Half-yearly Report

MediaZest Plc Interim results for the six months ended 30 June 2007 CHAIRMAN'S STATEMENT Introduction The results for MediaZest Plc ("MediaZest", the "Company", and collectively with the Subsidiary Companies, the "Group") reflect the six-month period to 30 June 2007. They incorporate the results of its subsidiaries, all of which are wholly owned. Results for the Period Turnover for the period was Â£1,806,000 (2006 - Â£1,325,000) and the Group made a loss for the period, after taxation, of Â£223,000 (2006 - Â£447,000) after finance costs of Â£3,000 (2006 - Â£2,000) and having paid administrative expenses of Â£1,003,000 (2006 - Â£955,000). The basic and fully diluted loss per share was 1 pence (2005 - 2 pence). The Group had cash in hand of Â£251,000 (2006 - Â£ 963,000) at the period end. Overview The Group has made considerable progress in revenue generation during the period in both operational subsidiaries, MediaZest Ventures Limited ("MediaZest Ventures") and Touch Vision Limited ("Touch Vision"). Revenues in the Group grew by 36% versus the comparative period, reflecting increased interest in the products and services we offer and the developing digital out-of-home advertising market. The programme of cost containment measures begun in 2006 has given the business a more tenable cost base going forward and the full effect of these changes is expected to be felt during the second half of 2007. Despite these positive developments, the Group recorded a loss in the period of Â£223,000, albeit half that of the comparative period in 2006. The largest proportion of these losses was incurred during a difficult start to the year in January and February. MediaZest Ventures In order to increase our revenue we pursued a new marketing strategy during the period, which has been successful in generating business from new clients. These continue to be, predominantly, advertising agencies, media agencies and brand owners looking for both creative and innovative ways to increase sales or reinforce branding messages. Our efforts have been aided by increasing acceptance of the use of digital media in out-of-home advertising. Industry intelligence puts the number of out-of-home screens capable of carrying advertising at over 120,000 in the UK alone. Although the Group does not currently operate such national media networks, it is indicative of the growing interest in the services that we offer. During the first half of 2007 we undertook projects for blue chip companies such as Mizuno, Sony, Famous Grouse and 20th Century Fox, amongst others. Repeat business with clients such as Chivas has also been encouraging. Touch Vision The improvement in Touch Vision results since we took ownership in 2005 has continued. This has been due, largely, to the reforms made to loss making areas, the winning of new contracts and an increasing volume of business being passed through from other Group companies. In addition to the three-year framework agreement for the provision of sales, installation, and maintenance of audiovisual equipment to London South Bank University and London Metropolitan University, won last year, we have been appointed as one of four audiovisual installation suppliers to another large university for a four year period with effect from 1 August 2007. Furthermore, we have recently won our first piece of business under this tender agreement, which will be completed by the end of September 2007. Other significant wins have allowed our Education department to continue to grow and we have spent considerable time honing our high quality offering in this area, with encouraging results. Since the majority of work for these organizations occurs during holiday-periods, this work has proven counter-cyclical to our retail business and hence reduces our operational risk. As the Christmas period approaches, orders across our retail clients have increased. We were pleased to have been involved in the HMV Store of the Future project, which has recently opened to much media interest. As well as providing audio-visual design, integration and installation services to this project, we have also supplied content management to a range of passive and interactive screens. The Company continues to provide maintenance services to all HMV UK stores. In the first half of 2007, we completed a range of exciting new audio-visual installations for a shopping centre in the North West of England, which included the deployment of Panasonic's 103" Plasma Screen for the first time in a UK retail environment and the implementation of a wide range of content management solutions. In the Corporate sector, the Company completed two significant orders - providing audiovisual solutions for the new UK headquarters of both Electronic Arts, a major international computer games manufacturer, and Dunnhumby, a leading database manager and analytical services provider. Outlook The growing demand for digital out-of-home media coupled with our improved positioning and awareness of our services in the marketplace gives us grounds for optimism in the future. The second half of 2007 has begun with the Group's strongest ever quarter and in addition to a wide range of work in the education sector we have a good order book going forward with a number of well known blue-chip clients. The impact of the rationalisation programme that was begun in 2006, is anticipated to be fully realised in the second half of 2007, with cost benefits occurring, primarily, in salary and administrative costs. Although headcount has increased, we have recruited more chargeable engineering resource whilst reducing non-revenue producing staff costs resulting in a net saving in salaries and employment overhead. As part of our revised strategy in the market, we have begun developing closer ties with traditional Point-of-Sale suppliers as we believe that the future of in-store Point-of-Sale lies in the amalgamation of our technology with more traditional methods; the common ground being creativity in the crafting and delivery of the message. Lance O'Neill Chairman 17 September 2007 CONSOLIDATED INCOME STATEMENT Unaudited Unaudited Audited Half Year Half Year Year Ended Notes 30-Jun-07 30-Jun-06 31-Dec-06 Â£'000 Â£'000 Â£'000 Continuing Operations Revenue 1,806 1,325 3,171 Cost of sales (1,023) (815) (2,053) Gross profit 783 510 1,118 Administrative expenses (1,003) (955) (2,099) Operating Loss (220) (445) (981) Finance costs (3) (2) (8) Loss before taxation (223) (447) (989) Taxation - - - Retained loss on ordinary activities (223) (447) (989) after taxation Loss per ordinary 10p share Basic 2 Â£0.01 Â£0.02 Â£0.04 Diluted 2 Â£0.01 Â£0.02 Â£0.04 CONSOLIDATED BALANCE SHEET Unaudited Unaudited Audited Half Year Half Year Year Ended 30-Jun-07 30-Jun-06 31-Dec-06 Â£'000 Â£'000 Â£'000 Non-current assets Goodwill 2,772 2,772 2,772 Plant and equipment 99 91 105 Total non-current assets 2,871 2,863 2,877 Current assets Inventories 234 219 142 Trade and other receivables 1,012 999 535 Cash and cash equivalents 251 963 569 Total current assets 1,497 2,181 1,246 Current liabilities Financial liabilities - bank (86) (163) - overdraft Trade and other payables (745) (655) (430) Current tax liabilities (138) (69) (73) Total current liabilities (969) (887) (503) Net current assets 528 1,294 743 Net assets 3,399 4,157 3,620 Equity Share Capital 2,283 2,283 2,283 Share premium account 3,211 3,211 3,211 Other reserves 7 - 5 Retained earnings (2,102) (1,337) (1,879) Total equity 3,399 4,157 3,620 CONSOLIDATED CASH FLOW STATEMENT Unaudited Unaudited Audited Half Year Half Year Year Ended Note 30-Jun-07 30-Jun-06 31-Dec-06 Â£'000 Â£'000 Â£'000 Net cash used in operating 3 (368) (439) (613) activities Investing activties Purchase of property, plant and (33) (10) (61) equipment Net cash used in investing (33) (10) (61) activities Financing activities Interest paid (3) (2) (8) Net cash used in financing (3) (2) (8) activities Cash and cash equivalents at 569 1,251 1,251 beginning of period Cash and cash equivalents at end of 165 800 569 period Cash in hand, at bank 251 963 569 Overdraft (86) (163) - Cash and cash equivalents at end of 165 800 569 period NOTES 1. Basis of preparation The next annual financial statements will be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the EU applied in accordance with the provisions of the Companies Act 1985. Accordingly, the interim financial information in this report has been prepared using accounting policies consistent with IFRS. IFRS is subject to amendment and interpretation by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) and there is an ongoing process of review and endorsement by the European Commission. The financial information has been prepared on the basis of IFRS that the Directors expect to be applicable as at 31 December 2007. The financial information has been prepared under the historical cost convention as modified by the revaluation of available-for-sale investments. The principal accounting policies set out below have been consistently applied to all periods presented. IFRS transition IFRS 1 permits companies adopting IFRS for the first time to take certain exemptions from the full requirements of IFRS in the transition period. The interim financial information has been prepared on the basis of the following exemptions: * Business combinations prior to 1 January 2006 have not been restated to comply with IFRS 3 "Business Combinations" * IFRS 2 "Share-based Payments" has been applied retrospectively to those options that were issued after 7 November 2002 and had not vested by 1st January 2006. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in note 4. Non-statutory accounts The financial information for the year end 31 December 2006 set out in this interim report does not comprise the Group's statutory accounts as defined in section 240 of the Companies Act 1985. The statutory accounts for the year ended 31 December 2006, which were prepared under UK Generally Accepted Accounting Practice (UK GAAP), have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 237 (2) or Section 237 (3) of the Companies Act 1985. The financial information for the 6 months ended 30 June 2007 and 30 June 2006 is unaudited. 2. Loss per share Basic loss per share is calculated by dividing the loss attributed to ordinary shareholders of Â£223,000 (2006 Â£989,000) by the weighted average number of shares during the period of 22,825,327 (2006 - 22,825,327). The diluted loss per share is identical to that used for basic loss per share as the exercise of warrants would have the effect of reducing the loss per share and therefore is not dilutive under International Accounting Standard 33 "Earnings per Share". 3. Cash used in operations Unaudited Unaudited Audited Half Year Half Year Year Ended 30-Jun-07 30-Jun-06 31-Dec-06 Â£'000 Â£'000 Â£'000 Operating loss (220) (445) (981) Share option charge 2 - 5 Depreciation of tangible assets 39 47 84 Decrease/(increase) in stock (92) (50) 27 Increase/(decrease) in creditors 380 263 42 Decrease/(increase) in debtors (477) (254) 210 Cash used in operations (368) (439) (613) Tax paid - - - (368) (439) (613) 4. Transition to IFRS MediaZest plc reported under UK GAAP in its previously published financial statements for the year ended 31 December 2006. The analysis below shows a reconciliation of net assets and profit as reported under UK GAAP as at 31 December 2006 to the revised net assets and profit under IFRS as reported in these financial statements. There is also a reconciliation of net assets and profit under UK GAAP to IFRS at the comparative interim date being 30 June 2006. Given the transitional exemption adopted (see note 1), there are no adjustments at the transition date of 1 January 2006. Reconciliation of equity at 31 Note Previous Effect of IFRS December 2006 GAAP transition to IFRS Â£'000 Â£'000 Â£'000 Non-current assets Goodwill A 2,622 150 2,772 Plant and equipment 105 - 105 Total non-current assets 2,727 150 2,877 Current assets Inventories 142 - 142 Trade and other receivables 535 - 535 Cash and cash equivalents 569 - 569 Total current assets 1,246 - 1,246 Current liabilities Trade and other payables (430) - (430) Current tax liabilities (73) - (73) Total current liabilities (503) - (503) Net current assets 743 - 743 Net assets 3,470 150 3,620 Equity Share Capital 2,283 - 2,283 Share premium account 3,211 - 3,211 Other reserves 5 - 5 Retained earnings (2,029) 150 (1,879) Equity shareholders' funds 3,470 150 3,620 Reconciliation of equity at 30 June Note Previous Effect of IFRS 2006 GAAP transition to IFRS Â£'000 Â£'000 Â£'000 Non-current assets Goodwill A 2,699 73 2,772 Plant and equipment 91 - 91 Total non-current assets 2,790 73 2,863 Current assets Inventories 219 - 219 Trade and other receivables 999 - 999 Cash and cash equivalents 963 - 963 Total current assets 2,181 - 2,181 Current liabilities Financial liabilities - overdraft (163) - (163) Trade and other payables (655) - (655) Current tax liabilities (69) - (69) Total current liabilities (887) - (887) Net current assets 1,294 - 1,294 Net assets 4,084 73 4,157 Equity Share Capital 2,283 - 2,283 Share premium account 3,211 - 3,211 Other reserves - - - Retained earnings (1,410) 73 (1,337) Equity shareholders' funds 4,084 73 4,157 Reconciliation of profit at 31 Note Previous Effect of IFRS December 2006 GAAP transition to IFRS Â£'000 Â£'000 Â£'000 Continuing Operations Revenue 3,171 - 3,171 Cost of sales (2,053) - (2,053) Gross profit 1,118 - 1,118 Administrative expenses A (2,249) 150 (2,099) Operating Loss (1,131) 150 (981) Finance costs (8) - (8) Loss before taxation (1,139) 150 (989) Taxation - - - Retained loss on ordinary activities (1,139) 150 (989) after taxation Reconciliation of profit at 30 June Previous Effect of IFRS 2006 GAAP transition to IFRS Â£'000 Â£'000 Â£'000 Continuing Operations Revenue 1,325 - 1,325 Cost of sales (815) - (815) Gross profit 510 - 509 Administrative expenses A (1,028) 73 (955) Operating Loss (518) 73 (445) Finance costs (2) - (2) Loss before taxation (520) 73 (447) Taxation - - - Retained loss on ordinary activities (520) 73 (447) after taxation Explanation of adjustments to equity and profit A. IFRS 3 does not permit the amorisation of goodwill. Enquiries: Geoff Robertson, Chief Executive Officer, 020 7724 5680 MediaZest Plc Liam Murray, City Financial Associates 020 7492 4777 Limited

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