Final Results
RNS Number : 1422U
Immedia Broadcasting plc
11 May 2008
12 May 2008
IMMEDIA BROADCASTING PLC
Preliminary Statement of Results for the FY to 31 December 2007
Immedia Broadcasting PLC ('Immedia'), the UK's leading provider of live,
tailored radio and video for retail, today announces its preliminary financial
results for the year to 31 December 2007.
Overview
· Underlying revenue (i.e. excluding one-off contributions from
discontinued contracts) of £3.8m (2006 : £3.8m)
· Underlying operating loss before tax (i.e. excluding Cube impairment
and one-off contributions from discontinued contracts) of £0.41m (2006:
Loss £0.79m)
· New 2-year contract with HSBC to continue to provide HSBC Live! to 940
branches in the UK
· GAME Live! roll-out complete - now broadcasting to c. 370 stores
across the UK
· Immedia's IKEA Live! performing well and broadcasting to all 20 IKEA
stores across the UK
· Lloyds Pharmacy Live! contract renewed - now entering its sixth year
· Integration of Cube into Immedia brand now complete
Financial Summary
12 months to 31 December 12 months to 31
2007 December 2006
Revenue £3,904,815 £4,472,225
Underlying revenue 1 £3,799,586 £3,855,034
Operating profit before depreciation, amortisation and impairment £206,369 £643,418
charges (EBITDA)
Underlying EBITDA 2 £101,140 £30,387
Impairment charge on intangible assets £1,055,225 -
Operating loss £(1,375,909) £(363,523)
Underlying operating loss 2 £(405,022) £(785,613)
Loss before taxation £(1,355,410) £(359,650)
Basic and diluted loss per share (9.13)p (2.54)p
Year end balance of cash and cash equivalents £661,845 £242,795
1 - Excluding one-off contributions from discontinued contracts
2 - Excluding Cube impairment and one-off contributions from discontinued
contracts
Bruno Brookes, Chief Executive of Immedia, said :
'2007 was a challenging year for Immedia but I am pleased with what has been
achieved in terms of structure, product offering and pipeline developments. As a
result of the changes that have been made in 2007 I am confident that we have
aligned Immedia's offering towards the most profitable areas of growth for 2008
and beyond.
'We believe that we are well equipped to benefit from the growth of the wider
digital out-of-home market, and that the actions we have taken over the last six
months will enable us to make good progress during the current year.'
Enquiries:
Immedia Broadcasting Plc
Bruno Brookes - Chief Executive +44 (0) 1635 572 800
Hudson Sandler
Nick Lyon / Sandrine Gallien +44 (0) 20 7796 4133
Daniel Stewart & Company Plc
Simon Leathers / Simon Starr +44(0) 20 7776 6550
Chairman's Statement
The year was a tough one for the company but the Board are confident that the
reviews undertaken following the underperformance of the Cube acquisition and
consequent changes made in both business strategy and structure will bear fruit
in the coming year.
Underlying revenue for the year was slightly down at £3,799,586 compared to
£3,855,034 for 2006 with the underlying operating loss of £405,022 for the year
a significant improvement on the 2006 underlying operating loss of £785,613.
The strengthened finance function has kept a rigorous control on costs and the
company remains cash generative with cash and cash equivalents of £661,845 at
the year-end, again a significant improvement on the prior year balance of
£242,795.
The sector that Immedia operates in is undergoing change with a growth in
screen-based digital out-of-home media. Digital out-of-home media is
increasingly found in the retail sector but importantly also in the leisure
sector and whilst this growth has initially been hardware driven, as hardware
penetration increases so does the demand for content. We believe that Immedia
has the strategy and the skills to exploit this demand for content and foresee
that this could become an important source of revenue and profit going forward.
Although it is still early days we have a pipeline of new business that gives us
encouragement for the year ahead.
Geoff Howard-Spink
Chairman
Business Review
I am pleased to present our full year results for the financial year ending 31
December 2007.
Results & Financial Performance
2007 was a challenging year but we believe Immedia has sustained its position
well with a strong focus on cost control and profitability. Revenue for the year
was £3,904,815 (2006: £4,472,225) with underlying revenue (excluding one-off
contributions from discontinued contracts) flat on last year. The underlying
operating loss before income tax was reduced from £785,613 to £405,022. This
year's results have been impacted by the previously disclosed £1.055 million
write-off of Cube's intangibles. We do not anticipate any further impairment
charges.
Following a disappointing performance by Cube since its acquisition and the loss
of two significant contracts in the first quarter of 2007, one of our priorities
for 2007 was to restructure the business in order to bring Cube's strong
expertise in in-store television under the Immedia brand. This has now been
completed and the problems linked to Cube's underperformance are now behind us.
In addition, since last September, we have undertaken a significant number of
sound and visual installations in the retail sector and remain positive about
Cube's clients' contribution to performance at Group level going forward.
At Group level, significant progress has also been made on the financial
structure of the Company, with all loans having been repaid during the year.
Costs have been rigorously controlled and the Group remains cash generative,
with £661,845 cash in the bank (31 December 2006: £242,795).
On the basis of current financial projections prepared up to the end of 2009,
recent news of contract renewals, continuing improvements in management of
costs, and ongoing availability of facilities, the Directors are satisfied that
the Group has adequate resources to continue in operation for the foreseeable
future and consequently the financial statements have been prepared on the going
concern basis.
Subscription Stations
All of our subscription radio stations continue to perform well. In October
2007, we were delighted to announce a contract with The GAME Group plc to
provide subscription radio to all of the GAME stores across the UK. The
roll-out has been successful and we currently broadcast GAME Live! to
approximately 370 stores.
In September, we were also pleased to announce that we had signed a new contract
with SPAR UK to continue to broadcast SPAR Live! under a subscription model to
circa 1,400 stores for another three years. The radio station is performing
extremely well and we are pleased to say that all advertising airtime has been
sold until October 2008. Immedia has provided SPAR with a full service radio
station since June 2004 and we have a strong relationship with the SPAR team
which we will seek to build on going forward.
Our station HSBC Live! which broadcasts to 940 branches across the UK continued
to perform well.
IKEA Live! rolled out as planned and the station broadcasts to all 20 IKEA
stores across the UK.
Lloyds Pharmacy Live! is operating well across all 1,500 stores, our contract
has been renewed and we are entering our sixth year of partnership with Lloyds
Pharmacy's team.
We have made good progress trialling other radio stations and as one of our
objectives to develop content provision going forward, we have continued to
provide tailored visual content for a range of first class brands.
Current Trading and Outlook
2007 was a challenging year for Immedia but I am pleased with what has been
achieved in terms of structure, product offering and pipeline developments. As a
result of the changes that have been made in 2007 I am confident that we have
aligned Immedia's offering towards the most profitable areas of growth for 2008
and beyond.
In the second half of the year, it had become apparent that there were numerous
opportunities within the wider market of 'digital out-of-home'. The digital
out-of-home sector is widely reported to be one of the fastest growing
advertising markets in the world. We have invested substantial time and effort
clarifying how we could develop innovative solutions to service customers' needs
in this field and as a consequence our strategy is now as follows:
- To continue to win radio and RadioVision contracts from retailers but
also in other sectors
- To drive new networks in new territories with existing clients
- To launch new and innovative TV solutions
- To develop our thriving installation and maintenance services
- To generate and develop content for digital network owners across
Europe, the Middle East and Africa (EMEA)
- To sign reseller agreements with providers across the EMEA region to
offer and distribute Immedia's first class offering
This strategy is being successfully implemented and we also remain focused on
cost management and profitability.
Current trading is in line with our expectations and we are also delighted to
announce today that our contract with HSBC has been renewed for another two
years. We look forward to developing our relationship with HSBC further.
We believe that we are well equipped to benefit from the growth of the wider
digital out-of-home market, and that the actions we have taken over the last six
months will enable us to make good progress during the current year.
Bruno Brookes
Chief Executive
Consolidated Income Statement
for the year ended 31 December 2007
Note 2007 2006
£ £
Revenue 5 3,904,815 4,472,225
Cost of sales (1,691,821) (1,958,973)
Gross profit 2,212,994 2,513,252
Administrative expenses before impairment charge
on intangible assets 14 (2,533,678) (2,876,775)
Impairment charge on intangible assets (1,055,225) -
Operating loss (1,375,909) (363,523)
Operating profit before depreciation, amortisation
and impairment charge 206,369 643,418
Depreciation and amortisation (527,053) (1,006,941)
Impairment charge on intangible assets (1,055,225) -
Finance income 9 22,374 21,428
Finance expense 9 (1,875) (17,555)
Loss before taxation 6 (1,355,410) (359,650)
Income tax 10 72,750 44,738
Loss for the year attributable to equity shareholders (1,282,660) (314,912)
Continuing operations
Loss per share - basic and diluted 11 ( 9.13) p (2.54) p
There was no income and expense for the current or comparative periods other
than that reported in the consolidated income statement.
Consolidated Balance Sheet
At 31 December 2007
2007 2006
Note £ £
Assets
Property, plant and equipment 13 208,837 561,687
Intangible assets 14 377,190 1,659,773
Total non-current assets 586,027 2,221,460
Current assets
Inventories - work in progress 3,703 2,409
Trade and other receivables 16 675,975 1,062,296
Prepayments for current assets 151,550 167,138
Cash and cash equivalents 17 661,845 246,147
Total current assets 1,493,073 1,477,990
Total assets 2,079,100 3,699,450
Share capital 18 1,455,684 1,334,056
Share premium 18 3,586,541 3,525,727
Shares to be issued 18 - 237,175
Merger reserve 18 2,245,333 2,245,333
Retained losses 18 (6,712,729) (5,430,069)
Total equity 23 574,829 1,912,222
Liabilities
Loans and borrowings 19 - 3,187
Deferred tax liabilities 20 12,480 85,230
Total non-current liabilities 12,480 88,417
Loans and borrowings 19 - 19,047
Trade and other payables 21 1,416,926 1,234,865
Deferred income 74,865 444,899
Total current liabilities 1,491,791 1,698,811
Total liabilities 1,504,271 1,787,228
Total equity and liabilities 2,079,100 3,699,450
Consolidated Cash Flow Statement
for the year ended 31 December 2007
2007 2006
Note £ £
Cash flows from operating activities
Loss for the year attributable to equity shareholders (1,282,660) (314,912)
Adjustments for:
Depreciation, amortisation and impairment 1,582,278 1,006,941
Financial income (22,374) (21,428)
Financial expense 1,875 17,555
Loss on sale of property, plant and equipment 19,138 -
Deferred tax credits 10 (72,750) (30,250)
Decrease/(increase) in trade and other receivables 401,909 (140,827)
(Increase) in inventories (1,294) (2,409)
(Decrease)/increase in trade and other payables (187,973) 342,690
Tax paid - 1,882
Net cash from operating activities 438,149 859,242
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 1,753 -
Interest received 22,374 21,428
Acquisition of subsidiary, net of cash acquired 12 - (1,076,733)
Acquisition of property, plant and equipment 13 (22,469) (200,894)
Net cash from investing activities 1,658 (1,256,199)
Cash flows from financing activities
Proceeds from exercise of share options - 14,875
Interest paid (1,875) (17,555)
Repayment of borrowings (14,104) (9,500)
Repayment of other loans - (175,000)
Payment of finance lease liabilities (4,778) (4,932)
Net cash from financing activities (20,757) (192,112)
Net increase/(decrease) in cash and cash equivalents 419,050 (589,069)
Cash and cash equivalents at 1 January 242,795 831,864
Cash and cash equivalents at 31 December 17 661,845 242,795
Notes
(forming part of the financial statements)
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2007 or 2006 but is derived
from those accounts. Statutory accounts for 2006 have been delivered to the
registrar of companies, and those for 2007 will be delivered in due course. The
auditors have reported on those accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the auditors drew attention
by way of emphasis without qualifying their report and (iii) did not contain a
statement under section 237(2) or (3) of the Companies Act 1985. The 2007
accounts will be delivered to the registrar of companies following the Company's
Annual General Meeting. The Annual Report and Notice of Annual General Meeting
will be posted to the shareholders by 6 June 2008. This preliminary
announcement was approved by the Board on 9 May 2008.
1 Reporting entity
Immedia Broadcasting plc (the 'Company') is a company incorporated and domiciled
in the United Kingdom. The address of the Company's registered office is 8-10
New Fetter Lane, London EC4A 1RS.
The consolidated financial statements of the Company as at and for the year
ended 31 December 2007 comprise the Company and its subsidiaries (together
referred to as the 'Group'). The Group primarily is involved in marketing and
communication services through radio and screen based media.
2 Basis of preparation
The consolidated financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting Standards as
adopted by the EU ('Adopted IFRSs').
On the basis of current financial projections prepared up to the end of 2009,
recent news of contract renewals, continuing improvements in management of
costs, and ongoing availability of facilities, the Directors are satisfied that
the Group has adequate resources to continue in operation for the foreseeable
future and consequently the financial statements have been prepared on the going
concern basis.
(a) Statement of compliance
The AIM Rules require that the consolidated financial statements of the Company
for the year ending 31 December 2007 be prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the EU
('Adopted IFRSs').
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these consolidated financial
statements and in preparing an opening IFRS balance sheet at 1 January 2006 for
the purposes of the transition to Adopted IFRSs.
Judgements made by the directors, in the application of these accounting
policies that have significant effect on the financial statements and estimates
with a significant risk of material adjustment in the next year are discussed in
note 2(c).
(b) Measurement convention
The consolidated financial statements have been prepared on the historical cost
basis except as noted in note 3 (a) below.
(c) Use of estimates and judgements
The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is
revised and in any future periods affected.
In particular, information about significant areas of estimation uncertainty and
critical judgements in applying accounting policies that have the most
significant effect on the amount recognised in the financial statements are
described in the following notes:
· Note 4 determination of fair values
· Note 14 intangible assets (goodwill impairment tests);
· Note 16 trade and other receivables (review and provisions against
doubtful debts).
3 Significant accounting policies
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements, and have been
applied consistently by Group entities.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group
has the power to govern the financial and operating policies of an entity so as
to obtain benefits from its activities. The financial statements of
subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. The Group includes
an Employee Benefit Trust which is included in the consolidation.
(ii) Acquisitions
Acquisitions are accounted for using the purchase method. The cost of an
acquisition is measured at fair value at the date of exchange of the
consideration provided plus costs directly attributable to the acquisition.
Identifiable assets and liabilities of the acquired business that meet the
conditions for recognition under IFRS 3 ('Business Combinations') are recognised
at their fair value at the date of acquisition. To the extent that the cost of
an acquisition exceeds the fair value of the net assets acquired the difference
is recorded as goodwill. Where the fair value of the net assets acquired exceeds
the cost of an acquisition the difference is recorded in the income statement.
(iii) Transactions eliminated on consolidation
Intra-group balances and any unrealised income and expenses arising from
intra-group transactions are eliminated in preparing the consolidated financial
statements.
(iv) Merger
On 20 November 2003 a new holding company was brought into the Group. This was
carried out by a share for share exchange and the existing shareholders of
Immedia Broadcast Limited received 1,000 10p Ordinary shares in Immedia
Broadcasting Plc for every share held. There was no cash consideration. As
part of its transition to IFRS on 1 January 2006 the Group has not restated the
Group reconstruction which has been accounted for as a merger as permitted by UK
GAAP.
(b) Property plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated
depreciation and accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of
the asset. Purchased software that is integral to the functionality of the
related equipment is capitalised as part of that equipment.
(ii) Subsequent costs
The cost of replacing part of an item of property, plant and equipment is
recognised in the carrying amount of the item if it is probable that the future
economic benefits embodied within the part will flow to the Group and its cost
can be measured reliably. The costs of the day-to-day servicing of property,
plant and equipment are recognised in income and expenditure as incurred.
(iii) Depreciation
Depreciation is recognised as an expense in income and expenditure on a
straight-line basis over the estimated useful lives of each part of an item of
property, plant and equipment. Leased assets are depreciated over the shorter
of the lease term and their useful lives.
The estimated useful lives for the current and comparative periods are as
follows:
Plant and machinery - 3 years
Fixtures and fittings - 3 to 5 years
Network equipment - 5 years
Depreciation methods, useful lives and residual values are reviewed at each
balance sheet date.
(c) Intangible assets and goodwill
(i) Goodwill
Goodwill arises on the acquisition of subsidiaries and is stated at cost less
any accumulated impairment losses. Goodwill, which under IFRSs is not amortised,
is tested annually for impairment.
Acquisitions prior to 1 January 2006
As part of its transition to IFRSs, the Group elected to restate only those
business combinations that occurred on or after 1 January 2006. In respect of
acquisitions prior to 1 January 2006, goodwill represents the amount recognised
under the Group's previous accounting framework, UK GAAP.
Acquisitions on or after 1 January 2006.
For acquisitions on or after 1 January 2006, goodwill represents the excess of
the cost of the acquisition over the Group's interest in the net fair value of
the identifiable assets, liabilities and contingent liabilities of the acquiree.
(ii) Amortisation
Amortisation is recognised as an expense in income and expenditure on a
straight-line basis over the estimated useful lives of intangible assets, other
than goodwill, from the date that they are available for use. The estimated
useful lives for the current and comparative periods are as follows:
Customer relationships - 2 to 3 years
Video library - 10 years
(d) Leased assets
Leases in terms of which the Group assumes substantially all the risks and
rewards of ownership are classified as finance leases. Upon initial recognition
the leased asset is measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments. Subsequent to initial
recognition, the asset is accounted for in accordance with the accounting policy
applicable to that asset.
Other leases are operating leases and are not recognised on the Group's balance
sheet.
(e) Lease payments
Payments made under operating leases are recognised in profit or loss on a
straight-line basis over the term of the lease. Lease incentives are recognised
as an integral part of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the
finance expense and the reduction of the outstanding liability. The finance
expense is allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability.
(f) Inventories
Inventories are measured at the lower of cost and net realisable value. In
determining the cost of raw materials, consumables and goods purchased for
resale, the weighted average purchase price
is used. For work in progress and finished goods cost is taken as production
cost, which includes an appropriate proportion of attributable overheads.
(g) Trade receivables
Trade receivables are stated initially at fair value then measured at amortised
cost less provisions for impairment. Provisions for impairment are recognised
when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables. The impairment
recorded is the difference between the carrying value of the receivables and the
estimated future cash flows discounted where appropriate. Any impairment
required is recorded in the income statement.
(h) Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
(i) Impairment
Non-financial assets
Assets that have indefinite lives are tested for impairment annually. Assets
that are subject to amortisation or depreciation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable.
An impairment loss is recognised if the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. A cash-generating unit is
the smallest identifiable asset group that generates cash flows that largely are
independent from other assets and groups.
Impairment losses are recognised in profit or loss. Impairment losses recognised
in respect of cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to reduce the carrying
amount of the other assets in the unit on a pro rata basis.
The recoverable amount of an asset or cash-generating unit is the greater of its
value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior periods are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset's carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
(j) Revenue
Revenue represents the amount invoiced by the Group for the provision of media
services and their related equipment in the normal course of business, excluding
value added tax. Revenue from these services and equipment is recognised on the
date of broadcast or delivery. Sponsorship and promotions revenue is recognised
over the life of the contract.
(k) Finance income and expenses
Finance income comprises interest income on bank deposits and is recognised as
it accrues using the effective interest method.
Finance expenses comprise interest expense on borrowings which is recognised in
profit or loss using the effective interest method.
(l) Taxation
Tax on the profit or loss for the year comprises current and deferred tax.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the
initial recognition of goodwill, the initial recognition of assets or
liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit, and differences relating to investments
in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. Deferred tax is measured at the tax rates that are expected
to be applied to the temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future
taxable profits will be available against which temporary difference can be
utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
(m) Share capital
Incremental costs directly attributable to the issue of ordinary shares and
share options are recognised as a deduction from equity.
(n) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its
ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is
determined by adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for the effects
of all dilutive potential ordinary shares, which comprise convertible loans (up
to 30 June 2006) and share options granted to employees.
(o) Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are
recognised as an expense in profit or loss when they are due. (See note 26).
(ii) Share-based compensation
The Group operates an equity settled compensation scheme which grants options to
key employees. The grant date fair value of options granted to employees is
recognised as an employee expense, with a corresponding increase in equity, over
the period in which the employees become unconditionally entitled to the
options. The amount recognised as an expense is adjusted to reflect the actual
number of share options that vest unless this adjustment is due to the share
price not achieving the set thresholds for vesting. As permitted by IFRS 1 ('
First time adoption of IFRSs') the Group has taken the exemption not to apply
this standard before the transition date.
(iii) Employee benefit trust
The Group operates an employee benefit trust (EBT) for the benefit of its
employees through Immedia Broadcasting Trustees Limited which acts as Trustee.
Transactions of the EBT are treated as being those of the Group and are
therefore reflected in the consolidated financial statements. In particular,
the trust's purchases and sales of shares in the Company are debited and
credited directly to equity.
(p) Segment reporting
A segment is a distinguishable component of the Group that is engaged either in
providing related services (business segment), or in providing services within a
particular economic environment (geographical segment), which is subject to
risks and rewards that are different from those of other segments. The Group's
primary format for segment reporting is based on business segments.
(q) Adopted IFRSs not yet applied
The following Adopted IFRSs were available for early application but have not
been applied by the Group in these financial statements. Their adoption is not
expected to have a material effect on the financial statements.
IFRS 8 'Operating Segments' (mandatory for the year commencing on or after 1
January 2009).
IFRIC 11 'Group and treasury share transactions' (mandatory for the year
commencing on or after 1 March 2007).
4 Determination of fair values
A number of the Group's accounting policies and disclosures require the
determination of fair value, both for financial and non-financial assets and
liabilities. Fair values have been determined for measurement and / or
disclosure purposes based on the following methods. Where applicable, further
information about the assumptions made in determining fair values is disclosed
in the notes specific to that asset or liability.
(i) Intangible assets
The fair value for initial recognition and impairment review of intangible
assets is based on the discounted cash flows expected to be derived from the use
and eventual sale of the assets (see note 14 below).
(ii) Trade and other receivables
The fair value for initial recognition and impairment review of trade and other
receivables is estimated as the present value of future cash flows, discounted
at the market rate of interest at the reporting date.
(iii) Trade and other payables
The fair value of trade and other payables is estimated as the present value of
future cash flows, discounted at the market rate of interest at the reporting
date.
(iv) Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as their carrying value
where the cash is repayable on demand.
5 Segment reporting
Segment information is presented in respect of the Group's business and
geographical segments. The primary format, business segments, is based on the
Group's management and internal reporting structure.
Inter-segment pricing is determined on an arm's length basis.
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly head office expenses and income tax assets and
liabilities.
Segment capital expenditure is the total cost incurred during the period to
acquire property, plant and equipment, and intangible assets other than
goodwill.
5 Segment reporting (continued)
Business segments
The Group comprises the following main business segments:
Radio services. The production and transmission of live radio programmes for
in-store retailer use.
Audio and visual content production. The production and transmission of music,
video and other screen based content for business use.
Geographical segments
The Group operates principally within the United Kingdom, with some European
Economic Area (EEA) customers. All Group activities originate in the United
Kingdom.
In presenting information on the basis of geographical segments, segment revenue
is based on the geographical location of customers. Segment assets are based on
the geographical location of the assets.
Business segments Radio Audio visual Total Radio Audio Total
visual
2007 2007 2007 2006 2006 2006
£ £ £ £ £ £
Revenue 3,050,044 854,771 3,904,815 3,710,194 762,031 4,472,225
Gross profit 1,780,644 432,350 2,212,994 2,275,843 237,409 2,513,252
Administrative expenses before
depreciation, amortisation and
impairment charge (1,543,216) (463,409) (2,006,624) (1,658,204) (211,630) (1,869,834)
EBITDA 237,428 (31,059) 206,369 617,639 25,779 643,418
Depreciation (328,272) (26,156) (354,428) (798,567) (20,487) (819,054)
Amortisation of intangible assets - (172,625) (172,625) (36,637) (151,250) (187,887)
Impairment charge on intangible assets - (1,055,225) (1,055,225) - - -
Operating loss (90,844) (1,285,065) (1,375,909) (217,565) (145,958) (363,523)
Net finance income 20,499 3,873
Income tax credit 72,750 44,738
Loss for the financial year
attributable to equity shareholders (1,282,660) (314,912)
Segment assets 926,760 214,712 1,141,472 2,870,494 319,674 3,190,168
Unallocated assets 937,628 509,282
Segment liabilities (832,313) (97,520) (929,833) (1,092,039) (184,868) (1,276,907)
Unallocated liabilities (574,438) (510,321)
Total net assets 574,829 1,912,222
Capital expenditure 11,259 11,210 22,469 198,656 2,238 200,894
Geographical segments UK EEA Total UK EEA Total
£ £ £ £ £ £
Revenue 3,676,626 228,189 3,904,815 3,504,890 967,335 4,472,225
Segment assets 1,141,472 - 1,141,472 3,090,585 99,583 3,190,168
Unallocated assets 937,628 509,282
Segment liabilities (929,833) - (929,833) (1,215,574) (61,334) (1,276,907)
Unallocated liabilities (574,438) (510,321)
Total net assets 574,829 1,912,222
6 Expenses and auditors' remuneration
2007 2006
£ £
Included in profit/loss are the following:
Auditors' remuneration
Group - audit 34,000 34,400
- fees paid to the auditors and their associates in respect of other services 8,060 8,760
- fees paid to the auditors in respect of acquisition due diligence - 60,500
Depreciation and amounts written off tangible and intangible fixed assets
- Owned 524,017 889,230
- Leased 3,036 3,788
Loss on disposal of tangible fixed assets 19,138 -
Impairment charge on intangible fixed assets 1,055,225 -
Hire of plant & machinery - -
Hire of other assets - operating leases 101,030 78,390
7 Remuneration of Directors
2007 2006
£ £
Directors' emoluments (including employer's national insurance of £47,973 in 2007
2007 and £40,335 in 2006) 571,303 539,222
Amounts receivable under long term incentive schemes - -
571,303 539,222
Contributions to defined contribution plans - -
571,303 539,222
The aggregate of emoluments and amounts receivable under long term incentive
schemes of the highest paid Director was £175,691 (2006: £177,614).
2007 2006
Number of Number of
Directors Directors
The number of Directors who exercised share options was - 2
Retirement benefits are accruing to the following numbers of Directors under money
purchase pension schemes 1 1
8 Staff numbers and costs
The full time equivalent average number of persons employed (including
Directors) during the year, analysed by category, was as follows:
Number of employees
2007 2006
Administration 13 14
Production and distribution 16 12
29 26
The aggregate payroll costs of these persons were as follows:
2007 2006
£ £
Wages and salaries 1,335,770 962,105
Compulsory social security contributions 132,719 118,273
Contributions to defined contribution plans - -
1,468,489 1,080,378
The Group made no pension contributions in the year (2006: £nil).
9 Finance income and expense
2007 2006
£ £
Interest income on bank deposits 22,374 21,428
2007 2006
£ £
Interest expense on bank loans and overdrafts 653 2,161
Interest expense on other loans - 13,173
Interest expense on finance leases 726 936
Other interest expense charges 496 1,285
Finance expense 1,875 17,555
Net finance income 20,499 3,873
10 Income tax credit in the income statement
2007 2006
£ £
Current tax (credit)
Current period - -
Adjustment for prior periods - (14,488)
Deferred tax (credit)
Reversal of temporary differences (72,750) (30,250)
Total tax (credit) in consolidated income statement (72,750) (44,738)
Reconciliation of effective tax rate
The current tax charge for the period is based on an effective rate of 20%.
(2006: 19.75%) and is higher (2006: higher) than the standard rate of
corporation tax in the UK for small companies (20%, 2006: 19%). The differences
are explained below:
Loss before tax (1,355,410) (359,650)
Current tax at 20% (2006: 19%) (271,082) (68,333)
Effects of:
Expenses not deductible for tax purposes 4,637 14,528
Amortisation and impairment of intangibles 243,326 35,698
Movement in unprovided deferred tax asset (23,119) 25,206
Reversal of temporary differences (72,750) (30,250)
Tax deductions not in accounts (exercise of share options) - (8,108)
Pre-acquisition movements in Cube - 1,009
Credit adjustments in respect of prior periods - (14,488)
Total income tax credit (72,750) (44,738)
11 Loss per share
2007 Number 2006 Number
Weighted average number of shares in issue 14,260,271 12,772,489
Less weighted average number of own shares (213,500) (383,747)
Weighted average number of shares in issue for basic loss per share 14,046,771 12,388,742
The basic and diluted loss per share are calculated using the loss for the
financial period of £1,282,660 (2006: loss £314,912). The weighted number of
shares used for the diluted loss per share is calculated after reflecting the
outstanding share options and conditional issuable shares at the year end. But
in accordance with IAS 33 the diluted basic loss per share is stated as the same
amount as basic as there is no dilutive effect.
12 Acquisition of subsidiaries
Business combination
On 8 May 2006 the Company acquired all the shares of The Cube Group of Companies
Limited and its trading subsidiary Cube Music Limited. The acquisition had the
following effect on the Group's assets and liabilities on acquisition date:
Pre acquisition carrying Fair value adjustments Recognised values on
amounts acquisition
£ £ £
Net assets acquired
Property plant and equipment 69,520 1 69,521
Intangible assets 362,000 330,880 692,880
Trade and other receivables 222,185 - 222,185
Cash and cash equivalents 204,236 - 204,236
Loans and borrowings (33,314) - (33,314)
Trade and other payables (313,496) - (313,496)
Deferred taxation - (115,480) (115,480)
Net identifiable assets and 511,131 215,401 726,532
liabilities
Goodwill on acquisition 1,063,410
Consideration paid * 1,789,942
Cash acquired (204,236)
Net consideration outflow 1,585,706
Of which: Number Fair (market) value £
Paid in shares 1,632,653 20.0 pence 326,531
1,216,281 15.0 pence 182,442
Paid in cash 1,076,733
1,585,706
* Includes professional fees of £218,775 and stamp duty £12,195.
The fair value adjustments on intangible assets relate to customer relationships
and the video library (see note 14 below).
The goodwill on acquisition arises from Cube Music's staff and its connected
relationships with recording companies.
Pre-acquisition carrying amounts were determined based on applicable IFRSs
immediately before the acquisition. The value of assets, liabilities recognised
on acquisition are their estimated fair values (see note 4 for methods used in
determining fair values). In determining the fair value of contract
relationships with customers, the Group applied the discount rate of 23% to the
estimated future net earnings; in determining the fair value of the video
library the Group used estimated replacement cost.
The consolidated results of the Cube Group of Companies Limited and its subsidiary Cube Music Limited, directly prior
to and post acquisition were as follows:
Year to 30 7 months to 8 8 months to 31
September 2005 May 2006 December 2006
(unaudited)
£ £ £
Revenue 1,677,862 1,069,437 762,031
Operating profit/(loss) 157,660 6,474 (32,035)
Finance expense (3,904) (1,167) (1,081)
Profit/(loss) before taxation 153,756 5,307 (33,116)
Income tax (16,315) - 14,488
Profit/(loss) for the period attributable to equity shareholders 137,441 5,307 (18,628)
13 Property, plant and equipment
Plant and Fixtures & Network Total
equipment fittings Equipment
£ £ £ £
Cost
At 1 January 2007 675,740 335,620 2,192,517 3,203,877
Additions 4,087 13,638 4,744 22,469
Disposals & retirements - - (1,539,884) (1,539,884)
At 31 December 2007 679,827 349,258 657,377 1,686,462
Depreciation and impairment losses
At 1 January 2007 593,453 245,832 1,802,905 2,642,190
Charge for year 61,083 50,748 242,597 354,428
On disposals & retirements - - (1,518,993) (1,518,993)
At 31 December 2007 654,536 296,580 526,509 1,477,625
Carrying amounts
At 31 December 2007 25,291 52,678 130,868 208,837
Cost
At 1 January 2006 615,366 245,852 2,378,993 3,240,211
Acquisition 52,009 69,011 - 121,020
Additions 8,365 27,132 165,397 200,894
Disposals & retirements - (6,375) (351,873) (358,248)
At 31 December 2006 675,740 335,620 2,192,517 3,203,877
Depreciation and impairment losses
At 1 January 2006 441,317 153,773 1,489,409 2,084,499
Acquisition 25,047 26,452 - 51,499
Charge for year 127,089 67,732 624,233 819,054
On disposals & retirements - (2,125) (310,737) (312,862)
At 31 December 2006 593,453 245,832 1,802,905 2,642,190
Carrying amounts
At 31 December 2006 82,287 89,788 389,612 561,687
Disposals and retirements in 2007
In April 2007 the Group ceased broadcasting on a free of charge basis its
Impulse radio brand for independent newsagents and replaced this with a
subscription only service.
Radio receiving network equipment which the Group had provided to independent
newsagents to receive Impulse radio and which had been fully depreciated
following an impairment charge in the Group's 2005 financial statements, has
been retired.
Other radio network equipment with a residual value of £20,891 was disposed of
on termination of a contract.
Finance leases
There were no outstanding finance leases in respect of property, plant and
equipment at 31 December 2007 (in 2006 the net book value of fixtures and
fittings included an amount of £3,036 in respect of assets held under finance
leases).
14 Intangible assets
Customer Video Goodwill Total
relationships library
£ £ £ £
Cost
At 1 January 2007 566,880 126,000 1,228,043 1,920,923
Adjustment * - - (54,733) (54,733)
At 31 December 2007 566,880 126,000 1,173,310 1,866,190
Amortisation and impairment losses
At 1 January 2007 142,750 8,500 109,900 261,150
Charge for year 159,500 13,125 - 172,625
Impairment losses 191,125 - 864,100 1,055,225
At 31 December 2007 493,375 21,625 974,000 1,489,000
Carrying amounts
At 31 December 2007 73,505 104,375 199,310 377,190
Cost
At 1 January 2006 - - 109,900 109,900
Acquisition 566,880 126,000 1,118,143 1,811,023
At 31 December 2006 566,880 126,000 1,228,043 1,920,923
Amortisation and impairment losses
At 1 January 2006 - - 73,263 73,263
Charge for year 142,750 8,500 36,637 187,887
At 31 December 2006 142,750 8,500 109,900 261,150
Carrying amounts
At 31 December 2006 424,130 117,500 1,118,143 1,659,773
* The adjustment to the cost of goodwill arises from the change in the share
price and therefore the value of the deferred share consideration between that
initially provided for at 31 December 2006, and that at which the shares were
issued on 30 March 2007.
Impairment review and movements in intangible assets and goodwill
For the initial allocation of goodwill arising on the acquisition of Cube Group
of Companies to cash-generating units (CGUs) on the adoption of IFRSs (as
disclosed in note (12)) the Group engaged independent expert valuers.
Assets that have indefinite lives are tested for impairment annually. Assets
that are subject to amortisation or depreciation are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable.
The recoverable amounts of the cash generating units are determined from value
in use calculations. The key assumptions for the value in use calculations are
those regarding discount rates, growth rates and expected changes to selling
prices, and direct costs during the period. Management have estimated the
discount rate using the weighted average cost of capital of the business,
changes in selling prices and direct costs are based on past experience and
expectations of future change in the market.
The group prepares cash flows derived from the most recent financial budgets
approved by management for the next year and extrapolates cash flows using
estimated growth rates beyond the budgeting period.
The key assumptions for the value in use calculations are: management forecast
modest growth to extrapolate cash flows in the period through to December 2009.
A post tax discount rate of 21% was applied to cash flow projections which
equates to a pre tax rate of approximately 26%.
During the first half of 2007 there were clear indications of impairment of the
customer relationships intangible asset and as a result management completed
impairment tests on all the Group's intangible assets, including goodwill.
The resulting impairment charges were disclosed in the Group's interim financial
statements and are explained in more detail below.
During the second half of 2007 there has been a performance improvement in the
audio visual part of the business, but no reversal has been made of any of the
impairment charges made during the first half year.
Method
In the period ending 30 June 2007, the performance of audio visual business was
significantly weaker than anticipated following the non-renewal of a significant
contract and lower than expected activity with other customers. These factors
indicated potential impairment in customer relationships and goodwill during the
period.
The test for impairment under IAS 36 compares the carrying value of an
intangible asset against its recoverable amount to the business, where economic
value is defined as the higher of the asset's fair value less costs to sell or
its value in use. (These measures are based on the net present value of future
cash flows). If the carrying value exceeds the economic value, an impairment
exists.
Economic values of intangible assets
For the Group's intangible assets, the fair values less costs to sell are
considered to be the same as the values in use because identical assumptions are
used for both valuations. Management has reviewed the customer relationships
and video library for impairment by reference to their fair values less costs to
sell and compared the result against their carrying values. In determining the
fair values of contract relationships with its customers, the Group applied the
discount rate of 23% to the estimated future net earnings; in determining the
fair value of the video library, the Group used estimated replacement cost.
The impairment review of the goodwill in the audio visual business was
undertaken by reference to its 'value in use'; the audio visual business forms
its own CGU within the Group and the net present value test was performed on
that CGU.
Impairment: the following calculations arise under the policy described in note
3(g) above
Video library: although the video library had not been used to the level
anticipated during the first half of 2007, sustained increased use is expected
for the future and management concluded that its fair value less cost to sell
exceeded its amortised carrying value of £110,000 at 30 June 2007 and no
impairment charge was required. This remains the case at 31 December 2007 when
the amortised carrying value was £104,375.
Customer relationships: the fair value less costs to sell of customer
relationships at 30 June 2007 was £152,875 which compared with an amortised
carrying value of £344,000 resulted in an impairment charge of £191,125. At 31
December 2007 the amortised carrying value of £73,505 is considered to be not
less than the fair value less costs to sell and no further impairment charge has
been made.
Goodwill: The net present value calculation for goodwill at 30 June 2007
indicated a recoverable amount of £199,300 compared with £1,063,400 at
acquisition date, resulting in an impairment charge of £864,100. No further
impairment charge is assessed at 31 December 2007.
15 Subsidiary companies
The following companies are wholly owned subsidiaries whose ultimate parent
company is Immedia Broadcasting Plc:
Name Registered number Country of incorporation Shareholding
Immedia Broadcast Limited 03873102 England & Wales 100%
Immedia Broadcasting Trustees Limited 04552356 England & Wales 100%
The Cube Group of Companies Limited 03845864 England & Wales 100%
Cube Music Limited 03822694 England & Wales 100%
Immedia Group Limited (1) 06336935 England & Wales 100%
(1) Incorporated 8 August 2007
At 31 December 2006 the Company held 100% of the ordinary share capital of
Immedia Broadcast Limited and of The Cube Group of Companies Limited (both
incorporated in England and Wales).
On 31 December 2007 the Company transferred its ownership of 100% of the
ordinary share capital of The Cube Group of Companies Limited to Immedia
Broadcast Limited. On 31 December 2007 The Company owned 100% of the ordinary
share capital of Immedia Group Limited.
At 31 December 2007 and 31 December 2006, Immedia Broadcast Limited also held
100% of the ordinary share capital of Immedia Broadcasting Trustees Limited (a
trust holding company) (incorporated in England and Wales).
At 31 December 2007 and 31 December 2006, The Cube Group of Companies Limited
held 100% of the ordinary share capital of Cube Music Limited (incorporated in
England and Wales).
16 Trade and other receivables
2007 2006
£ £
Trade receivables 593,250 1,009,127
Amounts owed by subsidiary undertakings - -
Other debtors 82,725 53,169
675,975 1,062,296
At 31 December 2007 trade receivables are shown after a provision for impairment
of £15,218 (31 December 2006: £111,154) arising from disputed charges. £84,500
of the 2006 provision for impairment was released in 2007 following recovery of
a disputed debt. All debts are due within one year.
At 31 December the totals of trade receivables past due, net of provision for
impairment, were as follows:
2007 2006
£ £
Up to 3 months past due 344,084 506,772
Over 3 months past due 58,847 413
402,931 507,185
17 Cash and cash equivalents
2007 2006
£ £
Bank balances 1,143 3,887
Call deposits 660,702 242,260
Cash and cash equivalents 661,845 246,147
Bank overdrafts used for cash management purposes (note 19) - (3,352)
Cash and cash equivalents in the statement of cash flows 661,845 242,795
18 Capital and reserves
The Group's objective when managing its capital structure is to minimise the
cost of capital while maintaining adequate capital to protect against volatility
in earnings and net asset values. The strategy is designed to maximise
shareholder return over the long term. The relative proportion of debt to equity
will be adjusted over the medium term depending on the cost of debt compared to
equity and the level of uncertainty facing the industry and the Group.
Reconciliation of movement in capital and reserves
Share capital 2007 2006
£ £
Authorised
36,000,000 Ordinary shares of 10 pence each 3,600,000 3,600,000
Allotted, called up and fully paid
14,556,844 (2006: 13,340,563) Ordinary shares of 10 pence each 1,455,684 1,334,056
Movements in year
At beginning of year 1,334,056 1,173,897
Conversion of convertible debt instruments - (3,106)
1,632,653 Ordinary shares of 10 pence each issued (a) - 163,265
1,216,281 Ordinary shares of 10 pence each issued (b) 121,628 -
1,455,684 1,334,056
(a)These shares were issued at 20.0 pence each. (b) These shares were issued at
15.0 pence each.
There are no restrictions on the transfer of shares in Immedia Broadcasting Plc.
All shares carry equal voting rights.
Employee share options (including Directors) are outstanding as follows:
Option scheme Date of grant Number of shares Option price per share
Immedia EMI Share Option Scheme 27 Jan 2003 10,000 3.75 pence
Immedia EMI Share Option Scheme 29 Oct 2003 35,000 20 pence
Immedia EMI Share Option Scheme 11 Dec 2003 90,000 110 pence
Options granted to employees under the Immedia EMI Share Option Scheme are
exercisable at any time between 12 December 2003 and their expiry on the tenth
anniversary of the date of grant.
Directors' share options are outstanding as follows:
Number of options during the year Exercise Market price Date from Expiry date
price at date of which
exercise exercisable
At start Granted Exercised At end of
of year year
T Brookes 20,000 - - 20,000 20 p n/a 12 Dec 2003 28 Oct 2013
90,000 - - 90,000 110 p n/a 12 Dec 2003 10 Dec 2013
At 31 December 2007 the EBT held 213,500 shares in Immedia Broadcasting Plc in
trust for employees against the future exercise of options granted under the
Immedia EMI Share Option Scheme (2006: 213,500 shares). All options vested
before the adoption date of IFRS 2 so there was no impact on its adoption.
Share premium and reserves
Reserves as at 31 December Share premium Shares to be Merger reserve Retained
2007 account issued earnings
£ £ £ £
At 1 January 2007 3,525,727 237,175 2,245,333 (5,430,069)
Retained loss for the year - - - (1,282,660)
1,216,281 Ordinary shares
of 10 pence each issued in year 60,814 (237,175) - -
At 31 December 2007 3,586,541 - 2,245,333 (6,712,729)
Reserves as at 31 December
2006
At 1 January 2006 3,390,411 - 2,245,333 (5,130,032)
Retained loss for the year - - - (314,912)
Released on repayment of (27,949) - - -
convertible debt
instruments
New shares issued 163,265 - - -
Conditional shares pending - 237,175 - -
issue
Proceeds from exercise of - - - 14,875
share options
At 31 December 2006 3,525,727 237,175 2,245,333 (5,430,069)
19 Loans and borrowings
2007 2006
£ £
Non-current liabilities
Unsecured bank loans - 3,187
- 3,187
Current liabilities
Bank overdrafts - 3,352
Current portion of unsecured bank loans - 10,917
Current portion of finance lease liabilities - 4,778
- 19,047
Unsecured bank loans were repaid in full during 2007. Finance leases were
repaid in full during 2007.
20 Deferred tax liabilities
Recognised deferred tax liabilities are attributable to the following:
2007 2006
£ £
Intangible assets 12,480 85,230
Tax value of loss carry-forwards - -
12,480 85,230
The movements in deferred tax during the year were as follows:
2007 2006
£ £
At beginning of year 85,230 115,480
Reversal of temporary differences (note 10) (72,750) (30,250)
At end of year 12,480 85,230
The deferred tax asset arising in respect of temporary differences between
capital allowances and depreciation of £254,000 (2006: asset of £270,000) has
been added to (2006: added to) accumulated trading losses. The residual trading
losses create a potential deferred tax asset of £755,000 (2006: £611,000) which
has not been recognised due to the uncertainty of the timing of its eventual
crystallisation.
21 Trade and other payables
2007 2006
£ £
Current
Trade payables due to related parties 3,848 8,760
Other trade payables 737,937 645,118
Other taxation and social security 144,547 125,684
Non-trade payables and accrued expenses 530,594 455,303
1,416,926 1,234,865
Included within Other trade payables is £23,500 (2006: £nil) expected to be
settled in more than 12 months.
Included within Non-trade payables and accrued expenses are uninvoiced charges
for servicing, maintenance and licencing costs, plus accruals for legal and
professional fees.
22 Financial instruments
At 31 December 2007 the Group had repaid all its borrowings (overdrafts, bank
loans, finance leases) and the following disclosures apply to the position
extant before its borrowings were repaid. There are no differences between the
disclosures given here for the Group and those required for its parent company.
Treasury
The Group's financial instruments comprise borrowings, cash and liquid
resources, and trade debtors and creditors, the principal risk arising from
which is interest rate risk, which the Board has reviewed and manages through
its policies summarised below. The Group maintains a policy of not trading in
financial instruments. This policy has remained unchanged since the beginning of
the year.
Interest rate risk
The Group finances its operations through a finance leases and bank borrowings.
The Group borrows at both fixed and floating rates of interest. During 2007 all
finance leases and bank borrowings were repaid and there was no interest rate
risk at 31 December 2007.
Liquidity risk
Short-term flexibility is achieved by use of overdraft facilities. There was no
borrowing on overdraft facilities at 31 December 2007.
Foreign currency risk
All trading in the UK and the EEA was denominated in sterling. The Group has no
material financial exposure to foreign exchange gains and losses on monetary
assets and liabilities at the year end and does not hedge any of its trading
activities.
Credit risk
The Group is not subject to significant credit risk with its exposure being
limited to a number of multinational blue chip customers. Policies are
maintained to ensure the Group makes credit sales only to customers with an
appropriate credit rating.
22 Financial instruments (continued)
Market risks
The risks the Group faces are similar to those faced by other small companies
servicing larger business within the UK retail sector. Primary risks are in the
economic cycle (e.g. the adverse effect of a downturn in consumer spending
leading to reduced marketing expenditure amongst clients), and competition (from
others in an already crowded media marketplace).
These risks are balanced against the relative financial resilience of the
Group's blue chip clients, the innovative and high quality services the Group
provides to those clients, and the methods it uses to protect its position in
the market.
Fair values
There is no difference between the carrying amounts and the fair values of the
Group's IAS 39 categories of financial instruments.
Interest rate bank currency profile of financial instruments at year end
Financial liabilities (in comparative year only)
The Group's financial liabilities consist of bank loans, finance leases and bank
overdrafts. Their fair value is estimated as carrying value where the cash is
repayable on demand.
2007 2006
£ £
Fixed rate liabilities
Sterling bank loans: repayable in 2007 (i) - 10,917
Sterling finance leases: repayable in 2007 (ii) - 4,778
Repayable within one year or less: - 15,695
Repayable more than one year not more than two years:
Sterling bank loan: repayable originally in 2008 (iii) - 3,187
- 18,882
(i) Comprised two loans on which interest was fixed at 8.7% and at 9.35%. (ii)
Comprised two leases on which interest was fixed at 10.1%. (iii) Comprised one
loan on which interest was fixed at 8.7%.
Floating rate liabilities
Sterling overdraft - 3,352
The facility is repayable on demand and bears interest at rates based on The
Royal Bank of Scotland Plc base rate plus 3%.
Borrowing facilities
The Group had nil borrowings at 31 December 2007. (At 31 December 2006
borrowings, which were for Cube Music Limited, consisted of two bank loans under
the DTI Small Companies Loan Guarantee scheme and a £25,000 overdraft facility
(all with The Royal Bank of Scotland Plc) and two finance leases (with Lombard
Asset Finance). Security for the bank loans and overdraft facility is by
debenture on the assets of Cube Music Limited).
At 31 December 2007 there were no undrawn committed borrowing facilities (2006:
none).
Financial assets
The Group's financial assets consist of cash and cash equivalents which comprise
cash balances and short-term call deposits. The fair value is estimated as
carrying value where the cash is repayable on demand.
2007 2006
£ £
Sterling cash and cash equivalents 661,845 246,147
23 Equity reconciliation
2007 2006
£ £
Opening shareholders' funds 1,912,222 1,679,609
Loss for the financial year after taxation (1,282,660) (314,912)
New shares issued 182,442 326,530
Conditional shares pending issue (237,175) 237,175
Proceeds from exercise of share options - 14,875
Released on repayment of Other loan under FRS 25 - (31,055)
Closing shareholders' funds 574,829 1,912,222
24 Related party disclosures
BBME Media Group Limited (BBME), a company controlled by Bruno Brookes, owns
1,150,000 shares in the Company. There were no transactions between BBME and
the Immedia Broadcasting group in 2007 (2006: £nil).
Morchard Bishop & Co, an accountancy practice controlled by Charles
Barker-Benfield, contracts with Immedia Broadcasting Plc to provide accountancy
services to the Group. During the year to 31 December 2007 Immedia Broadcast
Limited paid £57,923 (2006: £46,622) to Morchard Bishop & Co in respect of fees
for Charles Barker-Benfield.
Immedia Broadcasting Plc and its subsidiary companies:
During the year to 31 December 2007 Immedia Broadcasting Plc completed the
following transactions with its subsidiary companies:
With Immedia Broadcast Limited:
· transfer of investment in The Cube Group of Companies Limited at net
book value of £789,450;
· recharge of management charges totalling £214,335 (2006: £nil).
With the Immedia Broadcasting Employee Benefit Trust:
· loan interest charge of £2,604 (2006: £2,256).
25 Commitments
(a) Annual commitments under non-cancellable operating leases are as follows:
2007 2006
Land and Other Land and Other
buildings
buildings
£ £ £ £
Operating leases which expire:
Within one year 26,244 - - -
In two to five years inclusive 60,800 - 101,030 -
87,044 - 101,030 -
(b) Capital commitments
There were no unprovided capital commitments outstanding at 31 December 2007
(2006: £nil).
26 Pension schemes
The Group operates a defined contribution pension scheme (the Immedia Broadcast
Limited Stakeholder Pension Scheme) with Allied Dunbar Assurance Plc which is
open to all employees to join. There were no contributions paid or payable by
the Group to the scheme during the year (2006: £nil) and there were no
outstanding or prepaid contributions at either the beginning or the end of the
current or previous financial years.
The Group also operates a defined contribution pension scheme (the Immedia
Broadcast Limited Retirement Benefit Scheme) which currently has two members.
This scheme is closed to new members. There were no contributions paid or
payable by the Group to the scheme during the year (2006: £nil) and there were
no outstanding or prepaid contributions at either the beginning or the end of
the current or previous financial years.
27 Explanation of transition to adopted IFRSs
As stated in note 2, these are the Group's first consolidated financial
statements prepared in accordance with Adopted IFRSs.
The accounting policies set out in note 3 have been applied in preparing the
financial statements for the year ended 31 December 2007, the comparative
information presented for the year to 31 December 2006, and in the preparation
of an opening IFRS balance sheet at 1 January 2006 (the Group's date of
transition).
In preparing its opening IFRS balance sheet, the Group has adjusted amounts
reported previously in financial statements prepared in accordance with its old
basis of accounting (UK GAAP). An explanation of how the transition from UK
GAAP to Adopted IFRSs has affected the Group's financial position, financial
performance and cash flows is set out in the following tables and notes that
accompany the tables.
(i) Reconciliation of equity from UK GAAP to adopted IFRSs at 1 January 2006
UK GAAP Adjustment IFRS
£ £ £
Assets
Property, plant and equipment 1,155,712 1,155,712
Intangible assets 36,637 36,637
Total non-current assets 1,192,349 - 1,192,349
Current assets
Inventories - - -
Trade and other receivables 666,713 - 666,713
Prepayments for current assets 199,709 - 199,709
Cash and cash equivalents 831,864 - 831,864
Total current assets 1,698,286 - 1,698,286
Total assets 2,890,635 - 2,890,635
Equity
Share capital 1,173,897 - 1,173,897
Share premium 3,390,411 - 3,390,411
Shares to be issued - - -
Merger reserve 2,245,333 - 2,245,333
Retained losses (5,130,032) - (5,130,032)
Total equity 1,679,609 - 1,679,609
Liabilities
Loans and borrowings - - -
Deferred taxation - - -
Total non-current liabilities - - -
Loans and borrowings 188,367 - 188,367
Trade and other payables 814,590 - 814,590
Deferred income 208,069 - 208,069
Total current liabilities 1,211,026 - 1,211,026
Total liabilities 1,211,026 - 1,211,026
Total equity and liabilities 2,890,635 - 2,890,635
There are no adjustments from UK GAAP to Adopted IFRSs at 1 January 2006.
(ii) Reconciliation of equity from UK GAAP to adopted IFRSs at 31 December 2006
UK GAAP Adjustment IFRS
£ £ £
Assets
Property, plant and equipment 561,687 561,687
Intangible assets 1,658,216 1,557 1,659,773
Total non-current assets 2,219,903 1,557 2,221,460
Current assets
Inventories 2,409 - 2,409
Trade and other receivables 1,062,296 - 1,062,296
Prepayments for current assets 167,138 - 167,138
Cash and cash equivalents 246,147 - 246,147
Total current assets 1,477,990 - 1,477,990
Total assets 3,697,893 1,557 3,699,450
Equity
Share capital 1,334,056 - 1,334,056
Share premium 3,525,727 - 3,525,727
Shares to be issued 237,175 - 237,175
Merger reserve 2,245,333 - 2,245,333
Retained losses (5,346,396) (83,673) (5,430,069)
Total equity 1,995,895 (83,673) 1,912,222
Liabilities
Loans and borrowings 3,187 - 3,187
Deferred taxation - 85,230 85,230
Total non-current liabilities 3,187 85,230 88,417
Loans and borrowings 19,047 - 19,047
Trade and other payables 1,234,865 - 1,234,865
Deferred income 444,899 - 444,899
Total current liabilities 1,698,811 - 1,698,811
Total liabilities 1,701,998 85,230 1,787,228
Total equity and liabilities 3,697,893 1,557 3,699,450
The adjustment arises following the reclassification of part of the goodwill
arising on the Cube acquisition under UK GAAP into two new intangible assets of
customer relationships and the acquired video library on which deferred taxation
of £115,480 is provided. The original goodwill amortisation charge is reversed
(credit £37,327) and a recalculated amortisation charge of £151,250 is made on
the new intangible assets (see note 14), against which deferred taxation of
£30,250 is released. The net adjustment to equity is £83,673 and the net
deferred taxation provided is £85,230.
(iii) Reconciliation of loss for the year to 31 December 2006
UK GAAP Adjustment IFRS
£ £ £
Continuing operations
Revenue 4,472,225 - 4,472,225
Cost of sales (1,958,973) - (1,958,973)
Gross profit 2,513,252 - 2,513,252
Administrative expenses (2,762,852) (113,923) (2,876,775)
Results from operating activities (249,600) (113,923) (363,523)
Finance income 21,428 - 21,428
Finance expenses (17,555) - (17,555)
Net finance income 3,873 - 3,873
(Loss) before income tax (245,727) (113,923) (359,650)
Income tax credit 14,488 30,250 44,738
(Loss) for the year (231,239) (83,673) (314,912)
The adjustment is explained in note 27 (ii) above.
(iv) Reconciliation of cash flows for the year to 31 December 2006.
Apart from the normal reclassifications into the IFRS format, there are no
adjustments to the cash flows previously reported under UK GAAP for the year to
31 December 2006 in the transition to Adopted IFRSs.
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