Final Results
Cheerful Scout PLC
28 November 2005
CHEERFUL SCOUT PLC ('Cheerful Scout' or 'the Company')
FINAL RESULTS FOR THE YEAR ENDED 30 JUNE 2005
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 30 JUNE 2005
Cheerful Scout has made significant progress over the past year. After a period
of consolidation and retrenchment, the Company is focused upon the achievement
of prudent and profitable growth. The Company's results for the year ended 30
June 2005 represent a small turnaround in comparison to the previous year. The
management and workforce have been strengthened and, with a focus on cash
generation, the Company now has a solid infrastructure on which to build future
growth.
In line with the Board's expectations, the Company reports pre-tax losses before
taxation, goodwill amortisation and impairment for the year ended 30 June 2005
of £219,865 (2004: loss of £249,636) on turnover of £898,492 up 48 per cent. on
the previous year (2004: £607,042). In April the Company raised gross funds of
£525,000 through a placing with institutions. Cash at bank and in hand at the
year end was £721,757 (2004: £585,965) which is sufficient to invest further in
our products and team. Net current assets increased by 33 per cent. to £899,172
(2004: £676,168).
Our core business has performed well with new contracts won with new as well as
existing clients. Following positive indications that the industry was seeing a
turnaround, we have continued to invest in both personnel and technology
including interactive DVD. The programme production division, which produces
entire projects, has continued to strengthen its relationships with key
corporates including Allen & Overy, Getronics and several leading management
consultancy. It has also won further contracts with Centrica, Deloitte and the
Central Office of Information. The Company's DVD department is expanding
rapidly, and we are now pleased to be working with Freemantle, BBC, Universal,
Contender and other major independents.
Last year we updated our shareholders on our new communications technology -
nVision. This software has two applications; the first is nVision Presenter
which provides the seamless and high speed integration of several live event
elements. The roll out has taken longer than anticipated but, since the
fundraising in April and subsequent investment in its marketing and management
team, interest and sales momentum have gathered steadily. We now have a
dedicated events team that has recently managed a number of extremely successful
high profile conferences. We currently have a variety of other projects in the
pipeline with international blue-chip companies.
Our emphasis remains on the continuing development of nVision and improving its
capabilities through the integration of new hardware and software technology.
nVision's second application is a high end strategic version, nVision Strategy,
focussed at more sophisticated organisations which require complex problem
solving tools. This product is now fully developed and is being looked at by
global organisations, investment companies and various government departments
for long term strategy.
We remain focused on providing cutting edge creative work and were therefore
delighted to receive both gold and bronze awards at the annual ceremony held by
the International Visual Communication Association ('IVCA'), the professional
body for companies using film, video, interactive media and live events as part
of the communication process.
As a result of continuing trading losses following the Company's acquisition of
Centralfix Limited, the sole trading company within the Group, the Directors
have undertaken an impairment review on the goodwill arising from the
acquisition of that subsidiary.
This has been carried out in accordance with Financial Reporting Standard 11.
As a result, a one-off impairment charge of £1,867,467 has been provided for in
the accounts of the Group and has been shown as an exceptional item.
Your attention is drawn to the circular which accompanies the Report and
Financial Statements. This document outlines the proposed share premium account
cancellation subject to the passing of a special resolution to be proposed at an
EGM to be convened immediately after the AGM. Full details of the resolution are
contained in the circular but the overall result, subject to approval by the
High Court, should enable the Company to pay dividends as and when the Board
considers it appropriate to do so.
Looking forward, Cheerful Scout is beginning to see a number of attractive
opportunities present themselves across the group. With its broad product
platform and growing population of talented individuals I believe that the
Group's prospects are very encouraging.
S Appleton
Chairman
25 November 2005
CONSOLIDATED PROFIT & LOSS ACCOUNT
For the year ended 30 June 2005
2005 2004
Pre goodwill Goodwill Total Pre good Goodwill Total
amortisation amortisation will amortisation
and and amortisation and
impairment impairment and impairment
impairment
Notes £ £ £ £ £ £
Turnover 2 898,492 - 898,492 607,042 - 607,042
Cost of (631,550) - (631,550) (431,842) - (431,842)
sales
_______ _______ ________ _________ ________ ________
Gross profit 266,942 - 266,942 175,200 - 175,200
Administrative
expenses (504,071) (136,415) (640,486) (446,027) (136,415) (582,442)
_______ _______ ________ _________ ________ ________
Operating loss 3 (237,129) (136,415) (373,544) (270,827) (136,415) (407,242)
Exceptional
item 4 - (1.867.467) (1,867,467) - - -
Interest
receivable 17,268 - 17,268 21,284 - 21,284
Interest
payable and
similar
charges 5 (4) - (4) (93) - (93)
_______ _______ ________ _________ ________ ________
Loss on
ordinary
activities
before
taxation (219,865) (2,003,882) (2,223,747) (249,636) (136,415) (386,051)
Taxation on
loss on
ordinary
activities 6 54,000 - 54,000 16,946 - 16,946
_______ _______ ________ _________ ________ ________
Retained loss
for the year 16 (2,169,747) (369,105)
_________ ________
Earnings per
ordinary
shares:
Basic 8 (1.045661)p (0.205474)p
_________ _________
Diluted 8 (1.045661)p (0.205474)p
__________ _________
The profit and loss account has been prepared on the basis that all operations
are continuing operations.
There are no recognised gains or losses other than those passing through the
profit and loss account.
BALANCE SHEETS
As at 30 June 2005
Notes 2005 2004
£ £
Fixed assets
Intangible assets 9 799,135 2,611,152
Tangible assets 10 212,152 294,136
Investments 11 - -
_________ _________
1,011,287 2,905,288
Current assets
Debtors 12 295,946 226,369
Stock 1,211 1,472
Cash at bank and in hand 721,757 585,965
_________ _________
1,018,914 813,806
Creditors: amounts falling due within one year 13 (119,742) (137,638)
_________ _________
Net current assets 899,172 676,168
Total assets less current liabilities 1,910,459 3,581,456
_________ _________
1,910,459 3,581,456
_________ _________
Capital and reserves
Called up share capital 15 1,225,000 975,000
Share premium account 16 3,360,169 3,111,419
Profit and loss account 16 (2,674,710) (504,963)
__________ _________
Shareholders' funds - equity interests 17 1,910,459 3,581,456
__________ _________
The financial statements were approved by the Board on 25 November 2005
P Litten, Director
N J Newman, Director
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2005
2005 2004
£ £ £ £
Net cash (outflow)/inflow from
operating (136,242) (71,311)
activities
Returns on investments and servicing
of finance
Interest received 17,268 21,284
Interest paid (4) (93)
______ ______
Net cash inflow for returns on
investments and 17,264 21,191
servicing of finance
Taxation - 17,375
Capital expenditure and financial
investment
Payments to acquire intangible (191,865) (178,426)
assets
Payments to acquire tangible assets (52,115) (53,235)
________ ________
Net cash outflow for capital (243,980) (231,661)
expenditure
_______ _______
Net cash outflow before management
of liquid (362,958) (264,406)
resources and financing
Financing
Net proceeds from issue of ordinary
share 525,000 301,875
capital
Expenses relating to issue of share (26,250) (9,056)
capital
_______ _______
Net cash inflow/(outflow) from 498,750 292,819
financing
_______ _______
Increase/(Decrease) in cash in the 135,792 28,413
year
_______ _______
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2005
1. Reconciliation of operating loss to net cash outflow from
operating activities
2005 2004
£ £
Operating loss (373,544) (407,242)
Depreciation of tangible assets 134,099 161,783
Amortisation of intangible assets 136,415 136,415
Increase/(decrease) in debtors (15,577) 1,074
Decrease/(increase) in creditors within one year (17,896) 36,793
Decrease/(increase) in stock 261 (134)
________ ________
Net cash outflow from operating activities (136,242) (71,311)
________ ________
2. Analysis of net funds
1 July 2004 Cash flow 30 June 2005
£ £ £
Net cash:
Cash at bank and in hand (26,087) 26,087 -
_______ ______ ________
Liquid resources:
Bank deposits 612,052 109,705 721,757
_______ _______ _______
Net funds 585,965 135,792 721,757
_______ _______ _______
3. Reconciliation of net cash flow to movement in net funds
2005 2004
£ £
Increase in cash in the year 26,087 (27,929)
Cash (outflow)/inflow from movement in liquid resources 109,705 56,342
______ _______
Change in net funds resulting from cash flows 135,792 28,413
______ _______
Movement in net funds in the year 135,792 28,413
Opening net funds 585,965 557,552
_______ _______
Closing net funds 721,757 585,965
_______ _______
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2005
1 Accounting policies
1.1 Accounting convention
The financial statements are prepared under the historical cost
convention.
1.2 Compliance with accounting standards
The financial statements are prepared in accordance with applicable
accounting standards.
1.3 Basis of consolidation
The consolidated profit and loss account and balance sheet include the
financial statements of the company and its subsidiary undertakings made
up to 30 June 2005. The results of subsidiaries sold or acquired are
included in the profit and loss account up to, or from the date control
passes. Intra- group sales and profits are eliminated fully on
consolidation.
1.4 Turnover
Turnover represent amounts receivable for goods and services, net of VAT
and trade discounts.
1.5 Goodwill and impairment
Goodwill arising on acquisition is written off in equal annual
instalments over its estimated useful economic life of 20 years.
The carrying value of goodwill is reviewed for impairment in periods if
events or changes in circumstances indicate the carrying value may not be
recoverable. These reviews assess the recoverable amount by reference to
the net present value of expected future cash flows of the relevant
income generating unit at a discount rate of 2.8%. Impairment losses are
recognised in the period in which they are identified.
1.6 Development costs
Development expenditure is written off to the profit and loss account in
the year in which it is incurred, unless the directors are satisfied as
to the technical, commercial and financial viability of individual
projects. In this situation, the expenditure is deferred and amortised
over the period during which the company is expected to benefit.
Development costs of current projects will be amortised over 4 years.
1.7 Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less depreciation. Depreciation
is provided at rates calculated to write off the cost less estimated
residual value of each asset over its expected useful life, as follows:
Leasehold land and buildings straight line over the life of the lease
Fixtures, fittings and equipment 25% straight line
1.8 Leasing
Rentals payable under operating leases are charged against income on a
straight line basis over the lease term
1.9 Investments
Fixed asset investments are stated at cost less provision for diminution
in value.
1.10 Stock
Stock is valued at the lower of cost and net realisable value.
1.11 Deferred taxation
The accounting policy in respect of deferred tax reflects the
requirements of FRS19 - Deferred tax. Deferred tax is provided in full in
respect of taxation deferred by timing differences between the treatment
of certain items for taxation and accounting purposes
Deferred tax assets are recognised to the extent that it is regarded as
more likely than not that they will be recovered. Deferred tax is
measured on a non-discounted basis.
1.12 Pensions
The pension costs charged in the financial statements represent the
contributions payable by the company during the year in accordance with
FRS17.
1.13 Financial instruments
The group does not enter into derivative transactions and does not trade
in financial instruments. For the purpose of note 23, short term debtors
and creditors are not treated as financial assets or financial
liabilities.
1.14 Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are
translated into sterling at the rates of exchange ruling at the balance
sheet date. Transactions in foreign currencies are recorded at the rate
ruling at the date of the transaction. All differences are taken to
profit and loss account.
2. Turnover
The total turnover of the group for the year has been derived from its
principal activity wholly undertaken in the United Kingdom.
3. Operating loss
2005 2004
£ £
Operating loss is stated after charging:
Amortisation of intangible assets 136,415 136,415
Depreciation of tangible assets 134,099 161,783
Auditors' remuneration (company £4,250) 12,250 12,250
Operating leases 75,950 75,950
_______ _______
4. Exceptional item
2005 2004
£ £
Impairment of goodwill 1,867,467 -
_________ _______
A detailed review of the carrying value of goodwill has been performed which
has resulted in an impairment charge in respect of the goodwill relating to
the company's investment in Centralfix Limited.
5. Interest payable
2005 2004
£ £
Other interest 4 93
______ ______
6. Taxation
2005 2004
£ £
Domestic current year tax
U.K. corporation tax - -
Adjustments for prior years - -
_____ _____
- -
Deferred tax (54,000) (16,945)
_______ _______
(54,000) (16,946)
_______ _______
The group has estimated Losses of £363,079 (2004: £198,943) available for
carry forward against future trading profits.
7 Loss for the financial year
As permitted by section 230 of the Companies Act 1985, the holding company's
profit and loss account has not been included in these financial statements.
The loss for the financial year is made up as follows:-
2005 2004
£ £
Holding company's loss for the financial year (1,504,702) (48,464)
________ _______
This figure is stated after an exceptional charge for permanent diminution
in the value of the investment in the subsidiary undertaking of
£1,444,213.
8. Earnings per ordinary share
Basic earnings per share are calculated by dividing the loss attributable to
ordinary shareholders of £2,169,747 (2004: £369,105) using a weighted
average of 207,500,000 (2004: 186,250,000) ordinary shares in issue during
the year.
Diluted earnings per share are adjusted for warrants and share options
granted to employees where the exercise price is less than the average price
of the Company's ordinary shares during the year. These adjustments give
rise to no increase in weighted average ordinary shares.
9. Intangible fixed assets
Group Goodwill Development Costs Total
£ £ £
Cost
At 1 July 2004 2,728,292 178,426 2,906,718
Additions - 191,865 191,865
_________ _______ _________
At 30 June 2005 2,728,292 370,291 3,098,583
_________ _______ _________
Amortisation
At 1 July 2004 295,566 - 295,566
Charge for the year 136,415 - 136,415
Impairment 1,867,467 - 1,867,467
_________ _______ _________
At 30 June 2005 2,299,448 - 2,99,448
_________ _______ _________
Net book value
At 30 June 2005 428,844 370,291 799,135
_________ _______ _________
At 30 June 2004 2,432,726 178,426 2,611,152
_________ _______ _________
10 Tangible fixed assets
Group Leasehold land and Fixtures, fittings and Total
buildings equipment
£ £ £
Cost
At 1 July 2004 142,218 643,610 785,828
Additions - 52,115 52,115
At 30 June
2005 142,218 695,725 837,943
Depreciation
At 1 July 2004 51,876 439,816 491,692
Charge for the
year 26,443 107,656 134,099
At 30 June
2005 78,319 547,472 625,791
Net book
value
At 30 June 63,899 148,253 212,152
At 30 June
2004 90,342 203,794 294,136
11. Debtors
2005 Group
2004
£ £
Trade debtors 113,942 122,578
Amounts owed by group undertakings - -
Other debtors 38,464 37,287
Prepayments and accrued income 89,540 66,504
Deferred tax asset (see note 14) 54,000 -
______ ______
295,946 226,369
______ _______
Other debtors include £35,473 (2004: £35,473) rental deposit which is
secured by a charge in favour of the landlords.
12 Creditors: amounts falling due within one year
Group 2004
2005
£ £
Trade creditors 59,456 68,451
Amounts due to group undertakings - -
Taxes and social security costs 13,510 12,276
Accruals and deferred income 46,776 56,911
______ ______
119,742 137,638
______ ______
13 Provisions for liabilities and charges
The deferred tax asset (included in debtors, note 12) is made up as
follows:
2005 2004
£ £
Tax losses and accelerated capital allowances (54,000) -
_______ ______
14 Statement of movements on reserves
Group
Share premium account Profit and loss account
£ £
Balance at 1 July 2004 3,111,419 (504,963)
Retained loss for the year - (2,169,747)
Premium on shares issued
during the year 275,000 -
Expenses relating to issue
of shares (26,250) -
________ _________
Balance at 30 June 2005 3,360,169 (2,674,710)
________ _________
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