RNS Number : 1157X
Teleunit S.p.A
20 June 2008
20 June 2008
Teleunit SpA
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
Teleunit S.p.A., ("Teleunit" or "the Company"; stock code: TLU), the Italian telecom services provider, announces its preliminary
financial results for the year ended 31 December 2007.
Highlights:
* Group Revenue of EUR87.3 million (2006: EUR100.3 million) as Premium Access traffic diminished anticipating new regulatory
restrictions
* Gross profit up 31% to EUR26.6 million (2006: EUR20.3 million)
* Gross margin increased to 30% in 2007 from 20% in the previous year as business mix shifted to more profitable segments
* Net loss after tax, and after exceptional items of EUR9.1 million, equalled EUR10.1 million (2006: EUR2.5 million net loss)
* 2.5 million unique users interacted with Neomobile in Italy, Turkey and Spain in 2007 (2006: 1.0 million unique users)
* VoIP customer base increased by 49% to over 5,600 (2006: 3,750)
* Post year-end: EUR7.1 million of outstanding receivables recovered from Telecom Italia; Purchase and Sale Agreement signed with a
major Venture Capital Company for the sale of a 20% minority stake in Neomobile, giving it an Enterprise Value of EUR62 million and, subject
to the raising of debt and Antitrust Approval, contributing EUR23 million in cash to the Group's liquidity.
Commenting on the financial results, Gianfranco Cimica, Chairman & Chief Executive Officer of Teleunit S.p.A, said:
"In the second semester of 2007 the Group has booked a number of exceptional write-downs and one-off costs related to regulatory changes
governing access to premium services and to the settlement of long-overdue receivables with Telecom Italia, which are ultimately responsible
for the loss we now report. On the other hand, the recent turbulence in the financial markets has led the Group to focus its financial
strategy on the building up of cash reserves. As such, in H22007, the Group focussed primarily on laying the groundwork for the following
post period-end developments: the EUR9.8 million settlement with Telecom Italia (of which EUR7.1 has been received), and the potential sale
of a minority stake in Neomobile for a total cash consideration for TLU of EUR23 million. Accordingly I am pleased to report that Teleunit's
net cash position, which will prove vital to the future growth of the Group's most exciting and fast-growing initiatives, is expected to
reach record levels in 2008."
About Teleunit SpA
Based in Perugia in Central Italy, Teleunit is a telecom services provider to both business and residential customers throughout Italy.
The Group operates in three distinct sectors: voice and data services (providing fixed line voice and data, wholesale, and wireless services
to customers across Italy) and premium access services. Through its subsidiary, Neomobile SpA, Teleunit is also an active player in the
Mobile Content D2C arena. The Group is selectively expanding its operations in Italy and internationally. Teleunit listed on AIM in May
2004, the first Italian company to complete a primary listing in London. For more information, please visit the website:
http://ir.teleunit.it.
For further information, please contact:
Gianfranco Cimica, Chairman & CEO, Teleunit SpA 0039 075 528 3939
Oliver Rigby, Daniel Stewart & Company Plc 020 7776 6550
Chairman's Statement and CEO's review
On behalf of the Board of Directors, I present the Annual Report and Financial Statements of the Company for the financial year ended 31
December 2007.
Operating Performance
Strong performance by Neomobile and the continued growth of our VoIP customer base, was in FY2007 offset by a significant revenue
shortfall in the Premium Access segment and by two exceptional items booked in the period: the first relates to an impairment of the Group's
associates Pro-Advertising and Starline, and the second to an exceptional cost related to the settlement negotiated with Telecom Italia over
long-overdue receivables, previously disclosed to Shareholders via the March 7th and April 1st RNS releases.
In April of 2008, a new regulation governing access to value added services over premium access numbers was disclosed, by which all
fixed line telephony operators must by default block access to premium numbers for all new and existing customers, with lines enabled only
upon client request. This regulation was to be enacted on June 30th 2008, although it was recently rescinded at an Appeals Court to be
considered again in November.
In anticipation of a more restrictive regulatory regime, service centres started cutting back on advertising their services in the
second half of 2007. This resulted in a significant decline in traffic generated through Teleunit's premium numbers, leading to a FY2007
revenue shortfall in the segment of EUR25.3 million as compared to the prior year.
Rumours regarding this regulation have been circulating for some time, but were often offset with rulings favourable to the development
of the sector. Until the regulation was first made public, Teleunit was unable to evaluate the mid to longer term impact on the business,
although the trend in 2008 now confirms that a marked decline in premium traffic can be expected going forward.
Given this impending regulation, the business plans of the Group's associates Pro-advertising and Starline, both operating in the
Premium Access sector, became subject to review. Although the regulation has yet to be enacted, the impact on the market has been felt,
resulting in a necessary revaluation of future growth prospects of the Group's associates, and cause for impairment. Accordingly, the Group
has booked a EUR4.2 million write-down of its associates in the period under review.
Turning to Neomobile, in just three years, the business has grown from a local start-up to a multinational Company with an Enterprise
Value independently assessed at EUR62 million euros. A view by the Board that the Group could at this stage benefit from a partial unlocking
of the intrinsic value in its subsidiary led to a focus in the second half of 2007 on laying the foundations for the sale of a minority
stake of Neomobile to a third party. I am therefore pleased to announce that Teleunit has signed a Purchase and Sale Agreement (the
"Transaction") with a major Italian Banks' Venture Capital subsidiary ("the VCC") for the sale of a 20% minority stake in Neomobile (for
more information please see note 5). The Transaction is expected to complete by July 28th 2008.
The closing of the Transaction is subject to the raising of debt finance of EUR13 million (EUR1.0 million of which will be used to fund
consultancy and other expenses related to the Transaction), and receipt by the parties of the required authorisations from Italy's Antitrust
Authority. We are currently in the advanced stages of sourcing the required financing and although the Board expects a positive outcome, no
guarantees on the successful conclusion of the Transaction can be provided at this time.
The prospects for Neomobile are excellent and we are delighted that a major VCC has confirmed our view by making such an important
financial commitment to the business. The value of TLU's residual equity stake in Neomobile, should the Transaction be closed successfully,
will be in excess of EUR34 million (c. �26.8 million) which is substantially above the Company's current AIM market capitalisation; this,
plus the EUR23 million in new cash, net of expenses, expected for TLU's balance sheet, we hope will create the conditions for a significant
re-rating of the Company's shares. Moreover, the Transaction vindicates Management's efforts in creating new value for shareholders through
restructuring the Company and positioning it for growth through selective support for exciting new initiatives, such as Neomobile.
Financial Performance
The Group generated EUR87.3 million in revenues in FY2007, EUR13.0 million below the prior years' levels. The shortfall is due to a
EUR25.3 million reduction in the Premium Access divisions' contribution to the top-line, although strong performance in Neomobile and the
Voice and Data Services division, which grew revenues by EUR10.5 million (+77%) and EUR1.9 million (+18%) respectively, helped in part to
mitigate the decline. An improvement in the Group's gross margin, which increased from 20% in the year 2006 to 30% in 2007, led to a gross
profit up 31% to EUR26.6 million (2006: EUR20.3 million). This increase is due primarily to the growing role of Neomobile in the Group's
revenue mix. In 2007 Neomobile contributed 27% to the Group's top-line (2006: 13% of total Group revenues), and grew margins by 5% to 82
percent.
The increase in overheads from EUR21.3 million in 2006 to EUR30.9 million in 2007 is attributable mainly to Neomobile's continued
growth; the EUR5.1 million y-o-y rise in sales and marketing expense is due to Neomobile's sustained growth in Italy and Turkey, and due to
its advertising intensive launch in Spain in the second semester. Administrative expenses which at year-end 2007 came in EUR0.7 million
higher than in the preceding year (2006: EUR2.6 million) relate principally to an increase in Neomobile personnel, which rose from 17 at
year-end 2006 to 40 at year-end 2007, and to legal expenses related to the settlement with Telecom Italia. Other net operating expenses in
2007 came in EUR3.7 million higher than in 2006 (2006: EUR7.7 million). These include extraordinary expenses of EUR4.3 million booked in the
period; net of these the Group would be reporting comparatively lower operating expenses as a result of Group-wide cost-cutting measures
implemented in 2006 and 2007.
The Group's loss after tax in the period under review, as previously mentioned, has been conditioned by exceptional write-downs and
one-off costs amounting to EUR9.1 million. The Telecom Italia settlement resulted in an incremental loss of EUR3.6 million net of
provisions, of which EUR350,000 were booked as a direct cost attributable to the PA segment. The residual value of the Group's associates,
Pro-Advertising and Starline, now stands at EUR1.4 million as the result of a EUR4.2 million impairment booked in the year. The Group also
booked a provision of EUR0.8 million against a contingent tax liability linked with 2004 AIM listing costs. The balance of EUR0.2 million
relates to bad debt provisions associated with wholesale and retail clients. Net of these exceptional items, the FY2007 after-tax loss would
have primarily reflected the reduction in revenues experienced in the Premium Access segment. The Group will follow its associates and
developments in the PA market attentively to ascertain whether a further impairment will be necessary in the near-future, although the Board retains that it has taken a very prudent approach to
establishing fair value in the balance sheet.
The Telecom Italia write-down is compensated for by the cash the Group collected as a result of the agreement. As previously disclosed,
the Group successfully negotiated with TI a EUR9.8 million settlement package, marking the closure of a detrimental chapter in Teleunit's
history. An amount of EUR7.1 million has to date been received, and our lawyers remain confident that the balance of EUR2.7 million will be
cashed following the AGCOM's ruling, expected in the next few months. Moreover, the negotiation of a sale of a minority stake in Neomobile
is expected to provide an influx of EUR23 million. These post period-end developments, intricately tied to the Group's focus in the latter
part of 2007, we hope will result in a significantly improved and record net cash position in 2008.
Fiscal prudence and the importance of maintaining solid ties with financing institutions led the Group to settle EUR3.0 million in
current and non-current debt in 2007. In view of this, at year-end 2007 the Group had EUR3.4 million in short-term interest bearing loans
and borrowings and EUR15.8 in long-term borrowings compared to a 2006 position of EUR4.6 million and EUR17.7 million respectively. Bank
overdrafts were reduced in the period by EUR1.3 million to EUR1.7 million (2006: 3.0 million) due to more effective management of short-term
cash requirements.
Cash and cash equivalents at year-end 2007 stood at EUR6.2 million (2006: EUR11.0). The EUR4.8 million reduction in cash can be
attributed in part to the aforementioned payback of loans and borrowings, and in part to the new standardized PA contract signed with
Telecom Italia: the new payment terms provide for 65% of invoice amounts to be cashed within 90 days from invoicing date, the balance being
cashed 120 days thereafter. This differs from the 100% settlement at 30 days from invoice date that the division benefited from previously.
The Group has continued to pay service centres on a bi-monthly basis in order to maintain its competitive advantage, although the terms laid
out in the new standardized PA contract with TI have now become more cash-intensive for the Group.
In 2007 the Group generated a cash surplus from operations of EUR2.4 million (2006: EUR4.6 million). The EUR3.1 million cash outflow
from investments is due to EUR2.6 million spent in part on the VoIP Customer Premises Equipment ("CPE") required to support the growing
customer base, EUR2.3 million relating to the purchase of administrative software and content generation software for Neomobile, and due to
a EUR1.7 inflow from the disposal of assets previously classified as held for sale. The EUR2.7 million cash-outflow from financing is due to
the repayment of short and long-term loans and borrowings previously mentioned.
Total Shareholder's Equity which at year-end stood at EUR12.5 million (2006: EUR22.6 million) reflecting the loss incurred in the period
under review.
Employees
The number of employees now stands at 117 compared to 91 at year-end 2006 and can be attributed to the increase in Neomobile's
headcount, from 17 to 40 at year-end 2007. On behalf of the Management and the Board, I would like to take this opportunity once again to
thank all of our employees for their hard work and dedication over the course of this year.
Outlook
Given the new aforementioned regulation governing access to Premium Services, the Revenue and EBITDA outlook for 2008 is opaque. The
gross profit that could be lost as a result of any downturn in the PA segment will be substituted in large part by the increasing
contribution of Neomobile to the Group's profitability. Although margins should improve substantially, a full gross profit recovery in
absolute terms to levels previously anticipated by Management will prove difficult to achieve in the course of 2008.
The Board continues to believe strongly in the mid-term growth of the business. We continue to evaluate the Group's growth prospects on
a regular basis and will take appropriate steps should the growth and profitability of any of our business segments fail to meet our
targets.
Gianfranco Cimica 20 June 2008
Chairman & Chief Executive Officer
Chief Operating Officer's Review
Operational Review
Premium Access Services:
Divisional highlights:
* Revenues down 33% to EUR50.9 million (2006: EUR76.2 million)
* Gross profit of EUR7.1 million; 14% margin (2006: EUR9.8 million; 13% margin)
* Division impacted by new regulation governing access to premium services
Revenues in 2007 fell EUR25.3 million short of revenues in the corresponding period, although a slightly higher margin helped in part
taper the reduction in gross profit. This latest regulation is further testament to the unpredictable nature of the premium access sector.
Announced at April and originally to be enacted at the end of June, the new regulation was at mid-June deferred, to be again put to the
Courts in late November.
Although certain service centres have shifted their attention to rolling out mobile voice services, we do not expect these to compensate
for the further reduction forecasted in fixed-line data services. The Group intends to remain in the market and follow developments closely,
although a run-down in the business is, at this stage, being actively evaluated by the Board.
Voice and Data Services
Divisional Highlights:
* Revenues up 18% to EUR12.5 million (2006: EUR10.6 million)
* Gross profit, inclusive of amortisation, depreciation and personnel expenses, of EUR0.3 million on margins of 2% (2006: EUR0.6
million; 6%)
* 49% increase in the VoIP customer base to over 5,600 (2006: 3750)
* Alternative sales channels put in place; productive post period-end
In the year 2007, the division grew revenues by 18% with respects to the prior year due to a rise in demand for wholesale termination
services and as a result of new VoIP contracts acquired. Direct costs, inclusive of amortisation, depreciation and personnel expenses,
resulted in a segment gross profit of EUR327,000 in 2007 compared to EUR619,000 in 2006. In 2007, WLL assets reached their peak rate of
amortisation, leading to this reduction in gross profit - it is expected that up until mid-2009, by which time the asset will have been
fully amortised, these costs will continue to impact the division's profitability albeit at a lesser rate than experienced in 2007. The
division's aim to reduce CPS customer churn to 2% was realized in 2007, although further substitution of legacy services with VoIP services
can be expected as broadband penetration in Italy continues to rise.
WLL customer numbers have remained stable throughout the period, and although the underlying infrastructure provides value to the
Group's balance sheet, the division needs to sustain amortisation costs disproportionate to the top-line contribution provided by the
technology. Furthermore, ADSL technologies that have now evolved and are able to provide up to 20 megabytes of guaranteed bandwidth, as well
as new wireless standards expected to replace the technology, leave little space for the continued growth of our WLL customer base.
In 2007 The Voice and Data Services continued its focus on growing VoIP customer numbers, up 49% to 5,600 at period-end. Although growth
in customer numbers are in line with Managements' expectations, in the second half of 2007 a decline in productivity from traditional sales
channels highlighted a need to pursue alternative means to bolster future sales. In the latter half of 2007, the division took steps to
identify and prepare for the post period-end implementation of outbound call-center initiatives, with contracts acquired via the real-time
recording of customer consent, and targeted web marketing initiatives. These new sales channels have in their early stages been yielding
good results, and we expect these to actively contribute to segment growth going forward.
Mobile Content Services:
Divisional Highlights:
* Revenues up 76% to EUR24.0 million (2006: EUR13.6 million)
* Gross profit up 87% to EUR19.6 million; 82% margin (2006 EUR10.4 million; 77% margin)
* 2.5 million unique users interacted with Neomobile in 2007, up 150% on 2006 (2006: 1.0 million).
I am pleased to report that in 2007 Neomobile again exhibited exceptional growth. The 76% rise in revenues can be attributed to the
successful implementation of its strategy of internationalisation and due to strong demand for content in all countries it currently trades
in. More than 20% of Neomobile's revenues were in 2007 derived from Turkey and Spain, vindicating the strategy of internationalisation first
implemented in 2006, when Neomobile took its first step overseas.
In 2007 Neomobile also completed the internalisation of all technological platforms, thus allowing it to benefit from a full vertical
integration in the market's value chain. Neomobile now produces, markets and delivers content to end users in all countries in which it
operates, and therein benefits from a faster time-to-market than its competitors. In a marketing-centric business, real-time statistics and
reports are essential to tailoring content packages for the target market and are determinant in building competitive advantages.
Previously, the technological platform was outsourced, and often user behaviour could not be analysed before month-end. Today Neomobile
benefits from a direct interconnection with Mobile Network Operators, allowing for real-time analysis of user behaviour, leading to the
creation and marketing of content on the cutting edge of contemporary trends. The in-sourcing of the technology platform has also permitted
Neomobile to eliminate certain recurring costs linked with content delivery, resulting in a gross margin up 5% to 82% in 2007.
Revenues in 2007 were primarily derived from continued demand for traditional services, namely ring-tones and mobile personalization
products, although a shift to new forms of community-centred and chat services have entered the beta testing stage. We hope that these will
provide an added impetus to growth in 2008 and beyond.
In the year under review, Neomobile also diversified its sales channels to market content via web and WAP. A dedicated web department
has been added to the business, to manage all aspects of web marketing across geographical boundaries. Neomobile is pleased to report that
these new web initiatives are performing beyond Management's expectations, and we therefore expect them to further contribute to Neomobile's
profitability going forward.
Summary and Outlook
Teleunit's proprietary network is sufficiently scaled so as to guarantee that any foreseeable increase in new customers will not require
additional infrastructural investments. The current infrastructure can support a much larger client base, and the new sales channels
implemented in H12008 are expected to give the Voice and Data Services segment a welcome boost in the near future.
Market experts maintain their belief that demand for Value Added Services will persist. However as a consequence of the new regulation
that will be potentially enacted in 2008, we expect a continued reduction in traffic. Accordingly, it is our view that the Premium Access
Services segment will become increasingly less relevant to the business going forward.
The potential sale of a 20% minority stake in Neomobile is testament to the attractiveness of the business, and Teleunit's ability to
identify growth opportunities to add value to Shareholders' equity. A major VCC's involvement in the Company further validates future growth
prospects, and provides Neomobile with additional support and motivation to sustain current levels of growth via its strategy of selective
international expansion. Mobile content services is the market that is today exhibiting the strongest growth traits in the
telecommunications sector, and we believe that Neomobile will continue to gain market share in the countries it chooses to compete in. I
look forward to updating investors on the status of the Transaction in the near future.
In the short-term the growth in other business lines will only partially substitute the reduction in top-line contribution from the
Premium Access segment. This has led the Group to focus on identifying and developing new, higher margin, value added web services to
complement its existing offerings. Given the increase in margin and the transformation of the business to focus on more profitable segments,
we expect the Group's EBITDA to be substantially higher in 2008 and the Company's robust cash position will add comfort to Management's
ability to execute the business plan going forward.
Francesco Cimica 20 June 2008
Chief Operating Officer
INCOME STATEMENT
For the year ended 31 December 2007
in thousands of euro Note 2007 2006
Sales revenue 2 87,310 100,346
Cost of sales (60,755) (80,069)
Gross profit 26,555 20,277
Administrative expenses (3,388) (2,647)
Sales and marketing expenses (16,035) (10,932)
Other net operating expenses (11,446) (7,710)
Total operating expenses (30,869) (21,289)
(Loss)/profit from operations (4,314) (1,012)
Share of results of associates after tax - 86
Charge from impairment of associates 5 (4,255) -
Financial charges (1,639) (2,311)
Financial income 138 311
(Loss)/profit before tax (10,070) (2,926)
Taxation 3 (20) 422
Net (loss)/profit for the year (10,090) (2,504)
Basic (loss)/earnings per share (euro) 4 (0.0543) (0.0134)
Diluted (loss)/earnings per share (euro) 4 (0.0538) (0.0132)
BALANCE SHEET
As at year end 31 December 2007
in thousands of euro 2007 2006
Assets
Property, plant and equipment 13,404 14,591
Intangible assets 3,093 2,171
Investments in subsidiaries and associates 1,421 6,029
Other investments 355 375
Deferred tax assets 1,014 820
Total non-current assets 19,287 23,986
Trade receivables 26,439 26,688
Non-trade receivables 2,494 3,707
Cash and cash equivalents 6,215 10,950
Assets classified as held for sale - 1,305
Other financial assets - -
Total current assets 35,148 42,649
TOTAL ASSETS 54,435 66,636
Equity
Issued capital 2,334 2,334
Share premium 12,542 12,542
Reserves 467 467
Own shares (214) (214)
Retained earnings (2,648) 7,473
Total Group equity 12,481 22,605
Equity attributable to third parties (3) (3)
Total equity 12,478 22,602
Liabilities
Interest-bearing loans and borrowings 15,847 17,660
Employee benefits 258 311
Provisions 1,623 378
Deferred tax liabilities 1,064 1,173
Total non-current liabilities 18,792 19,522
Bank overdrafts 1,647 2,956
Interest-bearing loans and borrowings 3,365 4,575
Trade and other payables 17,296 16,151
Income tax payable 857 830
Total current liabilities 23,165 24,512
TOTAL EQUITY AND LIABILITIES 54,435 66,636
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2007
in thousands of euro Share Capital Legal Reserve Share Premium Own shares Retained Earnings Total
Balance at 1 January 2006 2,334 375 12,542 (114) 11,932 27,069
2005 profit allocated to - 92 - - (92) -
reserves
Dividend paid - - - - (1,859) (1,859)
Own shares acquired - - - (100) - (100)
Other - - - - (4) (4)
Net loss 2006 - - - - (2,504) (2,504)
Balance at 31 December 2006 2,334 467 12,542 (214) 7,473 22,602
Balance at 1 January 2007 2,334 467 12,542 (214) 7,473 22,602
Net loss 2007 - - - - (10,090) (10,090)
Other - - - - (31) (31)
Balance at 31 December 2007 2,334 467 12,542 (214) (2,648) 12,481
STATEMENT OF CASH FLOWS
For the year ended 31 December 2007
in thousands of euro 2007 2006
Operating activities
Net (loss)/profit for the year (10,090) (2,504)
Adjustments for:
Depreciation and amortization 5,015 4,071
Employee benefits (3) 181
Deferred tax (304) (669)
Share of results of associates after tax (18) (86)
Gain from disposal of assets classified as held for sale (334)
Loss from impairment of associates 4,255 -
Other 1,265 267
(214) 1,260
(Increase) in trade receivables 249 (3,308)
(Increase) in non-trade receivables 1,213 88
Increase in trade and other payables and income tax 1,415 7,178
Income tax paid (243) (589)
Retirement benefits payment (50) (77)
Other - -
Cash flows from operating activities 2,370 4,552
Investing activities
Purchase of property, plant and equipment (2,559) (3,823)
Proceeds from sale of fixed assets (3) -
Purchase of intangible assets (2,287) (1,458)
Proceeds from assets classified as held for sale 1,740 -
Purchase of investments in associates - (183)
Purchase of other investments - -
Cash flows from investing activities (3,109) (5,464)
Financing activities
Proceeds from loans and borrowings (2,686) (1,233)
Proceeds from the issue of share capital -
Increase in share premium (net of unsubscribed amount) -
Payment of transaction costs -
Purchase of owned shares - (100)
Dividends paid - (1,859)
Cash flows from financing activities (2,686) (3,192)
Net increase/(decrease) in cash and cash equivalents (3,425) (4,104)
Cash and cash equivalents (net of overdrafts) 7,994 12,098
at 1 January
Cash and cash equivalents (net of overdrafts) 4,569 7,994
at 31 December
NOTES TO THE FINANCIAL STATEMENTS
1. Statement of compliance & Basis of preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with the latest version of the International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB), as adopted by the European Union.
Under Italian law (D.l. 24/2/1998 n. 58 art 119) the Company is not required to prepare the statutory financial statements under IFRS,
as a consequence of the fact that the Company is admitted to the Alternative Investment Market (AIM) which, for the CONSOB, is an
unregulated stock exchange (effective 15/11/2005).
However, based on the D.l. 28/02/05 n.38 art. 2 and art. 3, the Directors have decided to prepare both the statutory consolidated
financial statements (ex. D.l. 9/4/91 n. 127 art. 27) and the separate financial statements of Teleunit S.p.A. in accordance with IFRS as
from year ending 31 December 2006. These have been prepared under IFRS in accordance with the requirements of the rules (Feb 2007) of the
Alternative Investment Market, part 1.19.
Accordingly the comparative information presented in these consolidated statements are obtained from the statements as at year ending 31
December 2006 prepared in accordance with IFRS.
The consolidated financial statements as at 31 December 2007 have been prepared in accordance with the current Italian statutory law
(Italian Civil Code, adopting also the rules of the D.l. n.6 17/01/2003 and following modifications and integration).
The Company is not subject to Direction and Coordination of another company in accordance with art. 2497 of the Italian Civil Code.
A copy of the Company's Annual Report & Accounts for the year ended 31 December 2007 will be sent to Shareholders by end June and will
also be available on the Company's website: http://ir.teleunit.it/.
(b) Basis of preparation
The consolidated financial statements of the Company as at and for the year ended 31 December 2007 comprise the Company and its
subsidiary (together referred to as the "Group") and the Group's interest in associates and jointly controlled entities. The parent Company
financial statements present information about the Company as a separate entity and not about its Group.
The consolidated financial statements have been prepared and approved by the Directors in accordance with International Financial
Reporting Standards as adopted by the EU ("Adopted IFRS").
As a consequence of the incorporation of Teleunit Turkey, starting from year ending 31 December 2006 the company is required to prepare
the consolidated financial statements; accordingly the comparative information presented in these consolidated statements are obtained from
the statements as at year ending 31 December 2006 prepared in accordance with IFRS.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements, and have been applied consistently by Group entities.
Certain comparative amounts relating to the statements have been reclassified to conform with the current year's presentation, although
these have had no impact on the Group's net Loss and net Equity reported at year-end 2006.
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that
affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
The consolidated financial statements are constituted of: the income statement, the balance sheet, the statement of changes in equity,
the cash flow statement and the notes the financial statements which provide additional information on the separate statements.
2. Segmental Information
Teleunit now has three operating divisions, namely:
* Voice and Data Services ("VDS")
* Premium Access ("PA")
* Mobile Content Services ("MCS")
The following tables provide information regarding the financial performance of these operating divisions:
in thousands of euro 2007
VDS PA MCS Unallocated TOTAL
Sales 12,456 50,878 23,976 - 87,310
Cost of sales (12,129) (43,734) (4,416) (475) (60,755)
Gross profit 327 7,144 19,560 (475) 26,555
Operating expenses (6,278) (7,881) (14,873) (1,838) (30,869)
Profit from operations (5,951) (737) 4,687 (2,313) (4,314)
Amortisation and depreciation 3,410 601 80 922 5,013
EBITDA (2,541) (136) 4,767 (1,391) 699
Trade receivables 3,031 14,939 8,468 1 26,439
Investments in associates - 1,421 - - 1,421
Non-trade receivables 1,248 227 251 768 2,494
Cash and cash equivalents - - - 6,215 6,215
Other assets 9,634 1,168 986 6078 17,866
Total assets 54,435
Trade payables 1,511 5,331 7,629 873 15,344
Bank overdraft - - - 1,647 1,647
Loans and borrowings 3,758 - 606 14,848 19,212
Other liabilities 247 1,449 2,441 1,614 5,751
Total liabilities 41,954
Net Equity 12,481
TOTAL 54,435
in thousands of euro 2006
VDS PA MCS Unallocated TOTAL
Sales 10,589 76,232 13,525 - 100,346
Cost of sales (9,970) (66,407) (3,076) (616) (80,069)
Gross profit 619 9,825 10,449 (616) 20,277
Operating expenses (5,570) (5,932) (8,647) (1,140) (21,289)
Profit from operations (4,951) 3,893 1,802 (1,756) (1,012)
Amortisation and depreciation 2,862 425 6 767 4,060
EBITDA (2,089) 4,318 1,808 (989) 3,048
Trade receivables 2,826 19,397 4,360 105 26,688
Investments in associates - 6,004 - 25 6,029
Non-trade receivables 1,347 192 424 1,744 3,707
Cash and cash equivalents - - 222 10,728 10,950
Other assets 9,854 1,987 178 7,243 19,262
Total assets 66,636
Trade payables 1,439 8,392 4,126 641 14,598
Bank overdraft - - - 2,955 2,955
Loans and borrowings 5,151 4,061 505 12,518 22,235
Unallocated liabilities 175 645 326 3,100 4,246
Total liabilities 44,034
Net Equity 22,602
TOTAL 66,636
3. Taxation
Two taxes are applicable to the Company:
* Corporate income tax (IRES) at the rate of 33%
* Regional tax (IRAP) at the rate of 4.25%
The difference in tax rates arises from the different basis for the two taxes.
in thousands of euro 2007 2006
Current tax expense:
- IRES (1,574) 99
- IRAP (318) (242)
Total current tax expense (1,892) (143)
Deferred tax expense:
- IRES 1,886 473
- IRAP 32 7
- Other (46) 85
Total deferred tax expense 1,872 565
Total (20) 422
Income tax expense/(income) may also be analysed as follows:
in thousands of euro 2007 2006
- IRES 312 552
- IRAP (286) (215)
- Other (46) 85
Net expense (20) 422
Reconciliation of the effective tax rate (IRES and IRAP)
2007 2007 2006 2006
in thousands of euro % %
Profit (loss) before tax (10,070) (2,926)
Income tax at standard rate 3,323 33.00 966 33.00
Permanent differences (3,011) (275)
IRAP (286) (214)
Effect of tax rate in foreign jurisdictions (46) (55)
Total (20) 422
4. Earnings per share
4.1 Basic earnings/(loss) per share
The calculation of basic earnings per share for the year ended 31 December 2007 and 2006 have been determined as net profit attributable
to ordinary shareholders divided by the weighted average number of ordinary shares for each year considering the effect of change in nominal
value of shares.
Net profit attributable to ordinary shareholders
in thousands of euro 2007 2006
Net profit/(loss) attributable to ordinary shareholders (10,090) (2,504)
Weighted average number of ordinary shares
in thousand of shares 2007 2006
Issued ordinary shares at the beginning (0.0125 EUR per 185,944 185,944
share)
Weighted average number of ordinary shares 185,944 185,944
in euro 2007 2006
Basic earnings/(loss) per share at 31 December (0.0543) (0.0134)
* Diluted earnings/(loss) per share
Diluted earnings per share are calculated by dividing the profit for the period attributable to shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period adjusted for the effects of all potentially dilutive shares (e.g.
employees stock options).
Net profit attributable to ordinary shareholders
in thousands of euro 2007 2006
Net profit/(loss) attributable to ordinary shareholders (10,090) (2,504)
Weighted average number of ordinary shares (diluted)
in thousands of shares 2007 2006
Issued ordinary shares at 31 December 185,944 185,944
Effect of share option agreements 1,681 3,141
Weighted average number of ordinary shares (diluted) 187,625 189,121
at 31 December
in euro 2007 2006
Diluted earnings/(loss) per share at 31 December (0.0538) (0.0132)
5. Subsequent events
On the 29th of May 2008, Teleunit signed a Purchase and Sale Agreement with a Major Italian banks' Venture Capital subsidiary (the
"VCC"), for the partial disposal, via a leveraged buy-out, of 20% of the share capital of the Group's subsidiary Neomobile S.p.A. for a
total cash consideration of EUR23 million. Neomobile was established on 31st January 2007 following the spin-off of the Group's Mobile
Content Services ("MCS") segment.
The Transaction comprises the following operations:
* The creation of a New Company (the "Newco") of which Teleunit will hold a 68% stake;
* The entry of the VCC into the Newco with EUR10 million for a 20% stake. The entry of Neomobile's Managers, who have presided
successfully over the dynamic and profitable growth in the business, into the Newco with EUR1.0 million for a 12% stake via a
non-proportional increase in share-capital;
* The subscription by Newco of a EUR13.0 million loan, EUR1.0 million of which will be used to pay expenses related to the
Transaction;
The successful closing of the Transaction is subject to the following conditions:
* The raising of EUR13.0 million of debt necessary to fund the operation;
* Authorization of the Transaction by Italy's Antitrust Authority.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FGGMVFLDGRZM
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