Preliminary Results
Upstream Marketing and Comms Inc.
01 June 2007
Upstream Marketing and Communications Inc.
('Upstream' or 'the Company')
Preliminary Results
Upstream, the AIM-listed Asia Pacific-focused corporate and marketing
communications services network, announces its audited preliminary results for
the year ended 31 December 2006.
Highlights of 2006
• Completion of the reverse acquisition of UAL by Raven Capital Limited ('Raven')
in October 2006 and change of the Company's name to Upstream Marketing and
Communications Inc. ('Upstream')
• Landmark year of progress for Upstream Asia Limited ('UAL'), with strong growth
in operating income and investment for future expansion that is already starting
to yield returns.
• The acquisition has enabled Upstream to enter the fast growing Asia Pacific
corporate and marketing communications services sector. UAL's key activity is
the provision of marketing and communication services to clients in the technology,
corporate & financial, and consumer & travel industries.
• Appointment of Shahed Mahmood (Non-Executive Chairman), David Ketchum (CEO)
and Jane McGuire Ketchum (Non-Executive Director) to the Board following completion
of the acquisition and Ajay Kejriwal as Finance Director on 17 January 2007.
Graham Butt and Joanna Barrett continue to act as Non-Executive Directors.
Results 2006
• In accordance with International Financial Reporting Standards, the acquisition
of UAL by Upstream has been accounted for as a reverse acquisition. The results
for the year ended 31 December 2006 comprise:
• the results for UAL for the year ended 31 December 2006; and
• the results of Upstream for the period from 16 October 2006, the date on which
the reverse acquisition completed, to 31 December 2006.
• Comparative figures for the year ended 31 December 2005 comprise only those of UAL.
• The Group demonstrated strong revenue growth in 2006 :
• UAL revenue amounted to US$2.693 million (2005: US$1.996 million)
• Offices in China and Taiwan experienced particularly strong growth in
the period
• Shanghai revenue up 190%; Beijing: 46%; Taiwan: 74%
• The loss from operations for the year before the write off of goodwill
arising on the reverse acquisition was US$89,000 (2005: profit of US$37,000)
which was in line with expectations and reflected the increased investment
in high quality staff as the year progressed.
• After the write off of goodwill arising from the reverse acquisition of
US$10.783 million the loss before taxation for the year was US$10.872
million (2005: profit of US$37,000).
• Upstream raised £150,000 on 13 January 2006 through a placing of
13,300,000 Ordinary Shares. A further £500,000 was raised by way of a
placing of 2,500,000 new Ordinary Shares at 20p at the time of the reverse
acquisition.
Current Trading and Outlook
• The Asia Pacific economies continue to grow, with activity stimulated by
China's accession to World Trade Organisation and the upcoming 2008 Beijing
Olympics and 2010 Shanghai World Expo.
• Demand for corporate and marketing communications services remains strong,
driven by rising consumer spending, the desire of multinational companies to
expand their business in the region, and Asia-based companies seeking to go
global.
• The Group's strong regional management and unique portfolio of marketing,
business development, and financial resources mean that the Group is well
positioned to drive growth in the network's offices throughout the region at
an above market rate.
• Several key appointments have been made since completion of the reverse
acquisition, which the Directors are confident will enable the Group to
pitch for, and win, larger and more profitable contracts and retainers.
• Assignments from many new clients have been added to the Upstream roster
and include: Bayer Levitra, Burger King, China Telecom, ESPN, JP Morgan,
Sony, and Yellow Pages.
• The Group's strategy of seeking appropriate acquisitions is proceeding
well. One acquisition has been completed, of Macro Consulting, and
management believes that further acquisitions will be completed over the
course of 2007. Acquisitions are expected to be a material part of the
growth envisaged for 2007.
• The growth in the first quarter 2007 revenue over that of the equivalent
period in 2006 has been 30%
David Ketchum, Chief Executive of Upstream, said:
'Our strategy has been to build solid foundations for success. The growth of
the network capabilities and revenue in 2006 is a strong platform for our 2007
performance, which is expected to accelerate through the year. We are very
encouraged by the Group's pipeline of new business, and the buoyancy in the Asia
Pacific economies, and we have invested to build a world class management team
and assure we have the right capabilities in place to deliver profitable growth
for shareholders. The consumer & travel and corporate & financial sectors are
showing particular promise, as is our business in China.'
Enquiries:
Ajay Kejriwal
m: + 44(0)7957 488104
John Bick
m: + 44(0)7917 649362
www.aboutupstream.com
Chairman's and Chief Executive's report
The Board is pleased to report Upstream's audited results for the year ended 31
December 2006.
On 16 October 2006 the Company completed its reverse acquisition of Upstream
Asia Limited ('UAL'), and the Company's name was changed to Upstream Marketing
and Communications Inc. ('Upstream'). The Directors believe that the Group's
focus on delivering corporate and marketing communications services in the Asia
Pacific region presents an excellent opportunity for profitable and sustainable
growth. Demand for corporate and marketing communications services remains
strong driven by rising consumer spending, the desire of multinational companies
to expand their business in the region, and Asia-based companies seeking to
spread their message to the global market place.
UAL is a full service marketing and corporate communications network positioned
to assist companies make the most of business opportunities in the Asia Pacific
region, with offices in Beijing, Hong Kong, Shanghai, Singapore, Sydney, Taipei
and Tokyo, as well as regional and global affiliates. In the months following
the reverse acquisition, the Group has made significant progress in executing
its business plan to drive organic revenue growth and identify strategic
acquisition targets.
The acquisition of UAL by Upstream has been accounted for as a reverse acquisition,
under International Financial Reporting Standards. In accordance with this
accounting policy the results of the Group for the year ended 31 December 2006
therefore comprise the results for UAL for the 12 months ended 31 December 2006
together with the results of Upstream from the period from 16 October 2006, the
date on which the reverse acquisition completed, to 31 December 2006. For
comparative purposes the results for the year ended 31 December 2005 comprise
only those of UAL.
For the year ended 31 December 2006 revenue amounted to US$2.693 million (2005:
US$1.996 million). The loss from operations for the year before the write off of
goodwill arising from the reverse acquisition was US$89,000 (2005: profit of
US$37,000), which reflected the continued investment in high quality staff as
the year progressed. After the write off of goodwill arising from the reverse
acquisition amounting to US$10.783 million, the loss before taxation for the
year was US$10.872 million (2005: profit of US$37,000) which was in line with
expectations.
The Group experienced strong growth in revenue throughout the year with the
total revenue for the final quarter of the year representing a 36% increase over
that achieved in the first quarter. The offices in China experienced
particularly strong growth. The PR market in China is estimated to be growing at
30% a year (source: PRC Embassy), and the Group's offices are comfortably
exceeding this rate, with the Beijing office achieving revenue growth during the
year of 46% and Shanghai 190%. Taiwan was also strong, with a 64% increase in
revenue over the year.
Management believes that this revenue trend will continue throughout the current
financial year with performance indicators showing continued growth in the first
quarter of 2007, with the revenue for this period representing a 30% increase
over the same period in the prior year . This improvement is primarily due to
the organic growth achieved by various country units.
The Company's primary objective in the prior year was to build solid foundations
for future growth in the business. The Directors believe that the expansion of
the Company's network capabilities and growth in revenue in 2006 will provide a
strong platform for its performance in 2007, which is expected to accelerate
throughout the year.
The Group's strong regional management and portfolio of marketing, business
development, and financial resources are well positioned to drive growth in the
network's offices throughout the region. The balance of centralized services and
financial control together with wholly-owned highly localized and motivated
operations throughout the Asia-Pacific region is proving to be a powerful
business model and point of competitive advantage.
We are very encouraged by the Group's pipeline of new business, and the buoyancy
in the Asia Pacific economies, and have invested to build a world class management
team to ensure we have the right capabilities in place to deliver profitable
growth for shareholders. The consumer & travel and corporate & financial sectors
are showing particular promise, as is our business in China.
Leaders in their fields have been recruited as managing directors for the Company's
Hong Kong and Beijing operations, further enhancing the strong regional management
team. These appointments have already started to have a positive impact on the
Group in the current financial year with a number new business wins from blue chip
international clients and Asian leaders such as Burger King, China Telecom, JP
Morgan. We believe that this growth will gather momentum as the year progresses.
In late 2006, the Group established a new subsidiary Media Services Asia to manage
and exploit the growing opportunities in digital marketing online news release
distribution services. A global distribution deal with leading international
news release distribution service MarketWire has opened new revenue opportunities
that are now being exploited.
In China, one of the network's focus markets, the Group continued to make progress
in expanding its operations, client base and revenue with Upstream being named
one of China's 10 Most Prominent Public Relations Agencies of 2007 by influential
Chinese business newspaper Fortune Times.
Acquisitions
On 29 March 2007, Upstream completed its first acquisition of its affiliate
Macro Consulting (now re-named Upstream Australia), for a maximum aggregate
consideration of £800,000 to be satisfied by the issue of up to 4 million new
ordinary shares in Upstream. The initial tranche of 1 million shares was issued
to the vendors following completion of the acquisition with the remaining three
potential future tranches of 1 million shares each, becoming payable on the
achievement of specific performance targets from 2007 to 2009.
Upstream has a solid pipeline of boutique and medium-sized acquisition targets
in strategic sectors for the Group such as public relations, branding and
design, digital marketing, and video production under consideration. The
Director's intend to make acquisitions which have a sound commercial basis,
where there is a clear financial benefit to shareholders and where management of
the target company is strongly incentivised to grow their business within the
enlarged group.
It is the Company's intention that acquisitions will provide a significant
source of the Group's growth for 2007 and beyond.
Finances and Share Issues
As at 31 December 2006 Upstream had net cash of US$307,000 and the total number
of ordinary shares in issue was 133,541,670.
Board Changes
Following completion of the reverse acquisition in October 2007, Shahed Mahmood
(Non-Executive Chairman), David Ketchum (CEO) and Jane McGuire Ketchum (Non-Executive
Director) were appointed to the Board. Graham Butt and Joanna Barrett continue
to act as Non-Executive Directors. On 17 January 2007, Ajay Kejriwal was named
Finance Director of the Company.
Current Trading and Outlook
The Asia Pacific economies continue to grow, with activity stimulated by China's
accession to World Trade Organisation and the upcoming 2008 Beijing Olympics and
2010 Shanghai World Expo.
Demand for corporate and marketing communications services remains strong,
driven by rising consumer spending, the desire of multinational companies to
expand their business in the region, and Asia-based companies seeking to go
global.
The Directors believe that the Group's strong regional management and unique
portfolio of marketing, business development and financial resources mean that
the Group is well positioned to drive growth in the network's offices throughout
the region at an above market rate.
Several key appointments have been made since completion of the reverse
acquisition which the Directors are confident will enable the Group to pitch
for, and win, larger and more profitable contracts and retainers.
Assignments from many new clients have been added to the Upstream roster and
include Bayer Levitra, Burger King, China Telecom, ESPN, JP Morgan, Sony, and
Yellow Pages.
The Group's strategy of seeking appropriate acquisitions is proceeding well,
with the first acquisition, that of Macro Consulting, having been completed in
March 2007. The Directors are confident that further acquisitions will be
completed over the course of 2007 in line with this strategy with acquisitions
expected to form a material part of the growth envisaged for the year. In
addition, the Group continues to experience encouraging organic growth with the
revenue for the first quarter of 2007 representing a 30% improvement over that
of the equivalent period in 2006.
David Ketchum, Chief Executive Shahed Mahmood, Chairman
1 June 2007 1 June 2007
www.aboutupstream.com
Consolidated income statement
Continuing operations Note 2006 2005
US$'000 US$'000
Revenue 2,693 1,996
Other income 170 30
--------- ---------
Total income 2,863 2,026
Other operating expenses (2,952) (1,989)
--------- ---------
(Loss)/profit from operations prior to write
off of (89) 37
goodwill
Write off of goodwill (10,783) -
--------- ---------
(Loss)/profit from operations and (loss)/
profit (10,872) 37
before taxation
Taxation expense 3 - 9
--------- ---------
(Loss)/profit for the year (10,872) 28
--------- ---------
(Loss)/earnings per share for profit US cents US Cents
attributable to the equity holders of the
Company during the year
- Basic 4 (11.51) 0.04
--------- ---------
Consolidated balance sheet
2006 2005
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 88 35
----------- -----------
88 35
----------- -----------
Current assets
Trade and other receivables 612 562
Cash and cash equivalents 307 104
----------- -----------
919 666
----------- -----------
Total assets 1,007 701
----------- -----------
LIABILITIES
Current liabilities
Trade and other payables 602 609
Deferred income 26 -
Current tax provision 3 9
----------- -----------
Total liabilities 631 618
----------- -----------
EQUITY
Share capital 617 16
Reserves (241) 67
----------- -----------
Equity attributable to equity holders 376 83
of the Company and total equity
----------- -----------
Total equity and liabilities 1,007 701
----------- -----------
Consolidated statement of changes in equity
Share Share Capital Foreign Profit Total
capital premium reserve exchange and loss equity
reserve account
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January
2005 16 136 - (10) (96) 46
Exchange
difference on
consolidation - - - 9 - 9
Profit for the
year - - - - 28 28
------ ------ ------ ------ ------- -------
At 31 December
2005 and
1 January 2006 16 136 - (1) (68) 83
------ ------ ------ ------ ------- -------
Exchange
difference on
consolidation - - - 14 - 14
Loss for the year - - - - (10,872) (10,872)
------ ------ ------ ------ ------- -------
Total
recognised
income and
expense for
the year - - - 14 (10,872) (10,858)
Issue of new
shares prior
to reverse
acquisition 2 159 - - - 161
Issue of new
shares on
reverse acquisition 106 3,700 - - - 3,806
Share issue costs - (9) - - - (9)
Adjustment on
reverse acquisition 493 153 6,547 - - 7,193
------ ------ ------ ------ ------- -------
At 31 December
2006 617 4,139 6,547 13 (10,940) 376
------ ------ ------ ------ ------- -------
The capital reserve movement of US$6,547,000 arises on the reverse acquisition
of Upstream Asia Limited.
Consolidated cash flow statement
2006 2005
US$'000 US$'000
Operating activities
(Loss)/profit after taxation (10,872) 28
Adjustments for:
Interest income (3) -
Depreciation of property, plant and equipment 37 25
Write off of goodwill 10,783 -
--------- ---------
Operating cashflow before working capital changes (55) 53
Decrease/(increase) in trade and other receivables 29 (197)
(Decrease)/increase in trade and other payables (90) 160
Increase in deferred income 26 -
--------- ---------
Cash (used from)/generated by operations (90) 16
Tax paid (10) (9)
--------- ---------
Net cash (outflow)/inflow used in operating (100) 7
activities --------- ---------
Investing activities
Interest received 3 -
Purchases of property, plant and equipment (89) (31)
Reverse acquisition expenses (730) -
Cash acquired on reverse acquisition 95 -
--------- ---------
Net cash outflow from investing activities (721) (31)
Financing activities
Issue of shares 928 -
Expenses in connection with shares issue (9) -
--------- ---------
Net cash inflow from financing activities 919 -
--------- ---------
Net increase/(decrease) in cash and cash equivalents 98 (24)
Cash and cash equivalents as at 1 January 104 125
Effect of exchange rate fluctuations 105 3
--------- ---------
Cash and cash equivalents as at 31 December 307 104
========= =========
Notes to the preliminary announcement
1. GENERAL INFORMATION
The preliminary announcement has been prepared in accordance with applicable
accounting standards and under the historical cost convention. The Company was
incorporated as a Corporation in the Cayman Islands which does not prescribe the
adoption of any particular accounting framework. The Board has therefore adopted
International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board. The principal accounting policies of the Group are
set out in the Group's 2006 annual report and financial statements.
2. SEGMENTAL INFORMATION
(a) Primary reporting format - business segment:
As defined under International Accounting Standard 14 (IAS14), the only material
business segment the Group has is that of marketing and public relations.
(b) Secondary reporting format - geographical segment:
Under the definitions contained in IAS 14, the only material geographic segment
that the Group operates in is Asia.
3. TAXATION EXPENSE
2006 2005
US$'000 US$'000
Current year income tax charge - 9
---------- ----------
The income tax charge for the year have been calculated at the rates prevailing
in the relevant jurisdictions.
A reconciliation of the tax expense to the (loss)/profit before taxation using
the statutory rates for the countries in which the Company and its subsidiaries
are domiciled to the tax expense at the effective tax rates, and a
reconciliation of the statutory tax rates to the effective tax rates, are as
follows :
2006 2005
US$'000 % US$'000 %
(Loss)/profit before taxation (10,872) 37
-------- -------- -------- --------
Tax at the domestic income tax (1,903) (17.5) 23 62.2
rates
Income not subject to tax - (7) (18.9)
Expenses not deductible for tax
(primarily 1,889 17.4 6 16.2
goodwill written off)
Tax effect of unrecognised tax 14 0.1 (13) (35.1)
losses
-------- -------- -------- --------
Current year income tax charge - - 9 24.4
-------- -------- -------- --------
The Group has unrelieved tax losses of approximately $170,000, the utilisation
of which is uncertain and consequently no deferred tax asset has been
recognised.
4. EARNINGS PER SHARE
(a) Basic earnings per share
The calculation of basic earnings per share is based on the loss attributable to
equity holders of the parent company of US$10,872,000 (2005: profit of
US$28,000) and the weighted average number of ordinary shares in issue during
the year of 94,479,385 (2005 : 79,675,002).
(b) Diluted earnings per share
There are no potentially dilutive instruments in issue.
5. POST BALANCE SHEET EVENTS
On 29 March 2007 the Group acquired Macro Consulting, a full service public
relations company, for a total maximum consideration of approximately US$1.5
million satisfied by the issue of up to 4 million ordinary shares in the Company
at an agreed price of 20p per share. The shares will be issued in four tranches
from the date of acquisition through to 2009 dependent on achieving certain
performance targets. If the maximum consideration shares are issued, the
consideration shares will represent approximately 3% of the enlarged share
capital of the Company.
In the financial year ended 31 December 2006 Macro Consulting achieved a pre-tax
profit of approximately US$90,000 and had net assets of approximately US$80,000
at that date.
6. 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 consolidated balance sheet at 31 December 2006 and the consolidated income
statement, consolidated statement of changes in equity, consolidated cash flow
statement and associated notes for the year then ended have been extracted from
the Group's 2006 statutory financial statements upon which the auditors opinion
is unqualified and does include any statement under Section 237 of the Companies
Act 1985.
The annual report for the year ended 31 December 2006 will be sent to
shareholders shortly.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
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