Preliminary Results
Screen Technology Group plc
29 June 2007
Screen Technology Group plc
("Screen Technology" or "the Company")
2006 PRELIMINARY RESULTS
Screen Technology Group plc ("Screen Technology" or "the Company" or "the
Group") the designer and manufacturer of revolutionary high-resolution
large-screen displays for high ambient light environments announces its
consolidated results for the year ended 31 December 2006.
Overview
• Modular product developed with Hantarex / Sambers S.p.a.
• Production partnership with Wilden
• Displays shipped to Virgin Megastores
• First high-speed assembly machine completed in 2007 and in final
commissioning phase
• Continued strong interest from potential customers
• Orders taken for modular products
• Significant sales in second half of 2007 are critical
Key financial information
• 2006 sales of £642,000
• Consolidated operating loss before tax £4.8 million
• Cash at bank at 31 December 2005 £0.6 million
• Lease finance of first high speed machine completed May 2007
Peter Smyth, Non-executive Chairman, said today:
"This year has presented both opportunities and challenges. While we have been
disappointed by the delays we have experienced in getting our high-speed tile
assembly machinery into full production we are very excited by the modular
product which the Board believes will be readily taken up by the commercial AV
industry. We continue to see significant interest in ITrans from potential
customers. The key challenge for the second half of the year will be to
translate this in interest into sales"
For more information please contact
Screen Technology Group plc 01223 559600
Tom Jarman, CEO
www.screentechnology.com
Russell Cook 020 7149 6000
Henry Fitzgerald-O'Connor
Charles Stanley Securities (Nominated adviser and broker)
Chairman's Statement
In 2006 Screen Technology has made a number of significant achievements but has
also faced a series of challenges. The Group is moving into 2007 with a product
that is finding a positive reception among our customer base although the
challenges we have faced have meant that the expected dramatic increase in the
production of ITrans displays has been delayed.
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. The
commercial display industry continues to show very strong interest in ITrans and
it is only the time taken to overcome the technical challenges of moving into a
full production environment during 2006 that has held back sales of ITrans.
Tony Kellett resigned as CEO in April 2006 and Tom Jarman has moved from being a
non-executive director to take over the CEO role full time. Simon Barton has
also resigned as Finance Director as of June 2007. I would like to thank both
Tony and Simon for their contributions to Screen Technology's development.
Commercial developments
2006 has seen significant developments in a number of areas. The Company has
developed a modular product in conjunction with Hantarex / Sambers S.p.a., a
major international company with extensive interests in the commercial large
screen display market. Hantarex has invested considerable resources in the
project which it is expected will result in Hantarex becoming a significant OEM
customer for ITrans tiles to manufacture its own displays as well as supplying
modular components for Screen Technology's own modular display sales. Hantarex
has placed an initial order amounting to about £1 million for ITrans tiles to go
into Hantarex's own sales of modular displays. We have already been shipping
tiles for advanced prototype and demonstration models and the Board expects to
start supplying ITrans tiles for commercial sales in the second half of 2007.
Screen Technology also formed an important strategic partnership with Wilden AG
the major producer of specialist high-technology injection mouldings for the
automotive, electronic and medical industries. As part of this agreement, Wilden
will produce the injection moulded light guides that form the basis of an ITrans
tile and will also operate the highspeed machine, manufacturing ITrans tiles
from the light guides.
The Company continued to develop relationships with resellers and potential
customers during 2006. However, the lack of available production resources has
meant that the Company remained reluctant to accept large orders.
Production capacity
By the end of 2005 the Company had placed orders for two new machines for the
assembly of the ITrans tiles that are the key building blocks of an ITrans
display. The first of these, a duplicate of the existing low-speed machine, was
delivered in early 2006, doubling production capacity and representing the first
step towards increasing our production capacity to enable Screen Technology to
supply ITrans displays in commercial volumes. By this stage, the construction of
a first high-speed tile assembly machine was underway, due for delivery in the
summer of 2006 and an order had been placed for a further two high-speed
machines for delivery in the third and fourth quarters of 2006.
By the middle of 2006 the Company was poised to increase sales in the second
half of the year but delays to the first high speed machine meant that the
efforts were instead focused on the second high-speed machine which was expected
to be delivered in the early Autumn, reaching full production capacity by the
end of the year.
Further delays to the availability of the high-speed machines came about as a
result of the unexpected acquisition of Wilden by Gerresheimer Group which held
up the process of setting up the new moulding tool and the production of parts.
However the first high-speed machine has been completed in 2007 as discussed
below.
During 2006 the ITrans modular display product continued in development and as
discussed below is expected to reach full production in 2007.
Trading during 2006
Limited production capacity meant sales were restricted to a small number of
monolithic displays. Screen Technology was delighted to announce in October of
2006 that it had received an order from Digital Screen Networks ("DSN") for an
initial 16 displays to provide window-based in-store advertising in Virgin
Megastores. Three of those displays were installed in late 2006 into the London
Piccadilly, Manchester Arndale and Birmingham New Street Megastores and the
remainder were delivered into DSN's consignment stock before the end of the
year, for installation in early 2007. One further display has since been
installed in the Glasgow Megastore but we have recently been informed by DSN
that changes at Virgin have meant that the contract has been scaled back to only
the four screens that are currently installed.
The Company made small sales of monolithic displays to reseller partners for use
as demonstrators but also made some significant sales to Ashingo plc although
these sales were initially of non-ITrans display equipment. These sales were
important for the future relationship with Ashingo, which is expanding its
activities providing display infrastructure in shopping malls in the UK and
Ashingo has placed orders for four ITrans displays for delivery in 2007.
However, as a result of the production delays experienced during 2006, sales
were disappointingly well below initial expectations.
Placing
The below expected level of sales has had a considerable effect on the Company's
cash position. We had expected to be able to accelerate production in 2007
quickly once sales had started with the introduction of a second and then a
third high-speed machine. With continuing overheads and expenditure on R&D it
became apparent that the company's cash flows would not sustain the growth that
was expected without further funds and in December 2006 the Company raised £1.5
million before expenses to enable it to fund the continued expansion in
production capacity.
Outlook for 2007
2007 poses a number of continuing challenges for Screen Technology combined with
great opportunity. The Company's existing monolithic displays, which are limited
to a maximum size of about an 85" diagonal, face strong competition from
high-brightness LCDs. However, from the middle of 2007, the Company has launched
production availability of its new modular product. The Company is therefore
focussing its efforts on ITrans modular displays. Unlike monolithic displays,
modular displays overcome the size limitations of LCDs offering seamless screens
of unlimited size in much higher resolutions than LED, which is currently the
only other practical solution for high ambient light environments. Modular
products also enable large, seamless displays to be easily transported and
installed.
The first high-speed machine has been completed and, as announced in May 2007,
the Company has successfully funded the acquisition of the machine by means of
lease finance. The machine is now, as at the middle of 2007, undergoing its
final setting up and commissioning process with the expectation that it will
enter full production early in the second half of 2007. The high-speed machine
will dramatically increase Screen Technology's ability to supply displays in
commercial volumes. The key challenge will be the translation of interest in
ITrans into actual sales. The board is confident that these sales can be
achieved but there can be no certainty at this stage.
The Company has historically been reluctant to bid for large orders for ITrans
in spite of significant interest because of the uncertainties over production
timetables. The board is now focusing on using existing and new
value-added-reseller and OEM relationships to turn the sales pipeline into
shipments of modular displays over the coming few months.
Financial review
Overview
The consolidated results are presented on a merger accounting basis. The Group
was formed on 28 July 2005 with the acquisition of Screen Technology Limited by
Screen Technology Group plc and Screen Technology Group plc then floated on AIM
on 1 August 2005. The comparative figures for 2005 are presented as though the
merger took place at the beginning of 2005.
Sales for the year consist of both sales of ITrans displays and sales of
non-ITrans display equipment. The ITrans sales consisted of two ex demonstrator
units sold during the year and four displays being used in the windows of Virgin
Megastores, which were concentrated in December 2006. The non-ITrans equipment
amounting to just over £0.5 million was the first part of a relationship with a
customer expecting to take delivery of modular ITrans displays during 2007.
The consolidated loss for the year after the flotation represents the continuing
development of ITrans, the development of highspeed production facilities and
the development of modular products. Staff numbers have remained largely
constant but there has been extensive use of sub-contracted engineering and
development facilities and design consultancies to supplement Screen
Technology's own technical expertise with the resources necessary to take ITrans
production to a commercial scale.
Cash resources
Cash resources have been put under some strain by the delays in production,
limiting sales while the Company has continued to incur overhead costs and
development costs. The placing in December allowed the Company to continue to
incur capital expenditure costs in the construction of both the first high-speed
machine and further machines that will closely follow. However, further delays
in moving into full production have continued to put pressure on cash resources.
The business finished the year with cash of about £616,000 although it also had
substantial debtor balances from the shipment of equipment late in the year.
The funding of the first high-speed machine was expected and was successfully
completed in May of 2007. As the machine had already been substantially paid for
out of the Company'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. It is expected that the business will seek to raise lease
finance on the next two high speed machines which are due to be delivered during
late 2007. The Company has, as at the date of this report, already paid 50 per
cent of the cost of both of these machines.
The Board expects the high speed machines to be quickly cash generative once
they enter full production. However, this is critically dependent on the
generation of sales in the second half of 2007.
Directors' Report
Principal activities
Screen Technology is a designer, manufacturer and seller of display solutions to
the commercial AV market making large format, high-brightness, high-resolution
display screens a reality.
The Group sells its display solutions principally through value-added resellers
and systems integrators to end-user customers requiring very large, bright,
highly visible, high-quality displays for advertising and information display
purposes in locations such as airport and railway concourses, control rooms and
shopping malls.
Business review
The business has made considerable progress since its flotation on the London
AIM market on 1 August 2005. A review of the business, current trading and
future developments is contained within the Chairman's Statement and Financial
Review.
Research and development
The Group continues to make substantial investment in research and development,
keeping the Group's products at the forefront of large-display technology.
During 2006, Screen Technology has been continuing to develop its ITrans product
including the development of modular products that will satisfy the need for
very large seamless screens that can be easily transported and assembled at the
customer's site. Development of high-speed fully automated production facilities
has continued with the expectation that full production from these new machines
will begin in mid 2007.
Proposed dividend
The directors do not recommend the payment of a dividend.
Director's interests
The directors who held office during the year were as follows:
Date appointed Date resigned
Peter Francis Smyth
Anthony Gerard Kellett 17 April 2006
Simon Charles Robert Barton 13 June 2007
Thomas Bernard Jarman
Thomas Macklyn Swan OBE
Ernest Richardson 14 December 2006
The directors who held office at the end of the financial year had the following
interests in the ordinary shares of Screen Technology Group plc according to the
register of directors' interests:
No of ordinary shares of 5p each No of ordinary shares of 5p each
Start of year End of year
Peter Smyth 23,809 57,142
Tom Jarman - 100,000
Thomas Swan is interested in the share capital of Screen Technology Group plc as
a result of his interest in Thomas Swan & Co Ltd. which owns approximately 16.9
per cent of the issued share capital of the Company.
Both Tom Jarman and Ernie Richardson have carried interests in MTI Partners
Limited which owns approximately 49.9 per cent of the issued share capital of
the Company.
Directors' rights to subscribe for shares in the Company are indicated below:
Number of options
At start of At end of year Exercise Price
year
Simon Barton 200,000 200,000 43.5p
Peter Smyth 100,000 100,000 63p
Tom Jarman - 1,630,449 30p
Tom Jarman was granted options over 1,630,449 shares at an exercise price of 30p
in November 2006.
None of the other directors who held office at the end of the financial year had
any other disclosable interest in the shares of Group companies.
Market price
The closing mid-market price of the Company's ordinary shares at 31 December
2006 was 70p. The closing mid-market price of ordinary shares during the year
ranged from 78p on 13 December 2006 to 27p on 28 March 2006.
Employees
The Group operates a policy of regularly informing all employees of the Group's
performance and objectives by means of electronic communication and through
informal meetings at which employees' contributions are welcome. Several
employees are holders of options over shares in the Company's equity and many
employees are also shareholders in the Company having subscribed at the time of
the flotation in 2005.
The Group gives full and fair consideration to all applications for employment
made by disabled persons, having regard to their particular aptitudes and
abilities. The Group's policies for training, career development and promotion
do not disadvantage these employees. The Group seeks to recruit, develop and
employ, throughout the organisation, suitably qualified, capable and experienced
people irrespective of sex, age, race, religion or sexual orientation.
Political and charitable contributions
The Group made no political or charitable contributions during the year.
Statement of disclosure of information to auditors
The Directors who held office at the date of approval of this Directors' report
confirm that, so far as they are each aware, there is no relevant audit
information of which the Company's auditors are unaware; and each Director has
taken all the steps that he ought to have taken as a Director to make himself
aware of any relevant audit information and to establish that the Company's
auditors are aware of that information.
Auditors
In accordance with Section 384 of the Companies Act 1985, a resolution for the
re-appointment of KPMG Audit Plc as auditors of the Company is to be proposed at
the forthcoming Annual General Meeting.
Consolidated profit and loss account
for the year ended 31 December 2006
2006 2005 restated
Note £ £
Turnover 642,713 115,500
Cost of sales (606,208) (65,633)
-------------- --------------
Gross profit 36,505 49,867
Administrative expenses (4,912,061) (2,100,578)
-------------- --------------
Operating loss (4,875,556) (2,050,711
Interest receivable and similar income 113,868 115,840
Interest payable and similar charges (7,845) (43,806)
-------------- --------------
Loss on ordinary activities before 2 (4,769,533) (1,978,677)
taxation
Tax on loss ordinary activities 3 164,042 -
-------------- --------------
Loss for the financial year (4,605,491) (1,978,677)
-------------- --------------
Loss per ordinary share
Basic 4 (14.06)p (6.09)p
Diluted 4 (14.06)p (6.09)p
All activities derive from continuing operations.
Consolidated statement of total recognised gains and losses
for the year ended 31 December 2006
2006 2005
Note £ £
Loss for the financial year (4,605,491) (1,978,677)
------------ --------------
Total recognised losses for the financial year (4,605,491) (1,978,677)
Prior year adjustment - FRS 20 6 (37,067) -
------------ --------------
Total recognised losses since last annual
report (4,642,558) (1,978,677)
------------ --------------
Consolidated balance sheet
at 31 December 2006
2006 2005
Note £ £
Fixed assets
Tangible assets 2,080,721 364,585
Current assets
Stocks 249,534 89,963
Debtors 1,117,270 475,811
Cash at bank and in hand 10 615,998 5,646,504
-------------- --------------
1,982,802 6,212,278
Creditors: amounts falling due within one
year (746,135) (478,502)
-------------- --------------
Net current assets 1,236,667 5,733,776
-------------- --------------
Total assets less current liabilities 3,317,388 6,098,361
Creditors: amounts falling due after more
than one year (4,656) (7,273)
-------------- --------------
Net assets 3,312,732 6,091,088
-------------- --------------
Capital and reserves
Called up share capital 5 1,755,448 1,624,448
Share premium 7 7,997,621 6,682,989
-------------- --------------
9,753,069 8,307,437
Other reserves 7 7,602,857 7,602,8567
Profit and loss account 7 (14,043,194) (9,819,206)
-------------- --------------
Shareholders' funds 3,312,732 6,091,088
-------------- --------------
Consolidated cash flow statement
for the year ended 31 December 2006
2006 2005 restated
Note £ £
Reconciliation of operating profit to net cash flow
from operating activities
Operating loss (4,875,556) (2,050,711)
Depreciation Charges 163,584 18,347
Loss on disposal of fixed assets 2,907 -
Impairment losses - 32,600
FRS20 share-based payment charge 381,503 37,067
Increase in stocks (159,571) (89,963)
Increase in debtors (477,417) (419,904)
Increase in creditors 267,382 414,509
-------------- -------------
Net cash outflow from operating activities (4,697,168) (2,058,055)
-------------- -------------
Cash flow statement
Cash flow from operating activities (4,697,168) (2,058,055)
Returns on investments and servicing of finance 106,023 72,034
Taxation - -
Capital expenditure and financial investment (1,882,627) (350,583)
-------------- -------------
Cash outflow before management of liquid
resources and financing (6,473,772) (2,336,604)
Management of liquid resources
Decrease/(increase) in short term deposits with
banks 5,400,000 (5,400,000)
Financing 9 1,443,266 7,968,702
-------------- --------------
Increase in cash for the period 369,494 232,098
-------------- --------------
Reconciliation of net funds
Net funds at beginning of year 10 5,636,927 14,406
Increase in cash for the period 369,494 232,098
Movement in liquid resources (5,400,000) 5,400,000
Movement in borrowings 2,366 (9,577)
-------------- --------------
Net funds at end of year 10 608,787 5,636,927
-------------- --------------
Reconciliations of movements in shareholders' funds
for the year ended 31 December 2006
Group Company
2006 2005 restated 2006 2005 restated
£ £ £ £
Opening Shareholders'
funds 6,091,088 (1,511,509) 8,410,883 -
(Loss)/profit for the
financial year (4,605,491) (1,978,677) 321,413 100,237
FRS 20 credit to reserves 381,503 37,067 7,705 3,209
Issue of shares on
conversion of loan stock - 2,150,000 - -
Issue of shares (Screen
Technology Limited) - 80,528 - -
Issue of shares on
formation of company - - - 2
Issue of shares on
acquisition of Screen
Technology Limited - - - 993,756
Issue of shares on
placement (net of
expenses) 1,445,632 7,313,679 1,445,632 7,313,679
--------- --------- -------- ---------
Closing shareholders'
funds 3,312,732 6,091,088 10,185,633 8,410,883
--------- --------- -------- ---------
Notes
Basis of preparation
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 December 2006 and 31 December 2005, but
is derived from them. Save as disclosed below, the accounting policies set out
in the 2005 accounts have been applied in preparing the information for 2006.
Statutory accounts for Screen Technology Limited for 2005 have been delivered to
the Registrar of Companies. The Auditors have reported on the accounts to 31
December 2006 and to 31 December 2005. Their reports were unqualified but
contained a modified audit opinion relating to the year ended 31 December 2006.
The reports did not contain statements under section 237 (2) or (3) of the
Companies Act 1985. This preliminary announcement was approved by the Board on
28 June 2007.
The Company will hold its Annual General Meeting on 25 July 2007, following
which the statutory accounts for 2006 will be delivered to the Registrar of
Companies.
The Annual Report and Accounts will be posted to shareholders on 29 June 2006.
Copies of the Annual Report and Accounts and of this announcement will be
available at the Company's registered office, The Maris Centre, Hauxton Road,
Cambridge, CB2 2LQ.
1 Accounting policies
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the financial statements,
except as noted below.
In these financial statements the following new standard has been adopted for
the first time:
• FRS 20 'Share-based payment'
The accounting policies under this new standard are set out below together with
an indication of the effects of its adoption.
Going Concern
The financial statements have been prepared on a going concern basis,
notwithstanding the loss for the year of £4.6m (2005:£2.0m), which the directors
believe is appropriate for the following reasons.
The ongoing activities of the Company are dependent upon sales of ITrans in the
second half of 2007. During the first six months of 2007, commercial scale
production of ITrans displays has been delayed by a number of factors that are
set out in the Chairman's Statement. Advanced prototypes have been produced and
have received a very favourable reception in the commercial AV industry and
demonstration units are being shown to potential customers. Orders have been
taken for modular ITrans displays, for delivery in 2007, and scale production is
expected to commence early in the second half of 2007. However no units have yet
been shipped in 2007.
The Board has prepared working capital forecasts for the period ending 12 months
from the date of the approval of these financial statements. These forecasts are
dependent upon sales of ITrans in the second half of 2007, which are themselves
dependent both upon the successful manufacture of ITrans tiles from a new
high-speed machine, which is undergoing its final setting-up and commissioning
process, and upon sufficient orders from customers for modular ITrans displays.
The forecasts also assume that lease funding will be available for the further
high-speed machines that are expected to be delivered in 2007.
The Board is confident that commercial scale production of ITrans tiles and of
modular displays is very close and that, based on the interest expressed by the
industry, the Company's sales revenue forecasts will be met. The board is also
confident that lease funding will be available to support growth in the
business. On the basis of these forecasts, the Directors consider that the
Company will continue to operate for the foreseeable future. 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 but the financial statements do not
include any adjustments that would result from insufficient production and sales
being achieved or lease funding being unavailable.
Share-based payments
The Group has adopted, in these financial statements, FRS 20 "Share based
payment" in respect of equity settled share-based payments. The adoption of this
standard represents a change in accounting policy and the comparative figures
have been restated accordingly. The cost relating to previous years has been
recognised in these financial statements as a prior-year adjustment and
comparative figures have been restated accordingly. The impact in the year
ending 31 December 2006 is a charge of £381,503 and the charge for the period
ended 31 December 2005 was £37,067.
The impact on reserves as at 31 December 2005 of the prior-year adjustment is a
credit to the profit and loss account in respect of FRS 20 equal to the charge
for the year ended 31 December 2005. There is therefore no change to the closing
reserves position in the comparative figures for the year ended 31 December
2005.
The cost of share options awarded to employees under the Group's share option
schemes is measured by reference to their fair value at the date of grant, with
fair value being measured with a Black-Scholes pricing model. The cost,
recognised over the vesting period in the profit and loss account with a
corresponding movement in reserves, of the options is based on the number of
options that, in the opinion of the directors, will ultimately vest.
The Company has obtained joint elections (or equivalent agreements) from the
holders of all options that could trigger a National Insurance liability such
that the option holder will pay any secondary National Insurance so arising. As
the liability is formally transferred to employees, there is no liability to
appear in the Group's or Company's accounts.
2 Notes to the profit and loss account
Loss on ordinary activities before taxation is
stated after charging 2006 2005
£ £
Depreciation and other amounts written off tangible and intangible fixed assets:
Owned 159,791 16,766
Leased 3,793 1,581
Loss on disposal of fixed assets 2,907 -
Charge for share-based payments 381,503 37,067
Research and development expenditure 1,457,490 799,606
Operating lease rentals - land and buildings 114,838 22,000
Impairment losses - 32,600
3 Taxation
Analysis of credit in period
2006 2005
£ £
UK corporation tax
Adjustment for prior year tax credit 164,042 -
Factors affecting the tax credit for the current period
The current tax credit for the period differs from that resulting from applying the standard
rate of corporation tax in the UK of 30% (2005:30%). The differences are explained below.
2006 2005
£ £
Current tax reconciliation
Loss on ordinary activities before tax (4,769,533) (1,978,677)
---------- ----------
Current tax at 30% (2005:30%) (1,430,860) (593,603)
Effects of:
Current tax at 30% (2005:30%) (1,430,860) (593,603)
Expenses not deductible for tax purposes 149,732 13,845
Capital allowances for period in excess of
depreciation (175,661) (15,394)
Losses carried forward 1,456,789 595,152
Adjustment for prior year tax credit (164,042) -
----------- -----------
Total current tax charge (see above) (164,042) -
----------- -----------
The group has tax losses of approximately £12,000,000 (2005: £8,200,000)
available to utilise against future taxable trading profits.
No deferred tax asset has been recognised as there is insufficient evidence that
the asset will be recovered in the foreseeable future. The amount of the asset,
(principally in relation to losses) not recognised at 31 December 2006 is
approximately £3,700,000 (2005: £2,600,000).
Future tax credits will be impacted by the announced change in the corporation
tax rate from 30% to 28% effective from 1 April 2008
4 Loss per ordinary share
The basic loss per ordinary share has been calculated by dividing the retained
loss for the financial year by the weighted average number of ordinary shares of
32,760,696 (2005: 32,488,970) in issue during the year. The Company had no
dilutive potential ordinary shares in the year that would serve to increase the
loss per ordinary share. Accordingly, there is no difference between the basic
and diluted loss per ordinary share.
5 Called up share capital
2006 2006 2005 2005
Number £ Number £
Authorised
Ordinary share of 5p each 60,000,000 3,000,000 60,000,000 3,000,000
Allotted, called up and fully paid
Ordinary share of 5p each 35,108,970 1,755,448 32,488,970 1,624,448
On 1 December 2006 the company placed 2,500,000 ordinary shares of 5p each at a
placing price of 60p per share raising £1,500,000 (£1,439,632 net of expenses).
A further £6,000 was raised from the exercise of options at 5p over 120,000
Ordinary Shares of 5p.
6 Share-based payments
A reconciliation of share option scheme movements for the years ended 31
December 2006 and 2005 is set out below:
2006 2006 2005 2005
Weighted Weighted
average average
exercise price exercise price
Number p Number p
Outstanding 3,409,320 42.4 821,403 26.2
at 1
January
Granted 1,830,449 32.2 2,587,917 47.1
Exercised (120,000) 5.0 - 5.0
Lapsed (827,997) 47.9 - -
---------- --------
Outstanding 4,291,772 37.5 3,409,320 42.4
at 31 ========== =========== ======== ==========
December
Exercisable 387,997 26.1 761,403 26.1
at 31 ========== =========== ======== ==========
December
The cost of share options awarded to employees under the Screen Technology Group
plc 2005 Enterprise Management Investment Scheme and the Screen Technology Group
plc 2005 Unapproved Share Option Scheme is measured by reference to their fair
value at the date of grant, with fair value being measured with a Black-Scholes
pricing model. The Company's effective date for FRS 20 'Share based payment'
implementation is 1 January 2006 and therefore FRS 20 has been applied to all
options granted after 7 November 2002 which have not vested by this effective
date.
The options disclosed below include options that the Company had agreed to grant
before 31 December 2006 but had not yet granted, showing the date of the grant
as the date the agreement was reached.
Details of options over ordinary shares of 5p outstanding at 31 December 2006
together with the fair value at grant of each option and the assumptions used in
the calculation are as follows:
Options granted under the Screen Technology Group plc 2005 Enterprise Management Incentive Scheme and the Screen
Technology Group plc 2005 Unapproved Share Option Scheme
Date of grant Date first Expiry date Number of Exercise price Expected Risk free Fair value
exercisable options (p) volatility rate per
option (p)
July 2005 15-Jul-08 15-Jul-15 1,408,732 46.5 50% 4.10% 15.6
August 2005 01-Aug-08 01-Aug-15 100,000 63.0 55% 4.26% 23.1
January 2006 01-Jan-09 01-Jan-16 200,000 50.5 55% 4.20% 17.4
November 2006 01-Apr-07 01-Apr-16 543,483 30.0 60% 4.89% 38.7
November 2006 01-Apr-08 01-Apr-16 543,483 30.0 60% 4.89% 38.7
November 2006 01-Apr-09 01-Apr-16 543,483 30.0 60% 4.89% 38.7
--------
Total options
relevant to
FRS 20 5,228,161
Notes:
1. The expected life of options ranges from 3.5 - 5 years according to the date that options were granted.
2. The expected dividend yield is nil reflecting the absence of a history of paying dividends.
3. There are no performance conditions associated with the exercise of options.
4. The leavers rate is assumed to be nil except where leavers during 2005, 2006 and 2007 are already known.
5. Expected volatility is derived from a "weighted average volatility", rounded to the nearest 5%, based on actual
volatility, calculated by the standard deviation of the
natural logarithm of share price movements, in the relevant period prior to the grant of the options or for options
issued at the time of the flotation immediately after
the flotation
6.The risk free rate is determined by the yield from Treasury Gilt Strips with a similar term to the period until the
expected exercise of the option.
The total charge for the year relating to share based payments was £381,503 which related to the above equity based
transactions. The cost relating to the prior year has
been recognised in these financial statements as a prior year adjustment and comparative figures have been restated
accordingly. The impact in the year ended 31 December
2005 is a charge of £37,067. There is no impact on the net assets of the Group.
7 Share premium and reserves
Share premium Other Profit and loss
account reserves account
Group £ £ £
At beginning of year 6,682,989 7,602,857 (9,819,206)
Loss for the year - - (4,605,491)
FRS 20 credit to reserves - - 381,503
Premium on share issues 1,375,000 - -
Expenses written off (60,368) - -
------------ --------- ------------
At end of year 7,997,621 7,602,857 (14,043,194)
------------ --------- ------------
Share premium Other Profit and loss
account reserves account
Company £ £ £
At beginning of year 6,682,989 - 103,446
Profit for the year - - 321,413
FRS 20 credit to reserves - - 7,705
Premium on share issues 1,375,000 - -
Expenses written off (60,368) - -
-------------- --------- ------------
At end of year 7,997,621 - 432,564
-------------- --------- ------------
8 Commitments
(a) capital commitments at the end of the financial year, for which no provision has been made, are as follows:
Group Company
2006 2005 2006 2005
£ £ £ £
Contracted 1,006,867 1,321,832 - -
(b) Annual commitments under non-cancellable operating
leases are as follows:
Land and Other Land and Other
buildings buildings
2006 2006 2005 2005
Group £ £ £ £
Operating leases which expire:
Within one year - - 14,667 -
In the second to
fifth years
inclusive 100,000 - - -
Over five years - - - -
---------- ---------- --------- --------
100,000 - 14,667 -
---------- ---------- --------- --------
9 Analysis of cash flows
2006 2005
£ £
Returns on investment and servicing of finance
Interest received 113,868 115,840
Interest paid (7,845) (43,806)
---------- -----------
106,023 72,034
---------- -----------
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,882,627) (350,583)
---------- -----------
(1,882,627) (350,583)
---------- -----------
Financing
Issue of ordinary share capital (net of expenses) 1,445,632 7,313,679
Issue of ordinary share capital (Screen Technology
Limited) - 80,528
Issue of convertible loan stock - 500,000
Called up share capital paid - 75,263
Capital element of finance lease rentals (2,366) (768)
---------- -----------
1,443,266 7,968,702
---------- -----------
10 Analysis of net funds
Analysis of net funds At beginning
of year Cash flow At end of year
£ £ £
Cash in hand, at bank 246,504 369,494 615,998
Liquid resources 5,400,000 (5,400,000) -
--------- ---------- ------------
5,646,504 (5,030,506) 615,998
--------- ---------- ------------
Finance leases (9,577) 2,366 (7,211)
--------- ---------- ------------
Total 5,636,927 (5,028,140) 608,787
--------- ---------- ------------
11 Related party disclosures
Thomas Swan & Co. Ltd. charged fees of £25,000 per annum for the provision of
the services of Thomas Swan as a director of the Company. MTI Partners Limited
has charged fees of £25,000 per annum for the provision at various times of the
services of Tom Jarman and Ernie Richardson as a non-executive director of the
Company and a further £25,000 for management services. MTI Partners also charged
fees of £65,000 for the services of Tom Jarman as acting Chief Executive Officer
from April 2006 until he was appointed Chief Executive Officer in November 2006.
The fees of £65,000 are included in directors' emoluments in the full financial
statements. Other incidental expenses incurred on behalf of the Company are also
recharged to the Company.
12 Post balance sheet events
In May 2007 the Group completed the acquisition of its first high-speed ITrans
tile assembly machine and also completed a sale and leaseback transaction
valuing the machine at £1.1 million.
Also in May 2007, the Group received an R&D tax credit of £164,042 in respect of
the year ended 31 December 2005. The receipt of this amount has been accrued in
the accounts for the year ended 31 December 2006 and included under Other
debtors.
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