RNS Number:7212E
Sun 3C Media PLC
28 September 2007
28 September 2007
Sun 3C Media Plc
Directors Report and Financial Statements
For the Half Year Ended 30 June 2007
London, Beijing, 28 September 2007: Sun 3C Media Plc ("Sun 3C", or "Company")
the Chinese mobile media company listed on AIM (AIM: SCCC), is pleased to
announce its interim results for the six months ended 30 June 2007. During this
period significant progress was made in laying the foundations for our future
growth strategy.
Highlights:
* Memorandum of Understanding (MOU) between China Electronics Corporation
(CEC) and its subsidiary China Electronics Appliance Corporation (CEAC) for
the subsequent acquisition by Sun 3C of CEAC's mobile payment services
business CEC-Unet;
* Successful placing of 22.5m shares at 11.8p raising #2.6m to finance the
integration and expansion of the CEC-Unet business;
* Acquisition of the database and electronic rights relating to the China
Business Post, a leading Weekly Chinese business newspaper;
* Successful disposal of non-core assets;
* Significant progress has been made with developing a new payment service
platform.
* New appointments of the highest calibre from the Chinese
Telecommunications industry were made to the board and senior management;
Mr. Chen Zhaobin Chairman of Sun 3C said:
"The acquisition of CEC-Unet lays the foundation for our aim to be China's
leading payment service provider and to combine the collection agent network
with content distribution. We have a very focused strategy and targeted
operational plan over the next 18 months which will see us gain significant
geographical reach and market share in China's rapidly expanding mobile services
business"
The full published accounts for the period ended 30 June 2007 are available on
the Company's web site, www.sun3cmedia.com, and can be obtained from the
Registered Office.
Chairman's Statement
As reported at the time of our annual financial statements, Sun 3C Media, Plc.
has gone through a transitional period where its strategy has changed from an
internet-focused TV shopping company into one of China's leading payment service
providers. In addition to our payment services we will continue to enhance our
strategic media content assets which form a key part of our longer term vision.
I am very pleased with our progress over the last six months and now believe
that our company has a very clear and focused strategy.
Payment Services Business
The mobile services market in China was worth almost $53bn in 2006, with China
Mobile's prepaid services sales reaching almost $8bn. The mobile "top-up" market
is dominated by the existing scratch-card "top-up" process, however the
management believes the electronic "top-up" will grow dramatically and will
eventually replace the scratch card. The management believes that the
acquisition of CEC-Unet firmly positions Sun 3C as China's second largest
provider of mobile electronic top-up services in China. Going forward, our
efforts will be primarily focused on our payment services platform.
As part of the acquisition of CEC-Unet, Sun3C has received a post-tax profit
guarantee of RMB 15 million (approximately #990,000) for the calendar year
ending December 31, 2007 and a post-tax profit guarantee of RMB 20 million (#1.3
million) for the year ending December 31, 2008 in relation to the existing top
up and sim card sales business in Henan province.
The profit guarantee only covers the existing top-up and sim-card sales business
in Henan province. Any profits resulting from geographic or product expansion
post-acquisition do not count towards the profit guarantee. Under the terms of
the Agreement, CEAC will pay to the Company, in cash, the shortfall between the
reported profit for the existing business of Unet in the years ended 31 December
2007 and 31 December 2008 and the targets referred to above.
Currently, through our operations in the Henan province, the company has signed
up over 40,000 retail "top-up" outlets servicing its market of over 7 million
customers. On September 3rd, the company announced the launch of its services in
the strategic Guandong province. Guangdong has a population of over 45 million
people, and in 2006 it accounted for approximately 1/3 of China Mobile's $2.1bn
profit. We are currently very active on the ground in Guangdong signing up new
outlets and building our distribution channel to quickly gain market share and
revenue growth.
Over the next 18 months we will move aggressively to expand the business and
develop our retail distribution channel in terms of both its geographic reach
and the types of payments we process through our operating platform. In
addition, significant progress has been made with developing a new payment
service platform aimed at revolutionising existing payment procedures.
Media Content Business
On the content side, we are continuing to consolidate our strengths in the areas
of branded content assets, most notably through the acquisition of an 80%
interest in the sales, marketing, and distribution rights to the China Business
Post (CBP). The acquisition of rights to a leading weekly Chinese business
newspaper gives Sun 3C a foothold in the traditional media industry and in a
brand that is well positioned to move onto mobile and online space. I am pleased
to say that the CBP is now the largest business focused newspaper in Beijing and
I expect it will make a contribution to the revenue and profitability of the
company over the next few years.
We continue to retain the exclusive use rights to the 34,000-plus kilometre
fibre network that we acquired at the time of admission. We are currently
working on a joint venture aimed at exploiting the significant commercial value
of the network and which ties into our longer term vision for this company.
Our financial results for the first half of 2007 reflect that this was a
transitional period for the company. The Group reported an operating net loss of
Euro4,764,000 for the period, which included amortisation of intangible fixed
assets of Euro2,742,000. These interim financial statements have been prepared
using accounting policies consistent with International Financial Reporting
Standards and in accordance with International Accounting Standard (IAS) 34
Interim Financial Reporting.
To reflect the new strategy of the Company and to capitalise on a strong and
important telecommunications brand in China, Sun 3C plans to change its name to
CEC Unet Plc by way of a resolution at the forthcoming annual general meeting of
the Company.
Finally, I would like to welcome Mr Li Gang to the Board. Mr Li recently joined
Sun 3C as Chief Executive Officer. He is one of the most respected and
experienced executives in the telecommunications industry and he will be an
excellent addition to our already highly experienced management team.
I am confident that our medium term strategy of building China's largest payment
services business in addition to continuing the development of our media assets,
will generate significant shareholder returns in the coming years. We now have a
focused strategy, a management team of the highest calibre and a strategic
partner and shareholder in CEAC, one of China's largest corporations. I look
forward with great optimism to providing regular updates to our shareholders on
our company's progress and ongoing expansion.
Mr. Chen Zhaobin
Chairman
Sun 3C Media Plc
Enquiries:
Brunswick Group LLP 020 7404 5959
James Hogan / Carole Cable
Blue Oar Securities
William Vandyk 020 7448 4400
Notes to Editors
About Sun 3C Media:
Sun 3C Media Plc ("Sun 3C", AIM: SCCC) is a Chinese mobile media and services
company based out of Beijing. Sun 3C is focused on two related, but separate
areas in China's mobile industry: content and services, and distribution and
payment. With our unique combination of assets, distribution network and highly
experienced management we are in a position to capitalise on an historic
opportunity in China's mobile services industry.
CONSOLIDATED INTERIM INCOME STATEMENT (Unaudited)
Six months Six months Year ended
30 June 30 June 31 Dec
Note 2007 2006 2006
(unaudited) (unaudited) (unaudited)
(as restated)
Euro'000 Euro'000 Euro'000
Revenue 3 579 - 170
Cost of sales (114) - (57)
Gross profit 465 - 113
Administrative expenses (2,514) (364) (1,878)
Amortisation of intangible
fixed assets (2,742) - (5,385)
Impairment of intangible
fixed assets - - (1,971)
Share based payments charge - - (2,498)
Operating loss 3 (4,791) (364) (11,619)
Interest receivable 28 - 60
Interest payable (1) - -
Loss on ordinary activities
before tax (4,764) (364) (11,559)
Tax expense - - -
Loss for the period 7 (4,764) (364) (11,559)
Loss per share 4 Euro Euro Euro
Basic and diluted (0.01) (0.01) (0.06)
STATEMENT OF TOTAL RECOGNISED INCOME AND EXPENSE (Unaudited)
Six months Six months Year ended
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
(as restated)
Euro'000 Euro'000 Euro'000
Exchange differences on
translation of foreign
operations (2) - (7)
Net loss recognised
directly in equity (2) - (7)
Loss for the period (4,764) (364) (11,559)
Total recognised income and
expense for the
financial period (4,766) (364) (11,566)
CONSOLIDATED INTERIM BALANCE SHEET (Unaudited)
As at As at As at
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
Note (as restated)
Euro'000 Euro'000 Euro'000
ASSETS
Non-current assets
Intangible assets 5 62,954 71,561 64,205
Goodwill 12,523 - 12,418
Property, plant and equipment 184 - 60
Investments 840 - 60
76,501 71,561 76,743
Current assets
Trade and other receivables 1,626 27 681
Cash and cash equivalents 2,387 6,160 2,737
4,013 6,187 3,418
LIABILITIES
Current liabilities
Trade and other payables (2,404) (244) (3,135)
Obligations under finance leases (9) - (128)
(2,413) (244) (3,263)
Net current assets 1,600 5,943 155
Non-current liabilities
Obligations under finance leases (78) - (84)
NET ASSETS 78,023 77,504 76,814
SHAREHOLDERS' EQUITY
Called up share capital
- equity 7 4,158 3,413 3,851
Called up share capital
- non equity 7 750 750 750
Share premium account 7 87,783 74,540 82,115
Share based payments reserve 7 2,499 - 2,499
Other reserves 7 8 8 8
Currency translation reserve 7 (9) - (7)
Retained earnings 7 (17,166) (1,207) (12,402)
TOTAL EQUITY 78,023 77,504 76,814
CONSOLIDATED INTERIM Cash Flow Statement (unaudited)
Six months Six months Year ended
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
(as
restated)
2004 2005 2006
Euro'000 Euro'000 Euro'000
Cash flows from operating activities
Cash generated from operations (2,991) (159) (1,508)
Net cash from operating activities (2,991) (159) (1,508)
Cash flows from investing activities
Purchase of intangible fixed assets (105) - -
Purchase of tangible fixed assets (126) - (4)
Acquisition of subsidiary, including
overdraft acquired 2 - (1,196)
Purchase of non current asset investment (223) - (61)
Interest received 28 - 60
Interest paid (1) - -
Net cash from investing activities (425) - (1,201)
Cash flows from financing activities
Share issue 3,193 6,319 5,453
Repayment of finance leases (126) - -
Net cash from financing activities 3,067 6,319 5,453
Increase/(decrease) in cash and cash
equivalents (349) 6,160 2,744
Reconciliation of net cash flow to
movement in net funds
Increase/(decrease) in cash and cash
equivalents (349) 6,160 2,744
Decrease/ (increase) in finance leases 126 - (212)
Foreign currency translation difference (2) - (7)
Change in net funds (225) 6,160 2,525
Net funds at start of period 2,525 - -
Net funds at end of period 2,300 6,160 2,525
NOTES TO THE UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
1. BASIS OF PREPARATION
The principal activity of Sun 3C Media Group Plc is in the provision of a suite
of mobile services in the People's Republic of China.
The registered office of the Company is Eagle House, 16 Wentworth, Eblana
Villas, Dublin 2, Ireland.
The group has historically prepared its audited financial statements on the
basis of accounting standards generally accepted in Ireland as published by the
Institute of Chartered Accountants in Ireland and issued by the Accounting
Standards Board. In the current year the group has adopted International
Financial Reporting Standards ("IFRS") for the first time as the group is
required to present its annual consolidated financial statements in accordance
with accounting standards adopted for use in the European Union. As a result
these interim accounts, which are unaudited, have been prepared on the basis of
the accounting policies which will apply for the financial year to 31 December
2007. These standards remain subject to ongoing amendment and/or interpretation
and are therefore still subject to change. Accordingly, information contained in
these interim financial statements may need updating for subsequent amendments
to IFRS required for first time adoption or for new standards issued post the
balance sheet date. This document includes reconciliations of the group's equity
to IFRS at the date of transition of 1 January 2006 and at the comparative
balance sheet dates of 30 June 2006 and 31 December 2006, and reconciliations of
the group's results for the comparative periods ended to 30 June 2006 and 31
December 2006.
The comparative information for the six months ended 30 June 2006 and the year
ended 31 December 2006 have been restated on the basis of IFRS. Reconciliations
between financial statements previously reported under Irish GAAP and on the
basis of IFRS are set out in note 9 to this interim statement in respect of the
Consolidated Income Statements for the year ended 31 December 2006 and six
months ended 30 June 2006 and Consolidated Balance Sheets as at 1 January 2006,
30 June 2006 and 31 December 2006.
The interim financial statements are unaudited and were approved by the board of
directors on 26 September 2007. The financial information contained in this
interim report does not constitute statutory accounts as defined in the
Companies Acts, 1963 to 2006 and the European Communities (Companies: Group
Accounts) Regulations 1992. The financial information for the year to 31
December 2006 has been extracted from the statutory accounts for that year and
adjusted for the conversion to IFRS. The statutory accounts for the year ended
31 December 2006, which were prepared under Irish GAAP, received an unqualified
audit report and did not contain a statement made under Section 237(2) and (3)
of the Companies Act 1985, and have been filed with the Registrar of Companies.
Following the implementation of IFRS, the group's accounting policies have been
consistently applied to all the periods presented unless otherwise stated. The
principal policies are set out below.
2. ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the group's financial
statements.
Basis of consolidation
The consolidated financial statements for the year to 31 December 2006 include
the results of Sun 3C Media Plc and its subsidiary undertakings for that period.
Subsidiary undertakings are entities over which the group has the power to
control the financial and operating policies so as to obtain benefits from the
activities. The group obtains and exercises control through voting rights.
The group adopts the purchase method in accounting for the acquisition of
subsidiaries. On acquisition the cost is measured at the fair value of the
assets given, plus equity instruments issued and liabilities incurred or assumed
at the date of exchange plus any costs directly attributable to the acquisition.
The assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured at their fair value at the date of
acquisition. Any excess of the fair value of the consideration over the fair
value of the identifiable net assets acquired is recorded as goodwill. Any
deficiency of the fair value of the consideration below the fair value of
identifiable net assets acquired is credited to the income statement in the
period of the acquisition.
The results of subsidiary undertakings acquired or disposed of during the year
are included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the group. Inter-company transactions and balances between group companies are
eliminated.
Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions
The group makes estimates and assumptions concerning the future. Whilst the
directors believe that the estimates and assumptions used in the preparation of
the interim financial statements are reasonable, the resulting accounting
estimates will, by definition, seldom equal the related actual results. The
estimates that have a significant risk of causing a material adjustment to the
carrying values of assets and liabilities within the next financial year are
discussed below.
1) Impairment of goodwill
The group tests whether goodwill has suffered any impairment annually or when
there is an indication of impairment. The recoverable amounts of cash-generating
units have been determined based on value-in-use calculations which require the
use of estimates.
2) Valuation of 'non core' intangible assets
Certain intangible assets, including the Network Use Rights, are no longer
considered core for Sun 3C Media plc and active steps are being taken to dispose
of them. The realisation of these intangible assets by the group is dependent on
a successful outcome of these actions.
The directors are aware that by their nature there is an inherent uncertainty in
the carrying value of the intangible fixed assets at that time. Should the
disposal of the intangible assets prove less successful than the directors
believe, the carrying value in the Balance Sheet will need to be reduced by any
shortfall.
The directors did engage independent valuers, Savills, to value these
intangibles as at 31 December 2006 and these valuations indicated no impairment
to the carrying value of the intangible assets. Having reviewed the valuation
and based on their own knowledge and experience, the directors are satisfied
that the value of the intangible assets is not less than the net book value.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the company's share of the net identifiable assets of the acquired subsidiary
at the date of acquisition. Goodwill is included in intangible assets and is
tested annually for impairment or when there is an indication of impairment. Any
impairment is recognised immediately in the income statement and is not
subsequently reversed.
Goodwill arising on the acquisition of overseas subsidiaries is recorded in the
functional currency of the acquired subsidiary and translated into the
presentation currency at the closing rate at each balance sheet date in
accordance with the group accounting policy of foreign currency.
On disposal of a subsidiary, the amount of attributable goodwill is included in
the determination of the profit and loss on disposal.
Intangible fixed assets
Intangible assets include acquired product distribution rights, network use
rights, media rights, and database rights.
The various media, television and database rights are capitalised in the balance
sheet and amortised over the estimated economic life of the asset of 10 years.
Network use rights are capitalised in the balance sheet and amortised over the
estimated economic life of the asset of 20 years.
The Group carries out an impairment review of its intangible assets when a
change in circumstances or situation indicates that those assets may have
suffered an impairment loss. Impairment is measured by comparing the carrying
amount of a fixed asset or of a cash-generating unit with the 'recoverable
amount', that is the higher of its fair value less costs to sell and its 'value
in use'. 'Value in use' is calculated by discounting the expected future cash
flows, using a discount rate based on an estimate of the rate that the market
would expect on an investment of comparable risk.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation.
The charge for depreciation is calculated to write down the cost of tangible
fixed assets to their estimated residual values by equal annual instalments over
their expected useful lives which are as follows:
Computer and office equipment 3 years
Computer software 3 years
Impairment provisions are made where the carrying value of tangible fixed assets
exceeds the recoverable amount.
Revenue recognition
Revenue, which arises principally from the sale of games software for mobile
phones, represents net sales to customers outside the Group and excludes Value
Added Tax.
Taxation
Current tax, including Irish corporation tax and foreign tax, is provided on the
group's taxable profits, at amounts expected to be paid using the tax rates and
laws that have been enacted or substantially enacted by the balance sheet date.
Deferred taxation is provided in full using the liability method on temporary
differences between the tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements. Deferred tax is determined
using tax rates that have been enacted at or substantially enacted by the
balance sheet date and are expected to apply when the related deferred tax asset
is realised or the deferred tax liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be
utilised.
Foreign currencies
Transactions in foreign currencies are recorded in Euro at the rate ruling at
the date of the transactions or at a contracted rate. The resulting monetary
assets and liabilities are translated into Euro at the balance sheet date or the
contracted rate and the exchange differences are dealt with in the income
statement.
Leased assets
Expenditure on operating leases is charged to the income statement on a basis
representative of the benefit derived from the asset, normally on a straight
line basis over the lease period.
Where fixed assets are financed by financing arrangements which give rights
approximating to ownership they are treated as if they had been purchased
outright at their fair value and the corresponding commitments are shown in the
balance sheet as obligations under finance leases and hire purchase contracts.
Depreciation of fixed assets acquired under finance leases and hire purchase
contracts is calculated to write off the attributed cost over the shorter of the
lease or contract term and their estimated useful lives by equal annual
instalments. The excess of the total rentals over the amount capitalised is
treated as interest which is charged to the profit and loss account in
proportion to the amounts outstanding under the lease and hire purchase
contracts.
Share based payments
The Company operates an employee share scheme under which it makes
equity-settled share based payments to certain employees. For share based
payments to employees of the Company, the fair value is determined at the date
of grant using a Black Scholes model, and is expenses on a straight line basis
together with a corresponding increase in equity over the vesting period, based
on the group's estimate of the number of shares that will vest.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with
banks, other short term highly liquid funds with original maturities of three
months or less and bank overdrafts. Bank overdrafts are shown within borrowing
in current liabilities on the balance sheet.
Financial instruments
Financial assets and liabilities are recognised in the balance sheet when the
Group becomes party to the contractual provisions of the instrument.
Trade and other receivables
Trade receivables are measured at cost less any provision necessary when there
is objective evidence that the group will not be able to collect all amounts
due.
Trade and other payables
Trade and other payables are not interest bearing and are measured at original
invoice amount.
3. SEGMENTAL INFORMATION
i) Primary business segment
Segmental information is presented in respect of the group's business segments.
The primary business segments are based on the group's reporting structure and
comprise mobile content and services, mobile distribution and payment, and TV
shopping.
Segment results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis. Unallocated items comprise
mainly corporate and head office expenses.
Revenue Six months Six months Year ended
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
as restated)
Euro'000 Euro'000 Euro'000
Mobile content and services 579 - 170
Mobile distribution and payment - - -
TV shopping - - -
579 - 170
Operating loss Six months Six months Year ended
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
(as restated)
Euro'000 Euro'000 Euro'000
Mobile content and services (482) - (359)
Mobile distribution and payment - - -
TV shopping (3,075) - (7,356)
Central departments (1,234) (364) (3,904)
(4,791) (364) (11,619)
Net assets Six months Six months Year ended
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
(as restated)
Euro'000 Euro'000 Euro'000
Mobile content and services 11,806 - 11,368
Mobile distribution and payment 1,491 - -
TV shopping 61,512 71,561 64,204
Central departments 3,214 5,943 1,242
78,023 77,504 76,814
The business segment which is termed 'TV shopping' relates to certain non core
assets which have been disposed of subsequent to the period end (see note 8 to
the Interim Accounts).
ii) Geographical analysis
Geographical analysis by location of operating company:
Revenue Six months Six months Year ended
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
(as restated)
Euro'000 Euro'000 Euro'000
People's Republic of China - - -
British Virgin Islands - - -
Ireland 507 - 166
Japan 72 - 4
579 - 170
Operating loss Six months Six months Year ended
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
(as restated)
Euro'000 Euro'000 Euro'000
People's Republic of China (427) - (145)
British Virgin Islands (3,075) - (7,854)
Ireland (1,065) (364) (3,461)
Japan (223) - (159)
(4,790) (364) (11,619)
Net assets Six months Six months Year ended
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
(as restated)
Euro'000 Euro'000 Euro'000
People's Republic of China 2,585 - 147
British Virgin Islands 63,631 71,561 65,299
Ireland 12,941 5,943 12,284
Japan (1,134) - (916)
78,023 77,504 76,814
4. EARNINGS PER SHARE
Six months Six months Year ended
30 June 30 June 31 Dec
2007 2006 2006
(unaudited) (unaudited) (unaudited)
(as restated)
Euro'000 Euro'000 Euro'000
Basic
Loss attributable to ordinary
shareholders (4,764) (364) (11,559)
Weighted average number of
shares 395,324,667 70,836,853 208,454,868
Basic loss per share Euro(0.01) Euro(0.01) Euro(0.06)
There was no dilutive effect from the share options outstanding during the year.
5. INTANGIBLE FIXED ASSETS
Total
Product Network Database &
Media distribution use Television electronic
rights rights rights rights rights
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Cost
At 1 January 2006 - - - - - -
Additions 2,333 27,497 35,424 6,307 - 71,561
At 30 June 2006 2,333 27,497 35,424 6,307 - 71,561
Additions - - - - - -
At 31 December
2006 2,333 27,497 35,424 6,307 - 71,561
Additions - - - - 1,491 1,491
At 30 June 2007 2,333 27,497 35,424 6,307 1,491 73,052
Amortisation
At 1 January 2006 - - - - - -
Charge for the period - - - - - -
At 30 June 2006 - - - - - -
Charge for
the period 233 2,750 1,771 631 - 5,385
Impairment charge 98 1,873 - - - 1,971
At 31 December 2006 331 4,623 1,771 631 - 7,356
Charge for
the period 117 1,374 886 315 50 2,742
At 30 June 2007 448 5,997 2,657 946 50 10,098
Net book value
At 30 June 2007 1,885 21,500 32,767 5,361 1,441 62,954
At 31 December
2006 2,002 22,874 33,653 5,676 - 64,205
At 30 June 2006 2,333 27,497 35,424 6,307 - 71,561
6. SHARE ISSUES
During the six months ended 30 June 2007 the company successfully completed the
placing of 22,555,932 shares at STG 11.8p per share to raise STG #2,661,600, the
proceeds of which will be used to finance the integration and expansion of the
CEC-Unet business.
7. STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Year ended 31 December 2006 (as restated)
Share
based Currency Retained Total
Share capital Share capital Share payments Other translation earnings
- equity - non equity premium reserve reserves reserve
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
At 1 January 2006 535 - 288 - 8 - (843) (12)
Shares issued
in the year 3,316 750 81,827 - - - - 85,893
Share based payments - - - 2,499 - - - 2,499
Loss for the year - - - - - - (11,559) (11,559)
Foreign currency
translation - - - - - (7) - (7)
At 31 December 2006 3,851 750 82,115 2,499 8 (7) (12,402) 76,814
Six months ended 30 June 2006
Share
based Currency Retained Total
Share capital Share capital Share payments Other translation earnings
- equity - non equity premium reserve reserves reserve
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Euro'000
At 1 January 2006 535 - 288 - 8 - (843) (12)
Shares issued
in the period 2,878 750 74,252 - - - - 77,880
Loss for the period - - - - - - (364) (364)
At 30 June 2006 3,413 750 74,540 - 8 - (1,207) 77,504
Six months ended 30 June 2007
Share
based Currency Retained Total
Share capital Share capital Share payments Other translation earnings
- equity - non equity premium reserve reserves reserve
Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Euro'000
Euro'000
At 31 December 2006 3,851 750 82,115 2,499 8 (7) (12,402) 76,814
Shares issued
in the period 307 - 5,668 - - - - 5,975
Share based payments - - - - - - - -
Loss for the period - - - - - - (4,764) (4,764)
Foreign currency
translation - - - - - (2) - (2)
4,158 750 87,783 2,499 8 (9) (17,166) 78,023
8. SUBSEQUENT EVENTS
On 18 September 2007 the Company completed the acquisition of the assets of CEC
Unet Plc ("Unet"), a Chinese leading provider of electronic payment and top-up
services for mobile phones. As announced on 15 May 2007, the Company has
acquired the assets from China Electronics and Appliances Corporation ("CEAC")
for a consideration of RMB 3.5 million (approximately #230,000) in cash and
77,355,946 ordinary shares of Euro0.01 each in the Company ("Ordinary Shares"). In
addition, the Company has simultaneously completed the acquisition of 80 per
cent. of the sales, marketing and distribution rights to the China Business Post
("CBP"), a leading weekly Chinese business newspaper.
CEC Unet Plc
Under the terms of the Asset Sale and Purchase Agreement ("Agreement"), the
Company has acquired the assets and business of Unet in exchange for the
transfer of 77,355,946 Ordinary Shares ("Consideration Shares") satisfied by the
allotment of shares from two existing shareholders, Sun Media Investment
Holdings Ltd ("SMIH") and Sun Media Investments International Ltd ("SMII"), both
companies owned and controlled by Dr Bruno Wu, founder of the Company, and the
payment by the Company of RMB 3.5 million in cash. The Consideration shares will
be subject to a lock in arrangement.
As consideration for settling the share payment for Unet, the Company will
transfer to SMIH the agreements entered into by it on 30 June 2006 giving it the
rights to a jewellery distribution contract, the online versions of a number of
lifestyle magazines, and the rights to the electronic edition of Wine & Dine.
CEAC, the vendor of Unet, has provided the Company with a post-tax profit
guarantee for Unet of RMB 15 million (approximately #990,000) for the calendar
year ending December 31, 2007 and a post-tax profit guarantee of RMB 20 million
(#1.3 million) for the year ending December 31, 2008. The profit guarantee only
covers the existing top-up and sim-card sales business in Henan province. Any
profits resulting from geographic or product expansion post-acquisition do not
count towards the profit guarantee. Under the terms of the Agreement, CEAC will
pay to the Company, in cash, the shortfall between the reported profit for the
existing business of Unet in the years ended 31 December 2007 and 31 December
2008 and the targets referred to above.
Since the announcement of 15 May, Unet has provided the Company with its
unaudited financial results for the year ended 30 June 2007, which show a loss
before taxation of US$151,000 on turnover of US$5.94 million. As at 30 June
2007, Unet had unaudited net assets of US$1.14 million
As a result of the transaction, CEAC will become a strategic shareholder in the
Company, with an interest of 15.8 per cent of the Company. Established in 1964,
CEAC is a subsidiary of China Electronics Corporation ("CEC") a RMB 80 billion
in sales electronics conglomerate which is one of China's largest producers and
distributors of mobile handsets. It also acquired Phillips's mobile phone
division in 2005. CEAC is one of China's top three logistics and electronics
distributors, with 13 domestic subsidiaries, holdings in 15 companies, and a
nationwide customer service and support network.
To reflect the strategy of the Company and to capitalise on a strong and
important brand in China, Sun 3C plans to change its name to CEC Unet Plc by way
of resolution at the annual general meeting of the Company.
Appointment of director
Mr. Li Gang, current CEO of CEAC will join the Company as Chief Executive
Officer. Mr Chen Zhaobin, the Company's current CEO and Chairman, will remain as
Chairman and hand over the role of CEO to Mr Li with effect from 3 September
2007.
Mr Li, 42, holds a Masters of Law from Beijing University. He joined CEAC in
1992 and has led the company into the mobile telecommunications industry with
his vast experience in working with government as well as in China's telecom
industry over the past 20 years. Mr Li is currently a director of China
Electronic Exhibition Corporation and China Electronic Appliance Shenzen
Limited.
China Business Post
In addition to the completion of the Unet acquisition, the Company has entered
into an agreement with SMIH and SMII whereby they will transfer to Panpac Tech
Strategic Limited a total of 19,558,000 Ordinary Shares to complete the
acquisition of an 80 per cent. interest in the companies holding the sales,
marketing and distribution rights to the China Business Post.
9. Principal impact of IFRS
The key differences between Irish GAAP and IFRS that will impact the group are
set out below.
The rules for the first time adoption of IFRS are set out in IFRS1 'First Time
Adoption of International Financial Reporting Standards'. The rules state that a
company should use the same accounting policies in its opening IFRS balance
sheet and throughout all periods presented in its first IFRS financial
statements.
Goodwill
Under Irish GAAP, the group was amortising goodwill arising on acquisitions over
a period of between 10 years. Under IFRS 3 'Business combinations', goodwill is
not amortised but instead is subject to annual impairment tests or more
frequently if there is an indication of impairment.
Amortisation provided under Irish GAAP has been written back under IFRS with the
result that net assets at 31 December 2006 have increased by Euro1,242,000 and loss
before taxation for the year ended 31 December 2006 has decreased by Euro1,242,000.
Foreign currency
Under Irish GAAP foreign exchange differences arising on the retranslation of
the net assets of overseas subsidiaries were written off directly to retained
earnings. Under IAS 21 'The effects of changes in foreign exchange rates', these
differences are required to be separately identified as part of equity.
The change has no impact on the net assets of the business or the profit before
taxation for any period but increases retained earnings by Euro7,000 at 31 December
2006.
Reconciliations
The following pages show the reconciliation of Profit under Irish GAAP to Profit
under IFRS for the 6 months ended 30 June 2006 and the year ended 31 December
2006 and Equity under Irish GAAP to Equity under IFRS at 1 January 2006, 30 June
2006 and 31 December 2006.
Reconciliation of Profit from Irish GAAP to IFRS
The transition to IFRS had no effect on Profit for the six months ended 30 June
2006. The effect of the transition to IFRS on Profit for the year ended 31
December 2006 is shown below.
Year ended 31 December 2006
Under Effect of
transition Under
Irish GAAP to IFRS IFRS
Euro'000 Euro'000 Euro'000
Revenue 170 - 170
Cost of sales (57) - (57)
Gross profit 113 113
Administrative expenses (1,878) - (1,878)
Amortisation of intangible fixed assets (6,627) 1,242 (5,385)
Impairment of intangible fixed assets (1,971) - (1,971)
Other operating expenses (2,498) - (2,498)
Operating loss (12,861) 1,242 (11,619)
Other interest receivable and similar
income 60 - 60
Loss before tax (12,801) 1,242 (11,559)
Tax expense - - -
Loss for the period (12,801) 1,242 (11,559)
Loss per share Euro Euro
Basic and diluted (0.06) - (0.06)
Euro'000
Loss under Irish GAAP (12,801)
Amortisation of goodwill 1,242
Loss under IFRS (11,559)
Reconciliation of Equity from Irish GAAP to IFRS
The transition to IFRS had no effect on Equity as at 1 January 2006 or as at 30
June 2006. The effect of the transition to IFRS on Equity as at 31 December 2006
is set out below.
As at 31 December 2006
Under Effect of
transition Under
Irish GAAP to IFRS IFRS
Euro'000 Euro'000 Euro'000
ASSETS
Non-current assets
Intangible assets 75,381 (11,176) 64,205
Goodwill - 12,418 12,418
Property, plant and equipment 60 - 60
Investments 60 - 60
75,501 1,242 76,743
Current assets
Trade and other receivables 681 - 681
Cash and cash equivalents 2,737 - 2,737
3,418 3,418
LIABILITIES
Current liabilities
Trade and other payables (3,135) - (3,135)
Obligations under finance leases (128) - (128)
(3,263) - (3,263)
Net current assets 155 - 155
Non-current liabilities
Obligations under finance leases (84) - (84)
NET ASSETS 75,572 1,242 76,814
SHAREHOLDERS' EQUITY
Called up share capital 4,601 - 4,601
Share premium account 82,115 - 82,115
Share based payments reserve 2,499 - 2,499
Other reserves 8 - 8
Currency translation reserve - (7) (7)
Retained earnings (13,651) 1,249 (12,402)
TOTAL EQUITY 75,572 1,242 76,814
Euro'000
Equity under Irish GAAP 75,572
Amortisation of goodwill 1,242
Equity under IFRS 76,814
This information is provided by RNS
The company news service from the London Stock Exchange
END
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