RNS Number:1019Q
Galleon Holdings PLC
25 January 2007
Galleon Holdings plc
"Galleon" or the "Company" or the "Group"
Preliminary Results for the year ended 30 September 2006
Galleon Holdings plc, the owner, developer and manager of intellectual property
("IP") in the entertainment sector announces its preliminary results for the
year ended 30 September 2006.
CHAIRMAN'S STATEMENT
Group Highlights
* Turnover increased by 16% to #1,317,998 (2005: #1,134,456)
* New streamlined structure of Entertainment Division and Product IP
Division is delivering results
* Croco Worldwide Sourcing Limited has grown 40% on last year and
already has an order book of #2.8m for 2007
* Galleon Entertainment signed a deal with Sony BMG in ground-breaking,
multi-platform, music-based entertainment business
I am pleased to present Galleon's financial results for the year
ended 30 September 2006. The loss before taxation in this year
was #1,199,389 compared with #1,426,257 for the year ended 30
September 2005 and we have seen a 16% increase in turnover which
grew to #1,317,998 compared with #1,134,456 for the previous year.
Growth
Our divisional approach is allowing us to build strong
operational teams which have delivered the innovation needed to
cut through in their respective marketplaces. As a result of
this we have seen Croco Worldwide Sourcing Limited, our product
IP division, significantly grow its business to date; winning
new clients, rolling out product into new territories and
successfully retaining existing clients with repeat orders.
Galleon Entertainment, our entertainment IP arm, has
successfully developed "Apollo's Pad", a new business which
embraces all aspects of convergence - music and entertainment
for the new multimedia generation. This has already led to a
global deal with Sony BMG and is scheduled to be in market
towards the end of 2007. We have also made significant progress
with our other development property "Sokator-442". With key
partners aligned in multiple territories, this is poised to move
into production during 2007.
Outlook
Our product IP division, Croco Worldwide Sourcing, has already secured a 2007
order book of more than double the whole Group's turnover last year. With the
strength of the current management team and the growth we are seeing in both of
our divisions I can see that 2007 will be a transforming year for the Group.
David Wong
Chairman
25 January 2007
CHIEF EXECUTIVE'S STATEMENT
Review of Operations
Our strategy of owning, developing and managing IP through an entertainment IP
division and a product IP division is, we believe, working. Galleon
Entertainment has signed a major deal with Sony BMG for Apollo's Pad, a new
business which leverages music catalogues to generate revenue across all
platforms. We are also delighted with the growth we are seeing in Croco
Worldwide Sourcing Limited in terms of broadening the customer base and
increasing the overall turnover of the business.
Galleon Entertainment
Galleon Entertainment owns, develops and manages entertainment-based
intellectual property.
For many years the entertainment industry has been watching media convergence
and considering its impact on entertainment consumption habits. In 2006 online
media came of age as an entertainment channel and TV broadcasters are reacting
to this new trend. For the first time, TV broadcasters are insisting on
properties being created with multi-channel consumption built into the content
as opposed to being an afterthought. The industry is referring to this as a "360
degree" or "multi-platform" approach to entertainment. As a company in the
entertainment IP business this has led to us spending more time on development,
considering multiple channels of access for consumers, such as TV, online,
mobile, live events and retail when creating IP. For some demographics, such as
the 16-24 year old market, online has overtaken TV as the main channel of
entertainment consumption. This means that the traditional TV-led route to
market is being challenged as other opportunities and partnerships arise.
As such, during 2006, we have focused on developing in-house entertainment IP
that allows the consumer to interact with the IP through all key channels. This
means that we have looked at not only creating entertainment that can be
consumed through multiple channels but we are also considering the assets that
may be needed to facilitate this consumption.
Apollo's Pad
Apollo's Pad is the first example of a successful application of our skills to
this new way of thinking. The consumer most affected by convergence is the 16-24
year old. They have a voracious appetite for music, comedy and other
entertainment that can be snacked across multiple platforms. Apollo's Pad is
effectively a business that takes your all-time favourite music and, by applying
the latest in animation and comedy, delivers these great tracks to today's
multimedia consumer as branded entertainment across all channels and platforms:
online, TV, radio, mobile and retail. It was critical that in development we not
only created the content but also the web portal that will allow consumers to
access this content on a global basis. As a business it allows traditional TV
partners to participate in the brand on a regional basis, but is not dependent
on them as means of accessing the consumer. This means that we can launch
Apollo's Pad directly to the global online music market, benefiting from
direct-to-consumer revenue streams from day one of launch. This direct dialogue
also allows our consumers to directly participate in the creating and shaping of
the content that they consume. This integrated two-way dialogue allows us to
constantly be in touch with our audience and effectively create "Organic
Content" that evolves according to their needs.
This new business model has already resulted in a global deal with Sony BMG who
will be our music partner providing access to music rights and catalogue as well
as the best artists and producers. Sony BMG will also be our partner in the
sales and marketing of the music videos we create on a global basis.
Conversations with TV, mobile and online partners are continuing on a territory
basis. The first content will be launched in quarter four 2007.
Sokator-442
Sokator-442, Galleon's football-based fantasy targeting children aged 6-11 has
also been developed as a full "360 degree" concept. It comprises linear TV
episodes that convey the story, live action Interstitials that demonstrate
playground football games from the TV show, an online function where children
can play fantasy games and upload content, and finally a live events program
that allows children to play the proprietary Sokator football games that we have
created.
The development of this property has been carried out in conjunction with key
broadcast partners. This "360 degree" approach to development has resulted in us
taking longer over this stage of development than originally planned. However
the result of this process is that we not only have a far better product but we
are also in negotiations with four key territories.
Skunk fu!
Skunk fu! is currently in production and on schedule for delivery of 52 episodes
which will be available for airing in quarter three 2007. The property continues
to get strong interest from markets around the world and was in the top five
screened shows at Mipcom, the International TV market. Currently the show is
placed in the UK with the BBC, Germany with Super RTL, France, Sweden, Benelux
and Australia. Discussions are ongoing in the US, Italy and other international
territories.
Mysti
Mysti, our "tween"-girl targeted brand continues to air on the BBC (UK). During
2006 we have been growing the brand through online activities, building the
online fanclub and creating a branded virtual community. Taking the learning
from this direct-to-consumer activity we are now in the process of redeveloping
Mysti as a more integrated "360 degree" property.
Other brands
Galleon controls the merchandising rights to 'Hoo Ha House', the
publishing-based brand targeting children aged 3-6. The brand has successfully
been launched in the UK with a direct-to-consumer publishing programme and also
through 3,000 primary schools as a branded reading and activity program.
Galleon has retained its 50% ownership of 'Peppers Patrol', the pre-school
property, currently being developed as a stop frame animated TV show by our
joint venture partner, Coolabi.
Croco Worldwide Sourcing Limited
Croco Worldwide Sourcing Limited designs, patents, sources and supplies in-pack
premiums to global FMCG companies.
Our strategy of focusing on the higher margin but more complex in-pack premium
segment has led to significant growth in this business.
Croco Worldwide is in a very strong position. The business has grown such that
the order book for 2007 already sits at #2,800,000 compared with #850,000 for
2006. This gives us good visibility of future revenues and furthermore we expect
to see this growth trend continuing for a number of reasons. Firstly, we have
now widened our customer base and are currently dealing with the world's largest
manufacturers of family branded food and drink products. The global nature of
these clients is presenting us with opportunities to roll out regional
promotions on a global basis. To date the success of our products in the market
and the excellence of our customer service and fulfilment has meant that we have
maintained 100% customer retention, giving us the benefits of repeat business
from our existing customers. As our portfolio of product IP grows we are also
able to look beyond in-pack premiums as a means of monetising our IP in order to
further widen our revenue streams.
Outlook
We have made some significant progress in 2006 in growing our immediate business
opportunities with Croco Worldwide and developing the assets that will deliver
long term sustainable revenues through our entertainment division.
Our entertainment division is leading the market with integrated "360 degree"
entertainment initiatives like Apollo's Pad and Sokator-442. With Sony BMG as
our partner, Apollo's Pad has gained significant momentum early on and, working
with them, we are actively discussing further deals with key global and regional
partners.
Croco Worldwide continues to grow its business exponentially with an expanding
client base, greater global reach, a growing portfolio of IP and levels of
service that are delivering repeat business. This is giving us better visibility
of revenues and presents a wider range of opportunities to sustain this growth.
We have an exciting year ahead in 2007 and I would like to thank the staff for
their hard work and the shareholders for your continued support.
Stephen Green
Chief Executive
25 January 2007
CONSOLIDATED PROFIT AND
LOSS ACCOUNT
Note Year ended Year ended Year ended Year ended
30 30 30 30
September September September September
2006 2006 2005 2005
# # # #
Turnover
Continuing
operations 1,183,627 855,405
Discontinued
operations 134,371 279,051
--------- ---------
1,317,998 1,134,456
Cost of sales (1,095,622) (1,023,883)
--------- ---------
Gross profit 222,376 110,573
Other
administrative
expenses (1,299,280) (1,449,560)
Amortisation of
goodwill (84,162) (77,298)
--------- ---------
Administrative
expenses (1,383,442) (1,526,858)
--------- ---------
Operating loss
prior to
amortisation of
goodwill (1,076,904) (1,338,987)
Amortisation of
goodwill (84,162) (77,298)
--------- ---------
Operating loss
Continuing
operations (1,129,018) (1,366,722)
Discontinued
operations (32,048) (49,563)
--------- ---------
(1,161,066) (1,416,285)
Share of operating loss of:
Joint venture (41) (5)
Associate 3,286 961
Net interest 2 (41,568) (10,928)
--------- ---------
Loss on ordinary activities
before taxation (1,199,389) (1,426,257)
Tax on loss on
ordinary activities 3 - -
--------- ---------
Loss on ordinary
activities after taxation
and loss for the financial
year (1,199,389) (1,426,257)
========= =========
Basic loss per
ordinary share 4 (2.6)p (7.1)p
CONSOLIDATED BALANCE SHEET
As at 30 September
Note 2006 2006 2005 2005
# # # #
Fixed assets
Intangible assets
Goodwill 669,066 753,228
Other 1,732,125 1,574
--------- ---------
2,401,191 754,802
Tangible assets 14,057 29,201
Investments
Joint venture
Share of gross assets 734,925 734,925
Share of gross liabilities (736,132) (736,091)
--------- ---------
(1,207) (1,166)
Associates (17,183) (20,469)
Other investments 1,500 28,800
--------- ---------
(16,890) 7,165
--------- ---------
2,398,358 791,168
Current assets
Stocks and work in progress 242,347 173,020
Debtors 147,362 476,576
Cash at bank and in hand 379,013 220,163
--------- ---------
768,722 869,759
Creditors: amounts falling due
within one year (1,061,261) (1,025,804)
--------- ---------
Net current liabilities (292,539) (156,045)
--------- ---------
Total assets less current
liabilities 2,105,819 635,123
Creditors: amounts falling due
after more than one year (550,000) -
Provisions for liabilities (12,050) (12,050)
--------- ---------
Net assets 1,543,769 623,073
========= =========
Capital and reserves
Called up share capital 494,393 279,393
Shares to be issued - 1,875
Share premium account 4,881,771 2,974,811
Capital redemption reserve 9,601,469 9,601,469
Other reserves 209,849 209,849
Profit and loss account (13,643,713) (12,444,324)
--------- ---------
Shareholders' funds 5 1,543,769 623,073
========= =========
CONSOLIDATED CASHFLOW STATEMENT
Note Year ended Year ended
30 30
September September
2006 2005
# #
Net cash outflow from operating 6
activities (707,462) (1,407,758)
Returns on investments and servicing
of finance
Interest paid (41,568) (10,432)
Hire purchase interest - (496)
--------- ---------
Net cash outflow from returns on
investments
and servicing of finance (41,568) (10,928)
--------- ---------
Capital expenditure
Purchase of tangible fixed assets (7,095) (7,051)
Purchase of intangible fixed assets (191,425) -
--------- ---------
Net cash outflow from capital
expenditure (198,520) (7,051)
--------- ---------
Acquisitions
Purchase of subsidiary undertaking (301,000) -
--------- ---------
Net cash outflow from acquisitions (301,000) -
--------- ---------
Net cash outflow before financing (1,248,550) (1,425,737)
Financing
Issue of shares 1,428,000 1,616,327
Expenses paid in connection with
share issues (28,040) (66,189)
Receipts/(repayment) of borrowings 300,000 (2,625)
Capital element of finance leases - (835)
--------- ---------
Net cash inflow from financing 1,699,960 1,546,678
--------- ---------
--------- ---------
Increase in cash 7 451,410 120,941
--------- ---------
Significant non-cash movements
Purchase of subsidiary settled by
shares and loan note 1,200,000 -
--------- ---------
1. Basis of Preparation
This preliminary announcement has been prepared under the historical cost
convention and in accordance with United Kingdom Generally Accepted Accounting
Practice. The principal accounting policies of the Group are set out in the
Group's 2006 annual report and financial statements. The policies have remained
unchanged from the previous annual report.
Going concern
The Directors have prepared cash flow forecasts through to 31 March 2008 based
upon a prudent estimate of revenue to be generated from the existing IP
portfolio. It is assumed that no significant development will be undertaken
unless there is sufficient finance in place to fund such development. The
Directors have also secured confirmation from MCM Limited that it is not their
intention to seek repayment of either the #300,000 loan advanced to the Group
during the year or the #800,000 advanced to the Group since the year end for at
least 12 months from the date of approval of these financial statements. The
forecasts, supported by the agreement and facility from MCM, demonstrate that
the Group has sufficient finance facilities available to allow it to continue in
business for a period of at least 12 months from the date of approval of the
financial statements.
On this basis the Directors consider it appropriate to prepare the financial
statements on a going concern basis. The financial statements do not include any
adjustments that would result if the assumptions detailed above were not met.
2. Net Interest
Year ended Year ended
30 30
September September
2006 2005
# #
On bank loans and overdrafts (6,492) (10,432)
Hire purchase interest - (496)
Loan interest (35,076) -
------- -------
(41,568) (10,928)
======= =======
3. Tax on loss on ordinary activities
No tax charge arises on the loss for the year.
The tax assessed for the period differs from the standard rate of Corporation
Tax in the UK as explained below:
Year ended Year ended
30 30
September September
2006 2005
# #
Loss on ordinary activities before tax (1,199,389) (1,426,257)
--------- ---------
Loss on ordinary activities before tax multiplied by
standard rate of Corporation Tax in the
UK of 30% (2005: 30%) (359,816) (427,877)
Effect of:
Expenses not deductible for tax purposes 81,302 23,994
Capital allowances for period in excess of
depreciation 600 969
Unrecognised deferred tax assets 277,914 402,914
-------- --------
Current tax credit for period - -
======== ========
Unrelieved tax losses of approximately #6,100,000 (2005 : #5,200,000) remain
available to offset against future taxable trading profits. The unprovided
deferred tax asset in respect of these losses amounts to approximately
#1,830,000 (2005 : #1,560,000).
4. Loss per share
The calculation of the basic loss per share is based on the loss for the year
attributable to ordinary shareholders of #1,199,389 (2005: #1,426,257) divided
by the weighted average number of shares in issue during the year of 45,974,861
(2005: 20,122,206). The effect of the share options is anti-dilutive.
5. Reconciliation of movements in shareholders' funds
Year ended Year ended
30 30
September September
2006 2005
# #
Loss for the financial year (1,199,389) (1,426,257)
Issue of shares 2,121,960 1,909,956
Shares to be issued no longer due (1,875) -
--------- ---------
Net increase in shareholders' funds 920,696 483,699
Shareholders' funds at 1 October 2005 623,073 139,374
--------- ---------
Shareholders' funds at 30 September 2006 1,543,769 623,073
========= =========
6. Net cash outflow from operating activities
Year ended Year ended
30 30
September September
2006 2005
# #
Operating loss (1,161,066) (1,416,285)
Loss on disposal of tangible fixed
assets 9,564 -
Provision against fixed asset
investments 27,300 -
Depreciation of tangible fixed assets 12,675 14,812
Amortisation and impairment of
intangible fixed assets 136,872 91,995
Release of provision for shares to be
issued (1,875) -
Amortisation and impairment of
goodwill 84,162 77,298
Increase in stocks and work in
progress (69,327) (14,815)
Decrease/(increase) in debtors 329,216 (32,535)
Decrease in creditors (96,983) (254,228)
Shares allotted to settle expenses and
creditors 22,000 126,000
-------- --------
Net cash outflow from operating
activities (707,462) (1,407,758)
========= =========
7. Reconciliation of net cash flow to movement in net debt
Year ended Year ended
30 30
September September
2006 2005
# #
Increase in cash in the period 451,410 120,941
(Receipts from)/payment of borrowings (300,000) 2,625
Issue of loan note (500,000) -
Capital element of hire purchase and
finance lease rentals - 835
-------- --------
Change in net debt resulting from cash
flows (348,590) 124,401
Net debt at 1 October 2005 (283,963) (408,364)
-------- --------
Net debt at 30 September 2006 (632,553) (283,963)
======== ========
8. Analysis of changes in net debt
At At
1 October 30
2005 Cash September
flow 2006
# # #
Cash at bank and in hand 220,163 158,850 379,013
Bank overdraft (504,126) 292,560 (211,566)
------- ------- -------
(283,963) 451,410 167,447
Other loans - (300,000) (300,000)
Loan note - (500,000) (500,000)
------- -------- -------
(283,963) (348,590) (632,553)
======== ======== ========
9. Publication of Non-Statutory Accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The consolidated balance sheet at 30 September 2006 and the consolidated profit
and loss account, consolidated cash flow statement and associated notes for the
year then ended have been extracted from the Group's 2006 statutory financial
statements upon which the auditors opinion is unqualified and does not include
any statement under Section 237 of the Companies Act 1985.
Those financial statements have not yet been delivered to the registrar of
companies.
10. 2006 Report and Accounts
The 2006 report and accounts will be published and copies sent to shareholders.
Further copies will be available from the nominated adviser: Smith & Williamson
Corporate Finance Limited, 25 Moorgate, London, EC2R 6AY.
11. Copy of Announcements
A copy of this announcement will be available from the nominated adviser: Smith
& Williamson Corporate Finance Limited, 25 Moorgate, London, EC2R 6AY for one
month from the date of this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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