Multiemedia LimitedAppendix 4DHalf yearly results for...

Multiemedia Limited
Appendix 4D
Half yearly results for announcement to the market as at
31 December 2005
$A'000
NTA backing 31 December 2005
31 December 2004
Net tangible asset backing per ordinary
security
0.23¢
0.52 ¢
Dividends
There were no dividends declared or paid in the previous or current period
Basis of accounts preparations
The half-year financial report is a general-purpose financial report, which has been prepared in
accordance with the requirements of the Corporations Act 2001, applicable accounting Standards
including AASB 134 “Interim financial Reporting” and other mandatory professional reporting
requirements. It should be read in conjunction with the annual Financial Report of Multiemedia
Limited as at 30 June 2005, which was prepared based on Australian Accounting Standards
applicable before 1 January 2005 (‘AGAAP’) and any announcements to the market made during
the period.
Revenues from ordinary activities
up 36.64% to $16,080
Profit (loss) from ordinary activities after tax
attributable to members
down 8.11% to ($4,827)
Net profit (loss) for the period attributable to
members
down 8.11% to ($4,827)
Review & Results of Operations
Group turnover increased 36.6% over the previous half year despite the distraction of the
acquisition and the integration of the new business. The consolidated net loss was down 8.11%
on the previous period and negative EBITDA before goodwill write off was down 47% from
$4.5m to $2.39m as well. These reductions are in line with Managements expectations and
evidence an encouraging turnaround in business performance.
During the six months since the Directors’ last report to June 2005, Group performance has
improved with the mediaport facilities, acquired in November 2005, now underpinning expansion
of the NewSat business both nationally and internationally. As previously announced, the
Directors confirm their commitment to the expansion of the NewSat business.
Over the period, Airworks Media continued to increase its market share and revenue and will
continue to do so in the current period.
MTD turnover reduced over the period under rationalisation, however losses reduced from
$0.328m to $0.255m before the write off of $800k goodwill. Directors confirm their intention to
divest this business in the second half of the financial year.
Multiemedia Limited
ABN 12 003 237 303
Half Yearly Financial Reports
As at 31 December 2005
Contents
Directors' Report ........................................................................................................................................................ 3 - 4
Condensed Income Statement .................................................................................................................................... 5
Condensed Balance Sheet .......................................................................................................................................... 6
Condensed Cash Flow Statement ............................................................................................................................... 7
Condensed Statement of Changes in Equity ............................................................................................................... 8 - 9
Notes to the Half-Year Financial Statements ............................................................................................................. 10
1. Basis of preparation of the half-year financial report........................................................................................... 10 -19
2. Revenues and expenses ....................................................................................................................................... 20
3. Issued capital ……………….............................................................................................................................. 21
4. Segment reporting …........................................................................................................................................... 22
5. Change in composition of entity ……………...................................................................................................... 23
6. Contingent assets and liabilities ........................................................................................................................... 24
7. Events after the balance sheet date ...................................................................................................................... 24
8. Additional information ……………….................................................................................................................. 24
Directors' Declaration ................................................................................................................................................ 25
Independent Review Report to the members of Multiemedia Limited .......................................................... 26-27
2
Directors' Report
Your directors submit their report for the half-year ended 31 December 2005.
DIRECTORS
John H Walker (Non-Executive Chairman)
Adrian M Ballintine (Chief Executive Officer and Founder)
Elwood C Ellison (Non-Executive Chairman)
REVIEW AND RESULTS OF OPERATIONS
ROUNDING
The Directors are delighted with the progress of the Group’s Middle East/ Africa operations which boast
distribution into 15 countries in the region and are confident that the dual strategy to grow nationally and
internationally simultaneously is correct and prudent.
The Directors have issued ASX statements regarding the future direction of the Group and hold firm on their
content. The next six months will be even more progressive and exciting.
The names of the company’s directors in office during the half-year and until the date of this report are as below.
Directors were in office for this entire period unless otherwise stated.
The six months operations and activity to December 05 have been the most fruitful and exciting since the
company listed on the ASX in 1999.
Successfully strategising the acquisition of world class mediaport facilities and ongoing profitable operations
from NewSkies Satellites in November, amidst fierce international competition and bidding was a coup for
shareholders.
The amounts contained in the half-year financial report have been rounded to the nearest $1,000 (where rounding
is applicable) under the option available to the company under ASIC Class Order 98/0100. The company is an
entity to which the Class Order applies.
These facilities are the cornerstone and catalyst for the transformation of Multiemedia into Australia’s foremost
provider of two- way broadband satellite. And the results are already starting to show.
Revenues for the Group have increased 36.6% over the previous half year, and despite the distraction of the
acquisition and the integration of the new business, the consolidated net loss was down 8.11% on the previous
period and negative EBITDA before goodwill write off was down 47% from $4.5m to $2.39m as well. These
reductions are in line with Managements expectations and evidence an encouraging turnaround in business
f
3
Directors' Report (continued)
AUDITOR'S INDEPENDENCE DECLARATION
We have obtained the following independence declaration from our auditors, Ernst & Young.
Signed in accordance with a resolution of the directors.
Adrian Ballintine
Director & CEO
Melbourne, 15 March 2006
4
Notes
31-Dec-05 31-Dec-04
$'000 $'000
Revenue 2 1 6,080 1 1,768
Cost of sales 2 (12,292) (11,412)
Gross profit/(loss) 3 ,788 3 56
Admin & general expenses (6,317) (5,105)
Other income 2 1 39 2 19
Profit/(loss) from continuing operations before goodwill,
depreciation, finance costs and tax
(2,390) (4,530)
Goodwill write off (800) -
Depreciation (1,425) (610)
Finance costs (212) (113)
Profit/(loss) from continuing operations before income tax (4,827) (5,253)
Income tax expense - -
Profit/(loss) after tax attributable to members from continuing operations (4,827) (5,253)
Earnings per share (cents per share)
– basic for loss for the half-year (0.24) (0.43)
– diluted for loss for the half-year (0.24) (0.43)
5
Condensed Income Statement
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
CONSOLIDATED
Notes
As at As at
31 December 2005 30 June 2005
$'000 $'000
ASSETS
Current Assets
Cash and cash equivalents 8 1 ,712 963
Trade and other receivables 5 ,416 4,818
Inventories 9 85 1,058
Prepayments 4 34 56
Other Assets 2 80 20
Total Current Assets 8 ,827 6,915
Non-current Assets
Property, plant and equipment 1 2,569 7,411
Intangible assets 1 1,045 1,669
Rental Deposit 2 45 295
Other Assets 5 4 226
Total Non-current Assets 2 3,913 9,601
TOTAL ASSETS 32,740 16,516
LIABILITIES
Current Liabilities
Trade and other payables 6 ,536 6,717
Interest-bearing loans and borrowings 3 ,148 2,130
Non interest-bearing loans and borrowings - 829
Income tax payable 8 29 -
Provisions 4 64 110
Deferred Income 8 16 270
Employee benefits 5 33 498
Other Liabilities 2 ,063 616
Total Current Liabilities 1 4,389 11,170
Non-current Liabilities
Interest-bearing loans and borrowings 2 76 249
Employee benefits 3 42 35
Total Non-current Liabilities 6 18 284
TOTAL LIABILITIES 15,007 11,454
NET ASSETS 17,733 5,062
EQUITY
Issued capital 3 1 04,056 86,831
Retained earnings (86,879) (82,052)
Other reserves 5 56 283
Parent interests 1 7,733 5,062
TOTAL EQUITY 17,733 5,062
CONSOLIDATED
Condensed Balance Sheet
AS AT 31 DECEMBER 2005
6
Notes
31-Dec-05 31-Dec-04
$'000 $'000
Cash flows from operating activities
Receipts from customers 15,222 8,396
Payments to suppliers and employees (20,019) (14,381)
GST received/(paid) 75 142
Interest received/(paid) 25 (71)
Net cash flows from operating activities (4,697) (5,914)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment - -
Purchase of property, plant and equipment (164) (68)
Purchase of investment property - -
Acquisition of subsidiary, net of cash acquired 5 (12,849) -
Other - 17
Net cash flows used in investing activities (13,013) (51)
Cash flows from financing activities
Proceeds from issue of shares 16,923 5,222
Proceeds from borrowings 1,536 500
Equity dividends paid - -
Repayment of borrowings - -
Net cash flows from financing activities 18,459 5,722
Net increase/(decrease) in cash and cash equivalents 749 (243)
Net foreign exchange difference -
Cash and cash equivalents at beginning of period 963 1,801
Cash and cash equivalents at end of period 8 1,712 1,558
CONSOLIDATED
Condensed Cash Flow Statement
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
7
Total equity
CONSOLIDATED
Issued
capital
Retained
earnings
Other
Reserves Total
$'000 $'000 $'000 $'000 $'000
At 1 July 2004 77,903 (69,042) - 8,861 8,861
Loss for the period - (5,253) - (5,253) (5,253)
Total income / expense for the period - (5,253) - (5,253) (5,253)
Issue of share capital 4,784 4,784 4,784
Exercise of options 1,950 - - 1,950 1,950
Cost of capital raising (827) - - (827) (827)
Equity dividends - - - - -
At 31 December 2004 83,810 (74,295) - 9,515 9,515
Condensed Statement of Changes in Equity
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Attributable to equity holders of the parent
8
Total equity
CONSOLIDATED
Issued
capital
Retained
earnings
Other
Reserves Total
$'000 $'000 $'000 $'000 $'000
At 1 July 2005 86,831 (82,052) 283 5,062 5,062
Loss for the period - (4,827) - (4,827) (4,827)
Total income / expense for the period - (4,827) - (4,827) (4,827)
Issue of share capital 20,432 - - 20,432 20,432
Share based payments - - 273 273 273
Cost of capital raising (3,207) - - (3,207) (3,207)
Equity dividends - - - -
At 31 December 2005 104,056 (86,879) 556 17,733 17,733
Condensed Statement of Changes in Equity
(continued)
Attributable to equity holders of the parent
9
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT
The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be
expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the
consolidated entity as the full financial report.
The half-year financial report should be read in conjunction with the annual Financial Report of Multiemedia Limited as at 30 June 2005, which
was prepared based on Australian Accounting Standards applicable before 1 January 2005 ('AGAAP').
It is also recommended that the half-year financial report be considered together with any public announcements made by Multiemedia Limited
and its controlled entities during the half-year ended 31 December 2005 in accordance with the continuous disclosure obligations arising under
the Corporations Act 2001.
(a) Basis of accounting
The half-year financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, applicable Accounting Standards including AASB 134 “Interim Financial Reporting” and other mandatory professional
reporting requirements.
The financial report has been prepared in accordance with the historical cost basis.
For the purpose of preparing the half-year financial report, the half-year has been treated as a discrete reporting period.
(b) Statement of compliance
The half-year financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial
Reporting Standards ('AIFRS'). Compliance with AIFRS ensures that the half-year financial report, comprising the financial statements and
notes thereto, complies with International Financial Reporting Standards ('IFRS').
This is the first half-year financial report prepared based on AIFRS and comparatives for the half-year ended 31 December 2004 and full-year
ended 30 June 2005 have been restated accordingly. A summary of the significant accounting policies of the Group under AIFRS are disclosed
in Note 1(d) below.
Reconciliations of:
- AIFRS equity as at 1 July 2004, 31 December 2004 and 30 June 2005; and
- AIFRS profit for the half-year 31 December 2004 and full year 30 June 2005,
to the balances reported in the 31 December 2004 half-year report and 30 June 2005 full-year financial report prepared under AGAAP are
detailed in Note 1(e) below.
(c) Going Concern
The financial statements disclose the Group has an operating loss for the period ended 31 December 2005 of $4,827k. The Group‘s ability to
continue as a going concern is dependent upon the budgeted sales, profit and cashflows of the Group’s operating entities being achieved in the
expected timeframes or that the Group is able to raise adequate capital within the next 12 months to meet its debts as and when they fall due.
The Directors are of the opinion that the budgets and forecasts will be achieved resulting in trading profits and positive cashflows, or additional
capital will be raised to enable the Group to continue as a going concern. However, as forecast events frequently do not occur as expected,
achievements of forecasts and thus the Group’s ability to continue as a going concern is inherently uncertain at the date of signing of the
financial statements.
Notes to the Half-Year Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
10
Notes to the Half-Year Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
(d) Summary of significant accounting policies
(i) Basis of consolidation
The consolidated financial statements comprise the financial statements of Multiemedia Limited and its subsidiaries ('the Group').
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies that may exist.
All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot be recovered.
Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which
control is transferred out of the Group.
Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during
which Multiemedia Limited has control.
NewSat Networks Pty Ltd has been included in the consolidated financial statements using the purchase method of accounting, which measures
the acquiree’s assets and liabilities at their fair value at acquisition date. Accordingly, the consolidated financial statements include the results
of NewSat Networks Pty Ltd from its acquisition on 8 November 2005. The purchase consideration has been allocated to the assets and
liabilities on the basis of fair value at the date of acquisition.
Minority interests represent the interests in Airworks Media Pty Ltd, held by the Group. Losses applicable to the minority which reduces the
minority interest to a debit balance are allocated against Group except to the extent the minority has a binding obligation and is able to make an
additional investment to cover the losses. If the subsidiary subsequently reports profits such profits are allocated to Group until the minority's
share of losses previously absorbed by the Group have been recovered.
(ii) Foreign currency translation
Both the functional and presentation currency of Multiemedia Limited and its Australian subsidiaries is Australian dollars (A$).
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.
All differences in the consolidated financial report are taken to the income statement.
The exchange differences arising on the specific hedging transaction arising up to the date of purchase or sale and costs, premiums and
discounts relative to the hedging transaction are deferred and included in the measurement of the purchase or sale. Exchange gains and losses
arising on the hedge transaction after that date are taken to the net profit.
(iii) Property, plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.
Land and buildings are measured at fair value less accumulated depreciation.
Leasehold improvemtns are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line
method.
Depreciation is calculated on a straight-line and diminishing value basis on all property, plant and equipment, other than freehold land of the
asset as follows:
Class of fixed assets Depreciation period
Buildings 15 years
Leasehold improvements lease term
Plant and equipment over 2 to 5 years
11
Notes to the Half-Year Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
(d) Summary of significant accounting policies (continued)
(iii) Property, plant and equipment (continued)
Impairment
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value
may not be recoverable.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to
which the asset belongs.
If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are
written down to their recoverable amount.
The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset.
(iv) Borrowing costs
Borrowing costs are recognised as an expense when incurred.
(v) Goodwill
Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer’s interest in the
net fair value of the identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
Goodwill is not amortised.
Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be
impaired.
As at the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the combination’s
synergies.
Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates.
Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the
operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the
cash-generating unit retained.
(vi) Intangible assets
Intellectual property
Website and licences are carried at a cost and amortised on a straight-line basis over their useful lives, being 5 years.
(vii) Recoverable amount of assets
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment
exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the
asset is considered impaired and is written down to its recoverable amount. In determining the recoverable amount, the expected net cash
flows have been discounted to the net present value.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset's value
in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of
those from other assets or groups of assets. The recoverable amount is determined for the cash-generating unit to which the asset belongs.
12
Notes to the Half-Year Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
(d) Summary of significant accounting policies (continued)
(vii) Recoverable amount of assets ( continued)
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset.
(viii ) Inventories
Inventories are valued at the lower cost and net realisable value.
Costs incurred in bringing each products to its present location and condition is accounted for as follows:
- Raw materials – purchase cost on a first-in, first-out basis;
- Finished goods and work-in-progress – cost of direct materials.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs
necessary to make the sale.
(ix) Trade and other receivables
Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.
An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.
Receivables from related parties are recognised and carried at amortised cost.
(x) Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three
months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
(xi) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the
borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest
method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as through the amortisation process.
Interest is recognised as an expense as it accrues.
(xii) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of
the obligation.
A provision of warranty is recognised for all products under warranty at the reporting date based on sales volume and past experience of the
level repairs and returns.
A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before
the reporting date.
(xiii) Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date. These benefits
include wages and salaries, annual leave and long service leave.
Liabilities arising in respect of wages and salaries, and annual leave benefits expected to be settled within twelve months of the reporting date
are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability os settled. All other
employee benefit liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by
employees up to the reporting date. In determining the present value of future cash outflows, the market yield as at the reporting date on
national government bonds, which have terms to maturity approximating the terms of the related liability, are used:
13
Notes to the Half-Year Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
(d) Summary of significant accounting policies (continued)
(xiii) Employee benefits (continued)
Employee benefit expenses and revenues arising in respect of the following categories:
- wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other benefits; and
- other types of employee benefits
are recognised against profits on a net basis in their respective categories.
Contributions are made by the group to employees superannuation funds and are charged as expenses when incurred. Contributions are made
by the company in accordance with statutory requirements of each jurisdiction. Contributions by the Company of up to 9% of employee’s
wages and salaries are legally enforceable in Australia.
(xiv) Share-based payment transactions
The Group provides benefits to employees (including directors) of the Group in the form of share-based payment transactions, whereby
employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).
There are currently two plans in place to provide these benefits:
(i) the Executive Officer Option Plan No.3 (EOOP), which provides benefits to directors and senior
executives, and
(ii) the Staff Share Option Plan (SSOP), which provides benefits to all employees, excluding senior
executives and directors.
Each of these plans has been approved by the remuneration committee in a general meeting. Under the Employee Option Plan, the board may
offer options to any full time employee.
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The
fair value is determined by an external valuer using a binomial model.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares
of Multiemedia Limited (‘market conditions’).
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance
conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the
vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is
formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions
being met as the effect of these conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In
addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of
modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the
award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on
the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the
previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.
14
Notes to the Half-Year Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
(d) Summary of significant accounting policies (continued)
(xv) Leases
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at
the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. A lease
liability of equal value is also recognised.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges are charged directly against income.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct
costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the
same bases as the lease income.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements, and amortised over the unexpired
period of the lease or the estimated useful lives of the improvements, whichever is the shorter.
(xvi) Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured. The following specific recognition criteria must also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably.
Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer.
Rendering of services
Revenue from a contract to provide services is recognised when the contract of the service is rendered. Revenue received in advance of the
provision of the production and media service is deferred until the service is rendered.
Interest
Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.
(xvii) Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching
conditions will be complied with.
When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the
costs that it is intended to compensate.
(xviii) Income tax
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
• except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where
the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
15
Notes to the Half-Year Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
(d) Summary of significant accounting policies (continued)
(xviii) Income tax (continued)
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to
the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of
unused tax assets and unused tax losses can be utilised:
• except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; and
• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred
tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.
(xix) Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance
sheet.
Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and
financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(xx) Derivative financial instruments
Forward exchange contracts
The consolidated entity enters into forward exchange contracts where it agrees to buy or sell specified amounts of foreign currencies in the
future at a predetermined exchange rate. The objective is to match the contract with anticipated future cash flows from sales and purchases in
foreign currencies, to protect the consolidated entity against the possibility of loss from future exchange rate fluctuations. The forward exchange
contracts are usually for no longer than 12 months.
Forward exchange contracts are recognised at the date the contract is entered into. Exchange gains or losses on forward exchange contracts are
recognised in net profit except those relating to hedges of specific commitments that are deferred and included in the measurement of the sale
or purchase.
16
Notes to the Half-Year Financial Statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
(d) Summary of significant accounting policies (continued)
(xxi) Earnings per share
Basic EPS is calculated as net [profit/loss attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and
perference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit/loss attributable to members, adjusted for:
- cost fo servicing equity (other than dividends) and preference share dividends;
- the after tax effect of dividends and interset associated with dilutive potential ordinary shares that have been recognised as expenses; and
- other non-discretionary charges in revenues or expenses during the period that would result from the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(e) AASB 1 Transitional exemptions
The Group has made its election in relation to the transitional exemptions allowed by AASB 1 'First-time Adoption of Australian Equivalents to
International Financial Reporting Standards' as follows
Business combinations
AASB 3 'Business Combinations' was not applied retrospectively to past business combinations (i.e. business combinations that occurred
before the date of transition to AIFRS).
Share-based payment transactions
AASB 2 'Share-Based Payments' is applied only to equity instruments granted after 7 November 2002 that had not vested on or before 1
January 2005.
Exemption from the requirement to restate comparative information for AASB 132 and AASB 139
The Group has elected to adopt this exemption and has not applied AASB 132 'Financial Instruments: Presentation and Disclosure' and AASB
139 'Financial Instruments: Recognition and Measurement' to its comparative information.
17
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
(i) Reconciliation of total equity as presented under AGAAP to that under AIFRS
30-Jun-05 31-Dec-04 01-Jul-04
$'000 $'000 $'000
Total equity under AGAAP 5,024 9,474 8,861
Adjustments to equity:
Write-back of goodwill amortisation (A) 120 41 -
Impairment of Assets (B) (82) - -
Total equity under AIFRS 5,062 9,515 8,861
(A)
(B)
Notes to the Half-Year Financial Statements (continued)
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
CONSOLIDATED
Under AASB 3 'Business Combinations', goodwill is not amortised but is instead subject to
annual impairment testing.
The impacts of adopting AIFRS on the total equity and profit after tax as reported under Australian
Accounting Standards applicable before 1 January 2005 ('AGAAP') are illustrated below.
(e) Impact of adoption of AIFRS
Under AASB 136 'Impairment of Assets', the recoverable amount of an asset is determined as
the higher of its fair value less costs to sell and value in use. The Group's goodwill were tested
for impairment and impairment losses were recognised under AIFRS.
18
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
Notes to the Half-Year Financial Statements (continued)
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
(ii) Reconciliation of loss after tax under AGAAP to that under AIFRS
Year ended Half-Year ended
30-Jun-05 31-Dec-04
$'000 $'000
Loss after tax as previously reported (12,042) (5,294)
Share-based payments (A) (283) -
Write-back of goodwill amortisation (B) 120 41
Write-off MI losses (C) (723) -
Impairment of Assets (D) (82) -
Loss after tax under AIFRS (13,010) (5,253)
(A)
(B)
(C)
(D)
CONSOLIDATED
(e) Impact of adoption of AIFRS (continued)
Under AASB 127 'consolidated and Separate Financial Statements', losses applicable to the
minority interests (MI) exceed its interest in the equity, the excess and any further losses
attributable to the MI are required to be adjusted against the parent ownership group's interest
unless the MI has a binding obligation, and is able to, make good the losses.
Under AASB 3 'Business Combinations', goodwill is not amortised but is instead subject to
annual impairment testing.
Under AASB 2 'Share-based payments', the share-based payments that vest after 1 January 2005
must be recognised as an expense in the appropriate period, but not under AGAAP.
Under AASB 136 'Impairment of Assets', the recoverable amount of an asset is determined as
the higher of its fair value less costs to sell and value in use. The Group's goodwill were tested
for impairment and impairment losses were recognised under AIFRS.
19
1 BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT (continued)
Notes to the Half-Year Financial Statements (continued)
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
(iii) Explanation of material adjustments to the cash flow statements
2005 2004
$'000 $'000
2 REVENUE AND EXPENSES
(a) Specific Items
(i) Revenue
Satellite broadband services 5,124 3,391
Distribution of technology products 6,046 7,824
Advertising & media services 4,910 553
16,080 11,768
(ii) Other income
Government grants on Export Marketing & Development Grant 139 219
139 219
(iii) Expenses
Cost of sales and development 12,292 11,412
12,292 11,412
Profit/(loss) before income tax expense includes the following revenues and
expenses whose disclosure is relevant in explaining the performance of the
entity:
There are no material differences between the cash flow statements presented under AIFRS and those
presented under AGAAP.
(e) Impact of adoption of AIFRS (continued)
CONSOLIDATED
20
3 ISSUED CAPITAL
Dec-05 Jun-05
$'000 $'000
Ordinary shares
Issued and fully paid 104,056 86,831
Number of
Shares in
Thousands
$'000
Movements in ordinary shares on issue
At 1 July 2005 1,556,471 86,831
Share issued under rights issue and share placement 1,133,097 17,711
Convertible note conversion 191,829 2,721
Transaction costs arising on share issues - (3,207)
At 31 December 2005 2,881,397 104,056
Notes to the Half-Year Financial Statements (continued)
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
CONSOLIDATED
21
4 SEGMENT REPORTING
Business segments
Total
Operations
Satellite
broadband
Distribution
of
Technology
products
Advertising
& media Total Eliminations Consolidated
$'000 $'000 $'000 $'000 $'000 $'000
31 December 2005
Segment revenue 5 ,125 6 ,045 4,910 16,080 - 16,080
Segment result (3,604) (1,055) (168) (4,827) - (4,827)
31 December 2004
Segment revenue 3 ,391 7 ,824 553 11,768 - 11,768
Segment result (4,755) (328) (170) (5,253) - (5,253)
5 CHANGE IN COMPOSITION OF ENTITY
The following table presents the revenue and profit information regarding business segments for the half-year
periods ended 31 December 2005 and 31 December 2004.
Notes to the Half-Year Financial Statements (continued)
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
Acquisition of NewSat Networks Pty Ltd
Continuing Operations
On 8 November 2005, Multiemedia Limited acquired 100% of the voting shares of NewSat Networks Pty Ltd,
an unlisted company based in Australia that provides satellite communication services.
In connection with the business combination, Multiemedia Limited issued 1,006,096,805 and 87,000,000
ordinary shares with a fair value of $0.015 and $0.02 respectively, to fund the acquisition.
From the date of acquisition, NewSat Networks Pty Ltd has contributed $245,536 of profit to the overall
Group result.
It is not practicable to determine the impact the acquisition would have had on the Group if it had occurred at
the beginning of the financial year, due to the nature and quantum of intercompany transactions prior to the
acquisition by the Group that do not continue past the acquisition of the business by Multiemedia Limited.
22
Notes to the Half-Year Financial Statements (continued)
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
5 CHANGE IN COMPOSITION OF ENTITY (continued)
Recognised
on
Carrying
value
$'000 $'000
Property, plant and equipment 6 ,073 6,073
Deferred income tax asset 5 08 508
Cash and cash equivalents 1 ,336 1,336
Trade receivables 5 87 587
Inventories 1 3 13
Prepayments & others 1 11 111
8 ,628 8,628
Trade payables (123) (123)
Provisions & accruals (3,197) (3,197)
Intercompany account (43) (43)
Income tax and deferred income tax liability (1,282) (1,282)
(4,645) (4,645)
Fair value of net assets 3 ,983 3,983
Goodwill arising on acquisition 1 0,202
1 4,185
Consideration:
Shares issued, at fair value -
Costs associated with the acquisition 1 4,185
Total consideration 1 4,185
The cash outflow on acquisition is as follows:
Net cash acquired with subsidiary 1 ,336
Cash paid (14,185)
Net cash outflow (12,849)
The above carrying values have been based on a preliminary assessment of fair value and remain provisional.
Any adjustment to these fair values within 12 months of the date of acquisition will be reflected in an
adjustment to goodwill arising on acquisition.
The fair value of the identifiable assets and liabilities of NewSat Networks Pty Ltd as at the date of acquisition
are:
CONSOLIDATED
The income tax and deferred income tax liabilities recognised above was a present obligation of NewSat
Networks Pty Ltd immediately prior to the business combination and was not conditional upon it being
acquired by Multiemedia Limited.
23
6 CONTINGENT ASSETS AND LIABILITIES
7 EVENTS AFTER THE BALANCE SHEET DATE
8 ADDITIONAL INFORMATION
Reconciliation of Cash
2005 2004
$'000 $'000
Cash at bank and in hand 1 ,331 677
Short-term deposits 3 81 286
1 ,712 963
Notes to the Half-Year Financial Statements (continued)
FOR THE HALF-YEAR ENDED 31 DECEMBER 2005
At balance date a contingent liability exists in relation to the termination of the proposed acquisition of
Switchcorp by Multiemedia. The claim, which was initially set for a trial date of 23rd November 2005,
has been amended and as a result the trial date has been changed to 13 August 2007. The directors are of
the opinion that the claim can be successfully defended by Multiemedia. In accordance with Accounting
Standard AASB 137 "Provisions, Contingent Liabilities and Contingent assets", the information usually
required by the Standard is not disclosed on the grounds that it may seriously prejudice the outcome of
any current or future legal proceedings.
CONSOLIDATED
For the purposes of the Condensed Cash Flow Statement, cash and cash equivalents comprise the
following at 31 December:
While no significant subsequent events have occurred after the balance date, it is anticipated the proposed
divestment of MTD, as previously announced by Directors will take place within the current reporting
period.
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Directors' Declaration
In accordance with a resolution of the directors of Multiemedia Limited, I state that:
In the opinion of the directors:
(a) the financial statements and notes of the consolidated entity:
(i) give a true and fair view of the financial position as at 31 December 2005 and the performance for the
half-year ended on that date of the consolidated entity; and
(ii) comply with Accounting Standard AASB 134 “Interim Financial Reporting” and the Corporations
Regulations 2001; and
(b)
On behalf of the Board
Adrian Ballintine
Director
Melbourne, 15 March 2006
there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
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Liability limited by a scheme approved under
Professional Standards Legislation.
Independent review report to members Multiemedia Limited
Scope
The financial report and directors’ responsibility
The financial report comprises the balance sheet, income statement, cash flow statement, statement
of changes in equity and accompanying notes to the financial statements for the consolidated entity
comprising both Multiemedia Limited (the company) and the entities it controlled during the period,
and the directors’ declaration for the company, for the period ended 31 December 2005.
The directors of the company are responsible for preparing a financial report that gives a true and
fair view of the financial position and performance of the consolidated entity, and that complies
with Accounting Standard AASB 134 “Interim Financial Reporting”, in accordance with the
Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting
records and internal controls that are designed to prevent and detect fraud and error, and for the
accounting policies and accounting estimates inherent in the financial report.
Review approach
We conducted an independent review of the financial report in order to make a statement about it to
the members of the company, and in order for the company to lodge the financial report with the
Australian Stock Exchange and the Australian Securities and Investments Commission.
Our review was conducted in accordance with Australian Auditing Standards applicable to review
engagements, in order to state whether, on the basis of the procedures described, anything has come
to our attention that would indicate that the financial report is not presented fairly in accordance
with the Corporations Act 2001, Accounting Standard AASB 134 “Interim Financial Reporting”
and other mandatory financial reporting requirements in Australia, so as to present a view which is
consistent with our understanding of the consolidated entity’s financial position, and of its
performance as represented by the results of its operations and cash flows.
A review is limited primarily to inquiries of company personnel and analytical procedures applied
to the financial data. These procedures do not provide all the evidence that would be required in an
audit, thus the level of assurance is less than given in an audit. We have not performed an audit
and, accordingly, we do not express an audit opinion.
Independence
We are independent of the company, and have met the independence requirements of Australian
professional ethical pronouncements and the Corporations Act 2001. We have given to the
directors of the company a written Auditor’s Independence Declaration, a copy of which is included
in the Directors’ Report.
26
Statement
Based on our review, which is not an audit, we have not become aware of any matter that makes us
believe that the financial report of the consolidated entity, comprising Multiemedia Limited and the
entities it controlled during the period is not in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the consolidated entity at 31
December 2005 and of its performance for the period ended on that date; and
(ii) complying with Accounting Standard AASB 134 “Interim Financial Reporting” and
the Corporations Regulations 2001; and
(b) other mandatory financial reporting requirements in Australia.
Inherent Uncertainty Regarding Continuation of Going Concern
Without qualification to the statement expressed above, attention is drawn to the following matter.
As a result of matters described in Note 1(c) Going Concern, there is significant uncertainty
whether the consolidated entity will be able to continue as a going concern and therefore whether it
will be able to pay its debts as and when they fall due and realise its assets and extinguish its
liabilities in the normal course of business and the amounts stated in the financial report. The
financial report does not include any adjustments relating to the recoverability and classification of
recorded asset amounts or to the amounts and classification of liabilities that might be necessary
should the consolidated entity not continue as a going concern.
Ernst & Young
D. J. Shewring
Partner
Melbourne
15 March 2006
27