Final Results

Internet Music & Media PLC 27 June 2003 To be embargoed Not to be released until 7.00am on 27th June, 2003 Internet Music & Media PLC ('IMM' or 'the Company') Preliminary results for the year ended 31st December, 2002 Chairman's Statement I am pleased to report on the results of Internet Music and Media PLC and its subsidiaries ('the Group') for the year ended 31st December 2002. Trading The results for the year ended 31st December 2002 show an operating loss of £1.8 million, which includes non cash depreciation of £0.5 million, compared with the previous years operating loss of £12.1 million which includes a non cash exceptional goodwill write off of £9.8 million and non cash depreciation of £0.6 million. The Company's business continues to be the sale of electronic dance music, mainly on vinyl, through its website, www.groovetech.com which also broadcasts live and archived music from its studios in London. The site won two further awards during 2002 namely Best Shopping Website, at the 2002 Midemnet Awards and Best Online Retailer at 2002 UK Online Music Awards. The Group has experienced revenue growth year on year since it commenced trading in 2000. Revenues for the period under review amounted to £2.1 million compared with £1.3 million for the previous year. The Group experienced a slowing of revenues during the second half of 2002, due to a number of external factors. In August 2002, the Company's bankers informed us that it wished to withdraw loan facilities. As a result, sales receipts had to be applied in reducing the Group's overdraft facility which deprived the Group of the working capital necessary for replacing stock. At around the same time, the US dollar weakened against the pound sterling. As about 70% of the Group's revenues are received in dollars our revenues declined as a result. The performance of the Group for the second half of 2002 was, therefore, not as I had hoped when I published my statement reporting on the interim results for the first half of 2002. Fundraising In January 2003 we were pleased to be approached by Mark Wadhwa and Timothy Robinson the principals of the Vinyl Factory Limited, which owns the leading pressing plants in the UK for the manufacture of Vinyl gramophone records, with an offer of financial support and commercial collaboration. On 28th March 2003 we announced that we had entered into an agreement with them, under which they agreed to advance funds to the Company to be applied in subscribing for new shares in the company on the terms and conditions set out in the announcement and subject to the approval of shareholders. A circular setting out the proposed arrangements in detail and the advantages arising from them is in the advanced stages of preparation and will be despatched to shareholders shortly for their approval. Steps are being taken both to reduce the operating overheads of the Group, particularly in the UK, and to increase turnover and margins. Details of these steps will be also be set out in the circular referred to above. Resignation of Directors During March, 2003 Z J Jenkins, B W Pember and D S Rogers resigned as directors to the company. No further appointments have been made since the above resignations. Outlook In spite of difficult economic times, the demand for Vinyl records continues to remain strong and I believe that the Group is well placed to benefit from this. I look forward to the future with cautious optimism. Nicholas Cowan Chairman 27th June 2003 Consolidated profit and loss account for the year ended 31st December, 2002 2002 2001 £ £ Group Turnover 2,074,139 1,260,153 Cost of sales 1,627,393 (909,603) ---------- ---------- Gross profit 446,746 350,550 Exceptional goodwill impairment - 9,806,650 Administrative expenses 2,153,185 2,661,383 Other operating income - (17,167) ---------- ---------- Operating loss (1,706,439) (12,100,316) Interest receivable 1,298 2,315 Interest payable and similar charges (55,449) (59,200) ---------- ---------- Loss on ordinary activities before taxation (1,760,590) (12,157,201) Tax on loss on ordinary activities - - ---------- ---------- Loss for the financial year (1,760,590) (12,157,201) ========== ========== Loss per share (pence) (4.96) (46.91) ========== ========== All of the activities of the group are classed as continuing. Group statement of total recognised gains and losses for the year ended 31st December, 2002 2002 2001 £ £ Loss for the financial year attributable to the (1,760,590) (12,157,201) shareholders of the parent company ---------- ---------- Currency translation differences on foreign currency net investments (161,142) (58,946) ---------- ---------- Total gains and losses recognised since the last annual report (1,921,732) (12,098,255) ========== ========== Consolidated balance sheet at 31st December, 2002 2002 2001 £ £ Fixed assets Tangible assets 848,311 1,493,309 ---------- ---------- Current assets Stocks 231,557 297,879 Debtors 71,840 132,213 Cash at bank - 21,225 ---------- ---------- 303,397 451,317 Creditors: amounts falling due within one year 2,320,286 491,472 ---------- ---------- Net current liabilities (2,016,889) (40,155) ---------- ---------- Total assets less current liabilities (1,168,578) 1,453,154 Creditors: amounts falling due after more than one - 700,000 year ---------- ---------- (1,168,578) 753,154 ========== ========== Capital and reserves Called up share capital 3,560,767 3,560,767 Share premium account 13,450,668 13,450,668 Profit and loss account (18,180,013) (16,258,281) ---------- ---------- (1,168,578) 753,154 ========== ========== Shareholders' funds Equity (4,374,697) (2,452,965) Non-equity 3,206,119 3,206,119 ---------- ---------- (1,168,578) 753,154 ========== ========== Consolidated cash flow statement for the year ended 31st December, 2002 2002 2001 £ £ Net cash inflow/(outflow) from operating activities 21,388 (2,181,743) ---------- ---------- Returns on investments and servicing of finance Interest received 1,298 2,315 Interest paid (55,449) (59,200) ---------- ---------- Net cash outflow from returns on investments and (54,151) (56,885) servicing of finance ---------- ---------- Capital expenditure Payments to acquire tangible fixed assets (3,075) (279,097) Receipts from sales of fixed assets - 4,187 ---------- ---------- Net cash outflow from capital expenditure (3,075) (274,910) ---------- ---------- Cash outflow before financing (35,838) (2,513,538) Financing Issue of equity share capital - 2,184,550 Increase in bank loans 23,506 127,698 ---------- ---------- Net cash inflow from financing 23,506 2,312,248 ---------- ---------- Decrease in cash (12,332) (201,290) ========== ========== Notes to the Consolidated Cash Flow Statement A. Reconciliation of operating loss to net cash inflow/(outflow) from operating activities 2002 2001 £ £ Operating loss (1,706,439) (12,100,316) Depreciation 531,017 556,615 Exceptional goodwill impairment - 9,806,650 Decrease/(increase) in stocks 66,322 (21,493) Decrease/(increase) in debtors 60,373 (59,789) Increase/(decrease) in creditors 1,114,201 (373,324) (Gain)/loss on foreign exchange differences (44,086) 9,914 ---------- ---------- Net cash inflow/(outflow) from operating 21,388 (2,181,743) activities ========== ========== B. Reconciliation of net cash flow to movement in net debt 2002 2001 £ £ Decrease in cash in the period (12,322) (201,290) Net Cash (inflow) from bank loans (23,506) (127,698) -------- -------- Change in net debt resulting from cash flows (35,838) (328,988) Net debt at 1 January 2002 (709,426) (380,438) -------- -------- Net debt at 31 December 2002 (745,264) (709,426) ======== ======== C. Analysis of changes in net debt At 1st Cash flow At 31st January, £ December, 2002 2002 £ £ Net cash: Cash in hand and at bank 21,225 (21,225) - Overdrafts (30,651) 8,893 (21,758) --------- --------- --------- (9,426) (12,332) (21,758) --------- --------- --------- Debt: Debt due within 1 year - (723,506) (723,506) Debt due after 1 year (700,000) 700,000 - --------- --------- --------- (700,000) (23,506) (723,506) --------- --------- --------- Net debt (709,426) (35,838) (745,264) ========= ========= ========= Notes 1 Loss per share The calculation of the basic loss per share is based on the loss after tax of £ 1,760,590 (2001: £12,157,201) and on 35,464,800 (2001: 25,914,502) ordinary shares being the weighted average number of shares in issue during the period. The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share. This is because the exercise of share options would have the effect of reducing the loss per ordinary share and is therefore not dilutive under the terms of Financial Reporting Standard Number 14. 2 Dividends The Directors are not proposing the payment of a dividend in respect of the year ended 31st December, 2002. 3 Tax on loss on Ordinary Activities There is no charge to corporation tax due to the net losses incurred during the year subject to agreement with the Inland Revenue. Accumulated tax losses have not been recognised as a deferred tax asset. 4 Publication of non-statutory accounts The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the year ended 31st December, 2002, is extracted from the Group's financial statements to that date which received an unqualified auditor's report and will be filed with the Registrar of Companies in due course. The financial information for the year ended 31st December, 2001, is extracted from the Group's full statutory accounts to that date, which received an unqualified auditors' report and have been filed with the Registrar of Companies. 5 Copies of the Report and Accounts will be sent to shareholders shortly and are now available from the company's registered office. Further enquiries Internet Music & Media PLC Nicholas Cowan - Chairman Tel: 07747 695083 John East & Partners Limited Tel: 020 7628 2200 David Worlidge / Simon Clements This information is provided by RNS The company news service from the London Stock Exchange

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