Interim Results
Screen Technology Group plc
28 September 2007
Screen Technology Group plc
("Screen Technology" or "the Company")
2007 Interim Results
Screen Technology the designer and manufacturer of revolutionary high-resolution
large-screen displays for high ambient light environments announces its
unaudited results for the six months ended 30 June 2007.
Chairman's statement
In June we reported that the Company was moving into the phase where conversion
of sales opportunity was of key importance, and that the business was no longer
production constrained. In August we launched our own version of the fully
scaleable ITrans(R) modular product demonstrating a 200" (5m) diagonal display
for the first time. This product is now available from our own manufacturing
partner Shearline, with availability of a similar product from our OEM partner
Hantarex also expected in the next few weeks.
Interest in this modular product has been very significant and the market
opportunity confirmed, however this interest is proving slower to convert into
sales orders than expected. The Company now expects sales in 2007 to be small.
The Board considers that the Company will need further funding to execute on its
potential and is taking appropriate actions to secure this.
ITrans continues to be the only technology capable of delivering large seamless
displays that can be seen in high-brightness environments, offering high
resolution and high image quality over a wide range of viewing distances.
Commercial developments
The Company has commissioned independent research into the professional displays
and digital signage market. The Worldwide Signage and Professional Displays
market is currently $8Bn and forecast to grow to over $13Bn by 2010. The Retail
Digital Signage sector alone is estimated to be worth $1.4Bn and in terms of
unit growth the number of digital retail displays is expected to grow
significantly by 43% CAGR from 498,668 units in 2006 to 2.1 million units in
2010 (source: iSuppli Corporation). Furthermore, in the traditional Outdoor
Advertising market (e.g. 6 sheet through to full size Billboards) large digital
displays are expected to represent up to 10% of the overall High Impact/Outdoor
Advertising sector within the next 3 to 5 years.
ITrans displays have a unique and compelling offer in this market. For displays
of between 60" to 300" diagonal, and those with unusual aspect ratios, ITrans
offers resolution, scalability and sunlight readability that no other display
technology can match.
The Company is pleased to report that the new modular product was fully launched
in August with the demonstration of the world's first 200" (5m) diagonal,
sunlight readable, high resolution display. This version of the product is now
available from our UK production partner, with availability of a similar product
from Hantarex, our major Italian partner following soon after. The Company has
conducted a series of demonstrations to major OEM and distribution partners,
together with some representatives of early end user applications. Reaction has
been extremely positive, with the size, quality and brightness of the display
creating a real 'wow' effect.
In August we also showed for the first time an outdoor enclosed '6 sheet poster'
format of the ITrans display made with the support of a further OEM partner.
This version of the product has created great interest and the Board believes
this is the only sunlight readable digital display of its size and resolution
available in the world. The 'sunlight readable' nature of the ITrans technology
was confirmed by testing at the UK's National Physical Laboratory. The Board
expects that this version of the product will become a significant part of its
sales from early 2008.
The conversion of this interest and opportunity into sales has been slower than
expected. The Board believes that this is a consequence of a lack of comparable
products to establish market expectations, "growth pains" of a young and
emerging digital signage market and the natural early adopter reticence with any
revolutionary new product. In addition, Hantarex are behind expected schedule
for the availability of their modular product. Nevertheless the opportunity is
great and ITrans offers a compelling product, so sales growth is expected to be
very significant once early momentum has been achieved.
Product capacity
The Company has established strong trading relationships with Gerresheimer
Wilden in Germany and the Czech Republic, Hantarex in Italy and Shearline in
Ely. Two high speed machines are available for installation over the coming
months as demand comes on stream, one is due to be installed in the Czech
republic and one in Ely. This is a highly scaleable production business model
which enables volume manufacture but controls working capital need. This puts
the business in a position where it can quote for larger orders, the first of
which is now anticipated in early 2008.
Interim financial statements
The condensed consolidated interim financial statements for the six months ended
30 June 2007 have been prepared in accordance with IAS 34 "Interim Financial
Reporting" and the requirements of IFRS 1 "First-time Adoption of International
Financial Reporting Standards" relevant to interim reports.
Cash position
The funding of the first high-speed machine was successfully completed in May
2007. As the machine had already been part paid for out of the Group's own cash
resources in the form of stage payments during its construction, the financing
of the machine realised a substantial amount of cash for the business. A
further two high-speed machines are in the course of construction and the Group
has already paid 50% of the cost of both of these machines. It is anticipated
that the business will seek to raise lease finance on these machines in due
course but availability of this finance will be critically dependent on the
generation of sales.
Outlook
The Board is encouraged by the high level of interest expressed in the ITrans(R)
product by a number of existing and new potential customers. However, while the
Company remains confident of significant sales in 2008 and beyond the Board now
believes that sales in 2007 will be small. The Board now considers that a
further fund raising is necessary to support the company through this early
adoption phase and this is being pursued.
Peter Smyth
Chairman
27 September 2007
For more information please contact
Screen Technology Group plc www.screentechnology.com
Thomas Jarman, CEO 01223 559600
Charles Stanley Securities
Nominated Adviser
Russell Cook/ Henry Fitzgerald O'Connor 020 7149 6000
Group Condensed Income Statement
for the six months ended 30 June 2007
Unaudited Restated Audited
6 months Unaudited Year ended
ended 30 June 6 months 31 December
ended 30 June
2007 2006 2006
£ £ £
Revenue 33,919 5,680 642,713
Cost of sales (10,566) (8,954) (606,208)
------------- ------------- -------------
Gross profit /loss 23,353 (3,274) 36,505
Administrative expenses - other (1,348,473) (2,068,070) (4,912,061)
------------- ------------- -------------
Operating loss before exceptional items (1,325,120) (2,071,344) (4,875,556)
Administrative expenses - exceptional items (437,916) - -
------------- ------------- -------------
Operating loss after exceptional items (1,763,036) (2,071,344) (4,875,556)
Finance revenues 28,818 50,194 113,868
Finance costs (47,004) (8,178) (7,845)
------------- ------------- -------------
Loss before taxation (1,781,222) (2,029,328) (4,769,533)
Income taxes 324,207 - 164,042
------------- ------------- -------------
Retained loss for the period attributable (1,457,015) (2,029,328) (4,605,491)
to ordinary shareholders
------------- ------------- -------------
Loss per ordinary share
Basic (4.14)p (6.24)p (14.06)p
Diluted (4.14)p (6.24)p (14.06)p
All activities derive from continuing operations.
There are no recognised gains or losses other than as stated in the profit and
loss account.
Group Condensed Balance Sheet
at 30 June 2007
Unaudited Restated Restated
30 June Unaudited Audited
2007 30 June 31 December
2006 2006
ASSETS £ £ £
Non-current assets
Property, plant and equipment 2,555,714 1,236,530 2,080,721
------------- ------------- -------------
Current assets
Inventories 531,707 184,925 249,534
Trade receivables 28,222 112,398 722,674
Other receivables 80,513 353,967 230,554
Current tax assets 324,207 - 164,042
Cash at bank and in hand 798,680 2,577,173 615,998
------------- ------------- -------------
1,763,329 3,228,463 1,982,802
------------- ------------- -------------
TOTAL ASSETS 4,319,043 4,464,993 4,063,523
------------- ------------- -------------
LIABILITIES
Non-current liabilities
Obligations under finance leases 747,249 5,964 4,656
------------- ------------- -------------
Current liabilities
Trade payables 1,091,986 157,963 285,809
Other payables 532,783 131,338 457,771
Obligations under finance leases 329,211 2,461 2,555
------------- ------------- -------------
1,953,980 291,762 746,135
------------- ------------- -------------
Total liabilities 2,701,229 297,726 750,791
------------- ------------- -------------
EQUITY
Share capital 1,760,573 1,624,448 1,755,448
Share premium account 7,998,121 6,682,989 7,997,621
Other reserve 7,602,857 7,602,857 7,602,857
Share based payment reserve 175,042 142,574 418,570
Retained losses (15,918,779) (11,885,601) (14,461,764)
------------- ------------- -------------
1,617,814 4,167,267 3,312,732
------------- ------------- -------------
TOTAL EQUITY AND LIABILITIES 4,319,043 4,464,993 4,063,523
------------- ------------- -------------
Group Condensed Cash Flow Statement
for the six months ended 30 June 2007
Unaudited Restated Restated
6 months Unaudited Audited
ended 30 June 6 months Year ended
ended 30 June 31 December
2007 2006 2006
£ £ £
Cash flow from operating activities
Loss for the period (1,457,015) (2,029,328) (4,605,491)
Depreciation and other non-cash items:
Depreciation charges 117,440 56,544 163,584
Loss on disposal of property, plant and 40,000 - 2,907
equipment
Share based payment (credit)/charge (243,528) 105,507 381,503
Decrease/(increase) in operating receivables 844,493 9,446 (477,417)
Increase in inventories (282,173) (94,962) (159,571)
Increase/(decrease) in operating payables 881,189 (186,897) 267,382
Finance revenues (28,818) (50,194) (113,868)
Finance costs 47,004 8,178 7,845
Income taxes (324,207) - (164,042)
------------- ------------- -------------
Cash generated from operations (405,,615) (2,181,706) (4,697,168)
Income taxes received 164,042 - -
------------- ------------- -------------
Net cash flow from operating activities (241,573) (2,181,706) (4,697,168)
------------- ------------- -------------
Cash flows from investing activities
Purchase of property, plant and equipment (1,777,433) (928,489) (1,882,627)
Disposal of property, plant and equipment 1,145,000 - -
Decrease in short term deposits - 5,400,000 5,400,000
------------- ------------- -------------
Net cash flows from investing activities (632,433) 4,471,511 3,517,373
------------- ------------- -------------
Cash flows from financing activities
Proceeds from issue of share capital 5,625 - 1,445,632
Payment of finance lease liabilities (75,751) (1,152) (2,366)
Proceeds from finance leases 1,145,000
Interest received 28,818 50,194 113,868
Interest paid (47,004) (8,178) (7,845)
------------- ------------- -------------
Net cash flows from financing activities 1,056,688 40,864 1,549,289
------------- ------------- -------------
Increase in cash and cash equivalents for the 182,682 2,330,669 369,494
period
Cash and cash equivalents at the start of the 615,998 246,504 246,504
period
------------- ------------- -------------
Cash and cash equivalents at the end of the 798,680 2,577,173 615,998
period
------------- ------------- -------------
Group Condensed Statement of Changes in Equity
for the six months ended 30 June 2007
Share based
Share Share payment Retained
capital premium Other reserve reserve losses Total
£ £ £ £ £ £
Balance at 31 December
2005 1,624,448 6,682,989 7,602,857 37,067 (9,856,273) 6,091,088
Changes in equity for the
first half of 2006:
Total recognised income
and expense - - - - (2,029,328) (2,029,328)
Issue of share capital - - - - - -
Share based payment
charge - - - 105,507 - 105,507
------------- ------------- ------------- ------------- ------------- -------------
Balance at 30 June 2006 1,624,448 6,682,989 7,602,857 142,574 (11,885,601) 4,167,267
Changes in equity for the
second half of 2006:
Total recognised income
and expense - - - - (2,576,163) (2,576,163)
Issue of share capital 131,000 1,314,632 - - - 1,445,632
Share based payment
charge - - - 275,996 - 275,996
------------- ------------- ------------- ------------- ------------- -------------
Balance at 31 December
2006 1,755,448 7,997,621 7,602,857 418,570 (14,461,764) 3,312,732
Changes in equity for the
first half of 2007:
Total recognised income
and expense - - - - (1,457,015) (1,457,015)
Issue of share capital 5,125 500 - - - 5,625
Share based payment
credit - - - (243,528) - (243,528)
------------- ------------- ------------- ------------- ------------- -------------
Balance at 30 June 2007 1,760,573 7,998,121 7,602,857 175,042 (15,918,779) 1,617,814
------------- ------------- ------------- ------------- ------------- -------------
Notes to the Interim Report
1. Nature of operations and general information
Screen Technology Group plc ("the Company") and its subsidiaries' ("the Group")
principal activity is to design, manufacture and sell display solutions to the
commercial AV market making large, high-brightness, high-resolution display
screens a reality.
Screen Technology Group plc is the Group's ultimate parent company. It is
incorporated and domiciled in England and Wales. The address of the registered
office of the Company is The Maris Centre, Hauxton Road, Cambridge CB2 9FT. It
trades through a wholly owned subsidiary, Screen Technology Limited, whose place
of business is at the registered office. Screen Technology Group plc's shares
are listed on the AIM Market of the London Stock Exchange.
The consolidated interim statements of Screen Technology Group plc are presented
in Pounds Sterling (£), which is also the functional currency of the parent.
These consolidated interim financial statements have been approved for issue by
the Board of Directors on 27 September 2007.
The financial information set out in the interim report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
Group's statutory financial statements for the year ended 31 December 2006,
prepared under UK GAAP, have been filed with the Registrar of Companies. The
auditor's report on those financial statements was unqualified and did not
contain a statement under Section 237(2) of the Companies Act 1985.
2. Basis of preparation
These interim consolidated financial statements are for the six-month period
ended 30 June 2007. They have been prepared in accordance with IAS 34 "Interim
Financial Reporting" and the requirements of IFRS 1 "First-time Adoption of
International Financial Reporting Standards" relevant to interim reports,
because they are part of the period covered by the Group's first IFRS financial
statements, and should be read in conjunction with the consolidated financial
statements of the Group for the year ended 31 December 2006.
These financial statements have been prepared under the historical cost
convention.
These consolidated interim financial statements have been prepared in accordance
with the accounting policies set out below which are based on the recognition
and measurement principles of IFRS in issue as adopted by the European union
(EU) and are effective at 31 December 2007 or are expected to be adopted and
effective at 31 December 2007, our first annual reporting date at which we are
required to uses IFRS Accounting Standards adopted by the EU.
Screen Technology Group plc's consolidated financial statements were prepared in
accordance with United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) until 31 December 2006. The date of transition to
IFRS was 1 January 2006. The comparative figures in respect of 2006 have been
restated to reflect changes in accounting policies as a result of adoption of
IFRS. The Group has taken advantage of exemptions under IFRS and no restatement
has been made to the accounting treatment of previous business combinations,
including the acquisition of Screen Technology Limited by Screen Technology
Group plc on 28 July 2005.
The accounting policies have been applied consistently throughout the Group for
the purposes of preparation of these consolidated interim financial statements.
The financial statements have been prepared on a going concern basis,
notwithstanding the loss for the six months ended 30 June 2007 of £1.5m, which
the Directors believe is appropriate for the following reasons:
• The iTrans modular screen was launched over the summer and the Group
has received encouraging expressions of interest, particularly from a number of
the specialist screen marketing companies. The Group's enquiry pipeline has
recently been strengthened significantly as a result.
• The time frame in which these enquiries will translate into orders
remains uncertain and, as a consequence, the Group is now required to seek
further funding. As announced on 21 September 2007 the Board is exploring
various alternatives in this regard and a further announcement will be made as
soon as possible.
• On the basis that adequate funding is available the Board consider
that the Company will continue to operate for the foreseeable future and is
capable of achieving a very significant level of sales of iTrans in 2008.
However, there can be no certainty in relation to these matters, which may cast
significant doubt on the Company's ability to continue as a going concern. The
Company may, therefore, be unable to continue realising its assets and
discharging its liabilities in the normal course of business. These interim
financial statements do not include any adjustments that would result if the
Group was unable to continue as a going concern.
3. Share based payments
In accordance with IFRS 2 the fair value of equity-settled share based payments
to employees is determined at the date of grant and is expensed on a
straight-line basis over the vesting period based on the Group's estimate of
when share options will eventually vest. In the case of options granted, fair
value is measured by a Black-Scholes pricing model.
All share based payment arrangements granted after 7 November 2002 that had not
vested prior to 1 January 2006 are recognised in the financial statements in
accordance with IFRS 1.
All goods and services received in exchange for the grant of any share based
payment are measured at their fair value. Where employees are rewarded using
share based payments, the fair values of employees' services are determined
indirectly by reference to the fair value of the instrument granted to the
employee. This fair value is appraised at the grant date and excludes the impact
of non-market vesting conditions (for example, profitability and sales growth
targets).
All equity-settled share based payments are ultimately recognised as an expense
in the profit and loss account with a corresponding credit to the share based
payment reserve.
If vesting periods or other non-market vesting conditions apply, the expense is
allocated over the vesting period, based on the best available estimate or the
number of share options expected to vest. Estimates are revised subsequently if
there is any indication that the number of share options expected to vest
differs from previous estimates. Any cumulative adjustment prior to vesting is
recognised in the current period. No adjustment is made to any expense
recognised in prior periods if share options that have vested are not exercised.
Upon exercise of share options, the proceeds received net of attributable
transaction cost are credited to share capital, and where appropriate share
premium.
4. Seasonal fluctuations
The Group has not yet made sufficient sales for seasonal fluctuations to have
become clear.
5. Exceptional items
All exceptional items are included within administrative expenses.
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2007 2006 2006
£ £ £
Write off of bad debt 437,916 - -
------------- ------------- -------------
6. Segmental information
The Group's principal activity (and its primary business segment) is the design,
manufacture and sale of display solutions to the commercial AV market. As such
its primary segmental information is the income statement.
Whilst the Directors recognise there is no requirement to disclose within
interim financial statements any further secondary segmental analysis the Group
gives an additional geographic analysis of revenue by destination.
Unaudited Unaudited Audited
6 months 6 months Year ended
ended 30 June ended 30 June 31 December
2007 2006 2006
£ £ £
Turnover by destination
UK - 5,680 586,149
Rest of world 33,919 - 56,564
------------- ------------- -------------
Total 33,919 5,680 642,713
------------- ------------- -------------
7. Loss per share
The calculation of the basic loss per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in issue
during the year.
The share options in issue are anti-dilutive in respect of the basic loss per
share calculation and have therefore not been included.
Unaudited Restated
6 months Unaudited Audited
ended 30 June 6 months Year ended
ended 30 June 31 December
2007 2006 2006
£ £ £
Attributable loss(£) (1,457,015) (2,029,328) (4,605,491)
------------- ------------- -------------
Average number of ordinary shares in
issue for basic and diluted earnings per
share 35,189,315 32,496,976 32,760,696
------------- ------------- -------------
Basic and diluted loss per share (pence) (4.14)p (6.24)p (14.06)p
------------- ------------- -------------
8. Share issues
During the period to 30 June 2007, 102,500 shares were issued to satisfy share
options previously granted under Screen Technology Group plc's employee share
option schemes.
The shares issued in the six months ended 30 June 2007 yielded £5,625 in cash
and increased equity also by £5,625.
9. Additions and disposals of property, plant and equipment
Fixtures,
Leasehold fittings, tools Plant and Motor
improvements and equipment machinery vehicles Total
£ £ £ £ £
Carrying amount at 1 January
2007 72,319 76,809 1,925,472 6,121 2,080,721
Additions - 11,192 1,766,241 - 1,777,433
Disposals - - (1,185,000) - (1,185,000)
Depreciation (29,258) (12,949) (73,337) (1,896) (117,440)
------------- ------------- ------------- ------------- -------------
Carrying amount at 30 June 2007 43,061 75,052 2,433,376 4,225 2,555,714
------------- ------------- ------------- ------------- -------------
Carrying amount at 1 January
2006 - 30,033 324,638 9,914 364,585
Additions - 56,856 871,633 - 928,489
Disposals - - - - -
Depreciation - (15,941) (38,707) (1,896) (56,544)
------------- ------------- ------------- ------------- -------------
Carrying amount at 30 June 2006 - 70,948 1,157,564 8,018 1,236,530
------------- ------------- ------------- ------------- -------------
Carrying amount at 1 January
2006 - 30,033 324,638 9,914 364,585
Additions 117,031 72,455 1,693,141 - 1,882,627
Disposals - (2,907) - - (2,907)
Depreciation (44,712) (22,772) (92,307) (3,793) (163,584)
------------- ------------- ------------- ------------- -------------
Carrying amount at 31 December
2006 72,319 76,809 1,925,472 6,121 2,080,721
------------- ------------- ------------- ------------- -------------
10. Taxation
Income tax represents amounts recoverable in respect of Research and Development
tax credits.
At 30 June 2007, the Group has tax losses of approximately £12 million that are
available for offset against future profits arising from the same trade. No
provision has been made for deferred tax on losses carried forward in the Group.
These losses will only be available for offset when the Group makes taxable
profits. As the timing of these profits is not certain it has been assumed the
losses will not be recoverable in the foreseeable future
11. Explanation of transition to IFRS
As stated in the Basis of Preparation, these are the Group's first consolidated
interim financial statements for part of the period covered by the first IFRS
annual consolidated financial statements prepared in accordance with IFRS.
An explanation of how the transition from UK GAAP to IFRS has effected the
Group's financial position, financial performance and cash flows is set out
below.
IFRS 1 permits companies adopting IFRS for the first time to take certain
exemptions from the full requirements of IFRS in the transition period. These
interim financial statements have been prepared on the basis of taking the
following exemptions:
• cumulative translation differences on foreign operations are deemed to
be nil at 1 January 2006. Any gains or losses recognised in the consolidated
income statement on subsequent disposal of foreign operations will exclude
translation differences arising prior to the transition date;
• only share based payment arrangements granted after 7 November 2002
that had not vested prior to 1 January 2006 are recognised in the financial
statements; and
• Business combinations prior to 1 January 2006, the Group's date of
transition to IFRS have not been restated to comply with IFRS 3 "Business
Combinations". Accordingly there has been no adjustment to the accounting
treatment adopted by the Group on the acquisition of Screen Technology Limited
by Screen Technology Group plc on 28 July 2005 which was accounted for at that
date as a merger under UK GAAP.
Application of IFRS has resulted in reclassification of certain items in the
cash flow statement as follows:
• Under UK GAAP, payments to acquire property, plant and equipment were
classified as part of "Capital expenditure and financial investment". Under
IFRS, payments to acquire property, plant and equipment have been classified as
part of "Investing activities";
• Income taxes received by the Group in respect of Research and
Development tax credits are now classified as an operating cash flow under IFRS,
however these were included in a separate category of tax cash flows under UK
GAAP; and
• The definition of cash is narrower under UK GAAP than under IAS 7
"Cash Flow Statements". Under IFRS highly liquid investments, readily
convertible to a known amount of cash with an insignificant risk of changes in
value are regarded as cash equivalents.
Explanation of reconciliation from UK GAAP to IFRS for the balance sheet and
income statement
The adoption of IFRS by the Group has resulted in some reordering of the
presentation of certain balances within both the income statement and the
balance sheet. However there has been no impact on previously reported equity,
liabilities or assets at 31 December 2006 or 30 June 2006, or comparative
amounts disclosed in the income statement for the year ended 31 December 2006 or
the six months.
12. Interim Report
The interim report will be circulated to all shareholders and copies will be
available from the Company's head and registered office: The Maris Centre,
Hauxton Road, Cambridge, CB2 9FT
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