Cellcast : Audited Results for the year ended 31 December 2016

24 May 2017

("Cellcast", "the Group" or "the Company") Audited results for the year ended 31 December 2016

The Board of Cellcast Plc (AIM: CLTV) announces the Company's audited results for the year ended 31 December 2016. A full copy of the annual report and accounts, along with a notice of the Group's annual general meeting, to be held at L'Escargot, 48 Greek Street, London W1D 4EF on 21 June 2017 at 12.00 p.m., has been posted to shareholders today and will shortly be available from the Company's website,www.cellcast.tv.

• Group operating revenues of £12.1 million (2015: £11.8 million), comprising:

  • core interactive broadcast revenue of £11.5 million (2015: £11.8 million); and

  • first revenues from the Group's new venture, providing technical services and consulting to overseas gaming and lottery operators, of £620,000

• Cost of sales were £11.0 million (2015: £10.6 million)

• Gross profit of £1.1 million (2015: £1.2 million)

   Profit for the year increased 21.7% to £645,000 (2015: £530,000)

• Net cash balance at 31 December 2016 of £1.1 million (31 December 2015: £839,000)

• Earnings per share of 0.8p (2015: 0.7p)

• Trading during the year to date has been challenging within the Group's core business and the Group is looking to restructure its cost base in line with these challenges.

The notes to the report and accounts for the year ended 31 December 2015 contained certain typographical errors which have been restated in the comparative numbers in the notes to the 2016 report & accounts. Details of these changes, none of which impact on the results for 2015, are set out in note 24 to the Group's 2016 report and accounts.

"We continued to see the anticipated and previously discussed decline in the core interactive broadcast business throughout 2016 and this has continued into 2017 as a result in the contraction in the market. The Board has been focusing on two key aspects, which are to manage the cost base of the Group and exploring revenue diversification opportunities.

"The first three months of the year are traditionally challenging as a result in seasonality in the Group's business. However, trading has continued to be depressed in the early part of the second quarter and the Board has therefore taken steps to mitigate this downturn with an increased focus on the cost base in all areas of the business.

"We are extremely pleased to report initial revenues during the year from our technical services and consulting operations in East Africa. The board will continue to look for opportunities to maintain the underlying financial stability of the Group."

Cellcast plc's (the "group's") total operating revenues amounted to £12.1 million in 2016, compared to £11.8 million in 2015, an increase of 2.5%.

The group's interactive broadcasting activities in the UK generated £11.5 million of revenue (2015: £11.8 million)

which reflects a decrease of 2.6%.

The group's income from the provision of management services and consultancy to overseas gaming and lottery operators, which launched during the year, generated an additional £620,000 of revenue (2015: nil).

Cost of sales amounted to £11.0 million, compared to £10.6 million in 2015.

The group's gross profit amounted to £1.1 million in 2016 compared to £1.2 million in 2015. The group benefitted from the additional revenue from its management services and consultancy activities, which compensated for the profit reduction in its core UK broadcast services.

General and administrative costs decreased by 12%, from £671,000 in 2015 to £593,000 in 2016. These costs exclude the foreign exchange gain of £140,000 in 2016 (2015: £11,000). Approximately half of these costs were personnel costs (2015: 52%). This reduction is as a result of the Board' ongoing focus to reduce the group's operating costs.

Amortisation and depreciation expenses for 2016 were £123,000, a £30,000 decrease on those of 2015 (£153,000). The decrease was due to some of the previously capitalised development costs being now fully amortized.

After taking into account the net interest, share of associate results and the taxation impact and fair value gains, the total profit for 2016 was £645,000 (2015: profit of £530,000), an increase of 21.7%. 2016 earnings per share was 0.8p (2015: earnings per share of 0.7p).

The Strategic report, set out on pages 5 and 6 of the Annual Report and Accounts, gives a more extensive description

of the group's operations during the year and technological developments.

At 31 December 2016, the group had a net cash balance of £1.1 million (2015: £839,000). Current asset investments, which comprised the investment in the Lexinta fund and the new investment in the Ventury fund described in Note 15 amounted to £511,000 at 31 December 2016 (31 December 2015: £205,000). In 2016, the total gain generated by the current asset investments represented £137,000 (2015: £40,335).

The total assets at 31 December 2016 amounted to £4.4 million, an increase of £562,000 on the previous year. The increase was mainly due to the improvement in the group's cash balance (£262,000) and an increase in the group's current asset investments (£306,000).

In line with previous reports, the Directors expect the group's core voice and SMS revenues, which are driven by the UK interactive broadcast business, to continue to decline through 2017 as they have done through 2015 and 2016, as the entire industry sector continues to contract and experience difficult trading conditions.

The group has seen the impact of this in the first quarter performance of 2017 within the broadcast business, where revenues and margins were lower than expected and budgeted, resulting in a difficult first quarter and bottom line losses. Whilst the first 3 months of the year are traditionally challenging due to the seasonality in the group's business, the group is not currently seeing any significant signs of this reversing. In order to address this, the group has commenced a major review of costs with key suppliers who have a commonality of interest in the sustainability of the group's business. Initial progress has been positive in these negotiations, which are focused on realigning costs relative to the revenue and margin erosion expressed within the market itself.

In addition to this, the group faces a challenge ahead with the decision of DMOL (Digital Television Multiplex Operators Limited) to move the group's channels to less 'trafficked' positions on the Freeview electronic program guide. Previous experience of such moves over the last 5 years suggest that, whilst existing customers may seek out the group's channels in their new locations, there is no guarantee of this and there is likely the potential for a decline in new customer acquisitions, which of itself could lead to further revenue decline in the medium term.

To mitigate these uncertainties within the UK broadcast industry, the group has continued to focus on both geographical and service diversification, as previously announced, by leveraging its established skills in mobile, broadcasting and new media, to address new market sectors which can potentially provide alternate sources of revenue.

Included amongst these initiatives is the provision of consultancy and management services to companies in the gaming, lottery and entertainment sector in East Africa and Asia, where the group is leveraging the new opportunities being created by the growth in 'mobile money' in these geographies. The group's remuneration for this activity is currently received on the basis of fixed management fees, enhanced by various performance incentives. This structure insulates the group from investment risk and preserves the group's cash position, whilst providing a steady contracted stream of income and potential for upside. This new stream of income is expected to be maintained through 2017 and beyond, subject to customer and market continuity.

The group is also looking at further ways to diversify in order to create sustainable new business going forward.

Chief Executive Officer 23 May 2017

For the year ended 31 December 2016