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Wireless Group PLC (TWG)

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Wednesday 30 March, 2005

Wireless Group PLC

Final Results

Wireless Group PLC
30 March 2005



                 THE WIRELESS GROUP PLC ('TWG' or the 'Group')

            PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004

            TWG ANNOUNCES ADJUSTED OPERATING PROFIT OF £4.3 MILLION

Operating performance
* Adjusted operating profit £4.3 million (2003: £2.8 million)                   Up 53.6%
* Turnover £39.7 million (2003: £32.6 million)                                  Up 22.0%
* Like for like turnover £36.3 million (2003: £32.6 million)                    Up 11.5%
* Like for like turnover up 11.5% compared to industry  average of 5.6% 
  (as reported by RAB)                                                          Beat industry average
* Interest cover (before goodwill amortisation) of 4.5 times
* Net debt of £5.7 million at year end (2003: £3.3 million)                     Forever acquisition
  talkSPORT adjusted operating profit £2.6 million (2003: 1.9 million)          Up 36.8%        
* ILRs adjusted operating profit £6.2 million (2003: £5.6 million) Positive 
  contribution from Forever stations of £0.6 million Award of Edinburgh 
  licence                                                                       Up 10.7%


Adjusted operating profit is presented to provide a better indication of overall
financial performance and to reflect how the business is run on a day to day
basis. The adjustments made are to exclude goodwill amortisation (£11.8 million;
2003 £12.3 million), non recurring expenditure relating to RAJAR court case
(£0.7 million; 2003 £0.1 million), GfK research costs (£0.6 million; 2003 £0.4
million), restructuring costs (£0.6 million;2003 £0) and provisions for
uneconomic sports rights (£0; 2003 £0.7 million). Adjusted operating divisional
results are shown before allocation of central and selling costs (£5.1 million;
2003 £4.7 million).


Statutory results
    * Operating loss of £9.4 million (2003: Loss £10.7 million) after goodwill 
      amortisation of £11.8 million (2003: £12.3 million)                       Improved £1.3 million
    * Loss on ordinary activities before taxation £9.7 million (2003: Loss 
      £11.2 million)                                                            Improved £1.5 million                   


Outlook
    * Strong start to 2005 financial year with Group revenues, excluding contra
      revenue, estimated to be 9.9 per cent ahead for first quarter
    * talkSPORT performing strongly


Kelvin MacKenzie, Chairman and Chief Executive of TWG, said:

'The first quarter for 2005 has started well with cash revenues for the group up
9.9 per cent against the same quarter in 2004. I expect national revenues will
be affected in April by the General Election with some advertisers not spending
until after the General Election in May. '


Potential Offer

Announcement by the Independent Directors of TWG

'Further to the announcement on 23 February, the Board confirms it is in ongoing
discussions with a number of potential offerors which may or may not lead to an
offer for the Company. The Board is not currently in a position to provide any
further information and further announcements will be made as appropriate.'

Keith Sadler
Stephen Davidson
Patrick Cox

                                    - ends -


For further information, please contact:

Kelvin MacKenzie/Keith Sadler
The Wireless Group plc                               Tel: 020 7959 7900

David Rydell/Dan de Belder/Robin Tozer
Bell Pottinger Corporate & Financial                 Tel: 020 7861 3232




Chairman's Statement

This has been a striking year for the Group. We completed the acquisition of
Forever Broadcasting plc at the end of February, Euro 2004 was a success and we
won the licence for Edinburgh. But perhaps our biggest triumph was forcing
RAJAR, the radio industry's audience measurement body, to introduce electronic
research from January 1, 2007. Their promise of change cost us the thick end of
£1 million in legal costs as RAJAR had to announce their complete volte-face in
order to win a High Court action against the Group.

The effect on electronic measurement on the group cannot be understated. Under
the present system - diary, pencil and recall - talkSPORT, our national station,
has an audience of 2 million. Under electronic it triples to 6.2 million. This
new audience would add revenue to the company.

A note of caution; RAJAR often backtracks on its promises and therefore I view
much of their pledges with cynicism. We shall have to wait and see.

I am pleased to announce a full year operating profit, before goodwill
amortisation, for the Group of £2.4 million against £1.6 million for the
previous year. These results were produced against difficult trading conditions
in the radio sector with many of our peers making profit warnings in the second
half of the year. We experienced difficult trading in our local markets but this
was offset partially by a better performance within talkSPORT, our national
station.

The operating profit before non-recurring expenditure and goodwill amortisation
is £4.3 million compared to £2.8 million (on the same basis) as reported last
year, a 53.6 per cent increase. The integration of the three Forever stations
went well and I am pleased to say they made a positive contribution of £0.6
million for the 10 months to 31 December 2004.

Turnover from continuing activities increased from £32.6 million to £39.7
million, an increase of 22.0 per cent. On a like for like basis the improvement
is 11.5 per cent from £32.6 million to £36.3 million. This result is materially
ahead of the industry average, which reported revenues up 5.6 per cent for the
year.

In the year the Group produced an operating profit of £2.4 million (before
goodwill amortisation) against a profit for the previous year of £1.6 million, a
£0.8 million improvement. The Group was also profitable (excluding goodwill
amortisation) after the net interest charge for the year. The interest cover, on
this basis, was 4.5 times (2003: 3.0). On a statutory basis the operating loss
for the year was £9.4 million compared with £10.7 million in 2003. This
operating loss includes goodwill amortisation of £11.8 million (2003: £12.3
million). Loss before taxation of £9.7 million fell by £1.5 million from £11.2
million in 2003.

talkSPORT produced an operating profit of £2.6 million (excluding central and
selling costs), compared with £1.2 million for the previous year, which included
a provision for uneconomic sports rights of £0.7 million. On a like for like
basis, excluding sports rights provisions and the allocation of central costs,
there has been a 37 per cent improvement in the operating profit of talkSPORT
from £1.9 million to £2.6 million.

Our local stations reported on a continuing basis operating profits up from £5.6
million to £6.8 million, before allocation of central costs and national selling
costs. On a like for like basis, excluding acquisitions, the operating profits
were up from £5.6 million to £6.2 million. Through the acquisition of Forever
Broadcasting, we have added Peak 107 FM (based in Chesterfield), 107.7 The Wolf
(based in Wolverhampton) and Tower 107.4 FM (based in Bolton) to the Group's
existing 13 local radio stations. These stations are a good geographic fit as
they are contiguous to our stations in Staffordshire and the North West. In the
year ended 30 September 2003, these stations produced revenue of £3.7 million
and an operating loss before goodwill and amortisation of £0.5 million.

Since last year end the Group has increased its shareholding in Digital Radio
Group (London) Limited, which operates the London III digital multiplex, from
23.6 per cent to 30.2 per cent. This makes the Group one of the largest digital
multiplex operators in the UK. We continue to believe that the take up of
digital radio will continue to accelerate and that the foundations we are
building will be for the long term benefit of the Group.

Our dispute with RAJAR over its diary based measurement system was settled in
the courts with RAJAR presenting its pathway to the adoption of electronic
research from January 2007. One Board member of RAJAR stated that it had been
investigating electronic research since December 1992. That will be 14 years of
investigation before adoption. Perhaps members of the company would like to
reflect on the changes in the world over the last 14 years. We await the
introduction of electronic measurement which will establish talkSPORT's true
audience.

Outlook

The first quarter for 2005 has started well with cash revenues for the group up
9.9 per cent against the same quarter in 2004. I expect national revenues will
be affected in April by the General Election with some advertisers not spending
until after the General Election in May.

I look forward with confidence to the future performance of The Wireless Group.

Kelvin MacKenzie
Chairman and Chief Executive
30 March 2005



Operational Review

Results

Group turnover for the year ended 31 December 2004 increased 22.0 per cent to
£39.7 million from £32.6 million. On a like for like basis revenues are up 11.5
per cent compared with the industry reported growth rate of 5.6 per cent (as
reported by RAB).

The operating loss, after amortisation for goodwill, for the year was down to
£9.4 million from £10.7 million.

The Group has incurred costs which should not be recurring and excluding the
effects of these the operating profit for the year is £4.3 million compared to
£2.8 million for the previous year. We incurred legal costs relating to the
RAJAR case. This incremental amount was £0.6 million. The costs of paying for
independent research through GfK was £0.6 million for the year.


The table below sets out the operating performance for the Group entities.


Year ended                                         31 December     31 December
                                                          2004            2003
                                                            £m              £m
Turnover
talkSPORT                                                 14.8            11.7
ILR                                                       24.7            20.4
Other                                                      0.2             0.5
                                                    ------------    ------------
Total turnover                                            39.7            32.6
                                                    ------------    ------------
Operating profit/(loss) before non-recurring
expenditure and goodwill amortisation
talkSPORT                                                  2.6             1.9
ILR - continuing                                           6.2             5.6
ILR - acquisitions                                         0.6               -
Impact - national selling costs                           (2.4)           (1.9)
Central costs                                             (2.7)           (2.8)
                                                    ------------    ------------
Operating profit/(loss) before non-recurring
expenditure and goodwill amortisation                      4.3             2.8
                                                    ============    ============
Non-recurring expenditure
Legal costs associated with RAJAR                         (0.7)           (0.1)
GfK research costs                                        (0.6)           (0.4)
Provision for restructuring costs                         (0.6)              -
Provision for uneconomic sports rights                       -            (0.7)
                                                    ------------    ------------
Operating profit/(loss) before goodwill
amortisation                                               2.4             1.6
Goodwill amortisation                                    (11.8)          (12.3)
                                                    ------------    ------------
Reported operating loss                                   (9.4)          (10.7)
                                                    ------------    ------------


During the year ended 31 December 2004 we incurred costs over and above costs
incurred during 2003. We invested in applying for licences advertised by Ofcom
and were successful in winning Edinburgh. The incremental cost was £0.3 million.
We will continue to apply for licences advertised by Ofcom and therefore this
will be a cost for at least the next couple of years. We also undertook extra
marketing of talkSPORT during the year and these costs are some £0.5 million up
on the year ended 31 December 2003.

talkSPORT

Revenues for talkSPORT increased from £11.7 million to £14.8 million. As
mentioned at the interim review, June 2004 benefited from Euro 2004. In the
second six months talkSPORT generated a further £7.6 million compared to £6.2
million for the same period in 2003. This result was due to a very strong third
quarter and along with the rest of the industry, a cooling in the fourth
quarter. The second six months produced a 22.6 per cent increase in revenues
which together with the first six months increase of 32 per cent, resulted in
the revenue for the year being £14.8 million, a 26 per cent increase.

talkSPORT has produced an operating profit for the year ended 31 December 2004
of £2.6 million, before allocation of central and sales costs and goodwill
amortisation, against £1.9 million for the previous year. At the half year we
reported an adjusted operating profit of £1.2 million which benefited from Euro
2004, we are therefore pleased to have produced a further £1.4 million in the
second six months.

Operational Review (continued)

talkSPORT audience figures, as measured by RAJAR, for the latest quarter to
December 2004 showed an audience increase of 6.9 per cent to 2.0 million
listeners with average hours up from 8.2 hours per week to 8.6 hours per week a
4.9 per cent increase.

As reported the judge opined in the pre-trial hearing that as RAJAR were to
introduce electronic research there was not a case at present to answer. We have
constantly said we want a system that records audiences for radio that is not
based on recall and pen and paper. We look forward to its introduction in 2007.
The costs of the case have been fully provided for within the results reported
for 2004.

Costs within talkSPORT continue to be controlled. The cost base increased as a
result of the coverage of the cricket tour to South Africa and an increase in
the marketing for the station. Marketing was bolstered by a competition to 'Win
Beckham's wages' in the first half of the year and further expenditure in the
second half resulting in expenditure on marketing for the year being £0.5
million higher than 2003.

Regional and local radio (ILRs)

The ILRs have produced an excellent result with operating profits before the
allocation of central and sales costs and goodwill amortisation up 10.7 per cent
at £6.2 million from £5.6 million last year. Across all activities total revenue
has increased by 5.2 per cent over the previous year. We completed the
acquisition of the Forever Broadcasting stations at the end of February and they
contributed £3.4 million to turnover and made a positive contribution of £0.6
for the ten months to 31 December 2004. With increased competition and
uncertainties in the market place this has been a difficult year for the local
stations. We continue to develop new initiatives for revenue generation, the
such of which have shown results in the past. Local airtime revenue, on a like
for like basis, was up 10.0 per cent from our Image Plus and Business Partners
selling programme. However, national revenue was down year on year by 4.2 per
cent.

The latest RAJAR results were mixed for our local stations. The three stations
we acquired with Forever Broadcasting plc all improved reach in their areas of
operation. Our stations in Wigan and St Helens, Blackpool and Swansea also
improved reach. We are improving our stations output to ensure that it reflects
what the local community wants to listen to. However, as some of our stations
are small they are affected by the RAJAR sampling methodology.

As already mentioned the Forever Broadcasting plc acquisition was completed at
the end of February 2004. This brought into the Group three local stations
contiguous to our existing stations in the North West: Tower (based at Bolton),
Peak (based at Chesterfield) and Wolf (based at Wolverhampton). Our offer valued
Forever Broadcasting at £8.1 million. This was a share offer with a cash
alternative. Most of Forever Broadcasting plc's shareholders accepted the share
offer.

Ofcom has begun its process for advertising new licences in quick succession. We
have applied for a number of licences and have been successful in winning the
lucrative Edinburgh licence for a speech based format. This should go to air by
the end of the year or early 2006. We will continue to apply for licences as
they are advertised.

Selling and Central Costs

Impact is the Group's national sales team and the cost of this service
fluctuates with both staffing levels and commissions earned. As a result of the
increased revenue the cost of operating Impact has increased and reflects the
underlying improvement in the revenue performance of the Group.

Central costs have increased as a result of application expenses for licences
and the full year charge for the GfK research costs.

Digital radio

We have continued to support the growth of digital radio in the UK through our
marketing and management of digital multiplexes. Since the end of last year we
increased our shareholding in the Digital Radio Group (London) Limited, who own
the London III digital multiplex, from 23.6 per cent to 30.2 per cent.

We shall be making further applications for digital multiplex licences through a
subsidiary in which EMAP has a minority interest.

Finance

The net interest charge for the year was £0.4 million (2003: £0.5 million)
reflecting the lower average debt levels in the Group throughout the year. At
year end the debt had fallen from £8.3 million reported at 30 June 2004 to £5.7
million. We have begun discussions with Barclays Bank plc to renew the overdraft
and revolving credit facility, which matures at 31 December 2005.

Impact of International Financial Reporting Standards (IFRS)

We have planned for the introduction of IFRS, which is mandatory from 1 January
2005. They will apply to the Group's interim results for the six months to 30
June 2005 and the full year results to 31 December 2005 and thereafter.

The areas which are expected to have the most significant impact on the
financial results are explained below.

As required by IFRS 3 purchased goodwill will no longer be amortised over its
estimated economic life through the profit and loss account. Instead an annual
impairment review will be carried out.

Operational Review (continued)
As required by IFRS 2 we will record as a charge through the profit and loss
account the fair value of all employee share awards issued after 7 November 2002
and not vested by 1 January 2005. No charge is currently made under UK GAAP.

Under IAS 19 there will be a requirement to recognise the deficit on the defined
benefit scheme on the balance sheet and make disclosure under the standard. This
information has been given by way of FRS 17 in these and the previous years
financial statements.

Other aspects of IFRS reporting relate to presentational points which we will
adopt to ensure we comply with the new standards.

Consolidated Profit and Loss Account

For the year ended 31 December                       Notes      2004      2003
                                                               £'000     £'000
Turnover
Continuing operations                                         36,307    32,547
Acquisitions                                                   3,415         -
                                                             --------- ---------
                                                              39,722    32,547
                                                             --------- ---------
Administration expenses
- goodwill amortisation                                      (11,831)  (12,266)
- other administration expenses                              (37,292)  (30,944)
                                                             --------- ---------
                                                             (49,123)  (43,210)
                                                             --------- ---------
Operating loss
Continuing operations                                         (6,556)  (10,663)
Acquisitions (after £2.9m goodwill amortisation and
£0.6m of restructuring costs)                                 (2,845)        -
                                                             --------- ---------
                                                              (9,401)  (10,663)
Income from interests in associated undertakings                 156        14
Interest receivable and similar income                            95       608
Interest payable and similar charges                            (547)   (1,134)
                                                             --------- ---------
Loss on ordinary activities before taxation                   (9,697)  (11,175)
Tax on loss on ordinary activities                       1     2,100         -
                                                             --------- ---------
Loss on ordinary activities after taxation                    (7,597)  (11,175)
Minority interests - equity interests                           (148)     (217)
Retained loss for the year                                    (7,745)  (11,392)
                                                             ========= =========
Basic loss per share:
Loss attributable to each ordinary share (£)                   (0.08)    (0.12)
                                                             ========= =========
Loss attributable to each 'B' ordinary share (£)              (77.13)  (118.20)
                                                             ========= =========

There were no gains or losses during the year or the prior year other than the
losses reported above, accordingly no separate Statement of Total Recognised
Gains and Losses has been prepared.

The diluted loss per share is the same as the basic loss per share because the
share options are not dilutive as they would have the effect of reducing the
loss per share if exercised.


Balance Sheets

                                               Group              Company
                                                  Restated            Restated
At 31 December                 Notes       2004       2003     2004       2003
                                          £'000      £'000    £'000      £'000
Fixed assets
Intangible assets                  2     25,713     33,074        -          -
Tangible assets                    3      2,047      1,913       76         49
Investments                        4        220      1,472   18,420      7,602
                                         --------   -------- --------   --------
                                         27,980     36,459   18,496      7,651
                                         --------   -------- --------   --------
Current assets
Debtors                            5     10,136      8,834   28,741     32,314
Short term deposits                6          -      1,025        -          -
Cash at bank and in hand                    306        551        -        107
                                         --------   -------- --------   --------
                                         10,442     10,410   28,741     32,421
                                         --------   -------- --------   --------
Creditors: amounts falling due
within one year
Bank and other borrowings          6     (3,497)    (3,776)    (752)         -
Loan notes                         6          -     (1,025)       -          -
Other creditors                    6    (11,252)   (13,704)    (845)      (776)
                                         --------   -------- --------   --------
                                        (14,749)   (18,505)  (1,597)      (776)
                                         --------   -------- --------   --------
Net current(liabilities)/assets          (4,307)    (8,095)  27,144     31,645
                                         --------   -------- --------   --------
Total assets less current
liabilities                               23,673     28,364   45,640     39,296
Creditors: amounts falling due
after more than one year
Bank and other borrowings          7     (2,549)      (120)  (2,450)         -
Other creditors                    7     (4,447)    (8,203)       -          -
                                         --------   -------- --------   --------
                                         (6,996)    (8,323)  (2,450)         -
Provisions for liabilities
and charges                        8       (316)      (296)       -          -
Net assets                                16,361     19,745   43,190     39,296
                                         ========   ======== ========   ========
Capital and reserves
Called-up share capital            9      10,195      9,682   10,195      9,682
Share premium account             10      39,986     35,064   39,986     35,064
Merger reserve                    10      81,820     81,820        -          -
Profit and loss account           10    (116,115)  (107,246)  (6,991)    (5,450)
                                         --------   -------- --------   --------
Equity Shareholders' funds                15,886     19,320   43,190     39,296
Equity minority interests         11         475        425        -          -
                                         --------   -------- --------   --------
Total capital employed                    16,361     19,745   43,190     39,296
                                         ========   ======== ========   ========

Consolidated Cash Flow Statement

Reconciliation of Movements in Shareholders' Funds

For the year ended 31 December                   Notes       2004         2003
                                                            £'000        £'000
Net cash inflow from operating activities           12      2,240        2,373
Dividends from associates                                      92            -
Return on investments and servicing of finance      13       (672)        (196)
Taxation repaid/(paid)                              13         47         (116)
Capital expenditure and financial investment        13     (1,289)        (318)
Acquisitions                                        13     (2,835)           -
                                                         ----------    ---------
                                                           (2,417)       1,743
Financing and management of liquid resources        13      3,083       (2,217)
                                                         ----------    ---------
Increase/(decrease) in cash in the year                       666         (474)
                                                         ==========    =========



                                                                  Group
For the year ended 31 December                               2004         2003
                                                            £'000        £'000
                                                                      Restated

Loss for the financial year                                (7,745)     (11,392)
Issue of ordinary shares on acquisition of subsidiary       5,435            -
Acquisition of subsidiary previously held as a fixed
asset investment                                             (844)           -
Shares held by EBT (note 10)                                 (280)
                                                          ---------    ---------
Net reduction to shareholders' funds                       (3,434)     (11,392)
Opening shareholders' funds                                19,320       30,996
Prior year adjustment for own shares held by EBT (note
10)                                                             -         (284)
                                                          ---------    ---------
Closing shareholders' funds                                15,886       19,320
                                                          =========    =========

Notes

1. Tax on loss on ordinary activities

At 31 December 2004, the Group had estimated accumulated trading tax losses of
£85,477,000.

Reconciliation of current tax charge
                                                               2004       2003
                                                              £'000      £'000
(a) Analysis of charge in the year
Current tax:
UK corporation tax on profits for the year                        -          -
Adjustments in respect of previous years                       (572)         -
Share of tax on associates profits                               20          -
                                                            ---------  ---------
                                                               (552)         -
Deferred tax:
Origination and reversal of timing differences               (1,548)
                                                            ---------  ---------
Total tax credit                                             (2,100)         -
                                                            =========  =========

(b) Factors affecting current tax charge for the year

Loss on ordinary activities before tax                       (9,697)   (11,175)
                                                            =========  =========

Tax on loss on ordinary activities at standard rate of tax
(30%)                                                        (2,909)    (3,353)
Disallowable expenses                                           125        140
Amortisation                                                  3,549      3,680
Depreciation in excess of capital allowances                    161        219
Share of associate                                              (27)        (4)
Dividends received                                              (21)       (18)
Other timing difference                                        (238)       (87)
Utilisation of tax losses                                      (620)      (577)
Adjustment in respect of prior periods                         (572)         -
                                                            ---------  ---------
Tax credit                                                     (552)         -
                                                            =========  =========

(c) Future tax charges

The Group has tax losses brought forward and as required by FRS 19 has
recognised a deferred tax asset to reflect the benefit expected to arise in the
foreseeable future. No tax asset was recognised in the previous year.

2. Intangible fixed assets

                                             Goodwill     Licence       Total
Group                                           £'000       £'000       £'000
Cost
At 1 January 2004                              91,285      15,500     106,785
Acquisition of subsidiary (note 16)             8,770           -       8,770
Additional investment in associates (note 4)      337           -         337
Adjustment to future cash flows for licence         -      (2,421)     (2,421)
At 31 December 2004                           100,392      13,079     113,471
                                              ---------   ---------   ---------
Amortisation
At 1 January 2004                              68,630       5,081      73,711
Charge for the year                            11,831       2,216      14,047
                                              ---------   ---------   ---------
At 31 December 2004                            80,461       7,297      87,758
                                              ---------   ---------   ---------
Net book value
At 1 January 2004                              22,655      10,419      33,074
                                              =========   =========   =========
At 31 December 2004                            19,931       5,782      25,713
                                              =========   =========   =========

During the year the deferred variable element of the cost of the talkSPORT
licence was adjusted to the latest estimate. A corresponding reduction in the
amount of the licence fees creditor has also been made resulting in no impact to
the profit and loss account.

Company

The Company does not have any intangible fixed assets.


3. Tangible fixed assets

                                                              Fixtures,
                    Land and                      Studio   Fittings and      Motor
                   buildings   Transmitters   equipment       equipment   vehicles    Total
Group                  £'000          £'000       £'000           £'000      £'000    £'000

Cost
At 1 January 2004      1,975            123       3,316           2,776        252    8,442
Additions                  -              -         358             169        153      680
On acquisition
of subsidiary             52              -         496             261         37      846
Disposals                  -              -           -             (13)       (68)     (81)
                      --------     ----------    --------       ---------    ------- --------
At 31 December 2004    2,027            123       4,170           3,193        374    9,887
                      --------     ----------    --------       ---------    ------- --------
Depreciation
At 1 January 2004      1,058            118       2,937           2,284        132    6,529
Charge for the year      171              1         252             238         45      707
On acquisition
of subsidiary             34              -         375             195         36      640
Disposals                  -              -           -              (4)       (32)     (36)
                      --------     ----------    --------       ---------    ------- --------
At 31 December 2004    1,263            119       3,564           2,713        181    7,840
                      --------     ----------    --------       ---------    ------- --------
Net book value
At 1 January 2004        917              5         379             492        120    1,913
                      ========     ==========    ========       =========    ======= ========
At 31 December 2004      764              4         606             480        193    2,047
                      ========     ==========    ========       =========    ======= ========

                         Fixtures, fittings
                              and equipment      Motor vehicles      Total
Company                               £'000               £'000      £'000
Cost
At 1 January 2004                         -                  68         68
Additions                                 3                  75         78
Disposals                                 -                 (68)       (68)
                             ----------------      -------------    -------
At 31 December 2004                       3                  75         78
                             ----------------      -------------    -------
Depreciation
At 1 January 2004                         -                  19         19
Charge for the year                       -                  14         14
Disposals                                 -                (31)       (31)
                             ----------------       -------------    -------
At 31 December 2004                       -                   2          2
                             ----------------       -------------    -------
Net book value
At 1 January 2004                         -                  49         49
                             ================       =============    =======
At 31 December 2004                       3                  73         76
                             ================       =============    =======


4. Fixed asset investments

                                           Group                 Company
                                                 Restated             Restated
                                     2004            2003     2004        2003
                                    £'000           £'000    £'000       £'000
Subsidiary undertakings                 -               -   17,968       7,493
Associated undertakings               188              61      420           -
Other investments                      32           1,411       32         109
                                   --------        -------- --------    --------
                                      220           1,472   18,420       7,602
                                   ========        ======== ========    ========



Associated undertakings

                                                           Group       Company
                                                           £'000         £'000
Cost and net book value
At 1 January 2004                                             61             -
Transfer from other investments                                -            77
Net assets acquired on acquisition                            83             -
Dividends received                                           (92)            -
Additions                                                      -           343
Share of retained profit for the year net of tax             136             -
                                                       -----------   -----------
At 31 December 2004                                          188           420
                                                       ===========   ===========

On 9 March 2004 the Company acquired an additional 6.6% stake in Digital Radio
Group (London) Limited.

On 14 June 2004 the shareholding of Dee 106.3 Radio Limited was increased by
5.6% and by a further 1% following a rights issue in October 2004.



Investment in own shares
                                                         Group        Company
                                                      Restated       Restated
                                                         £'000          £'000
Carrying amount
At 1 January 2004                                          284            284
Restatement in accordance with UITF 38                    (284)          (284)
                                                       ---------      ---------
Restated balance at 1 January 2004                           -              -
                                                       ---------      ---------
At 31 December 2004                                          -              -
                                                       =========      =========

Investments in own shares has been restated as a result of the adoption of UITF
38 (Accounting for ESOP trusts). The restatement is explained in note 10 .



Other investments

                                                               Group   Company
                                                               £'000     £'000
Carrying amount
At 1 January 2004                                              1,411       109
Transferred to investment in subsidiary on acquisition of
outstanding share capital                                     (1,302)        -
Transferred to investment in associate undertaking               (77)      (77)
                                                             --------- ---------
At 31 December 2004                                               32        32
                                                             ========= =========

On 20 February 2004 the Company acquired the outstanding share capital of
Forever Broadcasting plc at an amount equivalent to the carrying value at 31
December 2003. This acquisition is explained in note 16.

5. Debtors

                                                 Group              Company
                                            2004        2003     2004     2003
                                           £'000       £'000     £000    £'000
Amounts falling due within one year:
Amounts due from Group undertakings            -           -   28,593   32,292
Trade debtors                              6,593       6,361        -       14
Other debtors                                308         309       85        -
Prepayments and accrued income             1,696       2,164       63        8
Deferred tax                               1,539           -        -        -
                                          --------    -------- -------- --------
                                          10,136       8,834   28,741   32,314
                                          ========    ======== ======== ========




6. Creditors: amounts falling due within one year

                                                 Group             Company
                                            2004       2003     2004     2003
                                           £'000      £'000    £'000    £'000

Bank and other borrowings
  Bank loans                               2,700      2,000      700        -
  Finance leases                              20         88        -        -
  Bank overdraft                             777      1,688       52        -
                                          --------   -------- -------- --------
                                           3,497      3,776      752        -
                                          ========   ======== ======== ========

  Loan notes                                   -      1,025        -        -
                                          ========   ======== ======== ========

Other creditors

  Trade creditors                          2,028      2,377        -        -
  Corporation tax payable                      1        151        -        -
  Other taxation and social security         783      1,238        -        1
  Accruals and deferred income             6,920      7,559      756      686
  Licence fees                             1,335      2,216        -        -
  Other creditors                            185        163       89       89
                                          --------   -------- -------- --------
                                          11,252     13,704      845      776
                                          ========   ======== ======== ========


The loan notes were issued as part consideration for the acquisition of The
Radio Partnership Limited in 1999 and were guaranteed by Barclays Bank PLC in
accordance with an agreement dated 23 July 1999 pursuant to which the Company
agreed to maintain sufficient funds to cover the outstanding liability in the
form of a deposit as guarantee collateral. The loan notes were repaid on 30 June
2004. Interest was paid at 0.425% above LIBOR with an annual guarantee fee of
0.575%.


7. Creditors: amounts falling due after more than one year

                                              Group                Company
                                        2004         2003      2004      2003
                                       £'000        £'000     £'000     £'000
Bank and other borrowings
  Bank loans                           2,450            -     2,450         -
  Finance leases                          99          120         -         -
                                     ---------    --------- --------- ---------
                                       2,549          120     2,450         -
                                     =========    ========= ========= =========
Other creditors
  Licence fees                         4,447        8,203         -         -
                                     =========    ========= ========= =========

8. Provisions for liabilities and charges

                                           Deferred       Property
                                            Txation      Povisions       Total
                                              £'000          £'000       £'000
Group
At 1 January 2004                                 9            287         296
Utilised during the year                          -            (21)        (21)
(Credit)/charge to profit and loss account   (1,548)            50      (1,498)
Transfer to debtors (note 5 )                 1,539              -       1,539
                                             --------       --------    --------
At 31 December 2004                               -            316         316
                                             ========       ========    ========


                                              Provided            Unprovided
                                          2004        2003      2004      2003
                                         £'000       £'000     £'000     £'000

Accumulated tax losses                  (1,548)          -   (24,095)  (26,716)
Accelerated capital allowances               -           -    (1,863)   (1,579)
Other                                        9           9      (181)   (1,360)
                                        --------    --------  --------  --------
At 31 December                          (1,539)          9   (26,139)  (29,655)
                                        ========    ========  ========  ========

The property provisions relate to estimated dilapidation costs and committed
rental costs on currently unoccupied properties. The timing of these liabilities
depends on each individual lease and the likelihood of subletting the relevant
properties.

No amounts have been discounted.


Called up share capital

                                                               2004       2003
                                                              £'000      £'000
Equity
Authorised
147,780,000 ordinary shares of £0.10 each                    14,778     14,778
52,220 'B' ordinary shares of £100 each                       5,222      5,222
                                                            --------- ----------
                                                             20,000     20,000
                                                            ========= ==========
Allotted, called up and fully paid
Ordinary shares of £0.10 each
At 1 January - 70,828,707                                     7,083      7,083
Conversion of 'B' ordinary shares to ordinary shares
- 7,580,000                                                     758          -
Allotted on acquisition of Forever Broadcasting plc (note
16)                                                             513          -
                                                            --------- ----------
At 31 December - 83,535,911                                   8,354      7,083
                                                            ========= ==========
'B' ordinary shares of £100 each
At 1 January - 25,990                                         2,599      2,599
Conversion of 'B' ordinary shares to ordinary shares -         
7,580                                                          (758)         -
                                                            --------- ----------
'B' ordinary shares at 31 December - 18,410                   1,841      2,599
                                                            ========= ==========
Total share capital at 31 December                           10,195      9,682
                                                            ========= ==========

9.  Reserves

                                                              Share     Profit
                                                 Merger     premium   and loss
                                                Reserve     account    account
                                                   £000       £'000      £'000
Group
At 1 January 2004                                81,820      35,064   (106,962)
Prior year adjustment as a result of UITF 38          -           -       (284)
                                                ---------   ---------  ---------
Restated at 1 January 2004                       81,820      35,064   (107,246)
Issued on acquisition of Forever Broadcasting
plc (note 16 )                                        -       4,922          -
Purchase of shares by EBT                             -           -       (302)
Exercise of share options satisfied by EBT
shares                                                -           -         22
Acquisition of subsidiary previously trade
investment (note 4)                                   -           -       (844)
Retained loss for the year                            -           -     (7,745)
                                                ---------   ---------  ---------
At 31 December 2004                              81,820      39,986   (116,115)
                                                =========   =========  =========


                                                           Share        Profit
                                                         premium      and loss
                                                         account       account
                                                           £'000         £'000
Company
At 1 January 2004                                         35,064        (5,166)
Prior year adjustment as a result of UITF 38                   -          (284)
                                                         ---------     ---------
                                                          35,064        (5,450)
Issued on acquisition of Forever Broadcasting plc          4,922             -
Purchase of shares by EBT                                      -          (302)
Exercise of share options satisfied by EBT shares              -            22
Retained loss for the year                                     -        (1,261)
                                                         ---------     ---------
At 31 December 2004                                       39,986        (6,991)
                                                         =========     =========


Prior Year Adjustment and Employee Benefit Trust ('EBT')
On 15 May 2000, the Company established the Wireless Group Employee Benefits
Trust (the 'Trust'). The trustee of the Trust is an independent trustee company
resident in the Channel Islands. The Trust is used to manage the funding and
delivery of Ordinary Shares under the Share Option Plans. At 31 December 2003
the cost of investment in own shares is represented by 436,289 ordinary shares
acquired at a total cost of £765,000 (an average cost of £1.75 per ordinary
share). During the year ended 31 December 2004 a further 354,469 shares were
acquired at a cost of £302,000. Shares held by the Trust with a cost of £22,000
were used to satisfy the exercise of share options during the period. The
nominal value of the shares at 31 December 2004 was £75,368 (2003: £43,629). The
market value of the shares at 31 December 2004 based on the prevailing market
price of 81.5 pence per share was £614,248 (2003: £447,196). The Trust has
waived its right to receive dividends in excess of 0.0001 per cent of the
dividend payable on each share.

As a result of the adoption of UITF 38 ('Accounting for ESOP Trusts'), the
shares held by the EBT have been re-presented in the balance sheet from fixed
asset investments to a deduction in shareholders' funds.

The prior year adjustment at 1 January 2003 and 31 December 2003 to the profit
and loss account reserve is £284,000 which is analysed as follows:
                                                                         £'000
Reverse impairment writedown to reinstate carrying amount to cost         (481)
Re-presentation of the cost of EBT shares to a deduction from
shareholders' funds                                                        765
                                                                       ---------
                                                                           284
                                                                       =========


10.  Minority interests - equity interests

                                                                         £'000
At 1 January 2004                                                          425
Less dividends paid to minority                                            (98)
Share of profits on ordinary activities after taxation                     148
                                                                       ---------
At 31 December 2004                                                        475
                                                                       =========



11.  Reconciliation of operating loss to net cash inflow/(outflow) from
     operating activities

                                                              2004        2003
                                                             £'000       £'000

Operating loss                                              (9,401)    (10,663)
Depreciation charges                                           706         913
Loss/(Profit) on disposal of tangible fixed assets              10         (12)
Goodwill amortisation                                       11,831      12,266
Licence amortisation                                         2,216       2,104
Movement on licence liability                               (2,216)     (2,104)
Increase/(decrease) in debtors                               1,258        (848)
(Decrease)/increase in creditors                            (2,164)        717
                                                           ---------   ---------
Net cash inflow from operating activities                    2,240       2,373
                                                           =========   =========


12.  Analysis of cash flows for headings netted in the cash flow statement

                                                              2004        2003
                                                             £'000       £'000
Returns on investments and servicing of finance
Interest received                                               26         802
Dividends received                                              69          61
Interest paid                                                 (669)     (1,059)
Dividends paid to minority interests                           (98)          -
                                                           ---------   ---------
Net cash outflow                                              (672)       (196)
                                                           =========   =========

Taxation
                                                           ---------   ---------
UK corporation tax repaid/(paid)                                47        (116)
                                                           =========   =========

Capital expenditure and financial investment
Purchase of tangible fixed assets                             (680)       (258)
Sale of tangible fixed asset                                    36           -
Purchase of fixed asset investments (note 4 )                 (343)        (16)
Loan to purchase own shares by Employee Benefit Trust         (302)          -
Purchase of minority interest                                    -         (44)
                                                           ---------   ---------
Net cash outflow                                            (1,289)       (318)
                                                           =========   =========


                                                             2004          2003
                                                            £'000         £'000
Acquisitions and disposals
Acquisitions
Purchase of subsidiary undertakings                        (1,611)            -
Cash at bank and in hand acquired                          (1,224)            -
                                                          ---------      --------
Net cash outflow                                           (2,835)            -
                                                          =========      ========


                                                              2004         2003
                                                             £'000        £'000
Financing and management of liquid resources
Financing
Net increase/(reduction) in borrowings                       3,150      (8,000)
Proceeds on exercise of share options                           22           -
Redemption of loan notes                                    (1,025)     (8,424)
Capital element of finance lease rental payments               (89)       (217)
                                                           ---------     --------
                                                              2,058    (16,641)
Management of liquid resources
Decrease in short term deposits                               1,025      14,424
                                                           ---------     --------
Net cash inflow/(outflow)                                     3,083     (2,217)
                                                           =========     ========

13.  Reconciliation of movement in net debt


                                                              2004         2003
                                                             £'000        £'000
Increase/(decrease) in cash in the year                        666        (474)
Cash (inflow)/outflow from (increase)/decrease in
debt and lease financing                                    (3,061)       2,217
                                                           ---------    ---------
Change in net debt resulting from cash flows                (2,395)       1,743
Finance leases                                                   -            -
                                                           ---------    ---------
(Increase)/decrease in net debt in year                     (2,395)       1,743
Net debt at 1 January                                       (3,345)     (5,088)
                                                           ---------    ---------
Net debt at 31 December                                     (5,740)     (3,345)
                                                           =========    =========


14.  Analysis of net debt

                                   1 January                     31 December
                                        2004     Cash flow              2004
                                       £'000         £'000             £'000

Bank overdraft                        (1,688)          911              (777)
Cash at bank and in hand                 551          (245)              306
                                     ---------      --------      ------------
                                      (1,137)          666              (471)

Debt due within 1 year                (2,000)         (700)           (2,700)
Debt due after more than one year          -        (2,450)           (2,450)
Loan notes                            (1,025)        1,025                 -
Short term deposits                    1,025        (1,025)                -
Finance leases                          (208)           89              (119)
                                     ---------      --------      ------------
Net debt                              (3,345)       (2,395)           (5,740)
                                     =========      ========      ============


15.  Acquisitions

On 20 February the Company declared its offer to the shareholders of Forever
Broadcasting plc unconditional in all respects. The offer was made as a share
offer with a cash alternative. 5,127,204 ordinary shares of £0.10 each were
issued between 23 March 2004 and 15 April 2004. The cash consideration was
£1,186,000 excluding fees. Based on the share offer Forever Broadcasting was
valued at £8.1 million.

Prior to becoming a subsidiary, Forever Broadcasting plc was accounted for as a
fixed asset investment. In accordance with FRS 2 and in order to give a true and
fair view, purchased goodwill has been calculated as the sum of the goodwill
arising on each purchase of the identifiable assets and liabilities of the
interest purchased. This is a departure from the Companies Act, under which
goodwill is calculated as the difference between cost and fair value on the date
that Forever Broadcasting plc became a subsidiary. The Companies Act would not
give a true and fair view because it would not take into account a substantial
holding loss on the original investment in Forever Broadcasting plc. The effect
of this departure is to increase retained losses by £3.0 million and to decrease
purchased goodwill by £3.0 million. After the write back of the provision for
the diminution in value on the original investment in Forever Broadcasting plc
of £2.2 million the net effect on the Profit and Loss reserve was £0.8 million.

In the last financial year to 30 September 2003, Forever Broadcasting plc made a
loss after tax of £4.8 million. For the period since that date to the date of
the acquisition, Forever Broadcasting plc management accounts show:

                                                                         £'000

Turnover                                                                 1,768
                                                                       ---------

Operating loss                                                            (546)
                                                                       =========


Forever Broadcasting plc acquisition                          Consitency of 
                                           Book                  accounting
                                          value   Revaluations       policy    Other
                                          £'000          £'000        £'000    £'000   £'000

Goodwill                                  6,137              -           -   (6,137)       -
Fixed assets                                194              -          12        -      206
Investments                                 473              -           -     (473)       -
Debtors                                     922              -         (67)       -      855
Creditors                                  (991)            23           -        -     (968)
Taxation                                   (135)             -           -        -     (135)
Overdrafts                               (1,224)             -           -        -   (1,224)
                                          -------      ---------   ---------  ------- --------
Net assets/(liabilities) at 
acquisition                               5,376             23         (55)  (6,610)  (1,266)
Less 20% share held on original
acquisition                                                                              253
                                                                                      --------
Fair value of net liabilities acquired                                                (1,013)
Fair value of net assets
acquired on original acquisition                                                        2,718
                                                                                        1,705
                                                                                      ========
Consideration
On original acquisition                                                                 3,429
On acquisition of subsidiary
Shares issued                                                                           5,435
Cash                                                                                    1,611
                                                                                      ========
Goodwill                                                                                8,770
                                                                                      ========

The adjustments made to net assets for consistency of accounting policy comprise
alignment of fixed asset depreciation lives and bad debt provisioning policies.

An adjustment has also been made to write off the carrying amount of trade
investment in XY Network Limited and Somethin' Else Sound Directions Limited
following an assessment of the appropriate carrying value.

Preliminary results

These unaudited preliminary results do not constitute statutory accounts. The
preliminary results for the year ended 31 December 2004 are extracted from the
unaudited Group's accounts for the year. The audited accounts will be delivered
to the Registrar of Companies in due course. The results for the year ended 31
December 2003 have been extracted from the accounts for The Wireless Group plc,
which have been delivered to the Registrar of Companies and on which the
auditors gave an unqualified report that did not contain a statement under
Section 237 (2) or (3) of the Companies Act 1985.

These preliminary results have been prepared on the basis of the accounting
policies set out in the Company's 2003 statutory accounts, which have been
updated for changes in Financial Reporting Standards and UITF Abstracts coming
into force during the year, the impact of which on the financial information has
not been material. The effect of UITF 38 'Accounting for ESOP Trusts' has been
adopted in the accounts. This change in accounting policy and the resulting
restatement to the corporate figures is explained in note 10.



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