Cellcast : Final Results

25 May 2016

Cellcast plc

('Cellcast', 'the Group' or 'the Company')

Audited Results for the year ended 31 December 2015

The Board of Cellcast plc (AIM: CLTV) announces the Company's audited results for the year ended 31 December 2015. A full copy of the annual report and accounts, along with a notice of the Group's annual general meeting, to be held at L'Escargot, 48 Greek Street, London W1D 4EF on 30 June 2016 at 12 p.m., has been posted to shareholders and will shortly be available from the company's website,www.cellcast.tv.

Highlights

· Group operating revenues from core operations of £11.8 million (2014: £12.2 million)

· Cost of sales reduced by 3%, from £10.9 million in 2014 to £10.6 million in 2015

· Gross profit was £1.2 million (2014 gross profit: £4.2 million, including a one off £3 million inflow flow from sale of channel management contract)

· Profit for the year of £0.5 million (2014: £2.9 million)

· Net cash balance at 31 December 2015 of £839,000 (31 December 2014: £598,000).

· Profit per share of 0.7p (2014: 3.8p)

Andrew Wilson, Chief executive Officer of Cellcast, commented:

'During the year revenue from our core services continued to decline, with customer numbers and gross margins coming under increasing pressure. The Board has been looking at diversification opportunities, particularly in Africa, and during the period entered into an agreement to provide applications and services to a gaming operator in Kenya. The Directors consider that there is a significant amount of potential in the region to leverage the group's skills and expertise in interactive broadcasting and mobile transactional services.'

For further information:

Cellcast plc	020 3376 9420
Andrew Wilson, Chief Executive
Allenby Capital Limited(Nominated Adviser and Broker)	0203 328 5656
Nick Naylor / James Reeve

Chief Executive's statement

2015 Results

The group's operating revenues from interactive broadcasting activities in the UK amounted to £11.8 million, a decrease of 3% on 2014 (£12.2m).

Cost of sales went down by 3%, from £10.9 million in 2014 to £10.6 million in 2015.

The group's gross profit amounted to £1.2 million in 2015 compared to £4.2 million in 2014. The 2014 profits were exceptionally impacted by the receipt of £2.9 million from the disposal of a key channel management contract.

General and administrative costs decreased by 16%, from £789,000 to £660,000. Approximately 52% of these costs were personnel costs (2014: 50%).

Amortisation and depreciation expenses for 2015 were £153,000 a £27,000 increase on those of in 2014 (£126,000). The increase is primarily due to investment in new broadcast equipment.

After taking into account the net interest, share of associate results and the R&D tax credit, the total profit for 2015 was £530,000 (2014: profit of £2.9 million). 2015 earnings per share was 0.7p (2014: earnings per share of 3.8p).

Funding

At 31 December 2015, the group had a net cash balance of £839,000 (2014: £598,000).

Outlook

The core UK interactive TV business remains challenging. The continuing decline in revenue has been less sharp than in previous years as it was partially offset mid-year by a key competitor's cessation of broadcasting. But the initial uplift in revenue this drove in August and September did not prove durable into the last quarter.

At the same time, as previously announced, the group has been looking at redeploying its established skills in mobile, broadcasting and new media to address new market sectors that can provide alternate sources of revenue. Management has been especially focused on various opportunities in Africa driven primarily by the new potential for billing for interactive services offered by mobile money which is getting widespread adoption across the continent. The first of these potential opportunities was realised in an agreement to provide applications and services to a gaming operator in Kenya. Revenue is derived from a license fee levied on a per transaction basis. The local partner's marketing activity commenced in November 2015 and their initial contract runs until June 2016. Although the agreement did not contribute any significant revenue during 2015, after recovery of set up costs we expect this venture to be making a positive contribution within the initial contract term. If the contract is renewed this new activity should provide some offset to the decline of the core UK business both through a new income stream and also through absorption of some existing overhead.

Consolidated statement of comprehensive income

For the year ended 31 December 2015

	Note	2015			2014
		£			£
Revenue
Interactive broadcast		11,840,875				12,159,775
Channel management		-				2,980,000
Total revenue	1	11,840,875				15,139,775
Cost of sales		(10,606,279)				(10,933,554)
Gross profit		1,234,596				4,206,221
Operating costs and expenses:
General and administrative		(660,203)				(789,395)
TV exploration in overseas countries, new ventures		-				(42,252)
Exceptional costs		-				(302,109)
Amortisation and depreciation		(152,702)				(126,177)
Total operating costs and expenses		(812,905)				(1,259,933)
Operating profit		421,691				2,946,288
Interest receivable and similar income	4	28,880				-
Interest payable and similar charges	5	(6,268)				(8,441)
Share of results in associate	12	7,135				-
Profit before tax	3	451,438				2,937,847
Taxation	6	78,384				-
Profit for the year and total comprehensive income attributable to owners of the parent		529,822				2,937,847
Earnings per share attributable to owners of the parent
Basic & diluted (pence)	7	0.7p				3.8p

Consolidated statement of financial position

As at 31 December 2015

Assets	Note	2015 £			2014 £
Non-current assets
Intangible assets	8	154,912			215,351
Property, plant and equipment	9	209,373			245,977
Investments	10	88,813			202,627
Interest in associate	12	7,139			-
		460,237			663,955
Current assets
Investments Trade and other receivables	11 13	205,335 2,301,178			1,000,000 1,473,932
Cash and cash equivalents		839,276			597,670
		3,345,789			3,071,602
Total assets		3,806,026			3,735,557
Capital and reserves
Called up share capital		2,285,398			2,285,398
Share premium account		5,533,626			5,533,626
Merger reserve		1,300,395			1,300,395
Warrant reserve		13,702			13,702
Retained earnings		(7,421,655)			(7,951,477)
Equity attributable to owners of the parent		1,711,466			1,181,644
Liabilities
Non-current liabilities	14	485,000			585,000
Current liabilities
Trade and other payables	15	1,609,560			1,968,913
Total liabilities		2,094,560			2,553,913
Total equity and liabilities		3,806,026			3,735,557

Company statement of financial positionCompany number: 05342662

As at 31 December 2015

	Note	2015		2014
		£		£
Non-current assets Investments in subsidiary		1,211,281		1,211,218
Trade and other receivables - amounts falling due after more than one year	13	2,949,078		2,949,078
Total assets		4,160,359		4,160,359
Capital and reserves
Called up share capital		2,285,398		2,285,398
Share premium account		5,533,626		5,533,626
Warrant reserve		13,702		13,702
Retained earnings		(3,672,367)		(3,672,367)
Equity attributable to the owners		4,160,359		4,160,359

Consolidated statement of changes in equity for the year ended 31 December 2015

		Amounts attributable to the owners of the parent
	Share Capital		Share Premium	Merger Reserve	Warrant Reserve	Retained Earnings	Total
	£		£	£	£	£	£
Balance at 1 January 2014	2,285,398		5,533,626	1,300,395	13,702	(10,889,324)	(1,756,203)
Profit and total comprehensive income for the year	-		-	-	-	2,937,847	2,937,847
Balance at 31 December 2014	2,285,398		5,533,626	1,300,395	13,702	(7,951,477)	1,181,644
Profit and total comprehensive income for the year	-		-	-	-	529,822	529,822
Balance at 31 December 2015	2,285,398		5,533,626	1,300,395	13,702	(7,421,655)	1,711,466

Company statement of changes in equity for the year ended 31 December 2015

	Amounts attributable to owners
	Share Capital		Share Premium	Warrant Reserve	Retained Earnings	Total
	£		£	£	£	£
Balance at 1 January 2014 and 2015	2,285,398		5,533,626	13,702	(3,672,367)	4,160,359
Profit and total comprehensive income for the year	-		-	-	-	-
Balance at 31 December 2014 and 2015	2,285,398		5,533,626	13,702	(3,672,367)	4,160,359

Cellcast plc has not presented its own income statement as permitted by Section 408 of the Companies Act 2006.

Consolidated statement of cash flows

For the year ended 31 December 2015

		2015		2014
		£		£
Net cash (outflow) / inflow from operations	16a	(556,463)		1,242,653
Net cash inflow / (outflow) from investing activities	16b	804,337		(1,040,695)
Net cash used in financing activities	16c	(6,268)		(8,441)
Net increase in cash and cash equivalents		241,606		193,517
Cash and cash equivalents at beginning of year		597,670		404,153
Cash and cash equivalents at end of year	16d	839,276		597,670

Notes to the consolidated financial statements

The figures for the year ended 31 December 2015 and 2014 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The figures for the year ended 31 December 2015 have been extracted from the statutory accounts for that year on which the auditor has issued an unqualified audit report which have yet to be delivered to the Registrar of Companies. The figures for the year ended 31 December 2014 have been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report. No statement has been made by the auditor under Section 498(2) or (3) of the Companies Act 2006 in respect of either of these sets of accounts. This announcement was approved by the board of directors on 24 May 2016 and authorised for issue on 24 May 2016.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ('IASB') and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together 'IFRS') as endorsed by the European Union. The information in this preliminary statement has been extracted from the audited financial statements for the year ended 31 December 2015 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards ('IFRS').

Going concern

During the year ended 31 December 2015, the group recorded a profit of £530,000. The group had net cash of £839,000 as at 31 December 2015 and it had net current assets of £1,736,000.

The directors have carefully considered whether or not it is appropriate to adopt the going concern basis in preparing the 2015 financial statements. The directors have reviewed the group's detailed cash forecast to ensure that the group's current working capital and credit facilities in place are sufficient for the foreseeable future. This assessment is based upon forecasts following the reduction in the revenue of the UK television business together with the continued reduction in operational costs implemented over the year; it also assumes the maintenance of existing relationships with key suppliers.

After making enquiries, the Directors have concluded that the group has adequate resources to continue trading for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the group financial statements.

1. Segmental reporting

The group's revenues are almost entirely in the UK from broadcasting related activities on Sky, Freeview and Freesat channels.

The financial information is presented to the executive management team who are responsible for making financial decisions, as one operating unit which operates in one geographical unit. The executive management team make their decisions based upon this information. The executive management team comprises the chief executive officer and the chief financial officer.

The group has three significant telecom aggregators, generating 70% of the group's television and broadcast revenue. The three telecom aggregators contribute £5,947,946, £1,358,999, and £928,746 of the group's total revenue (2014: 67% representing £6,080,318, £1,300,595, and £709,734).

Revenue is further split below between revenue generated by:

	2015	2014
	£	£
Interactive broadcasting	11,840,875	12,159,775
Channel sales	-	2,980,000
	11,840,875	15,139,775

In the year to 31 December 2014 there was a sale of a channel for £2.98m.

2. Staff costs

	2015	2014
	£	£
Wages and salaries (including directors)	910,592	1,010,300
Social security costs	179,086	207,447
Other pension costs	106,990	70,990
	1,196,668	1,288,737

Staff costs of £343,334 (2014: £325,769) are included in general and administrative expenses and £853,334 (2014: £962,968) are included in cost of sales.

Average monthly number of employees by activity (including directors):

	2015	2014
Production	11	10
Technical	8	8
Management	4	4
Administration	2	3
	25	25

	2015	2014
Key management compensation:	£	£
Salaries and other short-term employee benefits	316,446	352,359
Post employment benefits	106,000	70,000
	422,446	422,359

Key management consists of the CEO, the CFO and one other member of staff who is considered key management

3. Profit / (loss) before tax

Profit before tax is stated after charging/(crediting):	2015	2014
	£	£
Depreciation - owned assets	92,263	79,230
Licences amortisation	34,082	21,468
Amortisation of development costs	26,357	25,479
Auditor's remuneration - statutory audit of parent and consolidated accounts	32,000	32,000
Foreign exchange (gain)/loss	(11,455)	19,733

4. Interest receivable and similar income

	2015	2014
	£	£
Returns on current asset investment	28,880	-

5. Interest payable and similar charges

	2015	2014
	£	£
Bank charges and interest paid	6,268	8,441

6. Taxation

	2015	2014
	£	£
Current tax credit	(78,384)	-
Factors affecting the tax charge for the year
	2015	2014
	£	£
Profit on ordinary activities before taxation	451,438	2,937,847
Group profit on ordinary activities before taxation multiplied by the effective standard rate of UK corporation tax of 20.25% (2014: 21.5%)	91,416	631,637
Effects of:
Non-deductible expenses	38,718	69,241
Carried forward losses not recognised	(124,358)	(700,878)
R&D tax credit	(84,160)	-
	(78,384)	-

At 31 December 2015, the group had estimated tax trading losses of £2 million (2014: £2.5 million) which subject to the agreement of the HM Revenue & Customs and overseas tax authorities, are available to carry forward against future profits of the same trade. No deferred tax asset has been recognised on these losses as timings of future profits are uncertain.

7. Profit / (loss) per share

The calculations of adjusted basic and diluted earnings per ordinary share are based on the following results:

	2015	2014
	£	£
Profit for the financial year	529,822	2,937,847
Weighted average number of ordinary shares	77,513,224	77,513,224
Basic and diluted earnings per share (pence)	0.7p	3.8p

There was no dilutive effect from the issued share options and warrants. The total potential number of dilutive ordinary shares at the year end was 12,783,699 (2014: 12,783,699).

8. Intangible assets

	Licences	Development Costs	Total
	£	£	£
Cost
At 1 January 2014	651,761	2,692,716	3,344,477
Transfer from assets held for sale	130,000	-	130,000
At 31 December 2014	781,761	2,692,716	3,474,477
Additions	-	-	-
At 31 December 2015	781,761	2,692,716	3,474,477
Amortisation
At 1 January 2014	599,538	2,612,641	3,212,179
Charge for the year	21,468	25,479	46,947
At 31 December 2014	621,006	2,638,120	3,259,126
Charge for the year	34,082	26,357	60,439
At 31 December 2015	655,088	2,664,477	3,319,565
Net book value at 31 December 2015	126,673	28,239	154,912
Net book value at 31 December 2014	160,755	54,596	215,351
Net book value at 1 January 2014	52,223	80,075	132,298

9. Property, plant & equipment

						Broadcasting equipment
						£
Cost
At 1 January 2014						1,899,193
Additions						40,695
At 31 December 2014						1,939,888
Additions						55,659
At 31 December 2015						1,995,547
Depreciation
At 1 January 2014						1,614,681
Charge for the year						79,230
At 31 December 2014						1,693,911
Charge for the year						92,263
At 31 December 2015						1,786,174
Net book value at 31 December 2015						209,373
Net book value at 31 December 2014						245,977
Net book value at 1 January 2014						284,512

10. Non-current investments

At 31 December 2015, the group had a 35% holding in 2Giraffes LLP. 2Giraffes LLP is a large global provider of mobile internet content. This holding is treated as an investment as the group does not have any significant influence on the operations of 2Giraffes LLP. The group received £25,000 in February 2015 from 2Giraffes LLP but nevertheless deemed it more prudent to further reduce the net book value of this investment by impairing 50% of the remaining carrying value due to the uncertainty surrounding the timing of future repayments.

	2015		2014
	£		£
Brought forward	202,627		202,627
Received from 2Giraffes LLP	(25,000)		-
Impairment of investment (included in general & administrative costs)	(88,814)		-
At 31 December	88,813		202,627

11. Current asset investments

Investment in joint venture

On 30 May 2014, the group entered into a joint venture to invest in Euro TV SA, a company incorporated in the British Virgin Islands. Under the joint venture, the group invested £1 million for a 49% equity interest in Euro TV SA which is a joint venture between Cellcast UK Limited and the owners of the remaining 51%, being the principles of the Atlas Group of Companies, to focus on the development of a multi-platform gaming business using certain intellectual property and other proprietary rights and technologies. Following a review of strategy it was subsequently decided that resources would be better employed in alternative investment ventures and therefore the joint venture did not commence trading and was wound up on 6 March 2015 with the investment sum of £1million being recovered in full by the company.

	2015		2014
	£		£
Brought forward	1,000,000		-
Additions	-		1,000,000
Disposals	(1,000,000)		-
At 31 December	-		1,000,000

Financial asset

In May 2015, the group decided to invest US$ 260,000 (£165,000) in a treasury product managed by the Lexinta Fund. This investment was classified in current assets as the capital and interests generated can only be withdrawn on a yearly basis at the anniversary date of the investment.

	2015		2014
	£		£
Brought forward	-		-
Investment in fund	165,000		-
Fair value gain	28,880		-
Foreign exchange gain (included in General and administrative costs)	11,455		-
At 31 December	205,335		-

12. Associate

On 26 November 2015 the group acquired 49% of the issued share capital of Global Gaming Limited for a total cost of £4. The directors have assessed that the group has significant influence, but not control over Global Gaming Limited and have accounted for the investment as an associate.

Company		Country of incorporation	Class	Shares and voting rights held %	Type of holding		Principal business
Global Gaming Limited		China	Ordinary	49%	Associate		Development of multigame platforming
						2015			2014
						£			£
	Brought forward					-			-
	Additions					4			-
	Share of associate result					7,135			-
	At 31 December					7,139			-

As at 31 December 2015, the amount due from associate stood at £594,900, this is shown in note 13. The group has got full confidence regarding the full recovery of this amount.

13. Trade and other receivables

Group	2015		2014
	£		£
Trade receivables	566,239		405,386
Other receivables	466,125		142,338
Prepayments and accrued income	673,914		926,208
Amount due from associate	594,900		-
	2,301,178		1,473,932

Company	2015	2014
Amounts falling due after more than one year:	£	£
Amounts owed by group undertaking	2,949,078	2,949,078

Following a review of the amounts due by the group undertaking, the directors have considered the projected performance of Cellcast UK Limited and are confident that the amounts will be recovered. The directors deemed that it is appropriate to classify the amounts due after more than one year as this reflects the timescale on which recovery is expected to occur.

14. Non-current liabilities

	2015		2014
	£		£
Trade payables	485,000		585,000
	485,000		585,000

Non-current trade payables fall due in equal instalments over 5 years to October 2020.

15. Trade and other payables

	2015		2014
	£		£
Trade payables	501,444		834,476
Other taxes & social security	320,061		403,125
Corporation tax	5,776		-
Other payables	300,000		326,810
Accruals	482,279		404,502
	1,609,560		1,968,913
Credit payment profile in days	52 days		59 days

The credit payment profile in days calculation excludes the long term trade payables days which is contractually due over one year as including this long term element would skew the trade payable days.

16. Cash flows

		2015	2014
		£	£
a	Reconciliation of net profit before tax to net cash outflow from operating activities
	Profit before tax	451,438	2,937,847
	Interest receivable and similar income	(28,880)	-
	Interest payable and similar charges	6,268	8,441
	Amortisation and depreciation Impairment of assets held for sale	152,702 -	126,177 40,000
	Impairment of non-current asset investments	88,814	-
	Share of associate's profit	(7,135)	-
	R&D tax credit received	78,384	-
	Foreign currency gain on current asset investment	(11,455)
	(Increase) / decrease in trade and other receivables	(827,246)	598,738
	Decrease in trade and other payables	(459,353)	(2,468,550)
	Net cash (outflow) / inflow from operating activities	(556,463)	1,242,653
b	Cash flow from investing activities
	Purchase of property, plant and equipment	(55,659)	(40,695)
	Purchase of investment in joint venture and associate	(4)	(1,000,000)
	Refund of joint venture	1,000,000	-
	Investment in treasury fund	(165,000)	-
	Proceeds received from non-current investment	25,000	-
	Net cash outflow / (inflow) from investing activities	804,337	(1,040,695)
c	Cash flow from financing activities
	Interest paid	(6,268)	(8,441)
	Net cash used in financing activities	(6,268)	(8,441)
d	Cash and cash equivalents
	Cash at bank	839,276	597,670
	Cash and cash equivalents at end of year	839,276	597,670