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 This information is provided by RNS The company news service from the London Stock Exchange

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