Final Results

Delling Group PLC 07 June 2005 DELLING GROUP PLC FINAL RESULTS YEAR ENDING 31 DECEMBER 2004 Loss Lower than Originally Forecast by Company's Broker Delling Group Plc ('Delling Group' or 'the Company'), the marketing services group, announces its final results for the period ending 31st December 2004, its maiden full year results since flotation on AIM last October. The Group is AIM listed and incorporated in the UK but its principal activities are located in the Nordic region. It is a pioneer in the application of the latest IT technology that provides outsourced services of digital and other printing materials to the marketing department 'back offices' of companies, predominantly operating in Scandinavia. Software developed by Azzet, a subsidiary of the the Company, assists in the automation of processes of marketing departments. Another subsidiary of the Company, Butler Systems, provides a turnkey concept in plasma screens in shopping centres. Customers in the Nordic region include Nokia, Statoil, Sony Eriksson, McDonalds Norway and Compass Group Sweden. Subsidiaries comprise Depicta, Depicta Fame, Azzets and Butler Systems. Depicta and Depicta Fame are the drivers of the business, accounting for over 90% of current sales revenue. The results are based on 9 months of operations at Depicta, Azzets and Butler Systems and 21/2 months of operations at, Depicta Fame. Financial highlights: • Turnover £2.17m (£1.8m turnover was forecast by the Company's broker, Seymour Pierce Limited). • Pre-tax loss £2.77m (£3.5m pre-tax loss was forecast by the Company's broker, Seymour Pierce Limited). • Contracts with a revenue of £4.5m per annum were gained in the first quarter of 2005. • Two acquisitions were made in April 2005, providing approximately £1m of annual turnover and £100k of annual operating profit, for consideration equivalent to one times pre-tax profit, contributing from 1 May 2005. • Cash, including credit facilities, of £0.8m as at 31 May. • Mobile marketing established as a new Group service. • Substantial pipeline of acquisitions and sales prospects. • Board strengthened by appointments of a Finance Director and a Director of UK sales and marketing. Commenting, David Kruck, Chairman, said: 'Delling Group is well positioned to take advantage of opportunities in the market place, to build itself into a substantial international business in the marketing support services sector in Northern Europe. We believe that the current financial year has the potential for strong growth in the market segments in which we operate, with a turn around to profitability expected in 2005/2006.' ENDS Contact: Delling Group Plc Aksel Bradvelt, Chief Executive Officer 020 7010 8210 James Robinson, Finance Director 020 7010 8210 Geir Lolleng, Chief Operating Officer 020 7010 8210 Binns & Co PR Ltd Peter Binns 020 7786 9600 Hannah Sloane 020 7153 1480 DELLING GROUP PLC ANNUAL REPORT CHAIRMAN'S STATEMENT The last year has been an exciting year for Delling Group. From the creation of the Group in March 2004, with the acquisition of the three companies based in Stockholm by Delling Group Plc to the listing on Aim in October 2004, followed by the acquisition of Depicta Fame, based in Oslo. The past 12 months have also been geared towards building up the Group organisation and creating a basis for the expansion of the Group. Our strategy is to grow through acquisitions and organic growth centered on our core offering. The space that the Group operates in is highly fragmented, with a large number of smaller potential acquisition candidates. The outsourcing of marketing material production is a growing market with significant potential. The new digital channels such as screen advertising and mobile marketing are expanding markets. The Group has positioned itself well within the different segments during the year. A number of contract wins, such as those with HP Sweden, Beijer and Compass Group have created a solid base within our business areas for expansion during this year. Furthermore, the successful acquisition of Depicta Fame in Oslo has provided a template for the Group of how to implement its acquisition strategy. The flotation on AIM has enhanced the profile of the Group, increasing its credibility in acquiring larger outsourcing contracts, created an alternative settlement structure for acquisitions and finally provided access to additional funding to support our expansion strategy. At the end of last year the Group entered into an agreement with Briscan AB, a small technology development company in Sweden, that has developed a technology for interactive marketing over mobile phones. The agreement has led to the establishment of a mobile marketing unit within Delling Group, which offers additional exciting potential. I would like to thank our staff for all their hard work over the last year. The competence level within the Group has been substantially enhanced through a number of new employees hired during the year. It is our belief that the present organisation will enable us to continue the rapid expansion that we have planned. Looking forward to the current financial year, we believe that the market segments we are operating in have the potential for strong growth. This is based on the increasing demands on marketing departments to become more efficient and to get more out of their marketing spend, as well as the trend towards the use of other marketing channels such as mobile marketing and screen advertising. I believe that we are well on our way to realising our vision of becoming a major force in Northern Europe in the marketing support services area and we will continue to work very hard towards achieving this objective during 2005. David Krucik Chairman. DELLING GROUP ANNUAL REPORT CHIEF EXECUTIVE'S REVIEW Introduction Delling Group has made significant progress since March 2004 with the listing on AIM as well as the development of the organisation, the pipeline of sales prospects, and potential acquisitions. The Group is well positioned to take advantage of the opportunities in the market segments it operates in as well as fulfilling its expansion plans during 2005. Financial Results The financial results are mainly based on 9 months of operations, as three of the operating companies were acquired by Delling Group Plc on 31 March 2004. Furthermore, the results also include 21/2 months of contribution from Depicta Fame in Oslo. Of the total turnover of £ 2.173 million last year, 71% is from Depicta (the media production company), 24% from Depicta Fame (media production company), 4% is from Azzets (IT solutions for the marketing department) and 1% from Butler Systems (turnkey concept for screen advertising). Of the pre-tax loss of £ 2.83 million, 66% was attributed to Azzets. As mentioned below, the company was restructured at the end of the year, of which at least 50% of the costs are non-recurring. Approximately 14% of the pre-tax loss is attributable to the start up costs of Butler Systems. Approximately 25% of the pre-tax loss is attributable to Depicta, with the build-up of the sales organisation in Depicta representing the main component. During the year 15,785,713 shares were issued at 14p per share in the listing on AIM in October 2004, raising the number of issued ordinary shares to 58,502,717. The payment for the acquisition of Depicta Fame, at the same time, increased the number of ordinary shares in issue by 1,190,476 to 59,693,193, which was the number of ordinary shares in issue at the year end. The Group issued a further 8,666,667 new ordinary shares at 15p per share in February, raising approximately £ 1.3 million. Business and operating review In March 2004 three business areas were organised in separate Swedish companies: Depicta, Azzets and Butler Systems were acquired by the newly established Delling Group Plc. Depicta produces marketing material (including videos, images, text) for marketing departments. In 2004, the company increased its resources in the sales area resulting in a substantial increase in its pipeline of sales prospects, especially within outsourcing of production and production management. The result of this work were the two major outsourcing contracts for HP and the building materials retail chain Beijer in Sweden. These contracts have been developed favourably during the first part of 2005 and the efforts from the sales department have made the ground work for a number of potential outsourcing contracts during 2005. In Azzets, which develops and sells software solutions for marketing departments, a strategic change was made in October. The company has developed a digital asset management system that is leading edge in the market. A strategic decision was made to sell the system to a software company and retain the rights to continue to sell it to our customers. That process will be carried out in 2005. Therefore, the development department was given notice and made redundant. The company is building up a portfolio of software solutions able to cater to the total needs of marketing departments through partners. Gartner Group is forecasting strong market growth in this area, which they call Market Resource Management (MRM) in the coming years. Azzets is being developed to take advantage of the growth opportunity. Butler Systems sells a turnkey concept for screen advertising and, despite being in a start-up period, last year won a number of contracts, including one with Compass Group in Sweden. These contracts, and a number of sales prospects, are the basis for the development of a profitable business in the current year. Mobile marketing became a new business area at the end of the year. A partnership was entered into with the mobile technology company Briscan AB. An agreement for a free trial in a limited period on Ericsson's systems in Sweden was granted. A number of pilot projects have been developed in the first months of the new financial year. The technology allows a potential customer to interact with the advertiser through a mobile phone. The response in the marketing community has been very favourable. Delling Group has the exclusive rights to market the concept worldwide. The market Delling Group is dependent on the development of the advertising market, particularly in Scandinavia, where most of the business is presently located. The advertising market in Sweden in particular has been gradually increasing from a historic low point. That trend is expected to continue this year. However, it is important to be aware that a major part of Delling Group's service concept is based on making the processes in the marketing departments more efficient by outsourcing production and production management and by using software solutions that reduces costs and decreases time to market campaigns. In the screen advertising area and the mobile marketing area the situation is different. These markets are based on the speed of adaptation of these new marketing tools. It might take a few years before these segments become mature, however, as a leading edge marketing support services company Delling Group is one of the companies that drive the developments in these segments, and is very well placed to take advantage of this developing market. Human resources During the year the IT business Azzets was restructured as mentioned above. The result was a reduction in staff by a total of 14 employees. The organisation in the other parts of the business have been strengthened with complementary competencies such as mobile marketing. The expansion has been mostly in the sales function. On the management side, in the first half of this year, a Finance Director has been appointed, as well as a Director in charge of running and developing business in the UK. Outlook In the first five months of the new financial year, contracts worth a total of £4.5 million have been announced, which includes every business area of the Delling Group. This is due to the build up of the sales force and the sales pipeline during 2004. We would expect this development to continue. We have also announced two acquisitions so far this year, with a combined annual turnover of £1 million with a pre-tax profit of £100,000. This is again due to the acquisition pipeline that the company started to build upon last year and which we are continuing to build this year. Acquisitions are a major part of our expansion strategy and this development is expected to continue until the Group reaches critical mass. A Director in charge of our business in the UK has been appointed to build our business in the UK market. Aksel Bratvedt Chief Executive Delling Group Plc Group Profit and Loss Account Period ended 31st December 2004 Group turnover 2 2,173 Cost of sales (795) -------------------------- Gross profit 1,378 Administrative expenses (4,051) -------------------------- Operating loss 3 (2,673) Interest receivable 2 Interest payable 6 (159) -------------------------- Loss on ordinary activities before taxation (2,830) Tax on loss on ordinary activities 7 33 -------------------------- Loss on ordinary activities after taxation 9 (2,797) Dividends 10 - -------------------------- Loss for the financial period (2,797) ========================== Loss per share 8 (6.74)p ========================== Delling Group Plc Group Statement of Total Recognised Gains and Losses Period ended 31st December 2004 2004 £000 Loss for the financial period attributable to the shareholders of the parent company (2,797) Currency translation differences on foreign currency net investments 97 ---------------- Total recognised gains and losses relating to the period (2,700) ================= Delling Group Plc Group Balance Sheet Period ended 31st December 2004 2004 Note £000 Fixed assets Intangible assets 11 2,920 Tangible assets 12 674 --------------- 3,594 --------------- Current assets Stocks 14 42 Debtors 15 698 Cash at bank 284 --------------- 1,024 Creditors: Amounts falling due within one year 16 (3,535) --------------- Net current liabilities (2,511) --------------- Total assets less current liabilities 1,083 Creditors: Amounts falling due after more than one year 17 (426) --------------- 657 =============== Capital and reserves Called-up share capital 21 597 Share premium account 22 2,700 Capital reserve 60 Profit and loss account 22 (2,700) -------------- Shareholder funds 23 657 ============== Delling Group Plc Group Balance Sheet Period ended 31st December 2004 2004 Note £000 Fixed assets Investments 13 1,035 --------------- Current assets Debtors 15 2,264 Cash at bank 21 --------------- 2,285 Creditors: Amounts falling due within one year 16 (162) --------------- Net current assets 2,123 --------------- Total assets less current liabilities 3,158 --------------- 3,158 =============== Capital and reserves Called-up share capital 21 597 Share premium account 22 2,700 Profit and loss account 22 (139) --------------- Shareholders' funds 23 3,158 =============== Delling Group Plc Group Cash Flow Statement (continued) Period ended 31st December 2004 2004 £000 Net cash outflow from operating activities (587) Returns on investments and servicing of finance Interest paid (159) Interest received 2 --------------- Net cash outflow from returns on investments and servicing of finance (157) Taxation 33 Capital expenditure and financial investment Payments to acquire intangible fixed assets (807) Payments to acquire tangible fixed assets (148) --------------- Net cash outflow for capital expenditure and financial (955) investment Acquisition Overdrafts acquired with subsidiaries (960) --------------- Cash outflow before financing (2,626) Financing Issue of equity share capital 2,847 --------------- Net cash inflow from financing 2,847 --------------- Increase in cash 221 =============== Major non-cash transaction During the period the company issued 35,880,000 ordinary shares of 1p in exchange for the net assets of Azzets AB, Butler Systems AB and Depicta AB and E-Path PVT Limited. Delling Group Plc Group Cash Flow Statement (continued) Period ended 31st December 2004 Reconciliation of operating loss to net cash outflow from operating activities 2004 £000 Operating loss (2,673) Amortisation 297 Depreciation 35 Increase in stocks (42) Increase in debtors (415) Increase in creditors 2,211 --------------- Net cash outflow from operating activities (587) =============== Analysis of changes in net debt At Cash Flows At 23 31 December March 2004 2004 £000 £000 £000 Net cash: Cash in hand and at bank - 284 284 Overdrafts (63) (63) ________ ________ ________ - 221 221 ====== ======= ======- Delling Group Plc Notes to the Financial Statements Period ended 31st December 2004 1. Accounting policies Basis of accounting The financial statements have been prepared under the historical cost convention and in accordance with applicable accounting standards. Basis of consolidation The consolidated financial statements incorporate the financial statements of the company and all group undertakings. These are adjusted, where appropriate, to conform to group accounting policies. Acquisitions are accounted for under the acquisition method and goodwill on consolidation is capitalised and written off over twenty years from the year of acquisition. The results of companies acquired or disposed of are included in the group profit and loss account after or up to the date that control passes respectively. As a consolidated group profit and loss account is published, a separate profit and loss account for the parent company is omitted from the group financial statements by virtue of section 230 of the Companies Act 1985. Turnover Turnover comprises the value of goods and services supplied by the company, net of value added tax and trade discounts. Amortisation Amortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Goodwill - 5%-10% straight line Fixed assets All fixed assets are initially recorded at cost. Depreciation Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Plant & Machinery - 3-5 years straight line Stocks Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Foreign Currencies Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are taken into account in arriving at the operating profit. Investments Fixed asset investments are stated at cost less any necessary provision for impairment. Capital instruments Shares are included in shareholders' funds. Other instruments are classified as liabilities if they contain an obligation to transfer economic benefits and if not they are included in shareholders' funds. The finance cost recognised in the profit and loss account in respect of capital instruments other than equity shares is allocated to periods over the term of the instrument at a constant rate on the carrying amount. Operating lease agreements Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits on a straight line basis over the period of the lease. 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 have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more tax, with the following exceptions: Provision is made for tax on gains arising from the revaluation (and similar fair value adjustments) of fixed assets, and gains on disposal of fixed assets that have been rolled over into replacement assets, only to the extent that, at the balance sheet date, there is a binding agreement to dispose of the assets concerned. However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold; Deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Going concern United Kingdom company law requires the company's directors to consider whether it is appropriate to prepare the financial statements on the basis that the group is a going concern. In considering this matter the directors have reviewed the group's budget for 2005 and its plan for 2006. This included consideration of the cash flow implications of the budget and plan. The directors see no reason why the group and the company should not continue in operational existence for the foreseeable future. For this reason they have adopted the going concern basis in preparing the group's financial statements. 2. Turnover The turnover and loss before tax are attributable to the one principal activity of the group. An analysis of turnover is given below: 2004 £000 Europe 2,173 ============== Turnover is all in respect of operations acquired during the period 3. Operating loss Operating loss is stated after charging: 2004 £000 Amortisation 297 Depreciation of owned fixed assets 35 Auditors' remuneration - as auditors 23 - non-audit services 123 ============== The audit fee to the parent company was £6,000 4. Particulars of employees The average number of staff employed by the group during the financial year amounted to: 2004 No Management 10 Sales 17 Production and development 33 Administrative 5 --------------- 65 =============== The aggregate payroll costs of the above were: 2004 £000 Wages and salaries 2,187 Social security costs 859 Other pension costs, life cover & medical costs 181 -------------------------- 3,227 ========================== 5. Directors' emoluments The directors' aggregate emoluments in respect of qualifying services were: 2004 £000 Emoluments receivable - from the company 26 - from group companies 352 Value of company pension contributions to money purchase schemes - --------------- 378 =============== During the year no director participated in a money purchase pension scheme. Emoluments of highest paid director: Total emoluments (excluding pension contributions) 206 ============== 6. Interest payable and similar charges 2004 £000 Interest payable on bank borrowing 156 Other similar charges payable 3 --------------- 159 =============== 7. Taxation on ordinary activities (a) Analysis of charge in the year Current tax: 2004 £000 UK Corporation tax based on the results for the year at 30% - Overseas tax credits 33 --------------- Total current tax credit 33 =============== (b) Factors affecting current tax charge The tax assessed on the loss on ordinary activities for the year is higher than the standard rate of corporation tax in the UK. 2004 £000 Loss on ordinary activities before taxation (2,830) ============== Loss on ordinary activities by rate of tax at 30% (849) Disallowed expenditure 15 Overseas tax credits (33) Losses carried forward 42 Overseas losses 792 --------------- Total current tax - credit (note 7(a)) 33 =============== Deferred tax assets have not been recognised in the financial statements as the directors are uncertain as to when they will be utilised. 8. Loss per share 2004 Pence Loss per ordinary share (6.74) ============== The basic loss per share is calculated by dividing the loss on ordinary activities after tax of £2,797,000 and the weighted average number shares in issue and carrying the right to receive dividend during period ended 31 December 2004 being 41,472,429. The diluted earnings per ordinary share calculation is the same as the basic earnings per share calculation. This is because no dilution arises as there is a loss. 9. Loss attributable to members of the parent company The loss dealt with in the accounts of the parent company was £139,000. 10. Dividends No dividends have been paid in respect of the period. 11. Intangible fixed assets Group Brands, licences Goodwill Total & patents £000 £000 £000 Cost Acquired in period 215 3,002 3,217 --------------- --------------- --------------- At 31 December 2004 215 3,002 3,217 =============== =============== =============== Amortisation Charge for the year 8 289 297 --------------- --------------- --------------- At 31 December 2004 8 289 297 =============== =============== =============== Net book value At 31 December 2004 207 2,713 2,920 =============== ============== =============== 12. Tangible fixed assets Group Plant & Total machinery £000 £000 Cost Acquired in period 709 709 --------------- --------------- At 31 December 2004 709 709 =============== =============== Depreciation Charge for the period 35 35 --------------- --------------- At 31 December 2004 35 35 =============== =============== Net book value At 31 December 2004 674 674 ============== ============== 13. Investments Company Total £000 Cost Additions 1,035 ------------- At 31 December 2004 1,035 ============= Net book value At 31 December 2004 1,035 ============= Subsidiary undertaking Holding Country of Proportion of Nature of business incorporation voting rights held Name of company Directly Held Azzets Limited Ordinary UK 100% Dormant Shares Butler Systems Limited Ordinary UK 100% Dormant Shares Depicta Limited Ordinary UK 100% Dormant Shares Indirectly Held Depicta AB Ordinary Sweden 100% Provides outsourced Shares solutions for all types of advertising media Azzets AB Ordinary Sweden 100% Provides software for shares media management Butler Systems AB Ordinary Sweden 100% Provides equipment and Shares support services for displaying advertising media Depicta Fame AS Ordinary Norway 100% Photographic reproduction Shares Pursuant to a Share Exchange Agreement dated 31 March 2004 Delling Group Plc allotted 35,880,000 ordinary shares on 31 March 2004 to the vendors of shares in Azzets AB, Butler Systems AB and Depicta AB in exchange for the entire issued share capital of each company and to vendors of shares in E-Path PVT Limited in exchange for 70% of the issued share capital in that company. The directors have subsequently decided to dispose of E-Path PVT Limited and this investment is therefore held in current assets. On 19 October 2004 8,000,000 Norwegian Kroner were paid to incorporate Depicta Fame AS. During the period the Company acquired 100% shareholding in all the above companies. Net assets/liabilities acquired are considered to be at fair value. £000 Intangible assets 851 Tangible assets 530 Debtors 276 Cash (960) Creditors (1,686) Net liabilities acquired (989) Cost-shares issued 359 Goodwill arising 1,348 14. Stocks Group Company 2004 2004 £000 £000 Finished goods 42 - ============== ============== 15. Debtors Group Company 2004 2004 £000 £000 Trade debtors 342 - Shares held for disposal (note 13) 3 3 Amounts owed by group undertakings - 2,227 Other debtors 353 19 Taxation - 15 ------------------ --------------- 698 2,264 =============== =============== 16. Creditors: Amounts falling due within one year, including convertible debts Group Company 2004 2004 £000 £000 Bank overdrafts 63 - Trade creditors 1,254 17 Other taxation & social security 897 4 Other creditors 1,280 100 Accruals and deferred income 41 41 -------------------------- --------------- 3,535 162 ========================== =============== The overdraft of a subsidiary is secured by a fixed and floating change over the assets of that subsidiary. 17. Creditors: Amounts falling due after more than one year Group Company 2004 2004 £000 £000 Other creditors 426 - --------------- --------------- 426 - =============== =============== 18. Treasury policy and financial instruments The group operates informal treasury policies which include ongoing assessments of interest rate management and borrowing policy. The board approves all decision on treasury policy. Facilities are arranged, based on criteria determined by the board, as required to finance the long term requirements of the group. The group has financed its activities by the raising of funds through the placing of shares. The group has taken advantage of the exemption permitting it not to include short term debtors and in the disclosures required by FRS 13 'Derivatives and Other Financial Instruments: Disclosure' other than the currency disclosures. At 31 December 2004 there were no net monetary assets denominated in currencies other than the functional currencies of the operations. There are no material differences between the book value and fair value of the financial assets at the year end. 19. Commitments under operating leases At 31 December 2004 the group had annual commitments under non-cancellable operating leases as set out below. Group Group Company 2004 2004 Land and Other items Land and Other items Buildings Buildings £000 £000 £000 £000 Operating leases which expire: Within 1 year - - - 10 Within 2 to 5 years - 3 - - --------------- --------------- --------------- --------------- - 3 - 10 =============== =============== =============== =============== 20. Related party transactions The company is exempt from the requirement to disclose related party transactions with other group companies under the provisions of Financial Reporting Standard No. 8. All group transactions were eliminated on consolidation. 21. Share capital Authorised share capital: 2004 2004 No £000 Ordinary shares of £0.01 each 200,000,000 200 ============== ============== Allotted, called up and fully paid: 2004 2004 No £000 Ordinary shares of £0.01 each 59,693,193 597 ============== ============== The following shares were issued in the period £000 No Reason March 2004 359 35,880,000 Acquisitions October 2004 2,461 15,785,713 Placing on AIM October 2004 957 6,837,004 Settlement of loan notes October 2004 166 1,190,476 Acquisition ------------------------ --------------------------------------------------- 3,943 59,693,193 ====================== =================================================== Warrants Delling has two warrants in existence as follows: (1) 1% of the issued share capital at admission to AIM at the admission price exercisable at any time over 5 years from the admission, and (2) 3% of the issued share capital at admission to AIM at the admission price exercisable at any time over 3 years from the admission. 22. Reserves Group Share premium Profit and loss account account £000 £000 Premium arising on shares issued 3,096 - Less share issue costs (396) - --------------- -------------------------- 2,700 Loss for the period (2,825) Exchange movement - 97 --------------- -------------------------- Balance carried forward 2,700 (2,728) =============== ========================== Company Share premium Profit and loss account account £000 £000 Premium arising on shares issued 3,096 - Less share issue costs (396) - Retained loss for the period - (139) ----------------------- -------------------- Balance carried forward 2,700 (139) ===================== ================== 23. Reconciliation of movements in shareholders' funds Group Equity shareholders' funds 2004 £000 Loss for the financial period (2,700) Dividends - --------------- (2,700) New equity share capital subscribed 3,297 --------------- Net increase to funds 597 Capital reserve 60 --------------- Closing shareholders' equity 657 =============== Company Equity shareholders' funds Loss for the financial period (139) New equity share capital subscribed 3,297 Net addition to funds 3,158 --------------- Closing shareholders' equity funds 3,158 24. Contingent Liabilities Depicta Guarantee In 2002, Kanonladdaren AB sold software rights to a related party Cultmag AS. Kanonladdaren agreed to guarantee Cultmag's bank borrowings for that purchase. Subsequently, as part of Kanonladdaren's sale of its assets to members of the Group, Depicta took over 2.5 million Swedish kronor of that guarantee in favour of Sparebanken Spreetogo which it will be called on to pay and will obtain no recourse. Azzets Undertaking In 2002, Kanonladdaren AB sold software rights to a related party, Cultmag AD. Kanonladdaren agreed to guarantee Cultmag's bank borrowings for that purchase. Subsequently, as part of Kanonladdaren's sale of its assets to members of the Group. Azzets agreed to take over 14.3 million Swedish kronor of that guarantee in favour of DNBOR which it will be called on to pay and will obtain no recourse. 25 Controlling party There is no controlling party 26. Post Balance Sheet Events In February 2005 the company had a further placing of 8,666,667 new ordinary shares at an issue price of 15p per share raising £1,300,000 before issue costs. In April 2005 the company announced the acquisition of two businesses in Norway for a total consideration of £100,000. This information is provided by RNS The company news service from the London Stock Exchange MJMTJA

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