Final Results

25 May 2016

Cellcast plc

("Cellcast", "the Group" or "the Company")

Audited Results for the year ended 31 December 2015

The Board of Cellcast plc (AIM: CLTV) announces the Company's audited results for the year ended 31 December 2015. A full copy of the annual report and accounts, along with a notice of the Group's annual general meeting, to be held at L'Escargot, 48 Greek Street, London W1D 4EF on 30 June 2016 at 12 p.m., has been posted to shareholders and will shortly be available from the company's website, www.cellcast.tv.

Highlights

· Group operating revenues from core operations of £11.8 million (2014: £12.2 million)

· Cost of sales reduced by 3%, from £10.9 million in 2014 to £10.6 million in 2015

· Gross profit was £1.2 million (2014 gross profit: £4.2 million, including a one off £3 million inflow flow from sale of channel management contract)

· Profit for the year of £0.5 million (2014: £2.9 million)

· Net cash balance at 31 December 2015 of £839,000 (31 December 2014: £598,000).

· Profit per share of 0.7p (2014: 3.8p)

Andrew Wilson, Chief executive Officer of Cellcast, commented:

"During the year revenue from our core services continued to decline, with customer numbers and gross margins coming under increasing pressure. The Board has been looking at diversification opportunities, particularly in Africa, and during the period entered into an agreement to provide applications and services to a gaming operator in Kenya. The Directors consider that there is a significant amount of potential in the region to leverage the group's skills and expertise in interactive broadcasting and mobile transactional services."

For further information:

Chief Executive's statement

2015 Results

The group's operating revenues from interactive broadcasting activities in the UK amounted to £11.8 million, a decrease of 3% on 2014 (£12.2m).

Cost of sales went down by 3%, from £10.9 million in 2014 to £10.6 million in 2015.

The group's gross profit amounted to £1.2 million in 2015 compared to £4.2 million in 2014. The 2014 profits were exceptionally impacted by the receipt of £2.9 million from the disposal of a key channel management contract.

General and administrative costs decreased by 16%, from £789,000 to £660,000. Approximately 52% of these costs were personnel costs (2014: 50%).

Amortisation and depreciation expenses for 2015 were £153,000 a £27,000 increase on those of in 2014 (£126,000). The increase is primarily due to investment in new broadcast equipment.

After taking into account the net interest, share of associate results and the R&D tax credit, the total profit for 2015 was £530,000 (2014: profit of £2.9 million). 2015 earnings per share was 0.7p (2014: earnings per share of 3.8p).

Funding

At 31 December 2015, the group had a net cash balance of £839,000 (2014: £598,000).

Outlook

The core UK interactive TV business remains challenging. The continuing decline in revenue has been less sharp than in previous years as it was partially offset mid-year by a key competitor's cessation of broadcasting. But the initial uplift in revenue this drove in August and September did not prove durable into the last quarter.

At the same time, as previously announced, the group has been looking at redeploying its established skills in mobile, broadcasting and new media to address new market sectors that can provide alternate sources of revenue. Management has been especially focused on various opportunities in Africa driven primarily by the new potential for billing for interactive services offered by mobile money which is getting widespread adoption across the continent. The first of these potential opportunities was realised in an agreement to provide applications and services to a gaming operator in Kenya. Revenue is derived from a license fee levied on a per transaction basis. The local partner's marketing activity commenced in November 2015 and their initial contract runs until June 2016. Although the agreement did not contribute any significant revenue during 2015, after recovery of set up costs we expect this venture to be making a positive contribution within the initial contract term. If the contract is renewed this new activity should provide some offset to the decline of the core UK business both through a new income stream and also through absorption of some existing overhead.

Consolidated statement of comprehensive income

For the year ended 31 December 2015

Consolidated statement of financial position

As at 31 December 2015

Company statement of financial position Company number: 05342662

As at 31 December 2015

Consolidated statement of changes in equity for the year ended 31 December 2015

Company statement of changes in equity for the year ended 31 December 2015

Cellcast plc has not presented its own income statement as permitted by Section 408 of the Companies Act 2006.

Consolidated statement of cash flows

For the year ended 31 December 2015

Notes to the consolidated financial statements

The figures for the year ended 31 December 2015 and 2014 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The figures for the year ended 31 December 2015 have been extracted from the statutory accounts for that year on which the auditor has issued an unqualified audit report which have yet to be delivered to the Registrar of Companies. The figures for the year ended 31 December 2014 have been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report. No statement has been made by the auditor under Section 498(2) or (3) of the Companies Act 2006 in respect of either of these sets of accounts. This announcement was approved by the board of directors on 24 May 2016 and authorised for issue on 24 May 2016.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ('IASB') and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together 'IFRS') as endorsed by the European Union. The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 December 2015 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards ('IFRS').

Going concern

During the year ended 31 December 2015, the group recorded a profit of £530,000. The group had net cash of £839,000 as at 31 December 2015 and it had net current assets of £1,736,000. 

The directors have carefully considered whether or not it is appropriate to adopt the going concern basis in preparing the 2015 financial statements. The directors have reviewed the group's detailed cash forecast to ensure that the group's current working capital and credit facilities in place are sufficient for the foreseeable future. This assessment is based upon forecasts following the reduction in the revenue of the UK television business together with the continued reduction in operational costs implemented over the year; it also assumes the maintenance of existing relationships with key suppliers. 

After making enquiries, the Directors have concluded that the group has adequate resources to continue trading for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the group financial statements.

The group's revenues are almost entirely in the UK from broadcasting related activities on Sky, Freeview and Freesat channels.

The financial information is presented to the executive management team who are responsible for making financial decisions, as one operating unit which operates in one geographical unit. The executive management team make their decisions based upon this information. The executive management team comprises the chief executive officer and the chief financial officer.

The group has three significant telecom aggregators, generating 70% of the group's television and broadcast revenue. The three telecom aggregators contribute £5,947,946, £1,358,999, and £928,746 of the group's total revenue (2014: 67% representing £6,080,318, £1,300,595, and £709,734).

Revenue is further split below between revenue generated by:

In the year to 31 December 2014 there was a sale of a channel for £2.98m.

2. Staff costs

Staff costs of £343,334 (2014: £325,769) are included in general and administrative expenses and £853,334 (2014: £962,968) are included in cost of sales.

Average monthly number of employees by activity (including directors):

Key management consists of the CEO, the CFO and one other member of staff who is considered key management

3. Profit / (loss) before tax

4. Interest receivable and similar income

5. Interest payable and similar charges

6. Taxation

At 31 December 2015, the group had estimated tax trading losses of £2 million (2014: £2.5 million) which subject to the agreement of the HM Revenue & Customs and overseas tax authorities, are available to carry forward against future profits of the same trade. No deferred tax asset has been recognised on these losses as timings of future profits are uncertain.

7. Profit / (loss) per share

The calculations of adjusted basic and diluted earnings per ordinary share are based on the following results:

There was no dilutive effect from the issued share options and warrants. The total potential number of dilutive ordinary shares at the year end was 12,783,699 (2014: 12,783,699).

8. Intangible assets

9. Property, plant & equipment

10. Non-current investments

At 31 December 2015, the group had a 35% holding in 2Giraffes LLP. 2Giraffes LLP is a large global provider of mobile internet content. This holding is treated as an investment as the group does not have any significant influence on the operations of 2Giraffes LLP. The group received £25,000 in February 2015 from 2Giraffes LLP but nevertheless deemed it more prudent to further reduce the net book value of this investment by impairing 50% of the remaining carrying value due to the uncertainty surrounding the timing of future repayments.

11. Current asset investments

Investment in joint venture

On 30 May 2014, the group entered into a joint venture to invest in Euro TV SA, a company incorporated in the British Virgin Islands. Under the joint venture, the group invested £1 million for a 49% equity interest in Euro TV SA which is a joint venture between Cellcast UK Limited and the owners of the remaining 51%, being the principles of the Atlas Group of Companies, to focus on the development of a multi-platform gaming business using certain intellectual property and other proprietary rights and technologies. Following a review of strategy it was subsequently decided that resources would be better employed in alternative investment ventures and therefore the joint venture did not commence trading and was wound up on 6 March 2015 with the investment sum of £1million being recovered in full by the company.

Financial asset

In May 2015, the group decided to invest US$ 260,000 (£165,000) in a treasury product managed by the Lexinta Fund. This investment was classified in current assets as the capital and interests generated can only be withdrawn on a yearly basis at the anniversary date of the investment.

12. Associate

On 26 November 2015 the group acquired 49% of the issued share capital of Global Gaming Limited for a total cost of £4. The directors have assessed that the group has significant influence, but not control over Global Gaming Limited and have accounted for the investment as an associate.

As at 31 December 2015, the amount due from associate stood at £594,900, this is shown in note 13. The group has got full confidence regarding the full recovery of this amount.

13. Trade and other receivables

Following a review of the amounts due by the group undertaking, the directors have considered the projected performance of Cellcast UK Limited and are confident that the amounts will be recovered. The directors deemed that it is appropriate to classify the amounts due after more than one year as this reflects the timescale on which recovery is expected to occur. 

14. Non-current liabilities

Non-current trade payables fall due in equal instalments over 5 years to October 2020.

15. Trade and other payables

The credit payment profile in days calculation excludes the long term trade payables days which is contractually due over one year as including this long term element would skew the trade payable days.

16. Cash flows