TIDMCLTV

RNS Number : 8818Y

Cellcast plc

14 May 2019

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014

14 May 2019

Cellcast plc

("Cellcast", the "group" or the "Company")

Final Results

Key points

   --        Group operating revenues of GBP11.3 million (2017: GBP12.0 million), comprising: 

o core interactive broadcast revenue of GBP10.9 million (2017: GBP11.3 million); and

o technical services and consulting to overseas gaming and lottery operators of GBP395,000 (2017: GBP660,000)

   --        Cost of sales were GBP11.0 million (2017: GBP11.2 million) 
   --        Gross profit of GBP0.3 million (2017: GBP0.8 million) 

-- Loss for the year was GBP250,000 (2017: loss of GBP645,000 which included, inter alia, the Lexinta impairment)

   --        Net cash balance at 31 December 2018 of GBP0.7 million (31 December 2017: GBP1.1 million) 
   --        Loss per share of 0.3p (2017: loss per share of 0.8p) 
   --        Board is undertaking a review as to the prospects for the group going forward 

Mike Neville, Chairman of Cellcast, commented:

"We continued to see the gradual decline in the core interactive broadcast business that we have witnessed for the past few years. This has continued in 2019 year to date. In addition, due to the adverse effect of a new taxation rate for the group's clients in Kenya, we also saw reduced fees for our technical and consultancy services to overseas gaming and lottery operators."

"There has therefore been increased focus by the Directors on the long-term viability of the economic model that the group utilises which has prompted the Directors to undertake a review as to the prospects for the group going forward. The Board is currently exploring all options available to the group."

For further information:

 
 Cellcast plc 
 Craig Gardiner, CEO                  Tel: +44 (0) 203 376 
                                       9420 
 craig@cellcast.tv                    www.cellcast.tv 
 
 Allenby Capital Limited (Nominated 
  Adviser) 
 Nick Naylor/James Reeve              Tel: +44 (0) 20 3328 
                                       5656 
 

Chairman's statement

Cellcast plc (the "group") continued to experience difficult trading conditions in 2018. This is a pattern that has existed over the last several years, with revenues in the core interactive broadcast business continuing to decline and margins being eroded, resulting in continuing losses to the bottom line and a decline in the Company's cash position.

The sectors for the group's core services are being gradually discontinued and, despite a clear focus by the Board on cost savings and related diversification, these are yet to have a material impact on the group. The Board has looked for suitable partners in order to expand and diversify, however, despite numerous attempts, these have not been forthcoming.

As reported in our trading update in November 2018, the latter half of 2018 was particularly difficult, and this has continued into 2019. There has therefore been increased focus by the Directors on the long term viability of the economic model that the group utilises which has prompted the Directors to undertake a review as to the prospects for the group going forward. The Board is currently exploring all options available to the group.

As part of this review, the carrying value of the company's investment in its 100% owned subsidiary undertaking; Cellcast UK Limited, through which the trade of the group is carried out, was undertaken in the year. As a result, an impairment loss of GBP461,000 (2017: GBPnil) was recognised in the company to reduce the carrying value of the investment to its expected recoverable amount of GBP750,000 and an impairment loss of GBP2,949,000 was recognised against amounts due from Cellcast UK Limited- refer to notes 13 and 16 for further detail. The recoverable amounts were assessed based on the market capitalisation of the group at 31 December 2018.

Mike Neville

Non-Executive Chairman

Chief Executive's statement

The second half of 2018 has proven more challenging than the second half of 2017 for both the core UK business and the East African consultancy service and this has continued into the first quarter of 2019. The consultancy services continue to be impacted by increased taxation and increased regulation of the gaming sector in East Africa.

The group has undertaken a full review of the UK business and the resources allocated to international businesses to see where savings can be made. In the UK, the first of these initiatives has been to make savings in operation and production costs.

2018 Results

Cellcast plc's (the "group's") total operating revenues amounted to GBP11.3 million in 2018, compared to GBP12.0 million in 2017, a decrease of 6%.

The group's interactive broadcasting activities in the UK generated GBP10.9 million of revenue (2017: GBP11.3 million), which represents a decrease of 4%.

The group's income from the provision of management services and consultancy to overseas gaming and lottery operators generated GBP395,000 of revenue (2017: GBP660,000), a decrease of 40%. This reduction is due to the adverse effect of a new taxation rate on the business of the group's clients in Kenya. This resulted in the bonus payments due to the group for 2018 of GBP265,000, forming part of the service remuneration, not being realised. The group is working to collect monies due to it from its clients in Kenya and expects to receive most of these monies in 2019, although the directors estimate that GBP293,000 will be recovered more than a year after 31 December 2018.

Cost of sales were down 2% on the previous year. In 2018, they amounted to GBP11.0 million, compared to GBP11.2 million in 2017. The group's gross profit amounted to GBP0.3 million in 2018 compared to GBP0.8 million in 2017. This decrease is mainly due to the loss of the bonus forming part of the overseas consultancy services.

General and administrative costs decreased by 13%, from GBP565,000 in 2017 to GBP489,000 in 2018. These costs exclude the foreign exchange loss of GBP26,000 in 2018 (2017: loss of GBP30,000). Approximately 53% of these costs were personnel costs (2017: 58%). Amortisation and depreciation expenses for 2018 were GBP80,000, a GBP13,000 decrease on those of 2017 (GBP93,000).

After taking into account the net interest and tax the total loss for 2018 was GBP250,000 (2017: loss of GBP647,000). 2018 earnings per share was negative 0.3p (2017: negative earnings per share of 0.8p). The Strategic report, set out on pages 4 and 5 of this Annual Report and Accounts, gives a more extensive description of the group's operations during the year and technological developments.

The group's total assets have reduced from GBP3,317,000 at 31 December 2017 to GBP2,517,000 at 31 December 2018.

The company only result for the year is affected by an impairment loss of GBP461,000 (2017: GBPnil) recognised against the carrying value of the company's investment in its 100% subsidiary undertaking; Cellcast UK Limited - refer to note 13 for further detail. A further impairment loss of GBP2,949,000 has been recognised against amounts due from Cellcast UK Limited - refer to note 16 for further detail. These impairment losses have led to a reduction in the total assets of the company from GBP4,160,000 at 31 December 2017 to GBP750,000 at 31 December 2018.

Funding

At 31 December 2018, the group had a net cash balance of GBP0.7 million (2017: GBP1.1 million). The decrease was mainly due to the losses incurred during the year. The total assets at 31 December 2018 amounted to GBP2.5 million, a decrease of GBP0.8m on the previous year.

Outlook

Unfortunately trading in the first quarter of 2019 has continued the pattern of the second half of 2018 and the group hasn't yet seen an upturn since the trading update announced on 27 November 2018.

With respect to the East African consultancy services, the group is looking to diversify away from gaming activities to support other transactional applications that are not subject to the tax and other regulatory restrictions that have damaged the sector over the last 18 months.

In the core UK business the group has undertaken a further review of the staffing costs and made some adjustments in light of the reduced trading. The decline in revenue is driven by the decline in mobile traffic generated by the core TV business which is impacted by global changes in viewing habits. However, the decline in TV driven revenues has been partially offset by continued growth in our online business. Online revenues grew by 15% in 2018 to GBP4.5m from GBP3.9m in 2017. The group is in the process of further optimising its online properties to improve its performance further. This potential is impacted by uncertainty regarding the implementation of the Government's online content verification programmes.

As noted in greater detail in the Chairman's statement on page 1, in light of the decline in the business and its prospects for the future, the Board is currently exploring all options available to the Company and its subsidiary, Cellcast UK Ltd.

Craig Gardiner

Chief Executive Officer

Strategic report

Review of business

The group's main core activity from which it derives the majority of its revenue continues in the production and distribution of participatory television formats across multiple digital platforms in the United Kingdom. However, revenues from online and mobile interaction have increased and now provide a significant income stream. These income streams combined are referred to as 'interactive broadcasting'. Additionally, the group has used its expertise in developing mobile applications and services to provide consultancy services specifically in relation to the use of mobile money. This consultancy income is mainly derived from East Africa which leads the world in the penetration of mobile money.

Further details on the financial performance of the company and group during the year, and of the financial position of the company and group at the reporting date, is given in the Chairman's statement on page 1 and the Chief Executive's statement on pages 2 and 3.

Update on technology

2018 saw an increase in Web revenues as the trend of customers moving away from TV and onto Online platforms continued. The Technology Division focused on improving Web related revenues by developing a number of new products to complement and expand upon the Broadcast offerings. The team continued to develop and utilise our Business Intelligence (BI) and Reporting systems to analyse costs, revenue and profit on all products and make improvements across the board. The Technology Division also continued to build the Technical Services platforms and focused on some key areas: Direct Mobile Operator Integrations, Mobile Payment Solutions across multiple markets and App Development. The team now have a strong platform to allow the group, and partners, to launch products and services in multiple markets quickly and cost efficiently which the group hopes to utilise beyond its existing business partnerships going into 2019 and beyond.

Key Performance Indicators

The directors continue to monitor the performance of the business through various key performance indicators ("KPIs"), of which the principal ones are broadcast revenue, consultancy services revenue, and overall group profitability. These KPIs continue to be monitored along with the compliance record with broadcasting regulations, where there have been no material breaches in the year.

 
                      H1 2018            H2 2018                  2018                2017 
                                                             Full year           Full year 
                          GBP                GBP                   GBP                 GBP 
                               -----------------  --------------------  ------------------ 
Broadcast revenue   5,442,995          5,432,082            10,875,077          11,309,626 
                    ---------  -----------------  --------------------  ------------------ 
Consultancy 
 services             330,000             65,000               395,000             660,000 
                    ---------  -----------------  --------------------  ------------------ 
Operating result        7,813          (308,662)             (300,849)             130,557 
                    ---------  -----------------  --------------------  ------------------ 
 

The KPIs show a 4% decline in broadcast revenue and a 40% decrease in revenues generated by its consultancy services, both of which are consistent with previous comments relating to the difficulties experienced by the group in the course of the year.

This decline in revenues has had a direct impact at the operating level, incurring losses of GBP301,000 in 2018 compared to a profit of GBP131,000 in 2017.

The group has been working on reducing its costs to compensate for the decline in revenue.

Consolidated statement of comprehensive income

For the year ended 31 December 2018

 
 
                                                  Note           2018               2017 
                                                                  GBP                GBP 
 Revenue: 
 Interactive broadcasting                                  10,875,077           11,309,626 
 Management and consultancy services                          395,000              660,000 
                                                        -------------      --------------- 
 Total revenue                                    1        11,270,077           11,969,626 
                                                        -------------      --------------- 
 
 Cost of sales                                           (10,976,656)         (11,151,615) 
                                                        -------------      --------------- 
 Gross profit                                                 293,421              818,011 
                                                        -------------      --------------- 
 Operating costs and expenses: 
 General and administrative                                 (514,649)            (594,636) 
 Amortisation and depreciation                               (79,621)             (92,818) 
 Total operating costs and expenses                         (594,270)            (687,454) 
                                                        -------------      --------------- 
 Operating (loss)/profit                                    (300,849)              130,557 
 
 Fair value gains and losses                      5             1,787               12,719 
 Foreign exchange loss on current asset 
  investments                                                       -             (45,315) 
 Impairment losses                                6                 -            (754,358) 
 Finance costs                                    7           (2,460)              (7,953) 
 Share of results in associate                   14                 -               11,913 
 Loss before tax                                  4         (301,522)            (652,437) 
 
 Taxation                                         8            51,117                5,794 
                                                        -------------      --------------- 
 
 Loss for the year and total comprehensive 
  income attributable to owners of the 
  parent                                                    (250,405)            (646,643) 
                                                        =============      =============== 
 
   Earnings per share attributable to owners 
   of the parent 
 Basic & diluted (pence)                          9            (0.3p)               (0.8p) 
                                                        =============      =============== 
 
 
 

Consolidated statement of financial position

As at 31 December 2018

 
                                Note         2018             2017 
  Assets                                      GBP              GBP 
Non-current assets: 
Intangible assets                10        78,768           94,149 
Property, plant and equipment    11       146,971          122,741 
Investments                      12        62,421           88,813 
Trade and other receivables      16       293,228                - 
                                          581,388          305,703 
                                      -----------      ----------- 
Current assets: 
 
  Trade and other receivables     16    1,237,915        1,954,053 
Cash and cash equivalents                 698,179        1,057,301 
                                      -----------      ----------- 
                                        1,936,094        3,011,354 
                                      -----------      ----------- 
Total assets                            2,517,482        3,317,057 
                                      ===========      =========== 
 
Capital and reserves 
Called up share capital          20     2,285,398        2,285,398 
Share premium account            20     5,533,626        5,533,626 
Merger reserve                   20     1,300,395        1,300,395 
Warrant reserve                  20     13,702              13,702 
Retained earnings                20   (7,702,078)      (7,423,494) 
                                      -----------      ----------- 
Equity attributable to owners 
 of the parent                          1,431,043        1,709,627 
                                      -----------      ----------- 
 
Liabilities 
Non-current liabilities          17             -           37,113 
Current liabilities: 
Trade and other payables         18     1,086,439        1,570,317 
Total liabilities                       1,086,439        1,607,430 
                                      -----------      ----------- 
Total equity and liabilities            2,517,482        3,317,057 
                                      ===========      =========== 
 
 

Company statement of financial position

As at 31 December 2018

 
                                                    2018          2017 
                                      Note           GBP           GBP 
 Non-current assets 
  Investments in subsidiary             13       750,000     1,211,281 
 Trade and other receivables          16               -     2,949,078 
 Total assets                                    750,000     4,160,359 
                                            ============  ============ 
 
   Capital and reserves 
 Called up share capital              20       2,285,398     2,285,398 
 Share premium account                20       5,533,626     5,533,626 
 Warrant reserve                      20          13,702        13,702 
 Retained earnings                    20     (7,082,726)   (3,672,367) 
                                            ------------  ------------ 
 Equity attributable to the owners               750,000     4,160,359 
                                            ============  ============ 
 

The company's loss and total comprehensive income for the year was GBP3,410,359 (2017: GBPnil).

Consolidated statement of changes in equity

For the year ended 31 December 2018

 
                                                    Attributable to owners of the parent 
 
                                       Share       Share      Merger     Warrant      Retained       Total 
                            Note     Capital     Premium     Reserve     Reserve      Earnings 
                                         GBP         GBP         GBP         GBP           GBP         GBP 
-----------------------  -------  ----------  ----------  ----------  ----------  ------------  ---------- 
 Balance at 1 January 
  2017                        20   2,285,398   5,533,626   1,300,395      13,702   (6,776,851)   2,356,270 
-----------------------  -------  ----------  ----------  ----------  ----------  ------------  ---------- 
 Loss and total 
  comprehensive 
  income for the 
  year                                     -           -           -           -     (646,643)   (646,643) 
-----------------------  -------  ----------  ----------  ----------  ----------  ------------  ---------- 
 Balance at 31 
  December 2017               20   2,285,398   5,533,626   1,300,395      13,702   (7,423,494)   1,709,627 
-----------------------  -------  ----------  ----------  ----------  ----------  ------------  ---------- 
 Aggregate adjustments 
  on adoption of 
  IFRS 9                      12           -           -           -           -      (28,179)    (28,179) 
-----------------------  -------  ----------  ----------  ----------  ----------  ------------  ---------- 
 Balance as 1 January 
  2018 as restated                 2,285,398   5,533,626   1,300,395      13,702   (7,451,673)   1,681,448 
-----------------------  -------  ----------  ----------  ----------  ----------  ------------  ---------- 
 Loss and total 
  comprehensive 
  income for the 
  year                                     -           -           -           -     (250,405)   (250,405) 
 Balance at 31 
  December 2018               20   2,285,398   5,533,626   1,300,395      13,702   (7,702,078)   1,431,043 
=======================  =======  ==========  ==========  ==========  ==========  ============  ========== 
 

Company statement of changes in equity

For the year ended 31 December 2018

 
 
                                                Share       Share     Warrant      Retained         Total 
                                     Note     Capital     Premium     Reserve      Earnings 
                                                  GBP         GBP         GBP           GBP           GBP 
--------------------------------  -------  ----------  ----------  ----------  ------------  ------------ 
 Balance at 1 January 
  2017                                 20   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 
  2017                                 20   2,285,398   5,533,626      13,702   (3,672,367)     4,160,359 
--------------------------------  -------  ----------  ----------  ----------  ------------  ------------ 
 Loss and total comprehensive 
  income for the year               13,16           -           -           -   (3,410,359)   (3,410,359) 
 Balance at 31 
  December 2018                        20   2,285,398   5,533,626      13,702   (7,082,726)       750,000 
================================  =======  ==========  ==========  ==========  ============  ============ 
 

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 2018

 
                                                         2018        2017 
                                                          GBP         GBP 
 
 Net cash outflow from operations             23a   (268,192)   (154,448) 
 
 
 Net cash (outflow)/inflow from investing 
  activities                                  23b    (88,470)     118,467 
 
 Net cash used in financing activities        23c     (2,460)     (7,953) 
 
 Net decrease in cash and cash equivalents          (359,122)    (43,934) 
                                                   ----------  ---------- 
 
 Cash and cash equivalents at beginning of 
  year                                              1,057,301   1,101,235 
 
 Cash and cash equivalents at end of year     23d     698,179   1,057,301 
                                                   ==========  ========== 
 

No separate company statement of cash flows is presented as the company holds no cash at 31 December 2018 (2017: GBPnil).

Notes to the consolidated financial statements

The figures for the years ended 31 December 2018 and 2017 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The figures for the year ended 31 December 2018 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 2017 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 reference was made to any matter to which the auditor drew attention by way of emphasis and 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 and authorised for issue on 14 May 2019.

The consolidated and company financial statements for the years ended 31 December 2018 and 2017 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 2018 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').

Accounting policies

The consolidated and company financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value, and in accordance with EU adopted IFRS.

Monetary amounts in these financial statements are rounded to the nearest whole GBP1, except where otherwise indicated.

Adoption of new and revised standards and interpretations

For the preparation of these financial statements, the following new or amended standards are mandatory for the first time for the financial year beginning 1 January 2018.

   --           IFRS  9     Financial instruments (effective 1 January 2018) 
   --           IFRS 15    Revenue from contracts with customers (effective 1 January 2018) 

-- Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions (effective 1 January 2018)

-- IFRIC 22 Foreign currency transactions and advance consideration (effective 1 January 2018)

IFRS 9

IFRS 9 'Financial instruments' replaces IAS 39 'Financial Instruments: Recognition and measurement', the adoption of IFRS 9 changes the group's accounting policy for un-quoted equity investments. The group's un-quoted equity investment was previously accounted for at cost less impairment, rather than fair value, using a specific exemption available under IAS 39. Under IFRS 9 there is no such exemption and the investment is required to be measured at fair value. In accordance with IFRS 9, the difference between the IAS 39 carrying value of this investment at the date of initial application of IFRS 9 (1 January 2018) and its fair value under IFRS 9 at that date has been recognised in opening retained earnings in the current year. The group's financial assets (previously classified as loans and receivables) and financial liabilities arising from normal operations, such as trade receivables, amounts owed by group undertakings, trade payables and accruals, continue to be recognised under the amortised cost model and there was no adjustment to amounts previously recognised, on transition to IFRS 9.

IFRS 15

IFRS 15 'Revenue from contracts with customers' replaces IAS 18 'Revenue'. The directors have considered the impact of implementing IFRS 15 and considered the performance obligations in the group's contracts with customers and the basis on which the revenue from those performance obligations should be recognised ('at a point in time' or 'over time'). The resulting accounting policy under IFRS 15 (refer to 'Revenue recognition' accounting policy) does not lead to any adjustment to amounts previously recognised for revenue under IAS 18.

Amendments to IFRS 2 and IFRIC 22

The implementation of the amendments to IFRS 2 and IFRIC 22 above did not result in any adjustments to amounts previously recognised.

Standards issued but not yet effective

The following standards, amendments and interpretations to existing standards have been published but are not effective and have not been early adopted by the group or the company.

   --           IFRIC 23            Uncertainty over income tax treatments (effective 1 January 2019) 
   --           Annual improvements 2015-2017 cycle 
   --           Amendments to IFRS 9: Prepayment features with Negative Compensation 

It is not anticipated that the adoption of the above standards, amendments and interpretations of existing standards will have a material impact on the group or company financial statements in the period of initial application. IFRS 16- 'Leases' is also effective for periods commencing 1 January 2019 and will result in almost all leases being recognised on the statement of financial position by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. This is not expected to have any impact because the group doesn't currently hold any leases.

Going concern

During the year ended 31 December 2018, the group recorded a loss of GBP250,405. The group had net cash of GBP698,179 as at 31 December 2018 and it had net current assets of GBP849,655.

The directors have carefully considered whether or not it is appropriate to adopt the going concern basis in preparing the 2018 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. During the prior year, the group made a 100% provision for the funds invested in Lexinta. The failure to recover these has no impact on the day to day business of the group and company, which has sufficient funds for its normal operations.

After making enquiries, the directors have concluded that the group and company have 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 and company financial statements.

Revenue recognition

Revenue is recognised at an amount that reflects the consideration to which the group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

The group generates revenue in relation to broadcast related income and the provision of management and consultancy services which is measured at the fair value of the consideration received or receivable net of discounts, VAT and other sales related taxes.

Revenue from broadcast related revenue arises from customers interacting with the group's television shows, the revenue is recognised immediately as the service is provided at the time of the call or SMS/ online interaction.

Revenue generated from the provision of management and consultancy services is recognised on a straight-line basis over the period during which the services are provided.

Accounting judgements and key sources of estimation uncertainty

The directors consider the critical accounting judgements and key sources of estimation uncertainty used in the financial statements and concluded that the main areas are:

-- Classification of investments. Management have considered whether the group has significant influence or control in classifying its investments. Details of these judgements are provided in notes 12 and 14.

-- The group's equity investment in 2Giraffes LLP (see note 12) is measured at fair value, management have applied judgement in determining that the most appropriate basis for measuring fair value is by using the group's percentage share of net asset value of the investee. Net asset value is considered the most appropriate basis due to the investee's underlying trading performance and perceived value held within the website domain owned by the investee. This fair value basis represents a level 3 valuation methodology in the IFRS 13 hierarchy whereby inputs other than quoted prices that are observable for the asset and observable inputs for the asset have been used.

-- Certain of the group's trade receivables due from its Kenyan management and consultancy services' clients are expected to be recovered in more than one year from the reporting date. Management have exercised judgement in estimating this amount at GBP293,228 based on the current expected payment profile of amounts due. Management have also exercised judgement in determining the full receivable due from these services of GBP493,228 to be fully recoverable and thus have not recognised any provision for impairment against this receivable. This judgement is based on the on-going relationship with the customer and payment plan in place.

-- Management have exercised judgement in determining the recoverable amount of the company's interests in its 100% owned subsidiary undertaking; Cellcast UK Limited. The company's total interests comprising of a fixed asset investment and a group receivable has been calculated using the market capitalisation of the company based on its share price at the reporting date. Management believe this is appropriate because the entire trade of the group is carried out through Cellcast UK Limited. The expected recoverable amount is GBP750,000 and the company has applied the impairment first to the group receivable (see note 16) with the excess recognised against its investment (see note 13).

These judgements are based on historical experience and various other assumptions that management and the board of directors believe are reasonable under the circumstances and are discussed in more detail in the relevant notes. The group also makes estimates and judgements concerning the future and the resulting estimate may, by definition, vary from the related actual results.

   1.                   Segmental reporting 

The group's interactive broadcasting revenues are almost entirely from broadcasting related activities on Sky, Freeview and Freesat channels as well as on webcams and mobile.

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. All non-current assets are in the UK.

The group has three significant telecom aggregators, generating 67% of the group's broadcasting related revenue. The three telecom aggregators contribute GBP3,449,806, GBP2,002,032 and GBP1,829,474 of the group's total revenue (2017: 66% representing GBP4,239,574, GBP1,655,082, and GBP1,577,385).

Revenue is further split below between revenue generated by:

 
                                                  2018         2017 
                                                   GBP          GBP 
 Interactive broadcasting                   10,875,077   11,309,626 
 Management and consultancy services           395,000      660,000 
                                            11,270,077   11,969,626 
                                       ===============  =========== 
 

An analysis of the geographical location of the group's revenue is as follows:

 
                                2018         2017 
                                 GBP          GBP 
 UK                       10,875,077   11,309,626 
 Rest of the world           395,000      660,000 
                          11,270,077   11,969,626 
                     ===============  =========== 
 

Revenue relates to broadcast related income and the provision of management and consultancy services (refer to revenue recognition accounting policy). The broadcast related income arises from customers interacting with the group's television shows, the cash is received at, or shortly after, the point when the service is provided at the time of the call or SMS/ online interaction. Fees for the provision of management and consultancy services are billed monthly on a straight-line basis over the period during which the services are provided. The timing of the satisfaction of the groups' performance obligations is therefore in line with the typical timing of invoicing and payment from customers. As a result, the only balances recognised in respect of the application of IFRS 15 to the group's contracts with customers, as at 31 December 2017 and as at 31 December 2018 were trade receivables and accrued income. There were no impairment provisions or impairment losses recognised on these debtor balances in the current or prior year. As there are no differences in how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors within each of the above revenue streams, no further disaggregation applies.

   2.         Staff costs 
 
                                                  2018        2017 
                                                   GBP         GBP 
 Wages and salaries (including directors)      817,567     868,757 
 Social security costs                         163,942     164,411 
 Other pension costs                            70,240      74,620 
                                             1,051,749   1,107,788 
                                            ==========  ========== 
 

Staff costs of GBP283,291 (2017: GBP328,996) are included in general and administrative expenses and GBP768,458 (2017: GBP778,792) are included in cost of sales. The parent company staff costs were GBPnil (2017: GBPnil).

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

 
                      2018     2017 
   Production           10     10 
   Technical             7      8 
   Management            3      4 
   Administration        2      2 
                        22     24 
                     =====  ===== 
 
 

All employees are employed by the subsidiary.

   2.         Staff costs (continued) 
 
                                          2018      2017 
 Key management compensation:                        GBP       GBP 
 Salaries, other short-term employee benefits 
 and employer's NI costs                         356,330   393,336 
 Post-employment benefits                         69,250    93,630 
                                       425,580   486,966 
 =============================================  ======== 
 
 

Key management personnel comprise the statutory directors.

   3.      Directors' emoluments 
 
                         Salary & Fees  Pension Contribution   Sub total 
         2018                      GBP                   GBP         GBP 
-----------------------  -------------  --------------------  ---------- 
Craig Gardiner                  91,150                36,000     127,150 
Emmanuelle Guicharnaud          88,700                33,250     121,950 
Bertrand Folliet                51,000                     -      51,000 
Michael Neville                 42,721                     -      42,721 
Samuel Malin                    24,000                     -      24,000 
-----------------------  -------------  --------------------  ---------- 
Total                          297,571                69,250     366,821 
=======================  =============  ====================  ========== 
 

In addition to the amounts above, GBP11,500 was paid to Andrew Wilson during the year in respect of his termination package.

 
                             Salary & Fees  Pension Contribution  Sub total 
           2017                        GBP                   GBP        GBP 
---------------------------  -------------  --------------------  --------- 
Andrew Wilson - resigned 
 4 July 2017                        70,000                30,000    100,000 
Craig Gardiner - appointed 
 4 July 2017                        72,000                38,630    110,630 
Emmanuelle Guicharnaud              90,000                25,000    115,000 
Bertrand Folliet                    60,000                     -     60,000 
Michael Neville                     42,000                     -     42,000 
Samuel Malin - appointed 
 1 August 2017                      10,000                     -     10,000 
---------------------------  -------------  --------------------  --------- 
Total                              344,000                93,630    437,630 
===========================  =============  ====================  ========= 
 

See Note 21 for details of share options granted to the directors.

   4.    Loss before tax 
 
 Loss before tax is stated after charging/(crediting):         2018      2017 
                                                                GBP       GBP 
 Depreciation - owned assets                                 64,240    67,746 
 Amortisation of intangible assets                           15,381    25,072 
 Auditor's remuneration - statutory audit 
  of parent and consolidated accounts                        30,000    33,000 
 Auditor's remuneration- accounting services- 
  statutory accounts                                         10,000     7,000 
  Auditor's remuneration- accounting services- 
   interim accounts                                           7,000     7,300 
  Foreign exchange (gains)/losses                          (32,207)    29,672 
 
 
   5.      Fair value gains and losses 
 
                                          2018     2017 
                                           GBP      GBP 
 Fair value gains on financial assets    1,787   12,719 
                                        ======  ======= 
 
   6.      Impairment losses - Group 

The impairment loss shown separately on the face of the statement of comprehensive arose in the prior year from a 100% provision against the following assets:

 
                                                       2018         2017 
                                                        GBP          GBP 
 Other receivables - being cash due from 
  redemption of Lexinta fund investment 
  (see note 15 and below)                                 -      309,973 
 Amounts due from associate - other receivables 
 (Global Gaming)                                          -      369,427 
 Interest in associate (Global Gaming 
  - see note 14)                                          -       74,958 
                                                    -------   ---------- 
                                                           -     754,358 
                                                     -------  ---------- 
 
 

In its prior year interim results to 30 June 2017, announced on 25 September 2017, the group stated it had elected to redeem its investments in the Lexinta Fund. This followed the decision of the fund manager of the Lexinta Fund to liquidate the fund's entire portfolio.

After these interim results were published, the group had not received the balances due at the reporting date and, in light of the ongoing investigation by the Swiss authorities into Lexinta AG (the manager of the Lexinta fund) and Mr Bismark Badilla (the individual fund manager), the Board of Cellcast concluded that it was appropriate to make a provision for 100% of the company's interest in the Lexinta fund in the prior year.

These investments comprised a current asset investment held directly and the group's interest in Global Gaming Limited, a company whose sole activity was to invest in the Lexinta fund. Therefore, in the prior year, an impairment charge of GBP309,973 was recognised in respect of Other Receivables, being the cash due from the redemption of the investment held directly, GBP369,427 in respect of amounts due from Global Gaming Limited and GBP74,958 in respect of the carrying value of the group's investment interest in Global Gaming Limited.

These investments and receivables continue to be provided for in full at 31 December 2018.

   7.      Finance costs 
 
                                               2018    2017 
                                                GBP     GBP 
 Interest expense on financial liabilities 
  measured at amortised cost                  2,460   7,953 
                                             ======  ====== 
 
   8.      Taxation 
 
                                             2018                  2017 
                                              GBP                   GBP 
 Current tax 
 In respect of the current year          (51,117)               (5,794) 
                                         (51,117)               (5,794) 
                                      ===========  ==================== 
 
  Factors affecting the tax credit 
   for the year 
                                             2018                  2017 
                                              GBP                   GBP 
 
  Loss before taxation                  (301,522)             (652,437) 
                                      -----------  -------------------- 
 
  Group loss on ordinary activities 
   before taxation multiplied by 
   the effective standard rate of 
   UK corporation tax of 19% (2017: 
   19.25%)                               (57,289)             (125,594) 
  Effects of: 
  Non-deductible expenses                (11,272)               118,098 
  Tax credit                                    -               (5,794) 
  Research and development tax           (51,117)                     - 
   credit 
  Unutilised tax losses carried 
   forward                                 68,561                 7,496 
                                      ===========  ==================== 
                                         (51,117)               (5,794) 
                                      ===========  ==================== 
 
 

At the reporting date, the group had estimated tax trading losses of GBP1.9 million (2017: GBP1.5 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.

A reduction in the UK corporation tax rate from 20% to 19% and subsequently to 17% was substantively enacted in September 2016 and will take effect from 1 April 2017 and 1 April 2020 respectively.

   9.      Earnings per share 

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

 
                                                 2018         2017 
                                                  GBP          GBP 
   Loss for the financial year              (250,405)    (646,643) 
   Weighted average number of ordinary 
    shares                                 77,513,224   77,513,224 
   Basic and diluted earnings per share 
    (pence)                                    (0.3p)       (0.8p) 
                                          ===========  =========== 
 

There was no dilutive effect from the issued share options because the exercise prices are above market price. The number of share options outstanding at the year-end was 1,050,000 (2017: 2,650,000).

 
 10. Intangible assets                             Development 
                                        Licences         costs       Total 
 
                                             GBP           GBP         GBP 
       Cost 
        At 1 January 2017                781,761     2,692,716   3,474,477 
       At 31 December 2017               781,761     2,692,716   3,474,477 
       At 31 December 2018               781,761     2,692,716   3,474,477 
                                       =========  ============  ========== 
 
       Amortisation 
       At 1 January 2017                 675,460     2,679,796   3,355,256 
       Charge for the year                13,767        11,305      25,072 
                                       ---------  ------------  ---------- 
       At 31 December 2017               689,227     2,691,101   3,380,328 
       Charge for the year                13,766         1,615      15,381 
       At 31 December 2018               702,993     2,692,716   3,395,709 
                                       =========  ============  ========== 
 
       Net book value at 31 December 
        2018                              78,768             -      78,768 
                                       =========  ============  ========== 
 
       Net book value at 31 December 
        2017                              92,534         1,615      94,149 
                                       =========  ============  ========== 
 
       Net book value at 1 January 
        2017                             106,301        12,920     119,221 
                                       =========  ============  ========== 
 

Included within Licences is an individual channel licence with a carrying value of GBP78,000 (2017: GBP91,000). The asset will be fully amortised in 6 years (2017: 7 years).

   11.     Property, plant and equipment 
 
                                             Broadcasting 
                                                equipment 
                                                      GBP 
 
       Cost 
       At 1 January 2017                        2,014,557 
       Additions                                   49,884 
                                            ------------- 
       At 31 December 2017                      2,064,441 
       Additions                                   88,470 
       At 31 December 2018                      2,152,911 
                                            ============= 
 
       Depreciation 
       At 1 January 2017                        1,873,954 
       Charge for the year                         67,746 
                                            ------------- 
       At 31 December 2017                      1,941,700 
       Charge for the year                         64,240 
                                            ------------- 
       At 31 December 2018                      2,005,940 
                                            ============= 
 
       Net book value at 31 December 
       2018                                       146,971 
                                            ============= 
 
       Net book value at 31 December 
       2017                                       122,741 
                                            ============= 
 
       Net book value at 1 January 
        2017                                      140,603 
                                            ============= 
 
 
 
   12.     Non-current investments - Group 

At 31 December 2018, the group had a 35% holding in 2Giraffes LLP. 2Giraffes LLP is a 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 un-quoted equity investment held in 2Giraffes LLP is measured at fair value. Fair value has been calculated based on the group's percentage share of the net asset value of the investee. This represents a level 3 valuation in the IFRS 13 hierarchy whereby inputs other than quoted prices that are observable for the asset and observable inputs for the asset have been used.

The directors do not consider that 'significant influence' is exercised by the company over the LLP and therefore, despite the holding of 35%, the investment is not accounted for as an associate undertaking. This is on the basis that a sole member has the remaining 65% holding and the company does not have voting rights.

 
                                                        2018             2017 
                                                         GBP               GBP 
       Fair value 
       At 1 January                                   88,813            88,813 
       Aggregate adjustment on adoption of IFRS 9   (28,179)                 - 
       Net gain from fair value adjustment             1,787                 - 
                                                    --------  ---------------- 
       At 31 December                                 62,421            88,813 
                                                    ========  ================ 
 

This investment was previously recognised at cost in accordance with IAS 39 and GBP88,813 was the IAS 39 carrying value, rather than fair value, as at 31 December 2017. In accordance with the transitional provisions in IFRS 9, the difference between this carrying value and the fair value of GBP60,634 under IFRS 9 at the date of initial application (1 January 2018) has been recognised in opening retained earnings in the current year. This opening adjustment is shown above as 'aggregate adjustment on adoption of IFRS 9' in the table above.

   13.    Non-current investments - Company 
 
                                                               Subsidiary 
                                                             undertakings 
       Cost                                                           GBP 
       At 1 January 2017, 31 December 2017 and 31 
        December 2018                                           1,211,281 
                                                           ============== 
 
       Allowances for impairment 
       Impairment charge                                          461,281 
                                                           -------------- 
       At 31 December 2018                                        461,281 
                                                           ============== 
 
       Net book value at 31 December 2018                         750,000 
                                                           ============== 
 
       Net book value at 1 January 2017 and 31 December 
        2017                                                    1,211,281 
                                                           ============== 
 
 

At 31 December 2018 Cellcast plc directly owned 100% of the issued ordinary share capital in Cellcast UK Limited, a company incorporated in the UK whose principal business was television and broadcasting. The registered office of Cellcast UK Limited is 184 The Terrace, The Dell, Southampton, England, SO15 2BU and the principal place of business is Unit 22, Cochran Close, Crownhill Industrial Estate, Milton Keynes, MK8 0AJ.

During the year, an impairment loss of GBP461,281 (2017: GBPnil) was recognised in the company in respect of the shares held in Cellcast UK Limited to reduce the carrying value of the investment to its expected recoverable amount of GBP750,000.

The impairment review was triggered following a particularly difficult trading period as reported in the group's half yearly November 2018 trading update which has continued in the latter half of 2018 and in to 2019. The accounting judgements and key sources of estimation uncertainty note in accounting policies explains the basis on which the recoverable amount was calculated. This represents a level 1 valuation in the IFRS 13 hierarchy whereby quoted prices that are observable for the asset have been used.

   14.      Associate 

On 26 November 2015 the group acquired 49% of the issued share capital of Global Gaming Limited for a total cost of GBP4. 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. Details of the associate undertaking and the movements in the investment in the year are as follows:

 
  Company               Country of         Class     Shares and voting    Type of holding   Principal business 
                       incorporation                   rights held % 
  Global Gaming           China          Ordinary           49                  Associate       Investment 
  Limited                                                                                       management 
 
    The registered office of Global Gaming Limited is 13/F, Times Tower, 391-407 Jaffe Road, Wanchai, 
    Hong Kong. 
                                                                                     2018               2017 
                                                                                      GBP                GBP 
        At 1 January                                                                    -             63,045 
        Share of associate result                                                       -             11,913 
        Impairment                                                                      -           (74,958) 
                                                                         ----------------  ----------------- 
        At 31 December                                                                  -                  - 
                                                                         ================  ================= 
 
 

In the prior year, at the reporting date the directors considered the group's interest in the associate to be irrecoverable. Therefore, an impairment was recognised in the prior year (see note 6). At the reporting date, the directors continue to consider the group's interest in the associate to be irrecoverable.

At the reporting date, the carrying value of the amount due from the associate stood at GBPnil (2017: GBPnil).

   15.        Current asset investments 

In May 2015, the group invested US$ 260,000 (GBP165,000) in a treasury product managed by the Lexinta Fund. This investment was classified in current assets as the capital and interest generated could only be withdrawn on a yearly basis at the anniversary date of the investment. In the prior year, the group redeemed the investment and re-classified the disposal proceeds due from the Lexinta fund to other receivables, subsequent to this the amount due was provided for in full (refer to note 6 for further details).

In September 2016, the group invested US$ 250,000 (GBP168,350) in the 'Ventury Fund Inc'. This investment was classified in current assets as the capital and interest generated could only be withdrawn on a yearly basis at the anniversary date of the investment. In the prior year, the group redeemed the investment for GBP197,103.

 
   2018                                                                   2017 
    GBP                                                                    GBP 
          At 1 January                                           -     510,920 
          Fair value gain                                        -      12,719 
          Foreign exchange loss                                  -    (45,315) 
          Redemption                                             -   (168,351) 
          Reclassified to other receivables on redemption        -   (309,973) 
          At 31 December                                         -           - 
                                                            ======  ========== 
 
   16.        Trade and other receivables 
 
          Group                                               2018       2017 
                                                               GBP        GBP 
          Non-current assets 
          Trade receivables                                293,228          - 
                                                         ---------  --------- 
 
          Current assets 
          Trade receivables                                691,109  1,349,103 
          Other receivables                                127,675    150,639 
          Prepayments and accrued income                   419,131    454,311 
                                                         ---------  --------- 
                                                         1,237,915  1,954,053 
                                                         ---------  --------- 
 
          Total trade and other receivables              1,531,143  1,954,053 
                                                         =========  ========= 
 
 
          Company                                             2018       2017 
                                                               GBP        GBP 
          Amounts owed by group undertaking (loans and 
           receivables)                                          -  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 concluded that the full amount was irrecoverable. As a result, an impairment loss of GBP2,949,078 (2017: GBPnil) was recognised in the Company only profit or loss account. In the prior year, the directors deemed that it was appropriate to classify the amounts due after more than one year as this reflected the timescale on which recovery was expected to occur. No interest was charged on this balance in the current or prior year.

In calculating the impairment, the company assessed that the group receivable was 'underperforming' and as such the risk of default occurring, and the subsequent impairment calculated, took into consideration all possible default events over the expected life of the receivable ('the lifetime expected credit losses').

   17.        Non-current liabilities 
 
                           2018    2017 
                            GBP     GBP 
          Trade payables      -  37,113 
                              -  37,113 
                           ====  ====== 
 
   18.        Trade and other payables 
 
                                                    2018       2017 
                                                     GBP        GBP 
          Trade payables                         311,509    498,425 
          Other taxes & social security          170,899    170,260 
          Other payables                          75,107    361,911 
          Accruals                               528,924    539,721 
                                           -------------  --------- 
                                               1,086,439  1,570,317 
                                           =============  ========= 
          Credit payment profile in days         35 days    49 days 
                                           =============  ========= 
 

The credit payment profile in days calculation excluded the long-term trade payable in the prior year, which was contractually due in over one year from the reporting date, as including this long term element would have skewed the trade payable days.

   19.        Financial instruments and financial risk management 

The group's financial instruments as at 31 December 2018 and 2017 mainly comprise cash and various items arising directly from its operations, such as trade and other receivables and trade and other payables. The main purpose of these financial instruments is to provide working capital for the group. The group's policy is to obtain the highest rate of return on its cash balances and current asset investments, subject to having sufficient resources to manage the business on a day to day basis and not exposing the group to unnecessary risk of default.

(a) Risk management policies

The group's finance function is responsible for procuring the group's capital resources and maintaining an efficient capital structure, together with managing the group's market, liquidity, foreign exchange, interest and credit risk exposures.

All treasury operations are conducted within strict policies and guidelines that have been approved by the directors.

(b) Financial assets and liabilities

The totals for each category of financial instrument, measured in accordance with IFRS 9 as detailed in the accounting policies, are as follows:

 
 As at 31 December 2018       Currency      Financial       Financial       Total 
                                            assets at     liabilities    carrying 
                                            amortised    at amortised       value 
                                                 cost            cost 
                                              GBP'000         GBP'000     GBP'000 
 Financial assets 
 Trade receivables and 
  accrued income              Sterling          1,265               -       1,265 
 Other receivables            Sterling            128               -         128 
 Cash and cash equivalents    Sterling            698               -         698 
 
   Financial liabilities 
 Trade payables               Sterling              -           (312)       (312) 
 Other payables               Sterling              -            (75)        (75) 
 Accruals                     Sterling              -           (529)       (529) 
 
                                                2,091           (916)       1,175 
                                          ===========  ==============  ========== 
 
 
 As at 31 December 2017       Currency               Financial       Financial       Total 
                                                        assets     liabilities    carrying 
                                                  at amortised    at amortised       value 
                                                          cost            cost 
                                                       GBP'000         GBP'000     GBP'000 
 Financial assets 
 
 Trade receivables and 
  accrued income              Sterling                   1,653               -       1,653 
 Other receivables            Sterling                     151               -         151 
 Cash and cash equivalents 
 
  Financial liabilities       Sterling                   1,057               -       1,057 
 Trade payables               Sterling                       -           (498)       (498) 
 Other payables               Sterling                       -           (362)       (362) 
 Accruals                     Sterling                       -           (540)       (540) 
  Trade payables > 1 year      Sterling                      -            (37)        (37) 
 
                                                         2,861         (1,437)       1,424 
                                                ==============  ==============  ========== 
 

In addition to the above, the group also held an un-quoted equity investment which is recognised at fair value under IFRS 9, the fair value at the reporting date was GBP62k. The carrying value of this investment at 31 December 2017 was GBP89k measured at cost in accordance with IAS 39 - refer to note 12 for further details.

The carrying value of all financial instruments is not materially different from their fair value. It is, and has been throughout the year, the group's policy that no trading in financial instruments shall be undertaken. Cash and cash equivalents attract floating interest rates. Accordingly, their carrying amounts are considered to approximate to fair value.

(c) Credit risk

Credit risk is the risk that the counterparty will default on its contractual obligations resulting in financial loss to the group. Maximum credit risk at 31 December was as follows:

 
 
                                                    2018     2017 
                                                 GBP'000  GBP'000 
          Trade receivables and accrued income     1,265    1,653 
          Other receivables                          128      151 
          Non-current investments                     62       89 
          Cash and cash equivalents                  698    1,057 
                                                   2,153    2,950 
                                                 =======  ======= 
 

Before accepting a new customer, the group assesses both the potential customer's credit quality and risk. Customer contracts are drafted to reduce any potential credit risk to the group. Where appropriate the customer's recent financial statements are reviewed. The average credit period given on trade receivables was 45 days (2017: 54 days).

Trade receivables are regularly reviewed for impairment loss. The group did not write off any trade receivables or accrued income during the current or prior year. There were no impairment provisions or impairment losses recognised on trade receivables or accrued income in the current or prior year.

In the prior year, an impairment of GBP309,973 was recognised in respect of other receivables and an impairment of GBP369,427 was recognised in respect of amounts due from associates. For more details see note 6.

Ageing of the trade receivables and accrued income is as follows:

 
                    2018        2017 
                 GBP'000     GBP'000 
Current              749         954 
Up to 3 months       228         571 
Over 3 months        288         128 
                   1,265       1,653 
                 =======  ========== 
 

The total of the trade receivables which were past due at the reporting date but not impaired was GBPnil (2017: GBPnil). Of the total trade receivables and accrued income balance amounting to GBP1,265,000, GBP835,000 was collected by 2 May 2019. The directors are confident as to the recoverability of the remaining balance and thus no impairment of the amount has been recognised in the financial statements at 31 December 2018.

All cash balances are held in established UK financial institutions.

The Group does not hold any collateral as security or any other credit enhancements, nor does it hold any derivatives which mitigate credit risk.

Receivables are considered to be in default when the principal is more than 90 days past due, based on an assessment of past payment practices and the likelihood of such overdue amounts being recovered. Receivables are written off by the Group when there is no reasonable expectation of recovery, such as when the counterparty is known to be going bankrupt, or into liquidation or administration.

The Group calculates lifetime expected credit losses for trade receivables using a portfolio approach. Receivables are grouped based on the credit terms offered and the type of product sold. The probability of default is determined at the year-end based on the aging of the receivables and historical data about default rates on the same basis. That data is adjusted if the Group determines that historical data is not reflective of expected future conditions due to changes in the nature of its customers and how they are affected by external factors such as economic and market conditions.

(d) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

Contractual cash flows relating to the group's financial liabilities are as follows:

 
                                           2018      2017 
 
                                        GBP'000   GBP'000 
 Trade payables (<6months)                (312)     (498) 
 Other payables (<6months)                 (75)     (362) 
 Accruals (<6months)                      (529)     (540) 
  Greater than 12 months                      -      (37) 
                                       --------  -------- 
 Cash flows on financial liabilities      (916)   (1,437) 
                                       ========  ======== 
 

The average credit period received on trade payables was 34 days (2017: 49 days).

(e) Interest rate risk

Interest rate risk is the risk that the future cash flows associated with a financial instrument will fluctuate because of changes in market interest rates. The interest rates on cash and cash equivalents are low, such that interest rate risk is minimal.

The only interest-bearing loan was fully repaid in the year. At the reporting date, GBPnil (2017: GBP300,000) was included within other payables. The interest rate on this loan was 2% per annum. The impact of a 1% interest rate increase would represent an annual sum of GBPnil (2017: GBP3,000).

(f) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises on financial assets and liabilities and investments in associates that are denominated in a currency other than the functional currency of the entity by which they are held.

In the current and prior year, the risk relates to cash balances held of US$165,000 (2017: US$476,000).

 
                                            2018       2017 
                                         GBP'000    GBP'000 
  Impact of 10% increase US$ foreign 
   exchange rate against pound 
   sterling                                   13         32 
  Impact of 10% decrease US$ foreign 
   exchange rate against pound 
   sterling                                 (13)       (32) 
                                       =========  ========= 
 

At the reporting date the group has no financial assets or liabilities (except bank balances) denominated in a currency other than the functional currency.

(g) Capital management

The group's main objective when managing capital is to protect returns to shareholders by ensuring the group will continue to trade for the foreseeable future.

The group considers its capital to include cash, share capital, share premium, retained earnings, and other equity reserves.

 
                     2018       2017 
                  GBP'000    GBP'000 
 Net cash             698      1,057 
 Total equity       1,431      1,710 
--------------  ---------  --------- 
 

The group has an undrawn overdraft facility with Barclays of up to GBP150,000 (2017: GBP150,000).

   20.    Share capital and reserves 
 
                                                 Group and Company 
                                          2018                       2017 
       Authorised                     GBP   No of shares         GBP   No of shares 
 
       Ordinary shares of 1p 
        each                    1,489,736    148,973,552   1,489,736    148,973,552 
       Deferred shares of 2p 
        each                    1,510,264     75,513,224   1,510,264     75,513,224 
                                3,000,000    224,486,776   3,000,000    224,486,776 
                               ==========  =============  ==========  ============= 
 
         Issued 
 
       Ordinary shares of 1p 
        each                      775,134     77,513,224     775,134     77,513,224 
       Deferred shares of 2p 
        each                    1,510,264     75,513,224   1,510,264     75,513,224 
                                2,285,398    153,026,448   2,285,398    153,026,448 
                               ==========  =============  ==========  ============= 
 
 

Ordinary shares, which carry no right to fixed income, each carry the right to one vote at general meetings of the company.

The deferred shares of 2p have no voting rights, no rights to dividends and negligible rights on return of capital. They are not listed on any stock exchange.

The share options granted over the shares of the company are set out in note 21.

The nature and the purpose of each reserve in equity is described as follows:

Retained earnings

Cumulative profit and loss net of distribution to owners.

Share premium account

The share premium account represents the premium paid on issue of ordinary shares in excess of their nominal value.

Merger reserve

The merger reserve arises as a result of a group reorganisation where the company acquired Cellcast UK Limited which was accounted for in accordance with merger accounting principles.

Warrant reserve

Warrants represent subscription rights for ordinary shares in Cellcast plc and the warrant reserve represents the fair value of the warrants at the date of issue. All warrants are expired.

   21.     Share options 

The group operates two different share option schemes, an Enterprise Management Incentive (EMI) share option plan and a General share option plan. Options are available to be granted to directors, staff, consultants and independent contractors as part of their remuneration package and they act as an incentive to assist with the future performance of the group.

During the year ended 31 December 2018 the company had share-based payment arrangements, all of which have vested, and expire 10 years after grant as follows:

EMI share option plan

   Date of grant                    25/07/08          27/10/10 
   Number granted                1,200,000            450,000 
   Exercise price                          GBP0.03               GBP0.04 

General share option plan

   Date of grant                    25/07/08           27/10/10 
   Number granted                  400,000              600,000 
   Exercise price                          GBP0.03               GBP0.04 

Options are forfeited if the employee leaves the group before the options are exercised

Further details of share options in issue during the year are as follows:

 
Share options                               2018                           2017 
                                   Number       Weighted           Number       Weighted 
                                  of options     average          of options     average 
                                                exercise                        exercise 
                                               price (GBP)                     price (GBP) 
---------------------------  ---------------  ------------  ----------------  ------------ 
Outstanding at 1 January           2,650,000          0.03         3,684,510          0.04 
Expired during the 
 year                            (1,600,000)        (0.03)         (584,510)        (0.05) 
Forfeited during the 
 year                                      -             -         (450,000)        (0.04) 
Outstanding at 31 December         1,050,000          0.04         2,650,000          0.03 
===========================  ===============  ============  ================  ============ 
 

All of the above share options outstanding at the end of the year are exercisable and have an exercise price of GBP0.04, with a weighted average remaining contractual life of 1.83 years (2017: 1.40 years).

The following EMI options, save those granted to Mike Neville and Bertrand Folliet which are Unapproved Options, over the ordinary shares of 1 pence each have been granted to the directors and were in place at the reporting date:

2018:

 
                                  Option price            Number granted                  Date of grant 
                                   GBP 
------------------------  --------------------  ------------------------  ------------------------------ 
 Bertrand Folliet                       0.04                     450,000                        27/10/10 
 Emmanuelle Guicharnaud                 0.04                      50,000                       27/10/10 
 Mike Neville                           0.04                      50,000                       27/10/10 
------------------------  --------------------  ------------------------  ------------------------------ 
 

2017:

 
                           Option price   Number granted     Date of grant 
                            GBP 
------------------------  -------------  -----------------  -------------- 
 Craig Gardiner                0.03           400,000          25/07/08 
 Bertrand Folliet              0.04           450,000          27/10/10 
 Emmanuelle Guicharnaud        0.03                400,000     25/07/08 
                               0.04            50,000          27/10/10 
 Mike Neville                  0.03                400,000     25/07/08 
                               0.04            50,000          27/10/10 
------------------------  -------------  -----------------  -------------- 
 
   22.     Related party transactions 

Group

SMS Media Limited

SMS Media Limited has a common director and beneficial shareholder in Bertrand Folliet. In 2018 management charges totalled GBPnil (2017: GBP114,000). The management charges levied by SMS Media in 2017 related to the running cost of the company's office in Hong Kong. It was made up of rent and the employment of local staff. Its purpose was undertaking business development in the Greater China, South East Asia and African regions. This resource had constituted a part of the company since November 2001.

Global Gaming Limited

In 2017 an impairment charge of GBP369,427 was recognised in respect of amounts owed by Global Gaming Limited, an associate of the company. After provision for impairment no amounts were due from Global Gaming Limited at the reporting date in the current or prior year.

Company

Cellcast UK Limited

At the reporting date GBPnil (2017: GBP2,949,078) was due from Cellcast UK Limited, a subsidiary of the company, this amount is net of accumulated impairment charges of GBP6,749,079 (2017: GBP3,800,001). During the current year an impairment charge of GBP2,949,078 (2017: nil) was recognised on amounts due from Cellcast UK Limited- refer to note 16.

   23.     Cash flows 
 
                                                      Note        2018       2017 
                                                                   GBP        GBP 
 a      Reconciliation of loss after tax to net 
         cash outflow from operating activities 
  Loss for the year                                          (250,405)  (646,643) 
  Income tax recognised in profit or loss                     (51,117)    (5,794) 
  Fair value gains                                             (1,787)   (12,719) 
  Finance costs                                                  2,460      7,953 
  Amortisation and depreciation                                 79,621     92,818 
  Impairment losses                                                  -    754,358 
  Share of results in associate                                      -   (11,913) 
  Foreign currency loss on current asset 
   investment                                           15           -     45,315 
  Decrease in trade and other receivables                      474,027     20,497 
  Decrease in trade and other payables                       (520,991)  (398,338) 
  Income taxes received                                              -         18 
                                                            ----------  --------- 
  Net cash outflow from operating activities                 (268,192)  (154,448) 
 
        Cash flow (used in) / from investing 
   b     activities 
                                                                  2018       2017 
                                                                   GBP        GBP 
  Purchase of property, plant and equipment                   (88,470)   (49,884) 
  Proceeds received from current investment                          -    168,351 
  Net cash (outflow) / inflow from investing 
   activities                                                 (88,470)    118,467 
                                                            ==========  ========= 
 
 c      Cash flow from financing activities 
                                                                  2018       2017 
                                                                   GBP        GBP 
  Interest paid                                                (2,460)    (7,953) 
  Net cash used in financing activities                        (2,460)    (7,953) 
                                                            ----------  --------- 
 
 
   d      Cash and cash equivalents 
 
                                                                  2018       2017 
                                                                   GBP        GBP 
 
  Cash at bank                                                 698,179  1,057,301 
  Cash and cash equivalents at end of year                     698,179  1,057,301 
                                                            ==========  ========= 
 

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END

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May 14, 2019 02:00 ET (06:00 GMT)

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