Final Results

RNS Number : 3858X

CSS Stellar PLC

24 June 2008

 



CSS Stellar plc

('CSS' or 'the Group')

Preliminary Results

for the year ended 31 December 2007

CSS Stellar plc, the entertainment and sports management and marketing group, today announces its audited preliminary results for the year ended 31 December 2007.

Highlights:

• Operating Results, after exclusion of one-off restructuring costs and impairment of goodwill, in line with market expectations                   

• Successful disposal of our holding in GEM Minneapolis, Inc., a non-core business    

• Contracts exchanged to sell The Peters Fraser & Dunlop Group Limited for up to £4 million in cash

• Retirement of David Buchler, Sir Jeremy Hanley and Caroline Michel at the forthcoming Annual General Meeting

• Appointment of Julian Jakobi, currently Vice Chairman, as Chairman at the forthcoming Annual General Meeting                        

Commenting on the results David Buchler, Chairman, said:               

    'The year has been challenging in many ways, although we are pleased that operating profits, before one-off costs and impairment provisions, remained in line with our indications at the half year. Early in 2008, we sold our interest in GEM Minneapolis as this shareholding did not represent a core strategic asset. We have also agreed to sell PFD for a total consideration of up to £4 million in cash, subject to the approval of shareholders. Trading for the current year has been demanding but we intend that the Group should be better placed to deliver an improving performance over the coming months'.

Julian Jakobi commented: 

'We are sorry to lose the three Directors from the Board and thank them for their contribution to the Group. They have advised their intention to retire from the Board at the forthcoming Annual General Meeting'.

For further information please contact:

CSS Stellar
David Buchler, Chairman	Tel: [phone]
Bell Pottinger Corporate & Financial
Stephen Benzikie/ Andrew Benbow	Tel: [phone]

CSS STELLAR PLC                                

CHAIRMAN'S STATEMENT                                

Overview 

2007 has been a year of considerable change for the CSS Stellar Group ('CSS'), which is reflected in the results for the year.

Financial Results

This is the first year that the Group's accounts have been prepared in accordance with International Financial Reporting Standards ('IFRS').

Revenue of £24.1 million was 12.0% below the prior year (2006: £27.4 million). The principal reason for the reduction in revenue is the lower level of trading in Icon Display compared to the turnover achieved in 2006, which was the best year in its history.

In the year to 31 December 2007 the Group achieved an adjusted operating profit on continuing operations of £0.7 million (2006: adjusted operating profit of £0.8 million). Operating profit has been adjusted for impairment of goodwill on continuing operations of £7.3 million and £1.3 million of one-off restructuring and legal costs.

During the year, net debt reduced from £1.9 million to £1.8 million due to tight control of working capital and the repayment of £0.4 million of bank debt.

In my first report to shareholders in the autumn of 2007 on the half year results I referred to the change and disruption, particularly in relation to PFD, that had affected the Group since mid 2006 and the resultant adverse impact on performance. These factors have continued to be present during the whole of 2007.  

The Peters Fraser & Dunlop Group Limited ('PFD')

A considerable number of the PFD Directors and senior agents had resigned their employment in June and July 2007 before the new Board had been appointed leaving us to deal with a situation that had been deteriorating for the previous 18 months. While I would have welcomed a genuine dialogue with the former PFD Directors and agents there appeared no appetite on their behalf to enter into such a dialogue. They had long since decided that a Management Buy Out on terms dictated by them was the only way forward. The same people that were dictating terms to CSS received the sum of £12.9 million some years earlier for the purchase of their business.

On 25 October 2007 we announced a review into monies paid by PFD from 2005 to 2007 to certain of its employees. I referred to the dismissal of the two joint managing directors of PFD and a further 11 employees including previous directors. Since then a further significant number of employees have left PFD although many have been replaced by our new team. The review has now been completed and disclosed that payments totalling £853,000 had been made to Directors and employees of PFD during these years without evidence of authorisation. 

Almost all the former directors and employees concerned have now set up in business together and PFD is currently in the early stages of litigation in respect of these payments and related matters. In order to protect its position, PFD is in course of taking the appropriate legal measures to recover monies due to them. I should stress that our results for 2007 do not include any recovery of these monies. With prolonged litigation now likely, PFD has taken in its results for 2007 a provision of over £500,000 to cover the potential legal costs that may be incurred.

In my statement of 12 September 2007 I announced the appointment of Caroline Michel as CEO of PFD and as a Director of CSS. I am pleased to report that despite the difficulties caused by the former PFD Directors and employees Caroline has built a new executive team to run PFD. She and her team are once again attracting new clients and providing a sound base from which PFD can grow and prosper. However, during our operational review it has become clear that there are no real links between the activities of PFD and any other Group company. In these circumstances the Directors concluded that it was in the interests of CSS shareholders to effect a disposal of PFD. 

A number of offers were received for PFD and as a result the company exchanged contracts for the sale of the business on 17 June 2008 for a total consideration of £4.0 million, of which £3.75 million is payable on completion, with the balance of £0.25 million payable in 2011 dependent on PFD's earnings in the three years to 2010. The sale requires approval of a majority of our shareholders at an Extraordinary General Meeting. The board unanimously recommends the disposal on the agreed terms and have given irrevocable commitments to vote accordingly at the Extraordinary General Meeting at which the disposal will be put to the shareholders for their approval.

Other Group operations

Our other UK operations have continued to perform profitably. Icon Display reported a lower level of operating profit, mainly because landmark sporting events that took place in 2006, such as the FIFA World Cup and the Ryder Cup, did not recur in 2007. Our Sports operations had a satisfactory year, although profits were lower than in 2006. In the USA, our New York marketing business moved into profit. As announced on 8 January 2008, the Group disposed of its 75% interest in GEM Minneapolis, Inc. for $1.8 million, with cash of $1.1 million received on completion, and a further $0.7 million due by way of a promissory note payable in cash in annual instalments over the next three years.

The Directors have completed their review of all the Group's operations and are now considering the course of action most likely to enhance shareholder value. In the light of the disposal of PFD, subject to the approval of shareholders, we are examining ways to significantly reduce our head office function and costs as these are likely to be superfluous once the sale is completed. 

In the circumstances that the Group has faced, the trading performance in 2007 has been a credit to the hard work and dedication of all the Directors and employees and I should like to express my thanks to them for their sterling efforts.

Board changes

At the end of the summer last year the Group announced a number of Board changes with Sean Kelly, Peter Owen and Simon Rhodes leaving the Board and with myself, George Wardale, Sir Jeremy Hanley and Caroline Michel joining the Board. I referred above to the disposal, subject to shareholder approval, of The Peters Fraser & Dunlop Group Limited. As PFD is a major part of the company's business and in order to ensure that head office costs are cut the Board will change again at the Annual General Meeting with myself and Sir Jeremy Hanley retiring from the Board. Julian Jakobi, the Vice-Chairman, will take over the role as Chairman.  Both Directors have informed the Company that they will not take any compensation. Furthermore, Caroline Michel, the CEO of PFD, will also retire from the Board and I wish her well for the future.

Current trading

The Group's trading to date in a challenging 2008 environment is behind expectations made when the Annual Group budget was drawn up. However the disposal of PFD will have a positive effect on financing as will the reduction in head office costs.  The Group should be better placed to deliver an improving performance over the coming months.

David Buchler                                

Chairman                                

23 June 2008

CSS STELLAR PLC                                

OPERATING AND FINANCIAL REVIEW                                

Group Review of 2007                                

Revenue for the Group in 2007 was £24.1 million, a reduction of 12.0% on 2006 (£27.4 million). The reduction was due to a 28% reduction in trading at Icon Display, due to work performed on major global sporting events in 2006 that did not recur in 2007.                                                

Group operating profit, adjusted for impairment of goodwill and other one-off costs, was £0.7 million, a 9% reduction on 2006, due primarily to Icon.                                                                

The Group's review of impairment concluded that a write down of £11.2 million was required. This consisted of £6.1 million relating to PFD following the departure of a number of agents, £3.8 million relating to GEM Minneapolis following the decision to dispose of the business in January 2008, and £1.2 million to reflect lower levels of trading in our other Talent Management businesses.                                                        

The Group's businesses are reviewed in more detail below.                    

Talent Management                                

Entertainment                                

The Group's Entertainment division consists principally of The Peters Fraser & Dunlop Group ('PFD'), one of Europe's oldest talent management agencies with offices in London and New York. PFD produced revenue of £9.5 million in 2007, an increase of 2% on 2006 (£9.3 million). Operating profit of £0.4 million is 47% lower than the prior year (2006: £0.7 million) due to the exceptional costs referred to above following the departure of a number of agents.                                

As detailed in the Chairman's Statement, PFD has undergone a number of structural changes during 2007. The Group entered into an agreement, conditional on shareholder approval, to sell PFD on 17 June 2008. This is described in more detail in the Chairman's Statement. Revenue, has however, been largely unaffected in the year under review, and our clients have achieved some notable successes in the period. 

Simon Schama triumphed at the 2007 International Emmy Awards, winning the Arts Programming award for 'Simon Schama's Power of Art: Bernini'.                

Sir Max Hastings released his latest book 'Nemesis: The Battle for Japan 1944-45' in October.

  Sport                                

The Group's Sports division had a successful year, with revenue of £3.9 million, an increase of 6.4% on 2006 (£3.6 million). Operating profit of £0.2 million was 42% lower than 2006 (£0.3 million), due to the loss of a number of contracts in 2006.    

Our clients once again achieved numerous successes during the year. Dario Franchitti won the world famous Indianapolis 500 in May, and went on to take the outright championship in the Indy Racing League. Dario has progressed to race in the Nascar series in 2008, a significant milestone for him as he becomes the first European driver in the history of Nascar to join the series full time. It also represents a significant opportunity in the continued expansion of the division into all major areas of international motorsports.                                

Allan McNish won the American Le Mans Series championship for the third time driving a diesel powered Audi. In Moto GP, Andrea Dovizioso achieved success in the 250cc series, with victory in the Turkish Grand Prix, and in 2008 has made the step up to race for Honda in the senior Moto GP competition, the world's premier motorcycling championship.                                

Sebastien Loeb won his fourth successive World Rally title in December, only the third driver to achieve this. In sailing, Alex Thomson has recently celebrated a second place finish in the inaugural Barcelona World Race, whilst breaking the 24 hour distance record for a 60 foot monohull yacht.                                

Within Golf, our portfolio of clients also achieved success during the year, with Gonzalo Fernandez-Castano securing his third European Tour title with victory in the Italian Open in May. Oliver Wilson continued to make good progress, with a second placed finish in the South African Open in December, to follow two further second place finishes throughout the 2007 season.    

 Events                                

The Group's Events division consists of Icon Display Limited, one of Europe's leading providers of signage and branding solutions. Icon produced revenue of £8.3 million in 2007, a reduction of 28% on 2006 (£11.6 million), due largely to significant sporting events taking place in 2006 such as the FIFA World Cup and the Ryder Cup in Ireland which did not recur in 2007. Consequently, operating profit of £0.3 million reduced by 58% (2006: £0.8 million) as a result of the fall in revenue.                

Icon nonetheless continued to deliver a number of significant projects during the year. Icon were appointed in May by the PGA European Tour to manage the installation of all event signage and branding at golf's Irish Open. Icon Look was appointed to consult on the image and dressing of the victorious Sochi 2014 Winter Olympic Games Bid, using Icon's considerable experience in producing the signage and support material for the recent London 2012 bid.                                 

As the main signage contractor for Chelsea FC, Icon was responsible for managing all perimeter and tier signage, including its rotational advertising system, successfully completed in time for the start of the 2007/08 Barclays Premier League season.                    

Icon were appointed by UEFA in June to handle external and internal stadium branding and perimeter signage for football's Euro 2008 tournament, which is taking place this summer in Austria and Switzerland, together with responsibility for signage at the UEFA Women's Championship in Finland in 2009.                                                                

In addition, Icon continue to work with UEFA and Team on the UEFA Cup and UEFA Champions League, as well as continuing relationships with World Snooker, the English Cricket Board, and the BMW PGA Championship at Wentworth. Icon's Qatar office has also completed several major projects during the year, including the Commercial Bank Qatar Masters golf tournament.

 Marketing                                

The Group's Marketing division is represented by our New York operation, GEM Group, and GEM Minneapolis, Inc.                                

GEM New York is a full service marketing agency delivering solutions through promotions, events, sponsorships and strategic alliances for a range of Corporate clients.                                                    

Revenue in 2007 was £1.5m (2006: £1.7m), which represents an increase in revenue of 6% in dollar terms once the adverse exchange variance is taken into account. Operating profit of £0.1 million represents a significant improvement on 2006 (loss of £0.3 million) as the business reaps the benefit of restructuring undertaken in previous years.                                        

During the year, GEM worked with GE Consumer & Industrial to produce a variety of integrated promotional campaigns for the Lighting Division including 'Light the Way to a Better World' which highlighted the overall environmental and cost-saving benefits of utilizing GE Energy Smart™ lighting products.                                                             

GEM also helped long standing client NBC Universal develop multiple consumer and trade driven programs for its various cable networks. For the Sci Fi Channel, GEM executed a hospitality incentive program in support of the highly acclaimed series, Battlestar Galactica.                                

GEM Minneapolis is a creative design and photography business in which the Group held a 75% stake at the year end. GEM Minneapolis services clients such as 3M, Best Buy and Fingerhut, and contributed revenue of £3.3 million during the year (2006: £4.3 million), with an operating profit of £0.4 million (2006: £0.7 million) before a write off of £0.9 million in relation to a discontinued business. The reduction in revenue and profit is due to a number of contracts which were not renegotiated during the year. The Group's interest in GEM Minneapolis was sold in January 2008, as highlighted in the Chairman's Statement and the notes to the financial statements.         

Central costs                                

Central costs in 2007 were £1.6 million, a 122% increase over 2006 (£0.7 million). The increase is due to the inclusion of £0.8 million in exceptional one off costs during the year, £0.6 million of which were announced at the half year. These included professional fees incurred due to the actions of a former shareholder, a termination payment to a former director, property costs arising from the relocation of the head office function and legal and professional costs incurred in addressing the situation at PFD. 

Interest Payable                                

The net interest payable by the Group in 2006 was £246,000 (2006: £144,000). The reasons for the increase are the higher levels of overdraft drawn down during the year.

 Goodwill                                

In accordance with IAS 36, the Board have reviewed the carrying value of goodwill held in the Balance Sheet for impairment. As a result of the review, the Board has concluded that a write down of £11.2 million is required, of which £6.1 million relates to PFD, £3.8 million to GEM Minneapolis, and £1.2 million to the smaller Talent Management businesses.                                                

Taxation                                

The Group's tax charge was £0.2 million (2006: £0.5 million), which relates entirely to the UK operations.                            

Earnings per Share                                 

Earnings per share on continuing operations on a basic and fully diluted basis shows a loss of 28.23p per share (2006: loss of 0.08p). Basic unadjusted earnings per share on discontinued operations were a loss of 14.99p (2006: profit of 2.59p), and diluted earnings per share on discontinued operations were a loss of 14.99p (2006: profit of 2.55p). The losses are due to the impairment write down booked in the year.

Foreign Exchange                                

The Group's earnings are exposed to the movement in the US Dollar. The average US Dollar rate in 2007 was $2.00 to the Pound (2006: $1.84), with the rate at 31 December 2007 also $2.00 to the Pound (2006: $1.96), as the dollar weakened during the year.    

Bank Debt                                

The Group's gross bank debt at 31 December 2007 was £3.1 million (2006: £3.6 million) of which £1.0 million is structured bank debt (2006: £1.4 million), and the remainder an overdraft to finance working capital. During the year £0.4 million of borrowings were repaid.                                

Cash Flow                                

The cashflow statement shows a decrease in cash of £199,000 (2006: increase of £124,000). The reduction is due to lower trading profits, along with higher interest costs incurred during the year.                            

David Buchler                                

Chairman                                

23 June 2008

CSS STELLAR PLC
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2007
			2007		2006
	Notes		£000		£000
Revenue	1		24,099		27,375
Cost of sales			(9,352)		(9,987)
Gross profit			14,747		17,388
Impairment of goodwill and investments	5		(7,316)		-
Abortive disposal costs	2		(26)		-
Restructuring costs	2		(1,310)		-
Other administrative costs			(14,025)		(16,594)
Total administrative costs			(22,677)		(16,594)
Operating result			(7,930)		794
Finance income			155		141
Finance costs			(401)		(285)
Sale of investments			260		-
(Loss)/profit before tax			(7,916)		650
Income tax expense	3		(217)		(535)
Net result from continuing operations			(8,133)		115
Net result from discontinued operations			(4,344)		751
Net result for the period			(12,477)		866
Attributable to:
Equity holders of the parent			(12,524)		729
Minority interest			47		137
			(12,477)		866
(Loss)/earnings per share (pence)	4		p.		p.
Continuing operations
Basic (loss)/earnings per share			(28.23)		(0.08)
Diluted (loss)/earnings per share			(28.23)		(0.08)
Discontinued operations
Basic (loss)/earnings per share			(14.99)		2.59
Diluted (loss)/earnings per share			(14.99)		2.55
Total
Basic (loss)/earnings per share			(43.22)		2.51
Diluted (loss)/earnings per share			(43.22)		2.47
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
			£000		£000
Exchange differences on translation of foreign operations			98		80
(Loss)/profit for the year			(12,477)		866
Total recognised income and expense for the year			(12,379)		946
Attributable to:
Equity holders of the parent			(12,426)		809
Minority interest			47		137
			(12,379)		946

CSS STELLAR PLC
CONSOLIDATED BALANCE SHEET
As at 31 December 2007
			2007		2007		2006		2006
	Notes		£000		£000		£000		£000
ASSETS
Non-current assets
Property, plant and equipment			1,713				1,899
Goodwill	5		8,240				19,397
Available for sale financial assets	6		37				41
Deferred tax asset			-				65
					9,990				21,402
Current assets
Inventories			270				187
Trade and other receivables			6,392				6,635
Cash and cash equivalents			759				1,649
					7,421				8,471
Disposal group classified as held for sale					772				-
Total assets					18,183				29,873
EQUITY
Equity attributable to equity holders of the parent
Share capital			14,487				14,487
Share premium account			28,158				28,158
Revaluation reserve			439				456
Translation reserve			35				80
Profit and loss account			(35,194)				(22,846)
					7,925				20,335
Minority interest					(485)				442
Total equity					7,440				20,777
LIABILITIES
Non-current liabilities
Long-term borrowings					549				894
Current liabilities
Trade and other payables			4,239				5,027
Short-term borrowings			2,039				2,155
Current portion of long-term borrowings			509				533
Current tax payable			632				487
Deferred tax liability			61				-
					7,480				8,202
Liabilities directly associated with disposal group classified as held for sale					2,714				-
Total liabilities					10,743				9,096
Total equity and liabilities					18,183				29,873

CSS STELLAR PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December 2007
		2007		2007		2006		2006
		£000		£000		£000		£000
Cash flows from operating activities
(Loss)/profit after taxation				(12,477)				866
Adjustments for:
Depreciation		505				469
Impairment of goodwill		11,157				-
Net interest expense		246				144
Taxation expense recognised in profit and loss		283				633
Profit from sale of investments		(259)				-
Change in trade and other receivables		571				(2,020)
Change in inventories		(86)				93
Change in trade and other payables		598				859
Income taxes paid		-				(45)
				13,015				133
Net cash from operating activities				538				999
Cash flows from investing activities
Purchase of property, plant and equipment		(413)				(334)
Proceeds from sale of investments		264				-
Proceeds from sale of property, plant and equipment		13				9
Interest received		155				141
Net cash used in investing activities				19				(184)
Cash flows from financing activities
Repayment of long-term borrowings		(376)				(362)
Payment of finance lease liabilities		-				(44)
New finance leases		21				-
Interest paid		(401)				(285)
Net cash used in financing activities				(756)				(691)
Net change in cash and cash equivalents				(199)				124
Cash and cash equivalents at beginning of period				(460)				(584)
Cash and cash equivalents at end of period				(659)				(460)

CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION
Year ended 31 December 2007
1. Segment Reporting
The Group has identified three distinct service areas as operating segments. These operating segments are monitored on an ongoing basis and strategic decisions are made in the context of the reported segmental results. In addition, central operating costs, which are not apportioned to each of the operating segments, are reported separately.
31 December 2007	Talent Management	Marketing	Events	Central costs	Total Continuing	Discontinued activities	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	14,286	1,521	8,292	-	24,099	3,334	27,433
Cost of sales	(2,877)	(1,182)	(5,293)	-	(9,352)	(499)	(9,851)
Gross profit	11,409	339	2,999	-	14,747	2,835	17,582
Employee benefits expense	7,312	84	1,563	543	9,502	1,369	10,871
Depreciation, amortisation and impairment of non-financial assets	7,412	29	237	60	7,738	3,924	11,662
Costs in acquiring plant, property and equipment	36	10	274	29	349	64	413
Restructuring costs	564	-	-	772	1,336	840	2,176
Other administrative costs	2,777	165	583	227	3,752	916	4,668
Total administrative costs	18,101	288	2,657	1,631	22,677	7,113	29,790
Operating (loss)/profit	(6,692)	51	342	(1,631)	(7,930)	(4,278)	(12,208)
Finance income	154	-	86	(85)	155	-	155
Finance costs	-	-	(5)	(396)	(401)	-	(401)
Other income	-	-	-	260	260	-	260
(Loss)/profit before tax	(6,538)	51	423	(1,852)	(7,916)	(4,278)	(12,194)
Income tax expense	(354)	-	(172)	309	(217)	(66)	(283)
(Loss)/profit for the year	(6,892)	51	251	(1,543)	(8,133)	(4,344)	(12,477)
Segment assets
- Continuing operations	4,584	450	2,144	10,233	17,411	-	17,411
- Discontinued operations	-	-	-	-	-	772	772
Segment liabilities
- Continuing operations	4,912	1,978	(185)	1,324	8,029	-	8,029
- Discontinued operations	-	-	-	-	-	2,714	2,714
Segment impairment losses
- Continuing operations	(7,316)	-	-	-	(7,316)	-	(7,316)
- Discontinued operations	-	-	-	-	-	(3,841)	(3,841)

CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year Ended 31 December 2007
1. Segment Reporting (continued)
31 December 2006	Talent Management	Marketing	Events	Central costs	Total Continuing	Discontinued activities	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	14,089	1,690	11,596	-	27,375	4,269	31,644
Cost of sales	(1,649)	(688)	(7,650)	-	(9,987)	(1,024)	(11,011)
Gross profit	12,440	1,002	3,946	-	17,388	3,245	20,633
Employee benefits expense	7,889	115	2,070	445	10,519	174	10,693
Depreciation, amortisation and impairment of non-financial assets	92	39	222	51	404	65	469
Costs in acquiring plant, property and equipment	134	15	149	36	334	-	334
Restructuring costs	-	-	-	-	-	-	-
Other administrative costs	3,276	1,162	695	204	5,337	2,321	7,658
Total administrative costs	11,391	1,331	3,136	736	16,594	2,560	19,154
Operating (loss)/profit	1,049	(329)	810	(736)	794	685	1,479
Finance income	129	-	78	(66)	141	-	141
Finance costs	(3)	-	(9)	(273)	(285)	-	(285)
Other income	-	-	-	-	-	-	-
(Loss)/profit before tax	1,175	(329)	879	(1,075)	650	685	1,335
Income tax expense	(433)	-	(152)	50	(535)	66	(469)
(Loss)/profit for the year	742	(329)	727	(1,025)	115	751	866
Segment assets
- Continuing operations	4,593	653	2,489	19,777	27,512	-	27,512
- Discontinued operations	-	-	-	-	-	2,361	2,361
Segment liabilities
- Continuing operations	5,799	2,039	571	(2,365)	6,044	-	6,044
- Discontinued operations	-	-	-	-	-	3,052	3,052
Segment impairment losses
- Continuing operations	-	-	-	-	-	-	-
- Discontinued operations	-	-	-	-	-	-	-

Year ended 31 December 2007
Geographical market
		Revenues		Assets		Plant, Property & Equipment
		2007	2006	2007	2006	2007	2006
		£000	£000	£000	£000	£000	£000
Europe		19,708	23,710	2,000	713	310	283
North America		7,725	7,934	(2,984)	(2,076)	74	15
Central costs/net assets		-	-	8,424	22,140	29	36
		27,433	31,644	7,440	20,777	413	334

2. Exceptional administrative costs
Impairment of goodwill and investments								(7,316)		-
Abortive disposal costs								(26)		-
Restructuring costs								(1,310)		-
								(8,652)		-
A £7,316,000 charge was recognised in 2007 (2006: £nil) in respect of the impairment of goodwill on continuing operations.
This is discussed in more detail in note 5. £26,000 were incurred during the year (2006: £nil) in respect of costs incurred on an aborted acquisition. £1.3 million of restructuring costs were incurred during the year
(2006: £nil) in respect of a termination payment to a former director, costs incurred in surrendering
surplus property, and legal and professional costs incurred in addressing the situation with PFD.

3. Income tax expense
The relationship between the expected tax expense based on the effective tax rate of the Group at 30% (2006: 30%) and the tax expense actually recognised in the income statement can be reconciled as follows:
Result for the year before tax								(7,916)		650
Tax rate								30%		30%
Expected tax expense								(2,375)		195
Expenses not deductible for tax purposes								121		152
Losses in overseas subsidiaries								279		66
Utilised losses								(75)		(69)
Impairment of goodwill and loss on disposal of subsidiaries								2,195		-
Difference in tax rates								7		-
Deferred tax (expense)/income resulting from the
origination and reversal of temporary differences								61		(24)
Other timing differences								4		215
Actual tax expense, net								217		535

CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year ended 31 December 2007
4. (Loss) / Earnings Per Share
				Weighted average		Basic per share amount
				no. of shares		pence
2007	£000
Continuing operations
Loss after tax	(8,180)
Earnings attributable to ordinary shareholders	(8,180)
Weighted average number of shares (used for basic earnings per share)				28,976,581		(28.23)
Effect of options				797,096
Diluted weighted average number of shares (used for diluted earnings per share)				29,773,677		(28.23)
Discontinued operations
Loss after tax	(4,344)
Earnings attributable to ordinary shareholders	(4,344)
Weighted average number of shares (used for basic earnings per share)				28,976,581		(14.99)
Effect of options				797,096
Diluted weighted average number of shares (used for diluted earnings per share)				29,773,677		(14.99)
Total basic (loss) / earnings per share						(43.22)
Total diluted (loss) / earnings per share						(43.22)
2006
Continuing operations
Loss after tax	(22)
Earnings attributable to ordinary shareholders	(22)
Weighted average number of shares (used for basic earnings per share)				28,976,581		(0.08)
Effect of options				487,619
Diluted weighted average number of shares (used for diluted earnings per share)				29,464,200		(0.08)
Discontinued operations
Profit after tax	751
Earnings attributable to ordinary shareholders	751
Weighted average number of shares (used for basic earnings per share)				28,976,581		2.59
Effect of options				487,619
Diluted weighted average number of shares (used for diluted earnings per share)				29,464,200		2.55
Total basic (loss) / earnings per share						2.51
Total diluted (loss) / earnings per share						2.47

CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year ended 31 December 2007
5. Goodwill
Following the annual impairment test for 2007, the carrying value of goodwill is allocated to the following
cash-generating units:
	PFD			Icon Display			CSS Stellar GEM Group, Inc.		CSS Stellar Sports / CSS Presenters		Other				Total Continuing operations				GEM Minneapolis, Inc.				Total continuing and discontinued operations
	£000			£000			£000		£000		£000								£000				£000
Cost at 01 January 2006	9,307			505			620		4,356		82				14,870				4,527				19,397
Accumulated impairment	-			-			-		-		-				-				-				-
Cost and net book value at 31 December 2006	9,307			505			620		4,356		82				14,870				4,527				19,397
Accumulated impairment	(6,086)			-			-		(1,148)		(82)				(7,316)				(3,841)				(11,157)
Net book value at 31 December 2007	3,221			505			620		3,208		-				7,554				686				8,240
The recoverable amounts for the following cash-generating units were determined based on value-in-use
calculations, covering detailed forecasts, followed by an extrapolation of expected cash flows for a period of ten years at the growth rates stated below. The growth rates reflect the long-term average growth rates for the cash-generating units.
Growth rates following 2012 are not in excess of nominal GDP.
		Icon Display			CSS Stellar GEM Group, Inc.			CSS Stellar Sports / CSS Presenters
Growth rates		4%			4%			4%
Discount rates		14%			14%			14%
The valuation of each cash generating unit is considered in turn below:

CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year ended 31 December 2007
5. Goodwill (continued)
PFD
The Group has signed an agreement, conditional on the approval of shareholders, to sell its 100% subsidiary, The Peters Fraser and Dunlop Group Limited ('PFD'). Management have written down the value of the goodwill in PFD based on fair value less costs to sell, as represented by the discounted sale proceeds.
GEM Minneapolis, Inc.
The Group's 75% interest in GEM Minneapolis, Inc. was disposed of on 7 January 2008. Management have written down the value of the goodwill in GEM Minneapolis, Inc. based on fair value less costs to sell, as represented by the discounted sale proceeds.
CSS Stellar Sports/CSS Presenters
CSS Stellar Sports and CSS Presenters are deemed to represent one income generating unit: that of Talent Management. The loss of a number of contracts during the period has led to a reduced expectation of future income streams. Again, associated costs have been applied to these income streams and a discount factor of 14% has been assumed. Growth of 4% on remaining income streams is felt by management to be appropriate on the basis of historic trends and are not considered to be in excess of market growth rates.
Other
Goodwill of £82,000 previously attributed to assets which are no longer generating income has been written off in the year.
The consequent impairment loss of £11.2 million has been recognised in the Income Statement in 2007 and attributed to the relevant operating segments in Note 1.
Apart from the considerations described in determining the value in use of the cash generating units described
above, the directors are not aware of any other probable changes that would necessitate changes in its key
estimates.

CSS STELLAR PLC
NOTES TO THE FINANCIAL INFORMATION (continued)
Year ended 31 December 2007
6. Available for sale financial assets
					The Group
							£000
Carrying value at 01 January 2006 and 2007							41
Disposals							(4)
Carrying value at 31 December 2007							37
Available for sale financial assets comprise trade investments where less than 20% of the share capital is held or there is no control. The Group disposed of its investment in Passhold Limited in December 2007.

7. Accounting Policies                                    

Basis of preparation    

CSS Stellar plc is a company incorporated in the United Kingdom.    The Group financial statements are for the year ended 31 December 2007 and have been prepared under the historical cost convention, except for revaluation of certain properties and financial instruments.                                    

The Directors have prepared cash flow forecasts which show that the Group will be able to meet its financial obligations for at least twelve months from the date of these financial statements. The Company has signed an agreement, conditional on the approval of shareholders, to sell its 100% subsidiary, The Peters Fraser and Dunlop Group Limited ('PFD'), for £4 million in cash, with £3.75 million payable on completion, the balance payable on the achievement of agreed profit targets over the next three years. The Company's bankers have indicated continuing support following the completion of the deal throughout this period. Accordingly, the Directors consider it appropriate to prepare the financial statements on a going concern basis.                            

These consolidated financial statements (the financial statements) have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ('adopted IFRS').                                    

CSS Stellar plc's consolidated financial statements were prepared in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) until 31 December 2006. The date of transition to IFRS was 1 January 2006. The comparative figures in respect of 2006 have been restated to reflect changes in accounting policies as a result of adoption of IFRS. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these consolidated financial statements.

Accounting standards not yet applied

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective: 

IAS1        Presentation of Financial Statements (Revised) 
IAS 23     Borrowing Costs (Amendments) 
IAS 27     Consolidated and Separate Financial Statements (Amended) 
IFRS 2     Share Based Payment: Vesting Conditions and Cancellations (Amendments) 
IFRS 3     Business Combinations (Amendments) 
IFRS 8     Operating Segments 
IFRIC 12  Service Concession Arrangements 
IFRIC 13  Customer Loyalty Programmes 
IFRIC 14   An interpretation of IAS 19 

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the consolidated financial statements of the Group except for additional disclosures and the presentational effects of IAS 1.  

Sources of estimation                                    

The preparation of the financial statements requires the Group to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The Directors base their estimates on historic experience and various other assumptions that they believe are reasonable under the circumstances, the results of which form the basis of making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.                                                                        

The directors believe that the most significant areas where estimates and judgements are used are in relation to the carrying value of goodwill, and accrued income within PFD. These judgements are explained in more detail in the accounting policies and note 5.

Basis of Consolidation

The Group financial statements consolidate those of the company and all of its subsidiary undertakings drawn up to 31 December 2007. Subsidiaries are entities over which the group has the power to control the financial and operating policies so as to obtain benefits from its activities. The group obtains and exercises control through voting rights.                                    

Unrealised gains on transactions between the group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the group.                                    

Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition.

Business combinations completed prior to date of transition to IFRS          

The group has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations prior to the date of transition.                                      

Accordingly the classification of the combination remains unchanged from that used under UK GAAP. Assets and liabilities are recognised at date of transition if they would be recognised under IFRS, and are measured using their UK GAAP carrying amount immediately post-acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement. Deferred tax and minority interest are adjusted for the impact of any consequential adjustments after taking advantage of the transitional provisions.

Goodwill    

Goodwill representing the excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets acquired is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses.                                    

Goodwill written off to reserves prior to date of transition to IFRS remains in reserves. There is no reinstatement of goodwill that was amortised prior to transition to IFRS. Goodwill previously written off to reserves is not written back to profit or loss on subsequent disposal.                                    

Impairment testing of goodwill                            

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the group at which management monitors the related cash flows.                                    

Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amount is determined as the higher of value in use less costs to sell.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. To determine the recoverable amount, the Group estimates expected future cash flows from each cash generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for the Group's impairment testing procedures are directly linked to the Group's latest approved budget. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by management. Impairment losses are recognised in the income statement and are allocated to the assets included in the cash generating unit in question.                        

Revenue                                     

Revenue is measured by reference to the fair value of consideration received or receivable by the group for goods supplied and services provided, excluding VAT and trade discounts. Revenue is recognised upon the performance of services or transfer of risk to the customer. Revenue is attributable to each of the three following operating segments, which represent the main products and services provided by the Group.    

Talent Management    

Revenue represents commission recognised from clients and is recognised in accordance with the terms of the underlying contract. Within PFD, commission is recognised when received during the year. Revenue is then accrued at the year end in respect of amounts received in the four months post year end which are known to relate to prior period services rendered.                                    

Marketing

Revenue represents fees and advertising sales, recognised when the services are performed in accordance with contractual arrangements for client representation and sales invoiced to third parties.                                    

Events

Revenue represents gross fees and sales of materials. Turnover is recognised on performance of services in accordance with contractual arrangements, and sales of materials are recognised on delivery.               

Property, plant and equipment          

Property, plant and equipment is stated at cost or valuation, net of depreciation and any provision for impairment.

 Assets carried at valuation

The only class of assets that is carried at fair value is freehold property. Revaluations are performed with sufficient frequency to ensure that the carrying amount does not differ materially from that which is determined using fair value at each reporting date. Any revaluation surplus is credited to 'revaluation reserve' in equity, unless the carrying amount has previously suffered a revaluation decrease or impairment loss. To the extent that any decrease has previously been recognised in the income statement, a revaluation increase is recognised in the income statement, with the remaining part of the increase charged to equity. Downward revaluations are recognised upon appraisal or impairment testing, with the decrease being charged against any revaluation surplus in equity relating to this asset and any remaining decrease recognised in the income statement.                                                    

Depreciation

Depreciation is calculated to write down the cost or valuation less estimated residual value of all property, plant and equipment other than freehold land by equal annual instalments over their estimated useful economic lives. The rates generally applicable are:                                    

Freehold properties - 3.3% per annum                

Motor vehicles - 25% per annum                    

Event equipment - 20% - 33% per annum

Office equipment - 33% per annum                

Furniture and fittings - 15% - 25% per annum            

Leasehold improvements - over the period of the lease    

Material residual value estimates are updated at least annually, whether or not the asset is revalued.

Finance Income and Costs

Finance income and costs are reported on an accruals basis. Borrowing costs are expensed as incurred.

Leased assets 

In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability. Leases of land and buildings are split into a land and building element, in accordance with the relative fair values of the leasehold interests at the date the asset is initially recognised. All property leases held by the Group are short term and have been assessed as operating leases.                                    

The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the income statement over the period of the lease.

All other leases are regarded as operating leases and the payments made under them are charged to the income statement on a straight line basis over the lease term. Lease incentives are spread over the term of the lease.         

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Cost includes materials and direct labour.    

Taxation

Current tax is the tax currently payable based on taxable profit for the year. Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the group are assessed for recognition as deferred tax assets.                                    

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.                                

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

 Financial assets

Financial assets are divided into the following categories: loans and receivables and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired, and are recognised when the group becomes party to contractual arrangements.                                    

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade and most other receivables fall into this category of financial assets. Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement.                                    

Provision against trade receivables is made when there is objective evidence that the group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.                                    

Available-for-sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. All financial assets within this category are measured subsequently at fair value, with changes in value recognised in equity, through the statement of recognised income and expense. Gains and losses arising from investments classified as available-for-sale are recognised in the income statement when they are sold or when the investment is impaired.                                    

In the case of impairment of available-for-sale assets, any loss previously recognised in equity is transferred to the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment losses recognised previously on debt securities are reversed through the income statement when the increase can be related objectively to an event occurring after the impairment loss was recognised in the income statement. An assessment for impairment is undertaken at least at each balance sheet date.                                    

A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the group transfers substantially all the risks and rewards of ownership of the asset, or if the group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.

 Financial liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the group becomes a party to the contractual provisions of the instrument. Financial liabilities categorised at fair value through profit or loss are recorded initially at fair value, all transaction costs are recognised immediately in the income statement. All other financial liabilities are recorded initially at fair value, net of direct issue costs.

All financial liabilities are recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.             

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.                                            

Disposal groups classified as held for sale

Disposal groups classified as held for sale include assets that the group intends and expects to sell within one year from the date of classification as held for sale. Assets classified as held for sale are measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. Assets classified as held for sale are not subject to depreciation or amortisation.        

Discontinued operations

A discontinued operation is a cash-generating unit, or a group of cash-generating units, that either has been disposed of, or is classified as held for sale, and:                                    

-   represents a separate major line of business or geographical area of operations;    

- is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or                                

-       is a subsidiary acquired exclusively with a view to resale.                                                        

The disclosures for discontinued operations in the prior year relate to all operations that have been discontinued by the balance sheet date for the latest period presented.

 Dividends

Dividend distributions payable to equity shareholders are included in 'other short term financial liabilities' when the dividends are approved in general meeting prior to the balance sheet date.                                    

Equity

Equity comprises the following:                                    

· 'Share capital' representing the nominal value of equity shares.                                    

·  'Share premium' representing the excess over nominal value of the fair value of consideration received  

    for equity shares, net of expenses of the share issue.                                    

·  'Translation reserve' represents the differences arising from translation of investments in overseas

    subsidiaries.                                    

·  'Revaluation reserve' representing gains and losses due to the revaluation of certain financial assets and

    property, plant and equipment.                                                        

·   'Profit and loss reserve' representing retained profits.                    

Foreign currencies

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the profit or loss in the period in which they arise. Exchange differences on non-monetary items are recognised in the statement of recognised income and expenses to the extent that they relate to a gain or loss on that non-monetary item taken to the statement of recognised income and expenses, otherwise such gains and losses are recognised in the income statement.

 The assets and liabilities in the financial statements of foreign subsidiaries and related goodwill are translated at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are taken directly to the Translation reserve in equity. On disposal of a foreign operation the cumulative translation differences are transferred to the income statement as part of the gain or loss on disposal.                                    

The group has taken advantage of the exemption in IFRS 1 and has deemed cumulative translation differences for all foreign operations to be nil at the date of transition to IFRS. The gain or loss on disposal of these operations excludes translation differences that arose before the date of transition to IFRS and includes later translation differences.                       

Share-based payment - Equity settled share-based payment         

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example, profitability and sales growth targets).                                                    

All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 January 2006 are recognised in the financial statements. All equity-settled share-based payments are ultimately recognised as an expense in the income statement with a corresponding credit to the profit and loss reserve.                                      

If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.                                    

Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate share premium.         

Defined Contribution Pension Scheme                

The pension costs charged against profits are the contributions payable to the scheme in respect of the accounting period.

 8. Financial Information

The financial information relating to the year ended 31 December 2007 set out in this preliminary announcement does not constitute Statutory Accounts as defined in Section 240 of the Companies Act 1985, but has been extracted from the statutory accounts, which received an unqualified auditors' report and which have not yet been filed the Registrar of Companies. The financial information relating to the period ended 31 December 2006 is extracted from the statutory accounts, which incorporated an unqualified audit report and which has been filed with the Register of Companies (subsequently adjusted for IFRS).

 

END

 

 

FR PUURAQUPRUBC