Interim Results for the six months to 31 December 2007
STRONG GROWTH IN INTERACTIVE BUSINESS. OVERALL PERFORMANCE IN LINE
WITH THE BOARD'S PREVIOUSLY ANNOUNCED PLANS
Spectrum Interactive plc, (LSE: SIN), the leading interactive and
payphone services provider, announces its interim results for the six
months ended 31 December 2007.
Financial highlights:
* Total revenue down 7% from �9.8m to �9.1m;
* Interactive revenues up 32% to �3.8m and now represent 42% of
total revenues;
* Payphone revenues down 24% to �5.3m;
* Capital expenditure of �1.5m of which over 90% was on the
interactive business;
* Administrative expenses reduced by 9% (approximately �0.3m)
compared with prior period;
* Gross debt of �6.0m (as at 31 December 2006: �5.9m). Net debt of
�5.5m (as at 31 December 2006: �4.7m);
* EBITDA (Earnings before interest, taxes, depreciation and
amortisation) �1.8m (six months to 31 December 2006: �2.1m);
* Profit before tax and amortisation charges down from �1.0m to
�0.8m;
* Seasonality of the business is changing because of growth of WiFi
services. Last year the result for the second half of the year,
prior to German write downs, was a loss of �0.5m, resulting in a
profit before tax and German write downs for the full year of
�0.3m. This year is expected to see a profit in the second half
with the consequent improvement in full year profitability; and
* Financial statements presented for the first time under IFRS
(International Financial Reporting Standards) - the main
differences are the elimination of the goodwill amortisation
charge (�0.2m charge in the first half of the prior year under UK
GAAP compared with no charge under IFRS) and the full recognition
of the deferred tax asset, which is then leading to a deferred
tax charge (�0.4m in the current period and �0.3m in the prior
period compared with no charge under UK GAAP).
Operational highlights:
* Completion of the rollout of WiFi services to Travelodge,
installing into over 300 hotels by 31 December 2007;
* In conjunction with Travelodge in February 2008, launch of an
online pre-pay purchase scheme for WiFi vouchers - initial
results have been very positive;
* Consolidation as the leading provider of interactive services to
airports with a new contract win for internet terminals and WiFi
at Birmingham Airport and the installation of internet terminals
at Heathrow Terminal 5, which opened in March 2008;
* Roll out of WiFi services to 25 Greene King hotels and over 100
Greene King pubs with orders to install WiFi into a further 50
Premier Inn hotels;
* Acceleration of the rationalisation of the payphone base,
removing over 1,500 unprofitable units during 2007, leaving 7,156
payphones in total in the UK and Germany; and
* Completion of the transfer of the media operation to Clear
Channel in respect of the 1,800-strong street payphone estate.
Commenting on the results, Lord Young of Graffham, Chairman, said:
"Overall, Spectrum Interactive is delivering on the plans announced
in 2007. While our financial performance in the first half of the
current year was below that of the prior period, the smoothing of our
seasonality caused by our growing WiFi business leads us to expect a
relatively stronger second half in comparison with the same period in
the prior year. As a result we expect to exceed current market
expectations for the full year."
Enquiries
+--------------------------------------------------------------------+
|Spectrum Interactive |Citigate Dewe Rogerson |
|plc |tel: 020 7638 9571 |
|tel: 01442 205515 |Sarah |
|Mark Lewarne |Gestetner |
|Chief Executive |George Cazenove |
|Officer | |
|Philip Congdon | |
|Chief Financial Officer|Seymour Pierce Limited |
| |Tel: 020 7107 8032 |
|Daniel Gray |Mark Percy |
|Head of Group Marketing| |
|& Communications | |
+--------------------------------------------------------------------+
Spectrum Interactive plc - Interim Results Six months to 31 December
2007
Chairman's Statement
I am pleased to announce the first half results for the financial
year 2007-8. The Group has continued its clear strategy which is to
re-invest profits from its declining payphone business into its
growing interactive digital services business, most notably in
airports and hotels. The rationalisation of the payphone business
has been accelerated to reflect its continuing decline.
Demand for interactive services has continued to grow quickly and
this has been reflected in increased installations, particularly into
hotels. As a result, although revenue was down 7% overall on the
comparative period, in the first half of the current year revenues
from interactive products grew by 32% and now constitute 42% of total
revenue, a figure we expect to rise to over 50% within the next
year.
EBITDA (earnings before interest, taxes, depreciation and
amortisation) were �1.8m (�2.1m in the six months to 31 December
2006) and profit before tax and amortisation in the six month period
was �0.8m, down from �1.0m in the prior period. The growth in the
WiFi business is smoothing the previous seasonality of the overall
business- last year prior to impairment charge there was a
second-half loss of �0.5m, whilst this year, based on the results
already seen from the first two months, there is expected to be a
profit in the second half.
With interactive revenues continuing to grow, our objective for 2008
is to continue to compete for new contracts and to develop new
products and services to deploy into our key target markets of
airports and hotels in the UK. As I mentioned in the November AGM
statement it is the Group's intention to disinvest itself of its
German payphone operation.
FINANCIAL RESULTS
Revenue was �9.1m in the period, down 7% on the same period last
year. As already mentioned, we are seeing a marked change in
seasonality within the business with the growth of WiFi improving the
performance in the January to June period. However, the business will
continue to have seasonal variation, with the summer months
continuing to make the July to December period the stronger of the
two half years.
Revenue in the interactive business grew strongly by 32% to �3.8m,
reflecting both like-for-like growth in usage from existing sites and
the effect of new installations into hotel sites in the six-month
period. The split of revenue within the interactive business was
�2.4m from internet terminals and �1.4m from WiFi services.
Revenue in the payphone business fell by 24% overall to �5.3m (�6.9m
in the six months to 31 December 2006). The decline was similar in
both the UK and Germany as users opted for alternative methods of
making voice calls. It is also important to note that revenues from
freephone calls (PAC) fell by 27% in comparison with the prior
period. Revenues from advertising on payphone kiosks increased by 36%
compared with last year.
Gross profit fell 13% on the prior period to �3.7m. As a percentage
of sales gross profit fell from 43% to 41% which can principally be
attributed to the loss of PAC revenue.
Administrative expenses were down �0.3m or 9% on the prior period.
This reflects the general reduction of overheads in the business,
both in the UK and Germany, which we have implemented in view of the
ongoing decline in the payphone business.
Net interest payable was up 9% on the prior period, reflecting mainly
higher bank interest rates in the period.
Because of the full recognition of the deferred tax asset (previously
only partially recognised) under IFRS, there is a deferred tax charge
in the period of �0.4m. This reflects the reversal of timing
differences and the decreased value of the tax losses and tax writing
down allowances as the tax rate reduces from 30% to 28%.
The overall debt position on the Group remained broadly neutral in
the six month period with �0.7m of bank debt and �0.2m of finance
leases repaid in the period. This was matched with an overall similar
amount of new debt (�0.4m of bank debt and �0.5m of finance leases),
which was secured to finance the investment in the Travelodge WiFi
estate. Gross debt at 31 December 2007 was �6.0m (�4.7m of bank debt
and �1.3m of finance leases), and net debt (gross debt less cash) was
�5.5m.
Capital expenditure in the period was �1.5m the majority of which
fell in two areas: the installation of WiFi services into
approximately 400 hotels, and the installation of payphones and
internet terminals into Heathrow Terminal 5.
This is the first time that the financial statements have been
prepared under International Financial Reporting Standards (IFRS).
The prior periods have been restated, as has the balance sheet at the
date of transition, 1 July 2006. The main impact of IFRS has been as
follows:
* Amortisation of goodwill - automatic amortisation no longer
required under IFRS but goodwill subject to annual impairment
review. Amortisation of goodwill last year under UK GAAP was
�0.4m for the full year.
* Deferred tax - full recognition in the balance sheet of the
value of losses and writing down allowances, but leading to a
charge in the income statement as those benefits are used - hence
the �0.4m deferred tax charge in the income statement for the six
months to December 2007.
* Borrowing costs - where a loan or lease relates directly to an
asset the lifetime interest costs are capitalised and depreciated
over the asset life. This does not have a material impact on the
results but does lead to a shift from interest expense to
depreciation.
* Holiday pay - no account was previously taken of the timing
difference between holiday being earned and taken. Under IFRS an
accrual is made to recognise this, leading to a small increase in
costs in the January -June period and a corresponding decrease in
the July-December period.
OPERATIONAL REVIEW
The Interactive business continues to grow quickly, with revenues up
32% on the prior period. Desk revenue rose from �2.2m to �2.4m and
the average monthly revenue per terminal rose from �192 to �211, an
increase of 10%. WiFi growth was even more impressive, rising from
575 hotspots in December 2006 to 927 at the end of 2007. WiFi
revenues increased by 109% from just under �0.7m to �1.4m as a result
of rapid deployment into new hotels, good marketing and most
importantly the increasing appetite from business users for this
service. Like for like WiFi revenues have been growing almost every
month, a trend which is expected to continue for the foreseeable
future.
The launch in December 2007 of an online website in conjunction with
Travelodge for purchasing WiFi in advance of the hotel visit is
proving very popular with customers and is also enhancing monthly
revenues.
WiFi services were also installed into 25 Greene King hotels, and we
have orders for over 50 new Premier Inn hotels. The Group sees this
as evidence of a progressively maturing market with hotel visitors
expecting WiFi as a standard feature of their hotel stay.
We have completed the installation of interactive services into
Birmingham Airport as part of a new contract where we provide both
internet terminals and WiFi.
We continue to work closely with our airport partners, and we expect
that the opening of Heathrow Terminal 5 in March 2008 will assist us
in further increasing our high visibility locations. Airports are
being required to increase the amount of space dedicated to security,
and this has forced us to de-install internet desks at some
locations, but we expect to identify new alternative locations and
believe that there is still considerable revenue growth possible.
The payphone base fell by 1,716 units since 31 December 2006 to
7,156, of which 5,496 are in the UK and the remainder in Germany.
This deliberate rationalisation process has been concentrated on the
UK managed estate where contracts have either been renegotiated or
terminated. This policy will continue in 2008 so that by the end of
the current calendar year we expect to reduce our payphone base to
just 5,000 units. This strategy is enabling the Group both to reduce
operational costs and focus its commercial activities on the growing
interactive business.
Our German business is generating cash despite a further 22% decline
in payphone revenues in the period. We have reduced our operating
expenses in line with this decline. Our interactive revenues in
Germany have risen with airport contracts in particular proving to be
a growing source of income.
ACQUISITIONS
The Group pursued one overseas acquisition during the period but
withdrew from the deal in November 2007. We incurred a cost of circa
�50k as a result of this aborted transaction. We have since decided
to focus our strategic initiatives on opportunities within the UK for
the immediate future.
OUTLOOK
The outlook for the second half of the current year is good in
comparison with the same period last year. We are seeing now in the
early months of 2008 the impact of the 352 new WiFi hotel sites
installed over the last six months, and this is expected to result in
continued growth in interactive revenues during the second half of
the financial year. Although further reductions in payphone revenues
are expected, the Group will continue its rationalisation process and
also intends to disinvest itself of its payphone operation in
Germany, as already announced.
We have implemented a number of key initiatives aimed at growing our
interactive business, including investing in new people and new
innovations for the long term. We are beginning to realise some
additional media revenues from our interactive estate and this,
coupled with new deployments and innovative new services (eg
PrintSpectrum), should enable us to increase yield from existing and
new sites.
Overall, Spectrum Interactive is delivering on the plans announced in
2007. While our financial performance in the first half of the
current year was below that of the prior period, the smoothing of our
seasonality caused by our growing WiFi business leads us to expect a
relatively stronger second half in comparison with the same period in
the prior year. As a result we expect to exceed current market
expectations for the full year.
DIVIDEND
Based on the first half results and our plans for further investment
in the business in the near term, the Directors do not recommend the
payment of an interim dividend and do not anticipate a dividend being
payable at year-end.
Lord Young of Graffham
March 2008
Consolidated income statement for the six months ended 31 December
2007
Notes 6 months to 6 months to 12 months to
31 December 31 December 30 June
2007 2006 2007
� � �
Revenue 2 9,079,417 9,812,365 17,850,427
Cost of Sales (5,377,844) (5,573,687) (10,649,536)
Gross Profit 3,701,573 4,238,678 7,200,891
Impairment of German
goodwill and fixed - - (4,795,281)
assets
Other administrative (2,804,193) (3,087,213) (6,520,709)
expenses
Total Administrative (2,804,193) (3,087,213) (11,315,990)
Expenses
Operating Profit 897,380 1,151,465 (4,115,099)
(loss)
Interest receivable 2,777 7,770 11,422
and similar income
Interest payable and (196,409) (184,941) (390,897)
similar charges
Profit (loss) on
ordinary activities 703,748 974,294 (4,494,574)
before taxation
Tax on profit (loss)
on ordinary activities (398,478) (338,328) (294,267)
Profit (loss) on
ordinary activities 305,270 635,966 (4,788,841)
after taxation
Earnings/(loss) per 3 0.91p 1.89p (14.25)p
share - basic
Earnings/(loss) per 3 0.90p 1.88p (14.12)p
share - diluted
EBITDA (a) 4 1,834,245 2,122,689 2,919,099
PBTA (b) 4 819,499 1,011,563 591,853
Consolidated statement of recognised income and expense
6 months to 6 months to 12 months to
31 December 31 December 30 June
2007 2006 2007
(unaudited) (unaudited) (audited)
� � �
Profit (loss) for the 305,270 635,966 (4,788,841)
financial year
Currency translation
differences on foreign (192,547) 41,863 46,594
currency net investments
Total recognised income
and expense recognised
since last annual report 112,723 677,829 (4,742,247)
(a) EBITDA is defined as earnings before interest, tax, depreciation,
amortisation and impairment - see note 4.
(b) PBTA is defined as profit before tax and before amortisation and
impairment charges - see note 4.
Consolidated balance sheet as at 31 December 2007
As at
As at 31 December As at
31 December 2007 2006 30 June 2007
� � �
Non-current Assets
Goodwill 4,198,055 7,535,866 4,198,055
Other intangible assets 1,665,014 549,736 1,724,876
Property plant and
equipment 5,619,737 6,826,979 4,921,292
Deferred tax asset 1,802,273 2,156,690 2,200,751
13,285,079 17,069,271 13,044,974
Current Assets
Inventories 59,788 29,876 29,877
Trade and other
receivables 1,969,779 2,158,048 2,782,967
Cash and cash
equivalents 491,441 1,132,054 1,336,847
2,521,008 3,319,978 4,149,691
Total Assets 15,806,087 20,389,249 17,194,665
Current Liabilities
Trade and other
payables (2,988,505) (2,415.866) (4,730,527)
Current tax liabilities (146,496) (133,487) (134,260)
Obligations under
finance leases (453,381) (130,404) (336,972)
Borrowings (1,450,353) (1,161,946) (1,215,825)
Provisions (420,045) (445,185) (446,240)
Deferred revenue (118,473) (117,818) (48,505)
(5,577,253) (4,404,706) (6,912,329)
Net current liabilities (3,056,245) (1,084,728) (2,762,638)
Non-current liabilities
Borrowings (3,206,965) (4,217,784) (3,590,389)
Obligations under
finance leases (914,372) (351,908) (697,173)
(4,121,337) (4,569,692) (4,287,562)
Total liabilities (9,698,590) (8,974,398) (11,199,891)
Net assets 6,107,497 11,414,851 5,994,774
Equity
Called up share capital 339,035 339,035 339,035
Share premium account 5,459,283 5,459,283 5,459,283
Own shares (2,553) (2,553) (2,553)
Share-based payment
reserve 112,555 112,555 112,555
Retained earnings 199,177 5,506,531 86,454
Total equity 6,107,497 11,414,851 5,994,774
The financial statements were approved by the board of directors and
authorised for issue on 26 March 2008. They were signed on its behalf
by:
Mark Lewarne
Director
Consolidated cash flow statement as at 31 December 2007
Notes 6 months to 6 months to 12 months to
31 December 31 December 30 June
2007 2006 2007
� � �
Net cash from operating 5 735,101 1,604,375 3,935,715
activities
Investing activities
Interest received 2,777 7,770 11,422
Purchase of tangible fixed (1,508,906) (957,270) (1,749,380)
assets
Purchase of intangible (55,979) - (1,181,231)
fixed assets
Proceeds from the disposal
of fixed assets - - 24,127
Acquisitions - (162,253) (198,110)
Net cash used in investing
activities (1,562,108) (1,111,753) (3,093,172)
Financing activities
Dividend paid - (406,882) (406,882)
Repayment of borrowings (659,000) (705,000) (1,273,000)
Repayment of obligations
under finance leases (221,730) (92,305) (162,173)
New bank loans raised 350,000 - -
Proceeds from sale and 516,168 465,773 977,190
leaseback
Proceeds from the exercise
of share options - 1,352 1,352
Net cash used in financing
activities (14,562) (737,062) (863,513)
Net decrease in cash and
cash equivalents (841,569) (244,440) (20,970)
Cash and cash equivalents
at the beginning of the 1,336,847 1,266,480 1,266,480
period
Effect of foreign exchange
rate changes (3,837) 110,014 91,337
Cash and cash equivalents
at the end of the period 491,441 1,132,054 1,336,847
Notes to the interim financial information
1) Accounting policies and basis of preparation
The Group's previous financial statements have been prepared under UK
Generally Accepted Accounting Principles (UK GAAP). However for the
financial year ended 30 June 2008, the Group is obliged to prepare
its annual consolidated financial statements in accordance with IFRS
as adopted by the European Union (EU) and implemented in the UK.
The Group's date of transition to IFRS was 1 July 2006 at which date
the Group prepared its opening IFRS balance sheet. The financial
information for the six months ended 31 December 2007 is unaudited
and has been prepared in accordance with the Group's accounting
policies, based on IFRS standards that are expected to apply for the
financial year 2007-8. The financial information for the six months
ended 31 December 2006 is also unaudited and has also been restated
under IFRS.
The presentation of financial information under IFRS is governed by
IFRS 1. In some cases this will require the presentation of an item
in a different position, or the use of a different description in the
IFRS income statement or balance sheet to that adopted in the UK GAAP
profit and loss account or balance sheet. These reclassifications
have been described in the explanatory notes.
Note 8 sets out an explanation of how the transition from UK GAAP to
IFRS has affected the Group's results and income statements for the
period ended 31 December 2006 and the year ended 30 June 2007, and
the equity and balance sheets as at 1 July 2006, 31 December 2006 and
30 June 2007. It also sets out the prior period adjustment for
decommissioning costs.
The interim financial information has not been audited and does not
constitute statutory accounts within the meaning of Section 240 of
the Companies Act 1985 but has been reviewed by the auditors in
accordance with International Standard on Review Engagements 2410
issued by the Auditing Practices Board. The Group's statutory
accounts for the year ended 30 June 2007, prepared under UK GAAP,
have been delivered to the Registrar of Companies; the report of the
auditors on these accounts was unqualified and did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985.
Accounting Policies
The financial statements are prepared in accordance with
International Financial Reporting Standards. The particular
accounting policies adopted are described below.
Accounting convention
The financial statements are prepared under the historical cost
convention.
Basis of consolidation
The Group financial statements consolidate the financial statements
of the Group and of its subsidiary undertakings. The financial
statements of each undertaking in the Group have been prepared to 31
December 2007. Profits or losses on intra-Group transactions are
eliminated in full. On acquisition of a subsidiary, all of the
subsidiary's assets and liabilities which exist at the date of
acquisition are recorded at their fair values reflecting their
condition at that date.
Revenue
Revenue is the total amount receivable by the Group in the ordinary
course of business with outside customers for goods supplied as a
principal and for services provided, excluding value added tax and
trade discounts.
Where up front payments are received for services and all obligations
have been fulfilled, revenue in relation to these payments is
recognised in full.
Intangible assets - goodwill
Goodwill arising on the acquisition of subsidiary undertakings and
businesses, representing any excess of the fair value of the
consideration given over the fair value of the identifiable assets
and liabilities acquired, is capitalised and held in the financial
statements at that amount with no amortisation. Provision is made for
any impairment and goodwill is reviewed for impairment on a regular
basis.
Intangible assets - customer contracts and relationships
Where the value of goodwill arising on acquisitions has been
allocated to customer contracts or relationships these are amortised
over 8 years. Where an intangible relates to specific rights, the
intangible is amortised over the life of those rights.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of depreciation
and any provision for impairment.
Depreciation is provided on tangible fixed assets, at rates
calculated to write off the cost, less estimated residual value, of
each asset over its expected useful life, as follows:
Phone kiosks 5-8 years
Internet kiosks and WiFi 3-5 years
Fixtures and fittings 3 years
Computer equipment 3 years
All assets with an expected life of over one year are capitalised and
depreciated over their expected useful life. The costs capitalised
include all costs associated with the asset including, where
appropriate, delivery costs, any installation costs where
installation is carried out by a third party, any borrowing costs,
where these are directly attributable to the asset, and the estimated
costs of decommissioning at the end of the asset life where there is
a clear explicit or implicit obligation on the Group to bear the
costs of deinstallation. Assets in the course of construction are
included in property, plant and equipment on the basis of costs
incurred to date and they are not depreciated until the construction
is complete.
Investments
Investments held as fixed assets are stated at cost less provision
for any impairment in value.
Stocks
Stocks and work in progress are stated at the lower of cost and net
realisable value.
Taxation
Current tax, including UK corporation tax and foreign tax, is
provided at amounts expected to be paid (or recovered) using the tax
rates and laws that have been enacted or substantively enacted at the
balance sheet date.
Deferred tax is provided in full on timing differences, which result
in an obligation at the balance sheet date to pay more tax, or a
right to pay less tax, at a future date, at rates expected to apply
when they crystallise based on current tax rates and law. Timing
differences arise from the inclusion of items of income and
expenditure in taxation computations in periods different from those
in which they are included in financial statements.
Foreign currency
Transactions in foreign currencies are recorded at the rate of
exchange at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet
date are reported at the rates of exchange prevailing at that date.
The results of overseas operations are translated at the average rate
of exchange during the period and their balance sheets at the rate
ruling at the balance sheet date. Exchange differences arising on
translation of the opening net assets and results of overseas
operations and on foreign currency borrowings, to the extent that
they hedge the Group's investment in such operations, are reported in
the statement of total recognised gains and losses. All other
exchange differences are included in the profit and loss account.
Pension costs
The Group and its subsidiary undertakings contribute to individual
employee's stakeholder pension schemes. The assets of the schemes
are administered by Trustees in funds independent from those of the
companies. Pension costs are assessed in accordance with the advice
of a qualified actuary.
The pension costs charged against profits represent the amount of the
contributions payable to the schemes in respect of the accounting
year.
Leases
Assets held under finance leases are capitalised at their fair value
on the inception of the leases and depreciated over their estimated
useful economic lives. The finance leases are allocated over the
period of the lease in proportion to the capital amount outstanding
and are charged to the profit and loss account. Rentals under
operating leases are charged on a straight line basis over the lease
term, even if payments are not made on such a basis.
Accounting for share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payment.
In accordance with the transitional provisions, IFRS 2 has been
applied to all grants of equity instruments after 7 November 2002
that were unvested as of 1 January 2006.
The Group issues equity-settled and cash-settled share-based payments
to certain employees. Equity-settled share-based payments are
measured at fair value (excluding the effect of non market-based
vesting conditions) at the date of grant. The fair value determined
at the grant date of the equity-settled share-based payments is
expensed on a straight line basis over the vesting period, based on
the Group's estimate of shares that will eventually vest and adjusted
for the effect of non market-based vesting conditions.
Fair value is measured by use of the Black-Scholes pricing model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations.
Financial assets and liabilities
Trade receivables, loans and other receivables that have fixed or
determinable payments that are not quoted in an active market are
classified as loans and receivables. Loans and receivables are
measured at amortised cost using the effective interest method, less
any impairment. Interest income is recognised by applying the
effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
Cash and cash equivalents comprise cash on hand and demand deposits
and other short-term highly liquid investments that are readily
convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial liabilities include borrowings and trade and other
payables. All financial liabilities are measured at amortised cost,
which equates to fair value.
2. Segmental information
The board considers the primary segments to be the two main business
areas, payphones and interactive. This is the information that the
board itself concentrates on, particularly given the very different
dynamics of the two areas. The secondary segment split is
geographical, i.e. the split between the UK business and Germany.
Six months to 31 December 2007
Payphones Interactive Other Total
� � � �
Revenue 5,310,166 3,769,251 - 9,079,417
Gross profit 2,354,265 1,347,308 - 3,701,573
Depreciation (372,476) (416,349) (32,290) (821,115)
Amortisation - (115,751) - (115,751)
Result 1,981,789 815,208 (32,290) 2,764,707
Unallocated corporate
expenses (1,867,327)
Operating profit 897,380
Interest receivable
and similar income 2,777
Interest payable and
similar charges (196,409)
Profit before tax 703,748
Tax (398,478)
Profit after tax 305,270
Other Information
Capital Additions 60,198 1,474,695 29,992 1,564,885
Balance Sheet
Assets
Segment assets 6,030,493 7,859,837 - 13,890,330
Unallocated corporate
assets 1,915,757 1,915,757
Consolidated total
assets 15,806,087
Liabilities
Segment liabilities (4,078,337) (2,366,778) - (6,445,115)
Unallocated corporate
liabilities (3,253,476) (3,253,476)
Consolidated total
liabilities (9,698,591)
Six months to 31 December 2006
Payphones Interactive Other Total
� � � �
Revenue 6,967,635 2,844,730 - 9,812,365
Gross profit 3,034,016 1,204,662 - 4,238,678
Depreciation (587,947) (300,471) (45,537) (933,955)
Amortisation - (37,269) - (37,269)
Result 2,446,069 866,922 (45,537) 3,267,454
Unallocated corporate
expenses (2,115,989)
Operating profit 1,151,465
Interest receivable
and similar income 7,770
Interest payable and
similar charges (184,941)
Profit before tax 974,294
Tax (338,328)
Profit after tax 635,966
Other Information
Capital Additions 100,259 857,011 - 957,270
Balance Sheet
Assets
Segment assets 12,082,126 5,380,411 - 17,462,537
Unallocated corporate
assets 2,926,712 2,926,712
Consolidated total
assets 20,389,249
Liabilities
Segment liabilities (4,880,731) (1,426,497) - (6,307,228)
Unallocated corporate
liabilities (2,667,170) (2,667,170)
Consolidated total
liabilities (8,974,398)
Year to 30 June 2007
Payphones Interactive Other Total
� � � �
Revenue 12,176,619 5,673,808 - 17,850,427
Gross profit 5,048,321 2,152,570 - 7,200,891
Depreciation (1,159,593) (697,535) (90,643) (1,947,771)
Amortisation - (81,362) - (81,362)
Impairment (5,005,065) - - (5,005,065)
Result (1,116,337) 1,373,673 (90,643) 166,693
Unallocated corporate
expenses (4,281,792)
Operating loss (4,115,099)
Interest receivable and
similar income 11,422
Interest payable and
similar charges (390,897)
Loss before tax (4,494,574)
Tax (294,267)
Loss after tax (4,788,841)
Payphones Interactive Other Total
� � � �
Other Information
Capital Additions 330,979 2,524,451 75,181 2,930,611
Balance Sheet
Assets
Segment assets 6,832,858 7,202,561 - 14,035,419
Unallocated 3,159,246 3,159,246
corporate assets
Consolidated total 17,194,665
assets
Liabilities
Segment liabilities (4,419,624) (1,866,975) - (6,286,599)
Unallocated (4,913,292) (4,913,292)
corporate
liabilities
Consolidated total (11,199,891)
liabilities
Geographical Segments
Sales Revenue by geographical market
6 months to 31 6 months to 31 December 12 months to 30
December 2007 2006 June 2007
� � �
UK 7,861,837 8,170,305 15,279,721
Germany 1,217,580 1,642,060 2,570,706
Total 9,079,417 9,812,365 17,850,427
Carrying amount of segment assets
6 months to 31 6 months to 31 December 12 months to 30
December 2007 2006 June 2007
� � �
UK 15,296,893 14,861,426 16,761,702
Germany 509,194 5,527,823 432,963
Total 15,806,087 20,389,249 17,194,665
Additions to property, plant and equipment
and intangible assets
6 months to 31 6 months to 31 December 12 months to 30
December 2007 2006 June 2007
� � �
UK 1,513,330 777,177 2,712,649
Germany 51,555 180,093 217,962
Total 1,564,885 957,270 2,930,611
Seasonality of the business is changing because of growth of WiFi
services and the decline of the payphone business.
3. Earnings per share
The calculation of earnings per share is based upon the profit for
the period after taxation and on the weighted average number of
shares in issue during the period. For basic earnings per share this
is 33,648,166, and for diluted earnings per share, this is 33,903,506
shares. For the six months to 31 December 2006, the number of shares
for the basic EPS calculation was 33,602,869. The number of shares
used for the fully diluted EPS calculation was 33,903,506. The
difference between the number of shares in the fully diluted and
basic EPS calculations is due to employee share options.
6 months to 6 months to 12 months to
31 December 31 December 30 June 2007
2007 2006
Earnings/(loss) per share- 0.91p 1.89p (14.25)p
basic
Earnings/(loss) per share- 0.90p 1.88p (14.12)p
fully diluted
4. Earnings before interest, tax, depreciation, and amortisation
6 months to 6 months to
31 December 31 December 12 months to
2007 2006 30 June 2007
� � �
Profit (loss) on ordinary
activities after tax 305,270 635,966 (4,788,841)
Interest 193,632 177,171 379,475
Tax 398,478 338,328 294,267
Depreciation 821,114 933,955 1,947,771
Amortisation 115,751 37,269 81,362
German impairment charges - - 5,005,065
EBITDA 1,834,245 2,122,689 2,919,099
PBTA 819,499 1,011,563 591,853
5. Reconciliation of operating profit (loss) to net cash inflow from
operating activities
6 months to 6 months to 12 months to
31 December 2007 31 December 30 June
(Unaudited) 2006 2007
� (Unaudited) (Audited)
� �
Operating profit (loss) 897,380 1,151,465 (4,115,099)
Adjustments
Depreciation of tangible
fixed assets 821,114 933,955 1,947,771
Amortisation of
intangible fixed assets 115,751 37,269 81,362
Impairment of German
fixed assets - - 1,667,254
Impairment of German
goodwill - - 3,337,811
Movement on share based
payment reserve - 8,802 8,802
Increase in provisions (26,195) (14,235) (13,180)
Operating cash flows
before movements on
working capital 1,808,050 2,117,256 2,914,721
(Increase) decrease in
stocks (29,911) 10,300 10,300
Decrease (increase) in
debtors 813,188 69,415 (555,506)
(Increase) decrease in
creditors (1,659,817) (407,655) 1,957,097
Cash generated from
operations 931,510 1,789,316 4,326,612
Income taxes paid - - -
Interest paid (196,409) (184,941) (390,897)
Net cash from operating
activities 735,101 1,604,375 3,935,715
6. Consolidated statement of changes in equity
Called Share Own Share Profit and Total
up premium Shares based loss �
share account � payment account
capital � reserve �
� �
At 1 July 2007
as previously
reported 339,035 5,459,283 (2,553) 112,555 (1,117,724) 4,790,596
IFRS
adjustments - - - - 1,513,427 1,513,427
Decommissioning
costs
adjustment - - - - (309,249) (309,249)
At 1 July 2007
restated 339,035 5,459,283 (2,553) 112,555 86,454 5,994,774
Profit for the
period - - - - 305,270 305,270
Other
recognised
gains and
losses - - - - (192,547) (192,547)
At 31 December
2007 339,035 5,459,283 (2,553) 112,555 199,177 6,107,497
7. Dividends
6 months to 6 months to 12 months to
31 December 2007 31 December 2006 30 June
(unaudited) (unaudited) 2007
(audited)
� � �
Paid dividends - (406,882) (406,882)
No interim dividend is proposed. Year ended 30 June 2007 (1.20p per
share).
8. Transition to IFRS
For all periods up to and including the year ended 30 June 2007 the
Group prepared its financial statements under UK GAAP.
In preparing these interim statements the Group has started from an
opening balance sheet as at 1 July 2006, the date of the Group's
transition to IFRS, and made those changes to accounting policies and
other restatements required by IFRS 1 for first time adoption of
IFRS.
IFRS allows first time adopters certain exemptions from the general
requirements to apply retrospectively IFRS for periods prior to the
transition date. The optional exemptions taken by the Group are:
Business Combinations
The Group has elected not to apply IFRS 3 "Business Combinations"
retrospectively to acquisitions that were made before the transition
date. Consequently, goodwill arising from such acquisitions remains
at the previous UK GAAP carrying value at the transition date.
Impact of IFRS
The impact of IFRS is relatively limited as the Group has already
implemented certain IFRS policies as part of UK GAAP, e.g. relating
to share based payments.
The principal impact on these financial statements of IFRS has been
in relation to the following:
a) Amortisation of goodwill
The Group previously amortised all goodwill over its expected useful
life, varying from 8 to 20 years. Goodwill is no longer amortised
automatically, but is subject to an annual impairment review. Other
intangibles continue to be amortised over their useful life.
b) Employee costs - holiday pay
The Group previously made no adjustment for the difference in timing
between holidays earned and holidays taken. Under IFRS it is accruing
the cost of any holiday earned but not taken at the balance sheet
date.
c) Deferred tax
The Group previously recognised only a part of the potential deferred
tax asset, being the amount that would be realised in the next 1-2
years. Under IFRS it recognises the entire potential deferred tax
asset. This has the effect of increasing the asset value but also
reducing the profit going forward as the timing differences reverse.
d) Borrowing costs
The company previously treated all borrowing costs as interest,
whether they were loans or finance leases. As per IAS 23 (revised),
which has been early adopted, the Company is required to identify any
borrowing costs directly attributable to a particular asset and add
those costs into the cost of the asset, depreciating them over the
life of the asset. This has the effect of decreasing interest expense
and increasing depreciation.
e) Decommissioning costs
This is a prior period adjustment to recognise the cost of
decommissioning the Group's assets such as payphones, internet kiosks
and WiFi installations, in line with IAS 16. The expected future cost
of the decommissioning is credited to a decommissioning provision and
released to the income statement when the assets are decommissioned.
Reconciliation of profit/(loss) for the period ended 31 December 2006
and the year ended 30 June 2007
6 months to 31 Year ended 30
December 2006 June 2007
� �
Profit/(loss) after tax per UK 747,929 (4,703,200)
GAAP
Decommissioning costs* (8,903) 577
Amortisation/impairment of 207,893 205,584
goodwill
Holiday Pay 27,375 2,465
Deferred tax (338,328) (294,267)
Borrowing costs - -
Profit/(loss) after tax per IFRS 635,966 (4,788,841)
* This is a prior period adjustment to recognise the cost and
resulting provision of decommissioning assets such as payphones,
internet kiosks and WiFi installations.
Reconciliation of income statement for the 6 months to 31 December
2006
UK Decommissioning IFRS
GAAP Costs* Adjustments IFRS
� � � �
Turnover 9,812,365 - - 9,812,365
Cost of Sales (5,598,837) 25,150 - (5,573,687)
Gross Profit 4,213,528 25,150 - 4,238,678
Administrative
Expenses (3,280,875) (34,053) 227,715 (3,087,213)
Operating
Profit 932,653 (8,903) 227,715 1,151,465
Interest
receivable and
similar income 7,770 - - 7,770
Interest
payable and
similar
charges (192,494) - 7,553 (184,941)
Profit on
ordinary
activities
before
taxation 747,929 (8,903) 235,268 974,294
Tax on profit
on ordinary
activities - - (338,328) (338,328)
Profit on
ordinary
activities
after taxation 747,929 (8,903) (103,060) 635,966
Reconciliation of income statement for the year to 30 June 2007
UK Decommissioning IFRS
GAAP Costs* Adjustments IFRS
� � � �
Turnover 17,850,427 - - 17,850,427
Cost of Sales (10,718,011) 68,475 - (10,649,536)
Gross Profit 7,132,416 68,475 - 7,200,891
Impairment of
German
goodwill and
fixed assets (4,795,281) - - (4,795,281)
Other
administrative
expenses (6,647,216) (67,898) 194,405 (6,520,709)
Total
administrative
expenses (11,442,497) (67,898) 194,405 (11,315,990)
Operating loss (4,310,081) 577 194,405 (4,115,099)
Interest
receivable and
similar income 11,422 - - 11,422
Interest
payable and
similar
charges (404,541) - 13,644 (390,897)
Loss on
ordinary
activities
before
taxation (4,703,200) 577 208,049 (4,494,574)
Tax on loss on
ordinary
activities - - (294,267) (294,267)
Loss on
ordinary
activities
after taxation (4,703,200) 577 (86,218) (4,788,841)
* This is a prior period adjustment to recognise the cost and
resulting provision of decommissioning assets such as payphones,
internet kiosks and WiFi installations.
Reconciliation of equity as of 1 July 2006 (date of transition), 31
December 2006 and 30 June 2007
31 December 2006
1 July 2006 30 June 2007
� � �
Total equity under UK 9,843,930 10,236,995 4,790,596
GAAP
Decommissioning costs* (309,826) (318,729) (309,249)
Goodwill amortisation - 207,893 205,584
Holiday Pay (27,375) - (24,910)
Deferred tax 1,627,020 1,288,692 1,332,753
Total equity under IFRS 11,133,749 11,414,851 5,994,774
* This is a prior period adjustment to recognise the cost and
resulting provision of decommissioning assets such as payphones,
internet kiosks and WiFi installations.
Reconciliation of balance sheet at 1 July 2006 (date of transition to
IFRS)
UK GAAP Decommissioning IFRS
(audited) Costs* Adjustments IFRS
� � � �
Non-current
Assets
Goodwill 7,535,866 - - 7,535,866
Other 471,897 - - 471,897
intangible
assets
Property 6,684,560 149,594 6,841,006
plant and
equipment 6,852
Deferred tax 867,998 - 2,495,018
asset 1,627,020
15,560,321 149,594 1,633,872 17,343,787
Current
Assets
Inventories 10,177 - - 10,177
Trade and 2,227,463 - - 2,227,463
other
receivables
Cash and cash 1,266,480 - - 1,266,480
equivalents
3,504,120 - - 3,504,120
Total Assets 19,064,441 149,594 1,633,872 20,847,907
Current
Liabilities
Trade and (2,746,142) - (34,227) (2,780,369)
other
payables
Current tax (134,260) - - (134,260)
liabilities
Obligations (43,862) - - (43,862)
under finance
leases
Borrowings (1,423,400) - - (1,423,400)
Provisions - (459,420) - (459,420)
Deferred (160,197) - (160,197)
revenue
(4,507,861) (459,420) (34,227) (5,001,508)
Net current (1,003,741) (309,826) (34,227) (1,497,388)
liabilities
Non-current
liabilities
Borrowings (4,712,650) - - (4,712,650)
Obligations - - - -
under finance
leases
(4,712,650) - - (4,712,650)
Total (9,220,511) (459,420) (34,227) (9,714,158)
liabilities
Net assets 9,843,930 (309,826) 1,599,645 11,133,749
Equity
Called up 339,035 - - 339,035
share capital
Share premium 5,459,283 - - 5,459,283
account
Own shares (3,905) - - (3,905)
Share-based 103,753 - - 103,753
payment
reserve
Retained 3,945,764 (309,826) 1,599,645 5,235,583
earnings
Total equity 9,843,930 (309,826) 1,599,645 11,133,749
* This is a prior period adjustment to recognise the cost and
resulting provision of decommissioning assets such as payphones,
internet kiosks and WiFi installations.
Reconciliation of balance sheet at 31 December 2006
Decommissioning IFRS
UK GAAP Costs* Adjustments IFRS
� � � �
Non-current
Assets
Goodwill 7,327,973 - 207,893 7,535,866
Other
intangible
assets 549,736 - - 549,736
Property
plant and
equipment 6,668,632 126,456 31,891 6,826,979
Deferred tax
asset 867,998 - 1,288,692 2,156,690
15,414,339 126,456 1,528,476 17,069,271
Current
Assets
Inventories 29,876 - - 29,876
Trade and
other
receivables 2,158,048 - - 2,158,048
Cash and cash
equivalents 1,132,054 - - 1,132,054
3,319,978 - - 3,319,978
Total Assets 18,734,317 126,456 1,528,476 20,389,249
Current
Liabilities
Trade and
other
payables (2,383,975) - (31,891) (2,415,866)
Current tax
liabilities (133,487) - - (133,487)
Obligations
under finance
leases (130,404) - - (130,404)
Borrowings (1,161,946) - - (1,161,946)
Provisions - (445,185) - (445,185)
Deferred
revenue (117,818) - - (117,818)
(3,927,630) (445,185) (31,891) (4,404,706)
Net current
liabilities (607,652) (445,185) (31,891) (1,084,728)
Non-current
liabilities
Borrowings (4,217,784) - - (4,217,784)
Obligations
under finance
leases (351,908) - - (351,908)
(4,569,692) - - (4,569,692)
Total
liabilities (8,497,322) (445,185) (31,891) (8,974,398)
Net assets 10,236,995 (318,729) 1,496,585 11,414,851
Equity
Called up
share capital 339,035 - - 339,035
Share premium
account 5,459,283 - - 5,459,283
Own shares (2,553) - - (2,553)
Share-based
payment
reserve 112,555 - - 112,555
Retained
earnings 4,328,675 (318,729) 1,496,585 5,506,531
Total equity 10,236,995 (318,729) 1,496,585 11,414,851
* This is a prior period adjustment to recognise the cost and
resulting provision of decommissioning assets such as payphones,
internet kiosks and WiFi installations.
Reconciliation of balance sheet at 30 June 2007
UK GAAP Decommissioning IFRS
(audited) Costs* Adjustments IFRS
� � � �
Non-current
Assets
Goodwill 3,992,471 - 205,584 4,198,055
Other
intangible
assets 1,724,876 - - 1,724,876
Property
plant and
equipment 4,797,590 96,991 26,711 4,921,292
Deferred
tax asset 867,998 - 1,332,753 2,200,751
11,382,935 96,991 1,565,048 13,044,974
Current
Assets
Inventories 29,877 - - 29,877
Trade and
other
receivables 2,782,967 - - 2,782,967
Cash and
cash
equivalents 1,336,847 - - 1,336,847
4,149,691 - - 4,149,691
Total
Assets 15,532,626 96,991 1,565,048 17,194,665
Current
Liabilities
Trade and
other
payables (4,678,906) - (51,621) (4,730,527)
Current tax
liabilities (134,260) - - (134,260)
Obligations
under
finance
leases (336,972) - - (336,972)
Borrowings (1,215,825) - - (1,215,825)
Provisions (40,000) (406,240) - (446,240)
Deferred
revenue (48,505) - - (48,505)
(6,454,468) (406,240) (51,621) (6,912,329)
Net current
liabilities (2,304,777) (406,240) (51,621) (2,762,638)
Non-current
liabilities
Borrowings (3,590,389) - - (3,590,389)
Obligations
under
finance
leases (697,173) - - (697,173)
(4,287,562) - - (4,287,562)
Total
liabilities (10,742,030) (406,240) (51,621) (11,199,891)
Net assets 4,790,596 (309,249) 1,513,427 5,994,774
Equity
Called up
share
capital 339,035 - - 339,035
Share
premium
account 5,459,283 - - 5,459,283
Own shares (2,553) - - (2,553)
Share-based
payment
reserve 112,555 - - 112,555
Retained
earnings (1,117,724) (309,249) 1,513,427 86,454
Total
equity 4,790,596 (309,249) 1,513,427 5,994,774
* This is a prior period adjustment to recognise the cost and
resulting provision of decommissioning assets such as payphones,
internet kiosks and WiFi installations.
INDEPENDENT REVIEW REPORT TO SPECTRUM INTERACTIVE PLC
We have been engaged by the Group to review the condensed set of
financial statements in the half-yearly financial report for the six
months ended 31 December 2007 which comprises the income statement,
the balance sheet, the statement of recognised income and expense,
the cash flow statement and related notes 1 to 8. We have read the
other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the Group in accordance with
International Standard on Review Engagements 2410 issued by the
Auditing Practices Board. Our work has been undertaken so that we
might state to the Group those matters we are required to state to
them in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group, for our review work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the AIM
Rules of the London Stock Exchange
As disclosed in note 8, the annual financial statements of the Group
are prepared in accordance with IFRSs as adopted by the European
Union. The condensed set of financial statements included in this
half-yearly financial report have been prepared in accordance with
the accounting policies the Group intends to use in preparing its
next annual financial statements.
Our responsibility
Our responsibility is to express to the Group a conclusion on the
condensed set of financial statements in the half-yearly financial
report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK
and Ireland) and consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us
to believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 31 December
2007 is not prepared, in all material respects, in accordance with
the AIM Rules of the London Stock Exchange.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditor
26 March 2008
Cambridge, UK
- ---END OF MESSAGE---
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