Interim Results
Yoomedia PLC
29 September 2006
YooMedia plc / Ticker: YOO / Market: AIM / Sector: Media
29 September 2006
YooMedia plc ('YooMedia' or 'the Company')
Interim Results
YooMedia plc, the AIM traded interactive media and gaming group, announces its
interim results for the six months ended 30 June 2006.
Overview
• Period of reconstruction aimed at rationalising the business,
strengthening balance sheet and re-positioning product offering
• Groundwork in place to secure an improved performance in the second half
• Financial restructuring programme initiated to alleviate debt and
the cost of financing such a facility and to support remaining stages
of re-structuring
• Business focus moved from operating own-branded businesses into
offering a portfolio of products and services to major brands
• Results reflect the steps taken to re-position the business
• Loss before interest, depreciation, tax and amortisation of £2.2m
(2005: £1.1m) on a turnover, excluding gambling winnings of £10m
(2005: £11.2m)
• Operating costs reduced by 17% to £5.1m
CHAIRMAN'S STATEMENT
As indicated in previous announcements and trading updates, this has been a
period of dramatic reconstruction for the Company aimed at rationalising the
business, strengthening its balance sheet and re-positioning YooMedia's product
offering to capitalise on growing opportunities within the interactive media
market. Much groundwork has been done to secure an improved performance in the
second half, and the Directors are confident that the process of transformation
is important to the mid and long-term interests of the Company and shareholders.
The results for the first six months of 2006 reflect the steps taken to
restructure and re-position YooMedia's business in the UK, along with the impact
of rapid changes and developments within its core markets, with the aim of
placing it on the path towards profitability.
Business Transformation
In order to improve the balance sheet, the Board initiated a financial
restructuring programme. This was aimed at alleviating its debt, predominantly
caused by problems in the Games & Gambling division in 2005, and the cost of
financing such a facility which amounted to interest and similar charges of £1m
for the first half of 2006 (2005: £0.2m). This financial initiative included the
raising of £6m through a convertible loan with two US funds, and a share placing
of £1.3m with an existing institutional investor, announced in May 2006.
Latterly, new banking arrangements and a credit facility were agreed with Mentor
Marketing & Investments, designed to support the remaining stages of the
re-structuring.
In parallel with the financial re-structuring process, YooMedia has continued to
execute the commercial and operational transformation of its business. It has
moved its business focus away from operating own-branded businesses, into
offering a portfolio of products and services to major brands that are seeking
to exploit the opportunity of interactive transactions with users of digital
media. This transformation and progress is highlighted by our relationship with
Freeview. In 2005 the Yooplay channel on Freeview offered pay-to-play games,
whereas in 2006 we have used the same bandwidth to provide a data-casting
service for the Freeview platform. This business line now has approximately
£0.9m of revenue per annum and has deals with Virgin Radio, Gemstar, Sony's
tvtv, and Electra Entertainment.
Games & Gambling
YooMedia expects the online and interactive gambling sector to transform in the
next two years as a consequence of changes in legislation and investment by
major operators. In order to exploit the new opportunities that will arise, we
have re-positioned our gambling business as a service provider and operator for
third party brands.
In line with this we signed an agreement with Gala Group, which will see the
Avago channel coming off air in the autumn of 2006, to be replaced by a
Gala-branded channel on our bandwidth and platform. This agreement, along with
the revised terms agreed with William Hill in late 2005, has meant a reversal in
performance of the division which I am happy to report delivered a gross profit
contribution of £0.7m in the first half of 2006, compared with a loss for the
same period last year.
On 29th June we also signed a £2m agreement with Catalyst Media Group plc to
provide them with an interactive digital head-to-head gaming platform and
various games licences. Revenues generated through this contract will be
reflected as earned in the year end results.
Prospects remain strong for this business, and the recently announced agreement
with Playboy is evidence of the strength of the competitive offering YooMedia
has in this sector. We are still at a relatively early stage and have some way
to go, but I believe the quality and increasing regularity of contract wins
bodes well for the future.
The Directors would however like to note that YooMedia does not operate 'call TV
' services using premium rate telephone numbers or any service that takes bets
from outside the UK. It is therefore not subject to the gambling legislation
which has been recently highlighted in the US in particular.
Dating
As part of the strategic review of the YooMedia Dating division, the Company
reached an agreement with the 25% minority shareholders in YooMedia Dating to
acquire their shares for a consideration of 19,230,770 shares in YooMedia plc. A
further consideration of £500,000, also payable in YooMedia plc shares, will be
paid on certain performance criteria being met.
The dating business, which operates two branded services - Dateline and Avenues
was a tale of two halves. The Dateline business has achieved continued growth in
the competitive online dating sector, although the pre-dominantly offline
business of Avenues has been impacted by competition from the online sector. Net
revenues declined to £1.89m (2005: £2.51m) and both businesses are now
undergoing re-structuring. Although not core to the Company's activities, the
Board is conscious of the value of the dating division, which will be realised
either from in-house development or disposal at an appropriate time.
Interactive Services
The Interactive Services division won significant new business in the first half
of 2006 and continued to deliver innovative interactive services for its
existing clients. The contract for the NHS Direct interactive channel was
renewed for a further two years and new services were launched for clients such
as Budweiser, Boots and Nestle. The 'red button' interactive TV sector has seen
a reduced level of investment compared with 2005, although audience usage
continues to be strong.
Whilst the interactive marketing business has seen strong growth in line with
increased overall investment in online marketing, changes in the Sky electronic
programme guide have had an impact on a number of our clients in the period and
this contributed to a reduction in gross margin from broadcast-related
activities. Turnover for the period was £4.5m (2005: £5.8m).
Management
During the first half of 2006 there were a number of changes to the Board. The
Finance Director, Robin Robbins, stepped down for health reasons, and Eddie
Abrams, YooMedia's Strategy and Development Director, is now managing the
finance function in the interim. Leo Noe, non-executive Director, also stepped
down from the board but maintains an active interest in the Company as a major
shareholder.
Recent events
We continue to make headway and since the period end, YooMedia has entered a
joint venture agreement with SGI Limited, a company backed by entrepreneur Peter
Shalson who currently controls three channels on Sky, into which it has vested
the rights to YooMedia's time stamped SMS messaging system and the television
rights to the Tringo game. It is intended that, together with our new partners,
these rights will be developed and exploited in the UK market and
internationally.
Outlook
The actions taken so far in 2006, have contributed significantly in transforming
the nature of YooMedia's activities and developing a profitable business. Whilst
risk remains, the Directors are nevertheless confident that the revised strategy
for the business is correct and that YooMedia has significant opportunities for
growth in its core markets. It is unlikely that the full year result for 2006
will be ahead of market expectations considering the extent of the
transformation undertaken, however the foundations for future have been laid.
Finally I'd like to thank all those involved with the business for their hard
work and support, which has been key in the implementation of our re-structuring
programme and positioning the Company as a leading interactive content and
services provider.
Michael Sinclair
Executive Chairman
29 September 2006
Profit and loss account for the six months to 30 June 2006
Unaudited Unaudited Audited
Six months ended Six months ended Year ended 31
30 June 2006 30 June 2005 December 2005
Total
Notes £000's £000's £000's
Turnover 2 31,233 48,527 85,580
Cost of sales (28,352) (43,471) (76,890)
Gross profit 2,881 5,056 8,691
Administrative costs (5,088) (6,162) (11,641)
Earnings before Interest, Tax, Depreciation, 4
Amortisation and Exceptionals (2,207) (1,106) (2,950)
Depreciation 4 (817) (991) (2,128)
Amortisation and Impairment of goodwill and 4
deferred development costs (1,961) (1,292) (2,998)
Exceptional items 3 - (1,074) (2,376)
Operating loss (4,985) (4,463) (10,452)
Interest receivable and similar income 1 51 50
Interest payable and similar charges (991) (222) (775)
Loss on ordinary activities before taxation (5,975) (4,634) (11,177)
Tax recoverable on ordinary activities - - -
Loss on ordinary activities after taxation (5,975) (4,634) (11,177)
Equity minority interest - 77 23
Loss for the financial period (5,975) (4,557) (11,154)
Loss per share
- basic 5 (1.14p) (0.99p) (2.37p)
- diluted 5 (1.09)p (0.97p) (2.32p)
The above results are derived entirely from continuing operations
There were no other gains or losses recognised in the period
There is no difference between the loss on ordinary activities before taxation
and the loss for the periods stated above, and their historical cost
equivalents.
Balance sheet as at 30 June 2006
Unaudited Unaudited Audited
Six months Six months Year ended 31
ended 30 ended 30 December
June 2006 June 2005 2005
Notes £000's £000's £000's
Fixed assets
Goodwill 42,594 45,161 43,980
Other intangible assets 1,886 1,848 1,925
Tangible assets 3,014 3,235 2,737
Investments 1,493 - 13
48,987 50,244 48,655
Current assets
Debtors 7,767 6,562 7,634
Cash at bank and in hand 401 498 117
8,168 7,059 7,751
Creditors - Amounts falling due within one year (14,763) (11,970) (15,076)
Net current liabilities (6,595) (4,910) (7,325)
Total assets less current liabilities 42,392 45,334 41,330
Creditors - Amounts falling due after more than one
year 6 (6,522) (3,000) (1,816)
Provisions for liabilities 7 (1,731) (1,058) (1,834)
Accruals and deferred income (1,977) - (881)
Net assets 32,162 41,276 36,799
Capital and reserves
Called -up share capital 12,786 11,620 12,060
Share premium account 76,490 73,029 75,521
Shares to be issued 281 281 281
Capital redemption reserve 455 455 455
Profit and loss account (57,850) (44,412) (51,875)
Equity shareholders' funds 8 32,162 40,973 36,442
Equity minority interest - 303 357
Total capital employed 8 32,162 41,276 36,799
Cash flow statement for six months to 30 June 2006
Unaudited Unaudited Audited
Six months Six months Year ended
ended 30 ended 30 31 December
June 2006 June 2005 2005
Notes
£000's £000's £000's
Continuing activities
Operating loss (4,985) (4,463) (10,452)
Depreciation charge 817 991 2,127
Amortisation and impairment of goodwill 1,386 1,117 2,323
Amortisation and impairment of deferred development costs 575 175 675
Exceptional impairment of development costs - - 680
UITF 25 provision for National Insurance on share options - (71) 1,116
UITF 17 charge on grant of share options - 865 -
Movement in provisions (103) (895) (1,307)
(Decrease) / increase in other non-current assets - - (13)
Increase / (decrease) in debtors (133) (502) (1,618)
(Decrease)/Increase in creditors 737 (4,169) (1,340)
(Decrease)/Increase in deferred income 377 - (526)
Net cash inflow/(outflow) from operating activities (2,085) (6,953) (8,334)
Returns on investments and servicing of finance
Interest received 1 51 50
Interest paid (965) (161) (705)
Interest element of finance lease rental payments (26) (61) (70)
Net cash (outflow)/inflow from returns on investments and
servicing of finance (990) (171) (725)
Taxation - 27 -
Capital expenditure and financial investment
Payments to acquire investments (5) (12) (12)
Payments to acquire intangible assets (536) (572) (1,878)
Payments to acquire tangible fixed assets (1,095) (721) (1,808)
Net cash outflow from capital expenditure and financial
investment (1,636) (1,305) (3,698)
Acquisitions
Purchase of subsidiary undertakings - (13) (264)
Net cash received with subsidiary undertaking - 23 (2)
Net cash (outflow)/inflow from acquisitions and disposals - 10 (266)
Net cash outflow before management of liquid resources
and financing (4,711) (8,392) (13,023)
Management of liquid resources
Increase in short term deposits with banks - - 6,417
Financing
Issue of ordinary share capital and convertible debt 7,695 50 2,981
Loans and finance lease acquired with subsidiary
undertaking - - 650
Increase / (Decrease) in loans (1,000) 1,000 -
Repayment of capital element of finance leases and hire
purchase contracts (146) (158) (371)
Net cash inflow from financing 6,549 892 3,260
Increase/(Decrease) in net cash 1,838 (7,500) (3,346)
Reconciliation to net funds Notes
Unaudited Audited
Unaudited Six months Year ended
Six months ended ended 30 June 31 December
30 June 2006 2005 2005
£000's £000's £000's
Increase/(Decrease) in net cash 1,838 (7,500) (3,346)
Increase in short-term deposits with banks - - (6,417)
Convertible debt, loans and finance leases acquired (6,000) (650) (650)
Repayment of capital elements on finance leases 146 158 371
Repayment of loans 1,000 - -
Movement in net (debt)/funds for the period (3,016) (7,991) (10,042)
Net (debt)/ funds at commencement of period (4,997) 5,045 5,045
Net debt at end of period (8,013) (2,947) (4,997)
Analysis of net funds At 1 January Convertibles Cash flow At
2006 and Loans 30 June
2006
£'000 £000's £000's £000's
Cash at bank and in hand 117 - 284 401
Overdrafts (3,488) - 1,554 (1,934)
Net cash and cash equivalents (3,371) - 1,838 (1,533)
Debt due within one year
Finance leases (160) - 146 (14)
Debt due after one year
Loans (1,000) - 1,000 -
Convertible debt - (6,000) - (6,000)
Finance leases (466) - - (466)
Total (4,997) (6,000) 2,984 (8,013)
Notes to the financial information for the six months to 30 June 2006
1 Basis of Preparation
Unless stated otherwise, the interim financial information has been prepared on
the basis of the accounting policies set out in the Group's financial statements
for the year ended 31 December 2005.
The financial information contained in this interim report is unaudited. It does
not constitute statutory accounts as defined in section 240 of the Companies Act
1985. Copies of the statutory accounts for the year to 31 December 2005 have
been filed with the Registrar of Companies. The Auditors report on these
accounts was not qualified and did not contain statements under Section 237 (2)
or (3) of the Companies Act 1985.
Further copies of this report are available from our registered office:
Northumberland House, 155-157 Great Portland Street, London, W1W 6QP.
Going Concern
The Group has made significant progress in financing the restructuring of the
business since 29 June 2006. In particular, the Group concluded new banking
arrangements and an on demand £2.9 million credit facility with Mentor Marketing
& Investments Ltd on 21 July 2006, of which £2.5 million has been drawn down so
far, replacing the previous on-demand credit facilities provided by Lloyds TSB.
In addition, the Group signed agreements with Catalyst Media Group Plc and SGI
Ltd on 29 June and 24 August 2006 respectively, for which the Company has
received consideration of £2.5 million in cash and listed securities.
On 24 August 2006, the Group granted an option, subject to shareholder approval,
at a price of £250,000 over ordinary shares in YooMedia plc at an issue price of
£0.04p per share. Additionally, the Company carried out a further equity placing
on 1 September 2006, raising £700,000. Finally, the Group has agreed terms with
Mr Leo Noe, subject to shareholder approval, under which a £500,000 loan to the
Group will be converted to equity.
The Directors believe that the actions above, taken in conjunction with other
financing options, including ongoing restructuring will ensure adequate working
capital is available to the Group. Consequently, the directors consider that it
is appropriate to prepare accounts on the going concern basis. However, the
Directors recognise that a material uncertainty remains over the Group's ability
to realise future profitability and positive cashflows until the Group has
established a track record of profitable trading and cash generation.
2 Turnover
Turnover, which excludes value added tax, comprises revenue from interactive
media services and dating services and is recognised as these services are
provided. Gaming revenues, where the Group holds a gaming licence, are
recognised on a gross basis and winnings are recognised as a cost of sale. All
turnover is generated in the United Kingdom.
3 Exceptional items
Exceptional items, within administrative expenses, are detailed below:
Unaudited Unaudited Audited
Six months ended 30 Six months ended Year ended 31
June 2006 30 June 2005 December 2005
£000's £000's £000's
Recognised in arriving at operating loss:
Redundancy costs1 - 363 437
Exceptional bonus payments2 - (154) -
Exceptional professional fees - - 143
UITF 17 charge3 - 865 1,116
Write-off of deferred development costs - - 680
- 1,074 2,376
1 Including all relevant taxes and other related costs of redundancy.
2 Including all relevant taxes.
2Under Urgent Issue Task Force abstract 17 (UITF 17), the Company is required to
recognise as a charge in the profit and loss account, the amount by which the
fair market value of any share options issued to employees exceeds their
respective exercise prices at the date of grant. The charge is notional in that
there is no underlying cash flow or other financial liability associated with
the charge, nor does it give rise to a reduction in net assets or shareholders'
funds. In addition there is no impact on distributable profits. This charge
relates to the share options granted on the acquisition of Digital Interactive
Television Group Ltd on 20 December 2004 which are fully vested.
4 Loss before interest, tax, depreciation, amortisation and exceptional items
Unaudited Unaudited
Six months Six months Audited Year
ended 30 June ended 30 June ended 31
2006 2005 December 2005
£000's £000's £000's
Operating loss (4,985) (4,463) (10,452)
Depreciation 817 991 2,128
Amortisation and impairment of goodwill 1,386 1,117 2323
Amortisation and impairment of deferred development costs 575 175 675
Exceptional items - 1,074 2,376
Earnings before interest, tax, depreciation, amortisation and (2,207) (1,106) (2,950)
exceptional items
5 Loss per share
The basic loss per share has been calculated by dividing the net loss of £5,975k
for the period (six months ended 30 June 2005 - £4,557k; 31 December 2005 -
£11,154k) by the weighted average number of 522,615,242 shares in issue during
the period (six months ended 30 June 2005 - 460,511,906; year ended 31 December
2005 - 469,655,350). The Company has potentially dilutive ordinary shares being
share options issued to staff and shares contracted to be issued.
The diluted loss per share has been calculated in accordance with Financial
Reporting Standard 22: Earnings per share, using 549,914,536 shares in issue
during the period (six months ended 30 June 2005 - 471,282,331; year ended 31
December 2005 - 480,426,774). As per Financial Reporting Standard 22: Earnings
per share, the diluted loss per share calculation is without reference to
adjustments in respect of certain share options that are considered to be
anti-dilutive.
The deferred shares are not included in the earnings per share or diluted
earnings per share. These shares have no voting rights and are non-convertible
and therefore do not form part of the ordinary share capital used for the loss
per share calculation in accordance with Financial Reporting Standard 22:
Earnings per share.
6 Creditors - Amounts falling due after more than one year
Unaudited Unaudited
Six months Six months Audited Year
ended 30 June ended 30 June ended 31
2006 2005 December 2005
£000's £000's £000's
Loans - 2,650 1,000
Convertible debt 5,722 - -
Obligations under finance leases and hire purchase contracts 450 - 466
Other creditors 350 350 350
6,522 3,000 1,816
The Convertible debt of £5,722k relates to a credit facility granted to the
Group by Platinum Partners LLP and Highbridge International LLC. This facility
attracts interest at a rate of 5% per annum.
7 Provisions for liabilities
Employers'
National
Insurance on Provision for Other Total
share options restructuring
£000's £000's £000's £000's
At 1 January 2006 1,137 519 178 1,834
Arising during the period - - - -
Utilised - (5) (98) (103)
Unused amounts reversed in the - - - -
period
At 30 June 2006 1,137 514 80 1,731
Employers' National Insurance on share options
On exercise of share options issued after 5 April 1999, under an unapproved
executive option scheme, the Company is required to pay National Insurance on
the difference between the exercise price and the market value at the exercise
date of the shares issued. The Company will become unconditionally liable to pay
the National Insurance upon exercise of the options, which are exercisable over
a period of 10 years from date of grant. The Company therefore makes a provision
following the grant of options as opposed to on vesting or on exercise. The
amount of National Insurance payable will depend on the number of employees who
remain with the Company and exercise their options, the market price of the
Company's ordinary shares at the time of exercise, and the prevailing National
Insurance rate at that time.
Provision for restructuring costs
The provision relates to certain items such as redundancy costs and losses on
onerous contracts that were incurred or expected to be incurred as part of the
Group's restructuring arising mainly upon the acquisition of the Digital
Interactive Television Group on 20 December 2004. These are fully detailed in
the statutory accounts for the year ended 31 December 2004. The Utilisation of
the provision taken in the period relates to further restructuring.
8 Reconciliation of movement in shareholders' funds
Unaudited Unaudited
Six months Six months Audited Year
ended 30 June ended 30 June ended 31
2006 2005 December 2005
£000's £000's £000's
Loss for the period (5,975) (4,557) (11,154)
New shares issued and convertible debt 1,414 1,172 7,150
Shares to be issued 281 281 281
Shares to be issued in prior year issued in current year - - (3,047)
UITF 17 credit - 865 -
Net reduction in shareholders' funds (4,280) (2,239) (6,770)
Opening shareholders' funds 36,442 43,212 43,212
Closing shareholders' funds 32,162 40,973 36,442
9 Post balance sheet events
On the 21 July 2006 the group concluded new banking arrangements and a credit
facility with Mentor Marketing & Investment Ltd ('MMI') which replaced the
previous credit facilities provided by Lloyds TSB. MMI, an active investor and
finance provider in the marketing and marketing services sector, agreed to
provide equivalent financing to the bank debt and in addition, further financing
to a combined total facility of £2.9 million towards the completion of the
re-structuring of the Company's business activities.
On the 24 August 2006, YooMedia plc, signed an agreement with SGI Ltd ('SGI') to
form a new company to exploit the UK and international interactive TV markets
through new forms of participation TV and gaming. The 50/50 joint venture,
controlled by SGI, has acquired and will further utilise YooMedia's innovative
Real Time Messaging System, which allows viewers at home to participate in
programmes and win prizes. In addition, the joint venture acquired the rights
to Tringo, a game which combines bingo and Tetris, for use on TV. Tringo will
be developed into a live presented interactive multiplayer game for TV with cash
prizes for the most skilful players.
Venture capital firm SGI is backed by Peter Shalson, who currently controls
three channels on Sky. Under the terms of the agreement, SGI has capitalised
the joint venture with a £1.1m loan. The joint venture has acquired the IP and
ownership of the Real Time Messaging System and the Tringo rights for TV from
YooMedia for a consideration of £1m to be satisfied in cash.
Contemporaneous with this joint venture, the Group has entered into an agreement
with Yieldtown Limited ('Yieldtown'), a company owned by Mr Peter Shalson, under
which subject to shareholder approval it is proposed to grant Yieldtown a two
year option to subscribe £250,000 of Ordinary Shares in the YooMedia plc, based
on an issue price of £0.04p per share
On the 1 September 2006 YooMedia raised £700,000 (gross) through a placing of
35,000,000 new ordinary shares of 1p each with an existing institutional
shareholder at 2p per share. As part of the placing, the placee will receive
warrants to subscribe for 3,900,000 new ordinary shares at 1.75p per share,
exercisable at any time until three years from issue.
On the 7 September 2006, YooMedia plc signed a multi-year exclusive agreement
with Playboy Enterprises, Inc. ('Playboy') (NYSE: PLA, PLAA), the leading
entertainment and lifestyle company, to provide a casino-type-style gaming
service for Playboy's range of satellite TV channels and mobile phones services.
Under the terms of the agreement, Playboy will offer state-of-the-art,
fixed-odds, casino-style gaming to all its customers in the UK and Ireland, and
will market these services to its customers and databases via TV, the Web,
direct communications and both above and below-the-line promotions. YooMedia
will provide other third-party distribution via mobile operators, retail stores
and other means of physical and digital distribution. The companies will also
jointly explore other value-added services, including enhancing the Playboy
channels with gaming and other interactive TV programming.
The services will include a red-button gaming portal as well as a Java-based
wireless portal, and will comprise over 20 gaming titles such as roulette, keno,
bingo-keno, hi-lo as well as various card games by Final Delivery. The portals
are backed by YooMedia's proprietary back-end gaming systems, multi-platform
E-Wallet and game client software. YooMedia's wireless portal is operator and
handset-agnostic and functions on almost all handsets in circulation.
Except for those matters referred to above, there were no material events after
the balance sheet date that requires disclosure.
INDEPENDENT REVIEW REPORT TO YOOMEDIA PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 which comprises the profit and loss account,
the balance sheet, the cash flow statement, and related notes 1 to 9. We have
read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company, in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company 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 company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Going concern - Emphasis of Matter
In arriving at a review conclusion, we draw attention to the disclosures made in
note 1 of the financial information concerning the company's ability to continue
as a going concern. The group incurred a net loss of £5.9 million during the
period ended 30 June 2006 and, as of that date, the group had net current
liabilities of £6.5 million. These conditions, along with other matters as set
forth in note 1, indicate the existence of a material uncertainty which may cast
significant doubt about the company's ability to continue as a going concern.
The financial information does not include the adjustments that would result if
the company was unable to continue as a going concern as it is not practicable
to determine or quantify them.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006.
Deloitte & Touche LLP
London
29 September 2006
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