accounting principles were #97,000, details of
which are set out below together with the resultant amount of goodwill arising:
# thousands Book value of Fair value Fair value of
asset adjustments assets
acquired acquired
Analysis of assets acquired:
Tangible fixed assets 225 (2) 223
Debtors 302 (5) 297
Cash 315 - 315
Creditors due less than one year (575) (36) (611)
Creditors due more than one year (171) - (171)
Provisions - (54) (54)
Net assets acquired 96 (97) (1)
Goodwill 2,504
Consideration 2,503
Consideration satisfied by:
Acquisition expenses 84
Cash 102
Shares 2,317
The book value of assets and liabilities has been taken from their audited group
accounts as at 31 December 2003. Kamera contributed in the six months to 30 June
2004: #842,000 to turnover; #(11,000) to operating losses before goodwill
amortisation; #(261,000) to loss before interest; and #(255,000) to loss after
tax. Kamera recorded in the twelve month period to 31 December 2003: #1,922,000
of turnover; and #(539,000) operating loss before goodwill amortisation.
Foroso Communications GmbH
On 6 May 2004 the Company acquired Foroso Communications GmbH, a webconferencing
company based in Germany. The Company has paid a total of #520,000 in cash and
will pay deferred consideration of #40,000 and #120,000 in November 2004 and
July 2005 respectively. The Company agreed to pay up to #600,000 of contingent
cash consideration subject to Foroso achieving certain conditions, included
earning either #600,000 profit after taxation or achieving revenues of #1.0
million from the period of acquisition until 31 December 2005. The book value of
assets and liabilities has been taken from the unaudited management accounts of
Foroso as at 30 April 2004. Foroso contributed #23,000 to turnover; #(1,000) to
operating losses before goodwill amortisation; #(25,000) to loss before
interest; and #(25,000) to loss after tax in the period from acquisition to 30
June 2004.
Australian acquisitions
On 12 February 2004 the Company acquired 289,663 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. The acquisition took
the Group's holding in its Australian subsidiary to 83% from 63%. On 14 May 2004
the Group acquired the business assets of Webcom for consideration of #59,000,
and on 28 May 2004 it acquired the business assets of AnnounceTV for
consideration of #119,000.
Summary of Foroso and Australian acquisitions
# thousands Australian Foroso(1) AnnounceTV Webcom Total
minority
interest
Book value of assets acquired 18 6 39 58 121
Fair value adjustments - - - - -
Net assets acquired 18 6 39 58 121
Goodwill 76 719 80 1 876
Consideration 94 725 119 59 997
Consideration satisfied by:
Acquisition expenses - 45 4 1 50
Cash - 520 115 58 693
Deferred cash consideration - 160 - - 160
Shares 94 - - - 94
(1) In connection with the acquisition of Foroso the Board has placed a fair
value of #nil over contingent consideration of potentially up to #600,000, which
is payable based on certain performance criteria, due to the limited trading
history of the company.
Net cash outflow in respect of acquisitions
# thousands (Unaudited) (Unaudited) (Audited)
Six months Six months 12 months
to 30.06.04 to 30.06.03 to 31.12.03
Net cash balances acquired 319 - 138
Acquisition of Kamera (186) - -
Acquisition of Australian minority interest - - -
Acquisition of Foroso (565) - -
Acquisition of AnnounceTV (119) - -
Acquisition of Webcom (59) - -
Acquisition of Unit.Net - - (124)
(610) - 14
Placing
On 5 May 2004 the Company issued 95,422,850 new ordinary shares through a
placing at a price of 3.25 pence per share, raising a total of #3.1 million
before expenses.
Post balance sheet events
On 22 July 2004 the Company agreed the surrender of the property lease of its
former head office, Tornado
House, Marlow which was unoccupied. Under the agreement the Company made a net
cash saving of #805,000 compared to its obligations under the lease over the
next two and a half years. The Company agreed to pay the landlord a surrender
premium of #495,000 net of VAT in addition to related expenses and reinstatement
costs of #110,000. As part of the settlement the Company will utilise a #318,000
secured rent deposit held in favour of the landlord which was previously written
of in the Company's 2002 Report & Accounts. In consideration of the surrender
premium the Company will avoid paying approximately #1.4 million of rent,
service charge, lease termination payments, reinstatement costs and running
costs. The Company made full provision for the expected costs arising under the
lease in its 2002 Report & Accounts.
On 19 August 2004 the Company merged with World Television Group Limited ('World
TV'). The merger was effected by the acquisition by the Company of the entire
issued share capital of World TV for a total consideration excluding transaction
expenses of #18.1 million. The consideration was satisfied by cash of #1.0
million and the issue of 440,582,265 new ordinary shares. The results for World
TV in the interim period are set out later in this report.
Exceptional items
The Company received exceptional income of #383,000 in 2003 which is comprised
mainly of: #100,000 in connection with a settlement of a claim by the Company
with the liquidator of a former subsidiary over a bank deposit held by in the
name of that subsidiary; and #282,000 arising on the disposal of its UK Media
Services Division, Virtue Media Services Limited.
Earnings per share
(Unaudited) (Unaudited) (Audited)
Six months Six months 12 months
to 30.06.04 to 30.06.03 to 31.12.03
Basic earnings per share
Loss for the period (1,111) (414) (1,241)
Weighted average number of shares (thousands) 232,910 113,966 124,373
Earnings per share (pence) (0.5) (0.4) (1.0)
Supplemental earnings per shares
Loss for the period (1,111) (414) (1,241)
Exceptional items - (290) (383)
Goodwill amortisation 294 24 34
Adjusted earnings (817) (680) (1,590)
Weighted average number of shares (thousands) 232,910 113,966 124,373
Earnings per shares - adjusted (pence) (0.4) (0.6) (1.3)
Reconciliation of operating profit to net cash flow from operating activities
# thousands (Unaudited) (Unaudited) (Audited)
Six months Six months 12 months
to 30.06.04 to 30.06.03 to 31.12.03
Group operating loss (1,124) (730) (1,709)
Depreciation 165 159 281
Amortisation 294 24 34
(Increase)/decrease in debtors (210) 661 436
Decrease in creditors (134) (989) (977)
Loss on disposal of fixed assets - - (1)
Non-cash transactions (26) - 18
Total net operating cash flow (1,035) (875) (1,918)
Reconciliation of movement in net funds
# thousands At 31.12.03 Cash flow Acquisitions Exchange At 30.06.04
(excluding movements
cash)
Cash at bank and in hand 1,384 1,143 - (7) 2,520
Finance leases - 23 (172) - (149)
1,384 1,166 (172) (7) 2,371
Pro-forma group profit and loss account
For the half year ended 30 June 2004
# thousands (Unaudited) (Unaudited) (Unaudited)
Six months Six months 12 months
to 30.06.04 to 30.06.03 to 31.12.03
Turnover
Continuing operations:
- Ongoing 4,438 3,370 8,463
- Acquisitions 866 - -
Turnover from continuing operations 5,304 3,370 8,463
Discontinued operations - 627 627
Total turnover 5,304 3,997 9,090
Net operating expenses (6,089) (4,291) (9,481)
Operating loss (785) (294) (391)
Continuing operations:
- Ongoing (506) (28) (132)
- Acquisitions (279) - -
Operating loss from continuing operations (785) (28) (132)
Discontinued operations - (266) (259)
Total operating loss (785) (294) (391)
Operating loss from continuing operations analysed as:
- Europe 333 522 1,262
- Australasia (97) (42) (88)
- Corporate expenses (716) (473) (1,250)
Operating loss before goodwill amortisation from (480) 7 (76)
continuing operations
- Goodwill amortisation (305) (35) (56)
Profit on sale or termination of operations - 290 383
Loss before interest and tax (785) (4) (8)
Interest receivable and similar income 22 18 30
Interest payable and similar charges (12) (7) (13)
Loss before tax (775) 7 9
Tax (100) (2) (205)
Loss after tax (875) 5 (196)
Equity minority interests 21 15 73
Loss for the period (854) 20 (123)
Dividends (600) - -
Retained loss for the period (1,454) (20) (123)
Loss per share (pence)
Basic - adjusted (0.1)p 0.0p (0.1)p
Basic (0.1)p 0.0p 0.0p
Weighted average number of shares (000s) 673,711 554,766 565,613
There were no material recognised gains or losses other than those shown in the
profit and loss account.
Notes to the pro-forma financial information
For the half year ended 30 June 2004
Basis of preparation
The Group merged with World TV on 19 August 2004. The Board anticipates that
this transaction will qualify for merger accounting in the full year report and
accounts, whereby the combined results and net assets of the Group and those of
World TV will be presented as if the Company had always been the parent of World
TV. Therefore the unaudited pro-forma information has been prepared to
illustrate the effect of this merger as if it had occurred before the interim
reporting balance sheet date.
Reconciliation of pro-forma and statutory financial statements
# thousands (Unaudited) (Unaudited) (Unaudited)
Six months Six months 12 months
to 30.06.04 to 30.06.03 to 31.12.03
Turnover
Virtue 2,493 1,264 2,697
World Television 2,811 2,733 6,393
Total 5,304 3,997 9,090
Operating (loss)/profit
Virtue (1,124) (730) (1,709)
World Television 339 436 1,318
Total (785) (294) (391)
(Loss)/profit before tax
Virtue (1,132) (429) (1,314)
World Television 357 436 1,323
Total (775) 7 9
This information is provided by RNS
The company news service from the London Stock Exchange
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