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Media Corp. - Final Results

Media Corporation plc Final Results for the year ended 30 September 2008 Media Corporation plc ('Media Corp' or 'the Company'), a leading internet media and advertising group focused on website publishing and online advertising, is pleased to announce its preliminary results for the year ended 30 September 2008. Highlights * Gross Profit of #1.4m (#2.5m)* Cash Balances at the year end #3.8m (#6.3m)* Consolidated Net Assets #8.0m (19.5m)* Acquisition and successful launch of Sport.co.uk* Partnership with Yahoo! provides search results across the Group's extensive network of websites* Contract with Express Newspapers to sell advertisements on online titles including the Express, Daily Star and OK magazine Chairman's Statement Trading across the Group during the 2008 financial year has been difficult as was outlined in the trading update at the end of September 2008. This is disappointing, as the Group has grown considerably and traded profitably since 2005. The Group's principal publishing asset Gambling.com has continued to be adversely affected by the ongoing ban on online gambling in the US. Furthermore the ongoing Google penalty, which has affected both Gambling.com and Creditcardexpert.co.uk, has caused a further reduction in revenues. These external factors were initially highlighted in the interims and have continued to hamper the performance of this business, despite the concerted efforts of the management and its advisers. Since the financial year-end the Board has implemented a wide-ranging review of its businesses and approved a plan to reduce costs in-line with current revenues. Despite the above, the Board remains positive that continued growth in the advertising network business will further enhance value for shareholders in the medium term and, despite poor recent performance in the publishing division, the portfolio of assets remains very valuable. Jason Drummond Chairman 31 March 2009 For further information please contact: Media Corporation plc Tel: + 44 020 7618 9000 Justin Drummond, Chief Executive www.mediacorpplc.com Nilesh Jagatia, Group Finance Director Daniel Stewart & Company plc (Nominated Advisor) Tel: + 44 0 20 7776 6550 Simon Leathers/Charlotte Stranner www.danielstewart.co.uk Bishopsgate Communications Tel: + 44 0 20 7562 3350 Jenni Herbert/Gemma O'Hara [email protected] About Media Corporation Plc Listed on the AIM market of the London Stock Exchange, Media Corp is a leading internet media and advertising group focused on website publishing and online advertising. The Group has two principal divisions: Advertising Network - Formed in 1996, Eyeconomy specialises in mass reach campaigns to over 32 Million unique consumers per month via its own proprietary ad-serving and tracking technology for clients including AOL, Dell and American Express. www.eyeconomy.co.uk Website Publishing - Media Corp has a diverse publishing division specializing in online media. Our impressive portfolio of websites includes a number of market leading sites including: www.gambling.com, www.onthebox.com, www.sport.co.uk, www.creditcardexpert.co.ukand www.flightcomparison.co.uk BUSINESS REVIEW Media Corporation has made good progress during 2008 whilst formulating and consolidating its ongoing strategy. As previously announced during the year, the ongoing strategy was to invest in the business. This investment took place in personnel and technology and has resulted in streamlined operations during the financial year. As identified in the Chairman's Statement, the Group's principal publishing asset Gambling.com has continued to be adversely affected by the ongoing ban on online gambling in the US. The business transformation has helped to reduced reliance on advertising revenues from the online gaming sector The Group has two principal divisions, Advertising Network and Internet Publishing: Advertising Network The Advertising Network business Eyeconomy was established in 1996 and is a separate operating division of Media Corporation. Eyeconomy specialises in online media planning as well as buying and managing online media campaigns for clients including AOL, Dell, T-Mobile and American Express. The division currently: * produces dynamic and engaging online advertising solutions including exit traffic (Subsites), rich-media floating toolbar (SubLines) and has recently launched a new online advertising division* offers a total reach of 32 million unique users every month, from over 800 quality host sites in all major channels including Finance, Travel, Motors, Sport, Male/Female, Student/Youth, Property, Entertainment, Film, Music and TV, Mobile/Gadget and Recruitment* produces in-house creative media* has launched a new Brand team with successful contract win with the Express Newspaper group with over #2 million potential revenue.* is expanding - the sales team has more than doubled in size during the financial year.* is seeing return value on significant presence at trade shows and in trade PR Internet Publishing Media Corporation has a diverse publishing division specialising in premium destinations and portals. Our impressive portfolio of websites includes a number of market-leading sites including www.onthebox.com(UK's definitive TV listings and entertainment guide with over 1.5 million unique visitors per month), www.sport.co.uk(Sport content site that within 8 months generated 1.2 million unique visitors), www.flightcomparison.co.uk(a leading flight booking portal), Gambling.com (a comprehensive gambling and sports portal providing industry news, tips and strategies) and www.creditcardexpert.co.uk(a credit card comparison website). In addition, the Group has over a thousand domain names. The Group has in depth expertise in developing and monetising online brands and has significant value in its publishing division. This was clearly illustrated in the value achieved by the sale of www.casino.co.ukin August 2007. FINANCIAL OVERVIEW The audited results for the year ended 30 September 2008 show a turnover of #3.9m (2007: 8.3m) and this is a direct result of reduced Gaming revenues during year. Gross profit has also reduced to #1.4m (2007:#2.5m); however the gross margin has increased to 35.9% (2007: 30%). The operating loss was #11.5m (2007: profit 2.8m) and the loss in the year includes exceptional costs of #8.9m that relate mainly to Impairment of intangible assets. Advertising Network Division's revenue increased during the year by 44% to #2.52 million (2007: #1.75 m) and was in line with management expectations. Net assets were #8.0m (2007: #19.5m) and the movement was largely attributable to the impairment of the intangible assets. Cash at the end of the financial year was #3.8 (2007: 6.3m) Key Performance Indicators (KPI's) FY2008 FY2007 #million #million Revenue - Continuing Operations 3.9 3.9 Revenue - Discontinued Operations - 4.4 Total Revenue 3.9 8.3 Gross Profit 1.4 2.5 Exceptional Costs (8.9) 2.5 Operating (Loss) / Profit (11.5) 2.8 Net Assets 8.0 19.5 Cash 3.8 6.3 Other non-financial KPI Employees - Number 42 26 Current trading and prospects incorporating principal risks and uncertainties The Board is aiming for continued growth during 2009 as we seek to maximise the potential of the Group's internet publishing assets and media businesses. The Group clearly owns very valuable internet assets, as previously demonstrated by the sale of the Casino.co.uk business for up to #3.625 million. The current growth in the online advertising sector and an existing significant web site portfolio still owned by the Group, the Board will continue to develop the business rapidly and enhance the value of its core Internet assets, and maximise their value for the benefit of shareholders. Justin Drummond Chief Executive 31 March 2009 Consolidated Income Statement For the year ended 30 September 2008 Total2008 Total2007 #000 #000 Revenue Continuing operations 3,912 3,945 Discontinued operations - 4,364 Total revenue 3,912 8,309 Cost of sales Continuing operations (2,507) (1,430) Discontinued operations - (4,369) Gross profit 1,405 2,510 Impairment of Goodwill (7,776) - Impairment of domain names (649) - Impairment of computer (686) - software and website Bad debt (79) - Income from sale of 277 2,513 non-current assets Total exceptional (loss)/gain (8,913) 2,513 Operating (loss)/profit (11,464) 2,806 Finance income 242 213 (Loss)/profit before income (11,222) 3,019 tax Income tax expense (57) (184) (Loss)/profit from continuing (11,279) 2,835 operations Loss on discontinued - (5) operations (Loss)/profit from continuing (11,279) 2,830 activities attributable to equity holder of the company. (Loss)/earnings per share Pence per share Pence per share attributable to equity holders of the company Basic (3.87p) 0.97p Diluted (3.87p) 0.91p Consolidated balance Sheet As at 30 September 2008 Group Group 2008 2007 #000 #000 Assets Non current assets Property, plant and equipment 158 177 Intangibles 4,566 13,096 Investments - - Deferred tax asset - 57 4,724 13,330 Current assets Trade and other receivables 753 898 Cash at bank and in hand 3,809 6,253 4,562 7,151 Total assets 9,286 20,481 Liabilities Current liabilities Trade and other payables (1,369) (944) Current tax liabilities (24) (53) (1,393) (997) Total liabilities (1,393) (997) Total assets less liabilities 7,893 19,484 Equity Share capital 4,773 4,764 Share premium 12,927 12,917 Other Reserves 1,422 1,422 Translation reserve (305) (471) Retained Earnings (10,924) 852 Total shareholders equity 7,893 19,484 Consolidated statement of recognised income and expenses For the year ended 30 September 2008 2008#000 2007# 000 Currency translation differences 166 (471) Total income/(expense) recognised directly in equity 166 (471) (Loss)/profit for the year (11,279) 2,830 Total recognised (expense)/income for the year (11,113) 2,359 All amounts attributable to equity holders of the company Consolidated Cash Flow Statement For the year ended 30 September 2008 2008 2007 #000 #000 Operating activities Operating (loss)/profit (11,464) 2,806 Loss on discontinued operations - (5) Depreciation and amortisation 168 228 Share based payment - 13 Impairment of intangibles 9,111 - Decrease/(increase) in receivables 172 (198) Increase/(decrease) in payables 376 (288) (Profit) on disposal of non-current asset - (2,513) Taxes paid (29) - Net cash (used in)/generated by operating activities (1,666) 43 Investing activities Interest received 242 213 Purchase of property, plant and equipment (101) (647) Purchase of intangibles (513) - Proceeds from sale of property, plant and equipment - 2,748 Acquisition of subsidiary undertaking (net cash acquired) (166) (1,087) Net cash (used in)/generated by investing activities (538) 1,227 Financing activities Issue of share capital 19 - Purchase of treasury shares (497) - Net cash used in financing activities (478) - Net (decrease)/increase in cash and cash equivalents (2,682) 1,270 Cash and cash equivalents at beginning of period 6,253 5,253 Effects on exchange movements 238 (270) Cash and cash equivalents at end of period 3,809 6,253 Media Corporation Plc Preliminary Announcement 1 Basis of preparation and significant accounting policies The consolidated financial statements of Media Corporation plc have been prepared in accordance with accepted International Financial Reporting Standards (IFRSs), International Accounting Standards (IAS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations (collectively 'IFRSs') as adopted for use in the European Union and as issued by the International Accounting Standards Board and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. These consolidated financial statements are the first Media Corporation plc financial statements to be prepared in accordance with IFRS, the transition date being 1 October 2006. Fundamental accounting concept - going concern The financial statements have been prepared on the assumption that the Group is a going concern. The accounts of the Group for the year ended 30 September 2008 show a loss including exceptional items for the year of #11.3 million. Exceptional items include an impairment charge of #8.9million and since the financial year end the Board has implemented a wide ranging review of its businesses and approved a plan to reduce costs in line with current revenues. At the date of these financial statements the Group's ability to continue as a going concern reflects the net funds of #3.8 million cash available to the Group at the year end and the forecasts for the Group for the current financial year. On this basis, in the opinion of the Directors, the financial statements have been properly prepared on the assumption that the Group is a going concern. Adoption of IFRS For all accounting periods up to and including the year ended 30 September 2007, the Group has prepared its financial statements under UK GAAP. For accounting periods from 1 October 2007, the Group is required to prepare its consolidated financial statements in accordance with IFRS as adopted by the European Union ('IFRS'). The Group's first results under this basis were its interim results for the six month period ended 31 March 2008. These results represent the first annual report and accounts the Group has prepared in accordance with its accounting policies under IFRS and the comparatives for the prior year have been restated from UK GAAP to comply with IFRS. A description of how the Group's reported performance and financial position were affected by the change can be found in note 24. For the purpose of the accounts, the date of transition to IFRS is 1 October 2006. The rules for first time adoption of IFRS are set out in IFRS 1 'First time adoption of International Financial Reporting Standards'. In general, the Group is required to determine its IFRS accounting policies and apply these retrospectively to determine its opening balance sheet under IFRS. The standard allows a number of exemptions to this general principle to assist companies as they change to reporting under IFRS. The Group has taken advantage of the following exemptions: ? Business combinations that took place prior to the date of transition have not been restated. ? All cumulative translation differences that existed at the date of transition are set to nil. ? To apply the requirements of IFRS 2 'Share Based Payments', to schemes granted after 7 November 2002. ? Investments held at the opening balance sheet date have been held at cost rather than revalued to market value. Intangible assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the acquisition date. Goodwill on acquisition of subsidiaries is included in goodwill and intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash generating units that are expected to benefit from the business combination in which the goodwill arose. In accordance with IFRS 3 'Business Combinations', any excess of acquirer's interest in the fair value of acquiree's identifiable net assets is immediately recognised in the income statement. Computer software Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised over their useful economic lives (3 to 5 years). Costs associated with developing and maintaining computer software programmes are recognised as an expense when incurred, subject to the capitalization criteria of IAS 38. Trade names/Domain names Acquired trade names/domain names are recognised where their fair value can be reliably measured. These assets are considered to have finite lives and are tested annually for impairment and carried at cost less accumulated impairment losses. Website costs Acquired websites are capitalised where their fair value can be reliably measured. Development of these websites are also capitalise as long as there are considered generating revenues. These assets are considered to have finite lives and are amortised on a straight line basis over their useful economic lives of 3 years. Impairment of non current assets The carrying amount of the Group's assets, other than deferred income tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. Assets that have an indefinite economic life are not subject to amortisation and are tested annually for impairment. If an indicator of a possible impairment is noted, the need for any asset impairment provision is assessed by comparing the carrying value of the asset against the higher of fair value less costs to sell or value in use (recoverable amount). An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the income statement. For the purposes of assessing impairment, the assets are grouped at the lowest levels for which they have separately identifiable cash flows (cash generating units). Impairment losses recognised in the income statement in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (groups of units) and then, to reduce the carrying amount of the other assets of the unit (group of units) on a pro rata basis. Impairment charges are included in the administrative expenses line item in the income statement, except to the extent they reverse gains previously recognised in the statement of recognised income and expenses. Basis of consolidation Subsidiaries Subsidiaries are all entities over which the Group (directly or indirectly) has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are excluded from the consolidation from the date on which control ceases. The Group uses the purchase method of accounting to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement for the year. Intra-group transactions, balances and unrealised gains on intra-group transactions are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Subsidiaries' accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group. Transactions and Minority Interests The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of the net assets of the subsidiary. 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. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty. Revenue arising from the provision of services is recognised when and to the extent that the Group obtains the right to consideration in exchange for the performance of its contractual obligations. Foreign currency The individual financial statements of each Group Company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group Company are expressed in Pounds sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements. In preparing the financial statements of the individual Companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at rates of exchange prevailing on the dates of the transactions. At the balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the profit and loss account for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such monetary items, any exchange component of the gain or loss is also recognised directly in equity. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income and expense in the period in which the operation is disposed of. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rates. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes. Sales of goods are recognised when goods are delivered and title has passed. Sales of services are recognised when the service has been completed and invoiced to the customer. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. Leased assets Where the assets are financed by leasing agreements that give rights approximating to ownership (finance leases), the assets are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments payable over the term of the lease. The corresponding leasing commitments are shown as a liability. Where a finance lease has been awarded to a group entity at a non-commercial interest rate is applied. Depreciation on the relevant assets is charged to the income statement. All other leases are treated as operating leases. Their annual rentals are charged to the income statement on a straight line basis over the term of the lease. Current and deferred income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group's subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income 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. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the Group controls the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 2. (Loss)/earnings per share 2008 2007 #000 #000 (Loss)/earnings (Loss)/earnings for the purpose of basic and diluted (11,279) 2,830 earnings per share Numbers Weighted average number of ordinary shares for the 291,927,298 291,027,298 purpose of basic earnings per share ** Effective of dilutive potential ordinary shares: Share warrants - 20,400,000 Weighted average number of ordinary shares for the 291,927,298 311,427,298 purpose of diluted earnings per share Pence Pence (Loss)/earnings per share - basic (3.87p) 0.97 (Loss)/earnings per share - diluted (3.87p) 0.91 Basic (loss)/earnings per share have been calculated by dividing (loss)/profit for the year by the weighted average number of ordinary shares in issue during the year. Diluted (loss)/earnings per share have been calculated by dividing (loss)/profit for the year by the weighted average number of ordinary shares in issue during the year adjusted to assume conversion of all dilutive potential options/warrants. Losses are not subject to dilution. 3 The financial information in this announcement does not constitute statutory accounts within the meaning of Section 240 Companies Act 1985 as amended ('the Act'). Statutory accounts in respect of the year ended 30 September 2007, on which the auditor's report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and contain no statement under Section 237 (2) or (3) of the Act, have been delivered to the Registrar of Companies. The auditors have indicated that they intend to give an unmodified report, which will not contain any statement under Section 237 (2) 4 (3) of the Act on the statutory financial statements for the year ended 30 September 2008. Copies of the company's report and financial statements will be on the companies' website and sent to shareholders today. Copies will also be available at the Registered Office of the company

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