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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Chrysalis | LSE:CHS | London | Ordinary Share | GB00B28TMS45 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 159.75 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMCHS
RNS Number : 0563Y
Chrysalis PLC
16 December 2010
CHRYSALIS PLC
Preliminary results for the year ended 30 September 2010
Hot Features
Premium
2010 2009
============================== ======== ========
GBP'm GBP'm
------------------------------ -------- --------
Revenue 69.8 62.9
============================== ======== ========
Consolidated NPS 16.7 13.4
============================== ======== ========
Normalised operating profit 5.3 3.3
============================== ======== ========
Normalised profit before tax 1.6 0.5
============================== ======== ========
Operating profit 0.3 2.2
============================== ======== ========
Loss before tax (3.7) (3.8)
============================== ======== ========
Basic loss per share(pence) (6.04)p (5.74)p
============================== ======== ========
Net debt 20.4 15.8
------------------------------ -------- --------
Results Highlights
-- Chrysalis PLCcontinues to deliver on the strategy set out in 2008: growing NPS, controlling overheads and increasing normalised profits for the second year in succession
-- Chrysalis PLC revenues, normalised operating profit and NPS are all ahead of Board's expectations
-- Consolidated NPS increased by 24.6% to GBP16.7m (2009: GBP13.4m) and by 23.9% to GBP16.6m on a constant currency4 basis
-- Lasgo Chrysalisoutperformed the Board's expectations despite the 15% fall in operating profit to reach GBP1.7m (2009: GBP2.0m) in an exceptionally difficult market
-- Successful integration of Chrysalis One acquired in April 2010
-- Property issues resolved with the sale of the freehold property and exit from a long-term lease agreement
-- Hedging instruments restructured to lower future interest costs
-- Securitisation loan facility amended to allow two further drawdowns against the available GBP22.4m, including a deferral of capital repayments to March 2012
-- High profile new signings include Rumer, Beach House,Jai Paul, Jamie Woon, the Bees, Matt Morris (US) and The Sword (US)
-- Encouraging release schedule in current financial year - including Rumer, Cee-Lo Green, Bon Iver and strong writer representation on albums by Kanye West, Adele, Josh Groban, Justin Timberlake and Clare Maguire
-- Current trading in line with the Board's expectations
-- Recommendation to shareholders to approve recent cash offer for Group to be distributed shortly
1. Net Publisher's Share (NPS) is the revenue received by a music publisher, less any royalties that have to be paid to writers, performers and others receiving a share of royalties.
2. Normalised measures are stated before separately disclosed items. See notes 2 and 3 to the attached financial information for further details. The Group believes that the normalised measures provide additional guidance to the statutory measures of the performance of the business during the period. These measures are not defined under Adopted IFRS and therefore may not be directly comparable with other companies adjusted profit measures. It is not intended to be a substitute for or superior to Adopted IFRS measurements of profit.
3. The loss before tax is operating profit after charging net finance costs of GBP4.0m (2009: GBP6.1m), which includes a GBP0.2m (2009: GBP3.2m) charge in respect of the fair value movements in derivative financial instruments.
4. Constant currency results are calculated by restating current period local currency results using prior period exchange rates.
Commenting on the results, Chris Wright, Chairman, said:
"Since the announcement on 26 November that Chrysalis is to be acquired by BMG, I have been filled with conflicting emotions. But, above all, it is with great excitement that Chrysalis will form part of BMG's vision to create a new and exciting music rights business, and that the name and heritage of the company will live on. Over the past four decades, we have succeeded in creating a vibrant business, with a leading position within the independent music publishing industry. I am immensely proud of what we have achieved and I am confident that BMG's offer of 160p a share for the Group fairly recognises our unique proposition: an enviable back catalogue and a sought after roster of current artists, as well as excellent management teams and talented staff throughout our UK and international operations."
Commenting on the results, Jeremy Lascelles, Chief Executive, said:
"This is a moment of very mixed emotions for me, but I take enormous satisfaction and pride in being able to hand over ownership with the business in such rude health. 2010 has already been a very successful year for us, and the current chart success of albums by Rumer and Cee-Lo Green will soon be followed by a host of other releases that make our prospects for 2011 very exciting indeed. I would like to take this opportunity to pay tribute to all of our staff and artists whose skills and talents are the fundamental reasons behind the success of the Group."
Enquiries:
Chrysalis PLC
Jeremy Lascelles, Group Chief Executive 020 7465 6170 or 07767 436 300
Andy Mollett, Group Finance Director 020 7465 6195 or 07825 781 785
Brunswick
Dania Saidam/Max McGahan 020 7404 5959
ABOUT CHRYSALIS PLC
Chrysalis PLC is an independent music company. The Group's principal areas of business comprise: Chrysalis Publishing which includes the Group's international network of music publishing companies, under the banner of Chrysalis Music and Chrysalis One, whose purpose it is to exploit and grow Chrysalis's rich catalogue of music copyrights; Chrysalis Non-Publishing, which is made up of The Echo Label, a copyright exploitation company; Chrysalis Copyrights, the owner of certain Master recordings and Flatiron Management, an artist management company. Chrysalis PLC also owns Lasgo Chrysalis, a UK-based wholesale entertainment product distribution business which serves both domestic and overseas wholesale, retail and entertainment markets with CD, DVD and book products.
Chief Executive's Review
Chrysalis once again delivered a very solid set of results across all business areas and performed ahead of the Board's expectations. Group revenue improved to GBP69.8m (2009: GBP62.9) and normalised operating profit rose by 60.6% to reach GBP5.3m (2009: GBP3.3m). Consolidated NPS, a key metric for the group, increased by 24.6% in the year to GBP16.7m (2009: GBP13.4m). Underlying consolidated NPS also showed a year-on-year improvement, up 11.9% from GBP13.4m in 2009 to GBP15.0m in 2010. Underlying NPS excludes the impact of the Chrysalis One acquisition in April 2010 and a one-off impact of GBP0.4m relating to the acceleration of Performance income reporting in the UK and US. This underlying growth was due to improved NPS performance from our music publishing operations and the full year inclusion of the Richard Marx catalogue. The consolidated NPS figure also includes the excellent result from Chrysalis Copyrights following the release of the digitally re-mastered Beatles albums in the autumn of 2009.
We were particularly pleased with the performance of our music publishing activities in the past financial year. In the first half of the year, the publishing division had exceptional chart and airplay success with consecutive US number one hits co-written and produced by our writers Fraser T Smith ('Break my Heart' by Taio Cruz) and Pendulum's Rob Swire ('Rude Boy' by Rihanna). In the UK, Robbie Williams also had chart success with 'You Know Me' and 'Morning Sun', co-written by our writers Soul Mekanik. In the second half, Pendulum's album 'Immersion' became a UK number one album and two of our writers - Nerina Pallot and Fraser T Smith - featured on a number of tracks on Kylie Minogue's number one album 'Aphrodite'. In addition to this chart success, our back catalogue artists also had an excellent year: songs from Chrysalis Music's songwriters such as Blondie, David Bowie and Billy Idol all generated good performance and synchronisation income, demonstrating the enduring appeal of their iconic songs.
Lasgo Chrysalis, our entertainment product distribution business again defied the downturn in the sales of CD, DVD and book product and produced financial results well ahead of the Board's expectations. This was very encouraging given the ongoing difficulties in this market place and the tough year-on-year comparables.
2010, however, was not just a year of focusing on our financial and commercial performance. We also made significant progress in addressing some of the key strategic priorities, which were identified to strengthen and simplify our business, improve our profitability and pave the way for future growth:
- The acquisition of First State Media Group in April 2010 for GBP10.9m (US$16.5m) illustrated our commitment to making significant catalogue acquisitions. Following the acquisition, Chrysalis now manages an additional 45,000 copyrights on behalf of FS Media Works Fund 1 ("the Fund"), a partnership of international institutional investors and pension funds. The acquired asset, subsequently named 'Chrysalis One', was substantially restructured and fully integrated into the Chrysalis music publishing network during the second half of the year.
- The Richard Marx catalogue, acquired in June 2009, is now fully integrated and delivered NPS of GBP0.4m in 2010 (2009: GBP0.1m).
- All property issues were resolved during the year, with the sale of the freehold property at Bramley Road for GBP6.8m, and we exited an onerous lease obligation for our Freston Road property at a gain of GBP0.1m.
- We completed the restructuring of our hedging arrangements to manage future cash interest costs through the unwinding of our cap and collar financial instrument in March 2010.
- Further progress was made in reducing our normalised corporate overhead costs, which fell to GBP1.59m in the year from GBP1.65m in 2009.
Following the year end, on 26 November 2010, the Board of Chrysalis announced the recommended cash offer, from BMG Luxco, a joint venture between Bertelsmann and Kholberg Kravis Roberts & Co., for the entire issued and to be issued share capital of the Company. Under the terms of the transaction, Chrysalis shareholders will receive 160p per Chrysalis share and this values the issued ordinary share capital of Chrysalis at approximately GBP107.4m. The purchase price represents a 55.7% premium to the average Chrysalis share price in the three months prior to the announcement that the Company was in offer discussions.
Whilst the sale of Chrysalis marks the end of forty years as a leading independent in the music industry, the Board feels sure that this is the right step for the Company going forward.
It remains for me to thank the staff across all of our businesses and our songwriters and artists from across the globe. Our achievements are merely a testament to your skills, talent and endeavour. I thank you all for your commitment and your professionalism in the recent months.
Jeremy Lascelles
Chief Executive Officer
15 December 2010
Business Review
Chrysalis Publishing
Chrysalis Music
2010 2009
GBP'm GBP'm
----------------------------- ------ ------
Revenue 38.4 35.9
Normalised operating profit 2.6 2.2
Profit before tax 1.7 1.9
(i) Normalised measures are stated before separately disclosed items. See notes 2 and 3 for further details.
Performance in 2010
Chrysalis Music increased revenues from GBP35.9m in 2009 to GBP38.4m for the year ended 30 September 2010. The NPS from Chrysalis Music's publishing operations grew by 9.8% to GBP13.5m (2009: GBP12.3m) and was up by 8.9% on a constant currency basis. Normalised operating profit rose by 18.2% from GBP2.2m in the prior year to GBP2.6m in 2010. This underlying growth in NPS was, primarily, due to improved NPS performance from our music publishing operations, the full year performance of the Richard Marx catalogue, and the impact of an incremental one-off GBP0.4m relating to an acceleration of Performance income reporting in the UK and US.
Once again, there was an encouraging mix of income generated from both our back catalogue and more recent signings. Our top earners in 2010 were Blondie, Paul Anka, Richard Marx, David Bowie and Johnta Austin. 2010 saw a number of our writers contributing to high profile hits on both sides of the Atlantic, which included a UK number one album, 'Immersion' from Pendulum, two of our writers - Nerina Pallot and Fraser T Smith - featuring on a number of tracks on Kylie Minogues' UK number one album, while other writers had chart success through their contributions to albums by Tom Jones and Robbie Williams. In the US we had consecutive number one hits from two Chrysalis writers - Fraser T Smith and Rob Swire - and singer-songwriter Ray LaMontagne achieved a top ten chart position with his album 'God Willin and the Creek don't Rise'. We have been pleased with the performance of the Richard Marx catalogue in the year, which had particular success in generating performance income from classic hits such as 'Right here Waiting' and 'Dance with my Father'. The Richard Marx catalogue was bought in June 2009 for $8.0m, and generated GBP0.4m of NPS in 2010 (2009 contribution for 3 months GBP0.1m).
Whilst not directly contributing to the financial performance of the Group, a number of Chrysalis songwriters were nominated for prestigious industry awards. In May, Bat for Lashes won the Ivor Novello Award for Best Contemporary Song for 'Daniel' and Johnny Marr, won the acclaimed Ivor Inspiration Award. More recently, both Laura Marling's 'I Speak Because I Can' and I am Kloot's 'Northern Skies' were nominated for Album of the Year at the Mercury Prize Awards.
As previously stated, the key to maintaining organic NPS growth is signing new songwriters to our roster. Whilst competition for new songwriters remains high, we were delighted that this year we signed Beach House, The Bees, Jamie Woon, Jai Paul and Rumer in the UK. In the US, new signings include Matt Morris, The Sword, The Walkmen, Tom Meredith and Ben Allen.
Chrysalis One
2010 2009
GBP'm GBP'm
----------------------------- ------ ------
Revenue 5.3 -
Normalised operating profit 0.7 -
Loss before tax (2.0) -
(i) Normalised measures are stated before separately disclosed items. See notes 2 and 3 for further details.
Performance in 2010
In April 2010, in line with the Board's stated strategy of acquiring suitable new catalogues, Chrysalis bought First State Media Group, an international music publishing business, for GBP10.9m. The deal gave Chrysalis access to an additional 45,000 music copyrights to be managed on behalf of a partnership of international institutional investors and pension funds. The acquisition, subsequently renamed Chrysalis One, comprises a number of well known copyrights including those of the former "Dreamworks" catalogue (including 'Leaving on a Jetplane' and 'Take me Home Country Roads' (John Denver), 'Disco Inferno' (The Trammps), 'Somebody to Love' (Jefferson Airplane)); the catalogue of Sheryl Crow (including 'If it Makes You Happy', 'All I Wanna Do' and 'Everyday is a Winding Road') and the "Wind-Up" catalogue (including 'Bring Me To Life' (Evanescence) and 'Paralyzer' (Finger Eleven)).
In its first six months as part of Chrysalis Group, Chrysalis One generated revenue of GBP5.3m and normalised operating profit of GBP0.7m, which were both broadly in line with the Board's expectations. The period of restructuring and integration is now substantially complete. The reduction in overheads and amalgamation of the new copyrights into the existing Chrysalis international infrastructure should improve operating cash flows, gross income and NPS from Chrysalis One in future years.
Chrysalis Non-publishing
2010 2009
GBP'm GBP'm
----------------------------- ------ ------
Revenue 4.1 3.2
Normalised operating profit 1.8 0.8
Profit before tax 1.8 0.8
(i) Normalised measures are stated before separately disclosed items. See notes 2 and 3 for further details.
The Echo Label
Revenue for The Echo Label was GBP1.0m in 2010 (2009: GBP1.1m), and normalised operating profits were GBP0.5m (2009: GBP0.4m), both in line with the Board's expectations. The Echo Label also produced NPS for the year of GBP0.6m (2009: GBP0.6m).
The steady improvement in profitability from The Echo Label's exploitation of its master recording copyrights underpins the decision to move away from the recorded music model to a pure copyright exploitation business. The Echo Label represents the master recording rights of artists including Nerina Pallot, Moloko, Morcheeba, Feeder, Bat for Lashes, Brendon Benson and Black Rebel Motorcycle Club. Both Nerina Pallot andBrendan Benson had new releases in 2010 ('The Graduate' and 'My Old Familiar Friend', respectively).
Chrysalis Copyrights
Chrysalis Copyrights performed ahead of the Board's expectations delivering revenues of GBP2.5m, (2009: GBP1.5m) and normalised operating profit of GBP1.1m (2009: GBP0.2m). The NPS contribution from Chrysalis Copyrights jumped from GBP0.6m in 2009 to GBP1.3m in 2010.
This exceptional performance was due to the high level of sales from the digitally re-mastered Beatles studio albums which were released in October 2009. Chrysalis Copyrights owns George Martin's producer royalties for The Beatles catalogue. These copyrights alone contributed in the region of GBP0.9m in incremental NPS in the 2010 financial year. In November 2010, The Beatles catalogue was made available online for the first time at the Apple iTunes store. In addition to The Beatles producer royalties, Chrysalis Copyrights also owns rights in master recordings by Tom Jones and Engelbert Humperdinck.
Flatiron Management
Revenue for Flatiron Management was GBP0.6m in 2010 (2009: GBP0.6m). Normalised operating profit was flat at GBP0.2m (2009: GBP0.2m).
Flatiron Management represents My Morning Jacket and Flight of the Conchords. Both acts toured extensively in 2010 and Flight of the Conchords toured the UK for the first time, selling 23,000 tickets for 4 evenings held at the Hammersmith Apollo and Wembley Arena.
Net Publisher's Share analysis
Following the reclassification of the gross profit from The Echo Label and Chrysalis Copyrights as NPS in 2009, we report both a 'consolidated NPS' figure for Chrysalis Music and the underlying NPS figures for both the Publishing and Non Publishing activities.
2010 2009
Constant currency Reported rates Reported rates
GBP'm GBP'm GBP'm
------------------------ ------------------ --------------- ---------------
Publishing
- Chrysalis
Music 13.4 13.5 12.3
- Chrysalis
One 1.3 1.3 -
Non Publishing 1.9 1.9 1.1
------------------------ ------------------ --------------- ---------------
Consolidated NPS 16.6 16.7 13.4
Chrysalis Music - NPS by income stream
Mechanical Performance Synchronisation
% % %
----- ----------- ------------ ----------------
2010 30.4 44.6 25.0
2009 32.6 38.8 28.6
2008 32.8 40.2 27.0
2007 38.5 37.4 24.1
2006 41.3 34.6 24.1
2005 43.0 36.5 20.5
As previously noted, the mix for our music publishing activities continued to move away from mechanical income (sale of physical product) towards the slightly higher margin areas of performance (public broadcast, live performance) and synchronisation (the use of music in TV/Film or advertising).
Performance income at Chrysalis was particularly strong in 2010, accounting for 44.6% of income up from 38.8% in 2009. This was due to a number of factors which included: the ongoing surge in the popularity of live performance ; an excellent first time contribution from the Richard Marx acquisition ( the catalogue has a number of well-known, classic hits which are popular radio airplay songs such as 'Right here Waiting' and 'Dance with my Father'); and there was also a one-off boost to performance income from our Michael Jackson copyrights, given the huge amount of airplay his music received following his death in June 2009. Chrysalis publishes some of his best known hit songs including 'Thriller', 'Rock with You' and Off the Wall' through our writer Rod Temperton.
Synchronisation income was slightly lower in 2010, in the main due to a weaker than hoped for performance from our US activities. However, our songs were used in a number of high profile synchronisations world-wide, which included 'Rapture' by Blondie in the film "Sex and The City II", 'Gold Lion' by the Yeah Yeah Yeahs in an Apple i-Pad commercial, 'It Must be Love' by Labi Siffre (Madness) for a You Gov advertisement and Eminem's iconic song 'My Name Is....' by Labbi Siffre for a DJ HERO product in the US.
Whilst mechanical income continued to decline, it should be noted that digital revenues, which are captured within the mechanical income stream accounted for approximately 12% of our music publishing NPS, up from 9.6% in 2009. Broadly, digital comprises the income generated by downloading via stores such as iTunes, streaming sites such as Spotify and YouTube, and a host of other digital applications.
Lasgo Chrysalis
Once again, Lasgo Chrysalis performed ahead of the Board's expectations in 2010. Revenues held up at GBP21.9m and normalised operating profits were GBP1.7m. Although these results are marginally behind the prior year, they should be viewed in the context of the exceptional market environment which prevailed in 2009 when, following the collapse of a number of competitors, Lasgo Chrysalis was able to purchase competitively priced stock from their Administrators. This provided a boost to revenues and profits in the 2009 year.
2010 2009
============================= =============== ===============
GBP'm GBP'm
----------------------------- --------------- ---------------
Revenue 21.9 23.7
============================= =============== ===============
Normalised operating profit 1.7 2.0
============================= =============== ===============
Normalised profit before
tax 1.7 2.0
============================= =============== ===============
(i) Normalised measures are stated before separately disclosed items. See notes 2 and 3 for further details.
The entertainment product market remained challenging in 2010. The ongoing problems of migration to digital media and price deflation continued to threaten the physical distribution business model. Given this background, the performance of Lasgo Chrysalis in 2010 is all the more impressive. All three core business genres at Lasgo Chrysalis had their own individual challenges. Within the DVD distribution sector, which represented 19.8% of sales in 2010 (22.7% in 2009), the product bore witness to continued price erosion and the hoped for take up of Blu-Ray has not yet occurred. The Book distribution business suffered during 2010 due to a buying 'freeze' from a major customer over the summer, which has since been lifted. As a result, Book distribution accounted for 12.7% of sales in 2010, down from 18.1% in 2009. Audio distribution, however, performed extremely well in the year, with sales increasing by 5.47% in the year (Audio accounted for 67.5% of sales in 2010 up from 59.2% in 2009). Whilst digital music continues to damage the audio distribution business, it should be noted that, overall, demand for CDs remains robust, with 75% of global albums still being sold in physical format (Source: Enders Analysis, June 2010).
The customer base continues to be made up of a balanced mix of online and traditional retailers from across the UK, Europe and Japan. In order to keep up with the increasingly complex demands for rapid order fulfilment, particularly from online customers, the business has invested in improving its IT systems during the year.
The financial management at Lasgo Chrysalis remained strong and this led to a small improvement in gross margin during the year. Additionally, stock management continued to be prudent, with year-end stock levels standing at less than GBP2.0m. During the year, the lease on the company head office and warehouse in Willesden were renegotiated for five years, with a tenant-only mid-term break clause. Post the year-end, a new management structure was put in place, with the appointment of Glenn Baker as Operations Director and Franco Passaniti as Commercial Director both of whom have served with Lasgo Chrysalis for over 15 years. They are ably supported in their roles by Stephen Digby, the incumbent finance controller, who has been with the company for over 20 years.
Financial review
2010 2009
=============================== ======== ========
GBP'm GBP'm
------------------------------- -------- --------
Revenue 69.8 62.9
=============================== ======== ========
Consolidated NPS 16.7 13.4
=============================== ======== ========
Normalised operating profit 5.3 3.3
=============================== ======== ========
Normalised profit before tax 1.6 0.5
=============================== ======== ========
Operating profit 0.3 2.2
=============================== ======== ========
Loss before tax (3.7) (3.8)
=============================== ======== ========
Basic loss per share(pence) (6.04)p (5.74)p
=============================== ======== ========
Normalised earnings per share 1.75p 0.74p
=============================== ======== ========
Income statement
Revenue increased by 11.0% from GBP62.9m to GBP69.8m. This was mainly due to the acquisition of Chrysalis One during the year, which generated revenue of GBP5.3m, an increase in the Chrysalis Music revenue of 6.8% to GBP38.4m, and a 27.9% increase in Non-publishing revenue to GBP4.1m, mainly due to The Beatles. Lasgo Chrysalis' revenue fell to GBP22.0m (2009: GBP23.7m).
The Group operating profit of GBP0.3m (2009: GBP2.2m) includes GBP5.0m (2009: GBP1.1m) of separately disclosed items relating to the:
- Amortisation of intangible assets, GBP1.5m;
- Profit on disposal of freehold land and vacant properties, GBP0.2m credit;
- Costs incurred in acquiring First State Media Group Ireland Ltd, GBP2.4m;
- Restructuring of German operations, GBP0.5m;
- Costs relating to a potential transaction, GBP0.2m;
- Costs relating to vacant properties, GBP0.4m; and
- Costs relating to write-down of certain assets relating to minority holdings, GBP0.2m.
The normalised operating profit before these separately disclosed items was GBP5.3m (2009: GBP3.3m). Chrysalis Music normalised operating profit increased by GBP0.4m to reach GBP2.6m (2009: GBP2.2m), Chrysalis One contributed GBP0.7m of normalised operating profit, Non-publishing normalised operating profit improved to GBP1.8m from a normalised operating profit of GBP0.8m in 2009, and Lasgo Chrysalis saw normalised operating profit fall to GBP1.7m (2009: GBP2.0m). Normalised corporate overheads fell to GBP1.6m from GBP1.7m in 2009, as the corporate functions continued to be streamlined and simplified.
Interest
The Group net finance cost was GBP4.0m (2009: GBP6.1m). The net financing cost is stated after including a charge of GBP0.2m in respect of ineffective fair value movements on derivative financial instruments (2009: GBP3.2m loss). During the year we unwound the interest rate cap and collar and this will result in a reduced future interest charge, comprising a cash interest saving and a reduction in the volatility of the overall charge caused by the fair value movements.
Profit/(loss) before tax
The normalised profit before tax for the Group for the year was GBP1.5m (2009: GBP0.5m). This excludes GBP1.5m (2009: GBP0.3m) of amortisation of intangible assets, and the other separately disclosed items of GBP3.7m (GBP4.1m). Taking these into account, the Group's loss before tax was GBP3.7m (2009: loss of GBP3.8m).
Tax
The tax charge of GBP0.3m for the year principally comprises GBP0.2m in relation to irrecoverable withholding taxes and foreign taxes (2009: tax credit of GBP0.1m). The normalised effective tax rate is 20.2% (2009: n/a).
Earnings per Share
The basic loss per share, which includes the separately disclosed items, is 6.04p (2009: 5.74p loss). Normalised earnings per share, calculated excluding the impact of the separately disclosed items, is 1.75p (2009: 0.74p).
Dividend
It is not proposed to pay a dividend for the year ended 30 September 2010. Future dividend policy will be determined by the Board, in relation to the Group's ongoing earnings.
Balance sheet
The Group's net liabilities have increased over the year from GBP4.6m to GBP10.7m. This principally reflects the impact of the separately disclosed items and the net cost of the First State Media Group acquisition.
Goodwill and intangible assets
Goodwill is consistent with the prior year. Other intangible assets have increased by GBP10.7m, primarily due to the acquisition of the First State Media Group half way through the year.
Working capital
Inventories have increased by GBP0.1m due to higher stocks at Lasgo Chrysalis. Receivables and prepayments show an increase of GBP2.8m, reflecting the increase in other receivables, which includes a GBP1.9m fee receivable from the Fund for fees based on the assets under management by Chrysalis One for the six months ended 30 September 2010. The asset held for sale last year was the Freehold at Bramley Road which was disposed of in March 2010 for GBP6.8m. Cash and cash equivalents is GBP5.4m higher primarily due to the proceeds from this sale, offset by the GBP3.0m we paid out to unwind our unfavourable interest rate cap and collar.
Current liabilities of GBP44.1m are GBP5.7m higher than last year, with the current interest-bearing loans down to GBP1.8m from GBP4.8m, as the first capital repayment against our securitisation facility is now only due in March 2012 following our renegotiation of the agreement in September 2010. The liability position of our derivative financial instruments has decreased to GBP5.0m from GBP5.8m, reflecting the settlement of the interest rate cap and collar and a reduced number of outstanding foreign exchange contracts.
The Group has no short-term financing requirements. Long term liabilities of GBP45.7m comprise our securitisation borrowing of GBP45.0m (stated net of unamortised issuance costs of GBP1.5m), (2009: GBP33.9m) deferred consideration for the Richard Marx catalogue of GBP0.3m (2009: GBP0.3m) and the vacant property provision of GBP0.4m in respect of certain vacant properties in the United Kingdom (2009: GBP0.9m). We can draw down on the undrawn facility of GBP22.4m at any time up until September 2011.
The Group's funded pension scheme, the Chrysalis Group Retirement Benefits Scheme, was terminated on 31 January 2008 and the process of winding-up the scheme started on that date. Although the winding-up process has not yet been legally completed, it is in its final stages and at 30 September 2010 the Group had settled its liability to secure members' benefits under the scheme. We do not expect any further charges in respect of the winding-up. The Group has established a new stakeholder plan which all eligible employees can join.
Net cash flow
The net cash generated by operating activities for the year was GBP2.8m, an improvement of GBP3.6m over GBP0.8m utilised by operations in 2009. In addition, our net interest payments were GBP3.4m (2009: GBP2.3m). We invested GBP0.4m in property, plant and equipment during the year (2009: GBP0.3m). There was one substantial acquisition, the First State Media Group, for GBP10.9m. In 2009, the Richard Marx catalogue was acquired for a cash consideration of GBP4.6m, with a further GBP0.3m deferred for five years. Other catalogue acquisitions were completed for GBP0.2m (2009: GBP0.3m).
Overall, our cash and cash equivalents amounted to GBP24.6m at 30 September 2010, an increase of GBP5.4m on the corresponding figure for 2009 of GBP19.2m.
Our gross borrowings at 30 September 2010 amounted to GBP46.6m (2009: GBP38.7m) and included the music publishing securitised loan of GBP45.0m (stated net of unamortised issuance costs amounting to GBP1.5m).
Our net debt at 30 September 2010 amounted to GBP20.4m (2009: net debt of GBP15.8m).
Going Concern
The group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Key Risks and Uncertainties on page 11 to 12. The financial position of the group, its cash flows, liquidity position and borrowing facilities are described within this section. In addition note 25 to the financial statements includes the group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The Group has significant undrawn credit facilities and adequate working capital.
On the basis of current financial projections, undrawn facilities and level of working capital, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.
Key Risks and Uncertainties
Significant further downturn in the economy
The Group operates worldwide and, as with all international companies, is susceptible to further downturns and current weakness in the global economy. Whilst this is an external factor, and thus beyond the Group's control, the Board regularly reviews its progress against forecasts, in order that it is able to appropriately adjust its business to any change in the economic backdrop. Overall, Chrysalis is well diversified internationally, with 47.7% of its revenue now derived from overseas territories up from 43.6% last year. Lasgo Chrysalis's income is partially derived from the UK retail market, which is particularly susceptible to a downturn in the UK economy. In order to manage this risk Lasgo Chrysalis has successfully broadened its customer base. Failure to adjust to changes in the global economy as such could have a material adverse effect on the Group's business, finances and continuing operations.
Further decline in the sales of physical music/DVD product
Both Chrysalis Music and Lasgo Chrysalis are exposed to further declines in the sales of physical music and DVD product.
The music industry continues to face the challenge of the changing means by which consumers choose to access music, including digital downloads, illegal downloading and pirated product, all of which are contributing to a fall in the sale of physical product. The industry still does not expect the downturn to be offset by new digital and internet based revenue streams. Although as a music publisher Chrysalis is, to a certain extent, protected from price deflation in the physical recorded music market, owing to the predominantly fixed nature of mechanical royalties, any decline in the volume of sales of physical music product impacts the mechanical royalty rates received by the Group and could have a material adverse effect on the Group's business, financial condition and/or results of operations.
80% of the revenue of Lasgo Chrysalis is generated by the sales of physical music and DVD product. At a consumer level, there continues to be a reduction in the average selling price of both of these formats which could result in reduced revenue for the Group. This risk is mitigated by sustained product diversification and active stock controls. Lasgo Chrysalis will only purchase stock if the price is right and the demand for the product is high. Lasgo Chrysalis' stock holding is reviewed on a daily basis and should slow moving lines be identified, then immediate action is taken to remedy this.
Failure to fully exploit new growth areas
There are substantial new areas within the music industry to be developed and exploited for financial benefit. These areas include digital downloading, the use of music on social networking sites and the use of music on mobile phones. In order to ensure that industry participants can fully benefit from these new potential areas of income, many industry participants, including the Group, belong to a variety of international publishing societies, such as the MCPS/PRS Alliance. These societies represent the music publishing industry with respect to the negotiation of the payment of royalties to publishers and songwriters by new media players, as we do not have sufficient scale to carry out these negotiations ourselves. Understanding and monetising the opportunities for the Group's music publishing business in this new media environment are an important part of the Group's growth strategy. Failure by the Group to fully exploit the use of music in fast growing areas of music consumption, such as social networking sites and digital downloads, could have a material adverse effect on the Group's business, financial condition and/or results of operations.
Failure to successfully integrate acquisitions
The Group regularly reviews potential acquisitions and uses third party advisors, where necessary, to assist it in detailed financial modelling of any potential acquisition to ensure such potential acquisition meets the Group's growth strategy. Acquisitions typically entail risks and could result in difficulties in integrating the operations and personnel of acquired businesses, so the Group has used third party consultants to help in the integration process of acquisitions this year. If the Group was not able to integrate acquisitions successfully, there is a risk that an acquisition may fail to meet the necessary financial targets or other anticipated advantages which could have a material adverse effect on the Group's business.
Exchange rate risk
The non-UK entities within the Group transact and account in their local currency. As the reporting currency of the Group is sterling, these results are translated into sterling at the applicable exchange rate. Adverse exchange rates could also impact on the Group's import and export business. Therefore, any significant foreign currency exchange rate fluctuations may have a material adverse effect on the Group's business, consolidated results of operations and/or financial condition. The Group undertakes forward purchasing and sales of foreign currencies and has hedging instruments in place within Chrysalis Music to mitigate foreign exchange risk. In addition, fluctuations in exchange rates could also significantly impact the comparability of the Group's results of operations between financial years.
Interest rate fluctuations
The Group's borrowings are subject to floating interest rates and it is therefore exposed to movements in interest rates. The Group has entered into interest rate swaps to achieve a suitable mix of fixed and floating interest exposure.
Loss of key individuals
There are a small number of Directors and key employees, whose departure could, in the short term, adversely affect the Group. It is the policy of the Group to provide competitive remuneration packages to enable it to attract, retain and motivate executives of the calibre and experience required, whilst cost-effectively incentivising executives to deliver long-term Shareholder value. Whilst the Group has ongoing service agreements with each of its key personnel, their retention cannot be guaranteed. Any loss of key individuals may have a material adverse effect on the Group's business, financial condition and/or results of operations.
Consolidated income statement
For the year ended 30 September 2010
2010 2009
Note GBP'000 GBP'000
----------------------------------------------- ----- --------- ---------
Revenue 2 69,753 62,876
----------------------------------------------- ----- --------- ---------
Operating expenses (69,448) (60,655)
----------------------------------------------- ----- --------- ---------
Profit from operations 305 2,221
----------------------------------------------- ----- --------- ---------
Analysed as:
Operating profit before separately disclosed
items 5,312 3,344
Separately disclosed items 3 (5,007) (1,123)
----------------------------------------------- ----- --------- ---------
Finance income 170 374
Financing costs (4,126) (6,465)
Net financing cost 4 (3,956) (6,091)
----------------------------------------------- ----- --------- ---------
Share of (losses)/profits of equity accounted
investments (net of tax) (11) 28
----------------------------------------------- ----- --------- ---------
Loss before tax (3,662) (3,842)
Taxation (charge)/credit 5 (316) 116
----------------------------------------------- ----- --------- ---------
Loss for the year (3,978) (3,726)
----------------------------------------------- ----- --------- ---------
Attributable to:
Equity holders of parent (4,053) (3,856)
Minority interests 75 130
Loss for the year (3,978) (3,726)
----------------------------------------------- ----- --------- ---------
Loss per share (pence per share)
Basic and diluted loss per share 6 (6.04) (5.74)
Consolidated statement of comprehensive income
For the year ended 30 September 2010
2010 2009
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Loss for the year (3,978) (3,726)
Other comprehensive income
Exchange differences on translation of foreign operations 192 (313)
Movement in fair value of cash flow hedges (2,642) (2,328)
Amount recycled in respect of cash flow hedges 619 141
-------- --------
Total other comprehensive income (1,831) (2,500)
Total comprehensive income for the year (net of tax) (5,809) (6,226)
---------------------------------------------------------- -------- --------
Attributable to:
Equity holders of parent (5,872) (6,436)
Minority interests (equity interests) 63 210
---------------------------------------------------------- -------- --------
Total comprehensive income for the year (net of tax) (5,809) (6,226)
---------------------------------------------------------- -------- --------
Consolidated balance sheet
As at 30 September 2010
2010 2009
Notes GBP'000 GBP'000
------------------------------------------------ ------ --------- ---------
Assets
Goodwill 1,061 1,061
Other intangible assets 19,849 9,174
Property, plant and equipment 725 848
Total non-current assets 21,635 11,083
------------------------------------------------ ------ --------- ---------
Inventories 1,879 1,742
Trade and other receivables 29,429 26,607
Assets held for sale - 6,500
Cash and cash equivalents 9 26,429 22,947
------------------------------------------------ ------ --------- ---------
Total current assets 57,737 57,796
------------------------------------------------ ------ --------- ---------
Total assets 79,372 68,879
------------------------------------------------ ------ --------- ---------
Liabilities
Interest-bearing loans and borrowings (45,037) (33,876)
Deferred consideration (317) (313)
Provisions (339) (898)
------------------------------------------------ ------ --------- ---------
Total non-current liabilities (45,693) (35,087)
------------------------------------------------ ------ --------- ---------
Interest-bearing loans and borrowings (1,835) (4,826)
Trade and other payables (37,149) (27,839)
Provisions (73) -
Derivative financial instruments (5,049) (5,761)
------------------------------------------------ ------ --------- ---------
Total current liabilities (44,106) (38,426)
------------------------------------------------ ------ --------- ---------
Total liabilities (89,799) (73,513)
------------------------------------------------ ------ --------- ---------
Net current assets 13,631 19,370
------------------------------------------------ ------ --------- ---------
Net liabilities (10,427) (4,634)
------------------------------------------------ ------ --------- ---------
Equity attributable to equity holders of parent
Issued capital 1,343 1,343
Share premium 4 4
Merger reserve 1,343 1,343
Foreign exchange reserve (717) (921)
Hedging reserve (2,719) (696)
Other reserve 741 741
Retained deficit (10,714) (6,634)
------------------------------------------------ ------ --------- ---------
(10,719) (4,820)
Minority interests 292 186
------------------------------------------------ ------ --------- ---------
Total equity (10,427) (4,634)
------------------------------------------------ ------ --------- ---------
Consolidated statement of changes in equity
For the year ended 30 September 2010
Foreign
Share Share Merger exchange Hedging Other Retained Minority Total
capital premium reserve reserve reserve reserve earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- --------- -------- -------- --------- --------- --------- ---------
Balance at 1
October 2008 1,343 4 1,343 (529) 1,491 741 (2,778) 1,615 396 2,011
Loss for the
year - - - - - - (3,856) (3,856) 130 (3,726)
Other
comprehensive
income - - - (392) (2,187) - - (2,579) 79 (2,500)
Deemed
distribution - - - - - - - - (419) (419)
--------------- -------- -------- -------- --------- -------- -------- --------- --------- --------- ---------
Balance at 30
September
2009 1,343 4 1,343 (921) (696) 741 (6,634) (4,820) 186 (4,634)
Loss for the
year - - - - - - (4,053) (4,053) 75 (3,978)
Other
comprehensive
Income - - - 204 (2,023) - - (1,819) (12) (1,831)
Acquisition of
minority
shareholding - - - - - - 391 391 (125) 266
Adjustment to
carrying
value of
minority
interest - - - - - - (418) (418) 168 (250)
--------------- -------- -------- -------- --------- -------- -------- --------- --------- --------- ---------
Balance at 30
September
2010 1,343 4 1,343 (717) (2,719) 741 (10,714) (10,719) 292 (10,427)
--------------- -------- -------- -------- --------- -------- -------- --------- --------- --------- ---------
Consolidated cash flow statement
For the year ended 30 September 2010
2010 2009
Note GBP'000 GBP'000
-------------------------------------------------- ----- -------- ---------
Cash flows from operating activities
Loss for the year (3,978) (3,726)
-------------------------------------------------- ----- -------- ---------
Adjustments for:
Depreciation 317 475
Finance income (170) (374)
Financing costs 4,126 3,233
Share of profits of equity accounted investments 11 (28)
Separately disclosed items 3 2,549 5,006
Gain on sale of property, plant and equipment 201 -
Income tax (charge)/credit 316 (528)
Restructuring costs of acquired business 2,474 -
Non-cash items (56) (195)
-------------------------------------------------- ----- -------- ---------
5,790 3,863
Decrease/(increase) in trade and other
receivables 221 (3,257)
(Increase)/decrease in inventories (137) 485
(Decrease)/increase in trade and other
payables 1,188 672
Decrease in provisions (516) (313)
-------------------------------------------------- ----- -------- ---------
6,546 1,450
-------------------------------------------------- ----- -------- ---------
Interest received 170 374
Interest paid (3,566) (2,718)
Income tax paid (392) 59
-------------------------------------------------- ----- -------- ---------
(3,788) (2,285)
-------------------------------------------------- ----- -------- ---------
Net cash generated by/(used in) operating
activities 2,758 (835)
-------------------------------------------------- ----- -------- ---------
Cash flows from investing activities
Acquisition of subsidiary undertakings,
net of cash and cash equivalents (6,712) -
Acquisition of intangible assets (225) (4,904)
Acquisition of property, plant and equipment (414) (295)
Receipt/(payment) in respect of pension
scheme buyout - 1,495
Proceeds from the sale of property, plant
and equipment 48 -
Loans repaid by/(advanced to) equity accounted
investments 31 48
-------------------------------------------------- ----- -------- ---------
Net cash from investing activities (7,272) (3,656)
-------------------------------------------------- ----- -------- ---------
Cash flows from financing activities
Repayment of borrowings - (12,700)
New borrowings 10,000 15,500
-------------------------------------------------- ----- -------- ---------
Net cash (used in)/from financing activities 10,000 2,800
-------------------------------------------------- ----- -------- ---------
Net increase in cash and cash equivalents
in continuing operations 5,486 (1,691)
Cash and cash equivalents at beginning
of the year 19,188 20,406
Effects of exchange rate changes on cash
and cash equivalents (80) 473
-------------------------------------------------- ----- -------- ---------
Cash and cash equivalents at end of the
year 24,594 19,188
-------------------------------------------------- ----- -------- ---------
Notes to the consolidated accounts
1. Accounting Policies
Basis of preparation
The Group financial statements consolidate those of Chrysalis PLC and its subsidiaries (together referred to as the "Group") and the Group's interest in jointly controlled entities. Except for as described below, the financial statements have been prepared on the basis of the accounting policies set out on pages 52 to 58 of the Chrysalis PLC Annual Report and Accounts for 2009.
As required by EU law (IAS Regulation EC 1606/2002) the Group's accounts have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standard Board (IASB), as adopted by the EU ("Adopted IFRS").
The accounts are principally prepared on the historical cost basis except for derivative financial instruments which are stated at their fair value. Assets held for sale are stated at the lower of previous carrying amount and fair value less costs to sell. Except as noted below these accounting policies have been applied consistently in presenting the consolidated financial information.
The results of subsidiaries 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, as appropriate.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
The financial information set out above does not constitute the company's statutory accounts for the years ended 30 September 2010 and 30 September 2009. The financial information for 2009 is derived from the statutory accounts for 2009 which have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported those accounts. Their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006, in respect of the accounts for 2009 and 2010.
Standards affecting presentation and disclosure
- IAS 1 (revised 2007) Presentation of Financial Statements requires the presentation of a statement of changes in equity as a primary statement, separate from the income statement and statement of comprehensive income. A consolidated statement of changes in equity has been included in the primary statements, showing changes in each component of equity for each year presented.
- IFRS 8 Operating segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Group's chief operating decision-maker, which in the case of Chrysalis PLC is its senior executive team, to allocate resources to the segments and to assess their performance. Internal reports include GAAP and non-GAAP measures, including revenue, operating profit and NPS. As NPS is considered to be a key measure of the performance of the Group and industry, this is now included in our segment information in Note 2. This standard has not resulted in any change to the Group's reportable segments.
These standards only affect the presentation and disclosures required in financial statements and accordingly have no impact on the results of the Group. Comparative amounts have been represented in conformity with the transitional requirements of these standards.
1. Accounting Policies (continued)
Standards affecting the reported results and financial position
IFRS 3 (revised 2008) Business Combinations and IAS 27 (revised 2008) applies to all acquisitions by the Group completed after 1 October 2009. For any such business combinations:
- All acquisition-related costs must be expensed as they are incurred.
- Contingent consideration must be measured at fair value at the acquisition date and form part of the total consideration. Subsequent changes in fair value must be recognised in profit or loss as they arise.
- Where step acquisitions occur, the equity holding at the date on which control is achieved must be re-measured to its fair value at that date, with the difference between carrying value and fair value recognised in profit or loss.
- Transactions between equity holders, including increases or decreases in ownership that do not result in a change of control, are reported within equity with no impact on profit or loss.
This standard applies prospectively and therefore has no impact on acquisitions completed by the Group prior to 1 October 2009.
Use of non-GAAP profit and loss measures
The Group believes that along with operating profit/ (loss), the following measures:
- normalised operating profit;
- normalised profit before interest, tax and amortisation;
- normalised profit before tax; and
- net publishers' share
Provide additional guidance to the statutory measures of the performance of the business during the financial year.
Normalised measures are stated before separately disclosed items. These items comprise individually significant items, by size or nature, which the Group believes should be separately disclosed to assist in the understanding of the business.
Net publisher's share ("NPS") is the revenue received by a music publisher, less any royalties that have to be paid to writers, performers and others receiving a share of royalties. Further details are included in Note 2.
None of the these non-GAAP profit and loss measures set out above are Adopted IFRS and therefore may not be directly comparable with other companies' adjusted profit measures. They are not intended to be a substitute for or superior to Adopted IFRS measurements of profit.
2. Segmental reporting
(a) Business analysis (primary segment)
Revenue 2010 2009
GBP'000 GBP'000
------------------------------ -------- --------
Publishing
- Chrysalis Music 38,368 35,931
- Chrysalis One 5,279 -
Non-publishing 4,135 3,233
Lasgo Chrysalis 21,971 23,712
------------------------------ -------- --------
69,753 62,876
------------------------------ -------- --------
2010 2009
---------------------------------- ----------------------------------
Separately Separately
disclosed disclosed
items items
Normalised (Note 4) Total Normalised (Note 4) Total
Segment result GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ----------- ----------- -------- ----------- ----------- --------
Publishing
-
Chrysalis
Music 2,633 (1,127) 1,506 2,203 (274) 1,929
-
Chrysalis
One 693 (2,742) (2,049) - - -
Non-publishing 1,824 - 1,824 756 - 756
Lasgo Chrysalis 1,750 - 1,750 2,036 - 2,036
Corporate (1,588) (1,138) (2,726) (1,651) (849) (2,500)
---------------------- ----------- ----------- -------- ----------- ----------- --------
Operating profit 5,312 (5,007) 305 3,344 (1,123) 2,221
Net finance costs (3,734) (222) (3,956) (2,859) (3,232) (6,091)
Share of
(loss)/profits of
equity accounted
investments (11) - (11) 28 - 28
---------------------- ----------- ----------- -------- ----------- ----------- --------
Profit/(loss) before
tax 1,567 (5,229) (3,662) 513 (4,355) (3,842)
Tax (charge)/credit (316) - (316) 116 - 116
---------------------- ----------- ----------- -------- ----------- ----------- --------
Profit/(loss) for
the year 1,251 (5,229) (3,978) 629 (4,355) (3,726)
---------------------- ----------- ----------- -------- ----------- ----------- --------
2010 2009
------------------------------------- -------------------------------------
Net Other Normalised Net Other Normalised
publisher's operating operating publisher's operating operating
share expenses profit share expenses profit
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------ ---------- ----------- ------------ ---------- -----------
Publishing
-
Chrysalis
Music 13,453 (10,820) 2,633 12,271 (10,068) 2,203
-
Chrysalis
One 1,320 (627) 693 - - -
Non-publishing 1,942 (118) 1,824 1,140 (384) 756
---------------------- ------------ ---------- ----------- ------------ ---------- -----------
Consolidated net
publisher's share 16,715 (11,565) 5,150 13,411 (10,452) 2,959
---------------------- ------------ ---------- ----------- ------------ ---------- -----------
3. Separately disclosed items
Separately disclosed items impact operating profit/(loss) and net finance (cost)/income as follows:
2010 2009
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Amortisation of intangible assets (1,490) (274)
Profit on disposal of freehold land and buildings (a) 91 -
Profit on surrender of vacant properties (b) 75 -
Acquisition of subsidiary (c) (2,433) -
Reorganisation of Chrysalis Germany (d) (459) -
Costs relating to a potential transaction (e) (191) -
Costs relating to vacant properties (f) (432) -
Costs relating to minority holdings (g) (168) -
Lease surrender premium (h) - 740
Redundancy costs (i) - (89)
Impairment of land and buildings (j) - (1,500)
--------------------------------------------------- ----- -------- --------
Operating loss (5,007) (1,123)
Net finance cost (k) (222) (3,232)
--------------------------------------------------- ----- -------- --------
Total separately disclosed items (5,229) (4,355)
---------------------------------------------------------- -------- --------
30 September 2010
(a) This relates to the net profit on the disposal of the Group's freehold property at Bramley Road. The Group entered into a fixed term operating lease over certain floors and its UK operations continue to be based there.
(b) This relates to the net profit on the surrender of the operating lease over vacant office space, resulting from the disposal of Chrysalis Radio in 2007, including the release of the balance of the vacant property provision.
(c) This relates to costs incurred in completing the acquisition and integration of First State Media Group into the Group's existing operations. The costs incurred relate primarily to redundancy costs (GBP1.5m), vacant property costs (GBP0.2m) and other professional fees (GBP0.7m).
(d) Following the acquisition of the First State Media operations in Berlin (now known as Chrysalis One Germany), a decision was taken to reorganise our overall German operations. This involved the relocation of the Chrysalis Music German operation from Munich to Berlin. The cost relates principally to redundancy and relocation costs. The relocation is expected to be complete by 31 December 2010.
(e) This relates to the legal and other professional fees incurred in anticipation of a potential transaction which was ultimately terminated.
(f) This relates to the vacant property costs in the United Kingdom.
(g) This relates to the write-down of certain balances in respect of a partially owned subsidiary.
(k) This relates to the ineffective portion of the fair value movements of derivative financial instruments.
30 September 2009
(h) This relates to a lease surrender premium received from Global Radio following its early termination of operating leases over office space.
(i) This comprises redundancy payments and associated costs of reorganising the corporate function.
(j) This relates to an impairment loss recognised against land and buildings held for sale to reflect the current fair value.
4. Net financing (costs)/income
2010 2009
GBP'000 GBP'000
------------------------------------------ -------- --------
Bank loans and overdrafts (3,607) (2,694)
Amortisation of issuance costs
on securitisation loan (228) (227)
Loss on derivative financial instruments
on remeasurement to fair value (222) (3,232)
Loss on settlement of derivative
financial instruments - (141)
Unwinding of discount (30) (39)
Other (39) (132)
------------------------------------------ -------- --------
(4,126) (6,465)
Bank interest receivable 170 374
------------------------------------------ -------- --------
(3,956) (6,091)
------------------------------------------ -------- --------
5. Taxation (charge)/credit
2010 2009
GBP'000 GBP'000
---------------------------------------------- -------- --------
UK Corporation tax
Current tax credit on income for the year at
28% (2009: 28%) 6 488
Refund in respect of previous years 68 -
Overseas tax
Current tax charge on income for the year at
28% (2009: 28%) (196) (267)
Withholding taxes (194) (105)
---------------------------------------------- -------- --------
(316) 116
---------------------------------------------- -------- --------
Reconciliation of notional tax (charge)/credit at UK standard rate to the actual charge
2010 2009
GBP'000 GBP'000
------------------------------------------------- -------- --------
Loss before tax 3,662 3,842
Notional tax credit at UK standard rate of 28%
(2009: 28%) 1,025 1,076
Utilisation of tax losses 511 377
Non-deductible expenses (47) (470)
Non utilisation of tax losses (1,919) (848)
Depreciation in excess of capital allowances (33) (113)
Hedging losses/profits not taxable (62) (905)
Withholding tax written off (194) (105)
Adjustment to prior year provisions/assessments (68) 410
Other timing differences 471 694
------------------------------------------------- -------- --------
(316) 116
------------------------------------------------- -------- --------
The difference between the tax credit and the standard rate of corporation tax of 28% is mainly due to the availability of losses.
6. Loss per share
2010 2009
GBP'000 GBP'000
-------------------------------------------- -------- --------
Loss attributable to equity holders of
parent (4,053) (3,856)
Separately disclosed items 5,229 4,355
-------------------------------------------- -------- --------
Normalised loss after tax 1,176 499
-------------------------------------------- -------- --------
Weighted average number of shares in issue
('000)
Basic and diluted 67,143 67,143
-------------------------------------------- -------- --------
Loss per share
Basic and diluted (6.04)p (5.74)p
-------------------------------------------- -------- --------
Normalised earnings per share
Basic and diluted 1.75p 0.74p
-------------------------------------------- -------- --------
7. Acquisition of subsidiary
On 1 April 2010, the Group acquired 100% of the issued share capital of Chrysalis One Music Publishing Group Ireland Limited (formerly know as First State Media Group Ireland Limited) for a cash consideration of GBP10.9m. This acquisition is in line with the Board's stated strategy of acquiring suitable new catalogues.
Provision details of the net assets acquired and fair value adjustments are set out below. The analysis is provisional and amendments may be made to these figures in the 12 months following the date of the acquisition, with a corresponding adjustment to goodwill.
Fair value
Book value adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ------------- -----------
Intangible assets 568 11,305 11,873
Property, plant and equipment 41 - 41
Trade and other receivables 2,952 - 2,952
Cash and cash equivalents 4,234 - 4,234
Trade and other payables (8,154) - (8,154)
------------------------------------- ----------- ------------- -----------
Net assets acquired (359) 11,305 10,946
Total consideration satisfied in
cash 10,946
------------------------------------- ----------- ------------- -----------
Fair value adjustments of GBP0.6m were made to write-off owned music catalogues. The intangible asset of GBP11.9m represents the value placed on the Fund agreement to administer the copyright assets on behalf of FS Media Works Fund 1 and is being amortised over the life of the contract, six years.
Chrysalis One Music Publishing Group Ireland Limited contributed GBP5.3m to revenue and a loss of GBP2.0m to loss before tax for the period between the date of acquisition and the balance sheet date.
If the acquisition of Chrysalis One Music Publishing Group Ireland Limited had been completed on the first day of the financial year, its contribution to Group revenues for the year would have been GBP11.2m and its contribution to Group profit attributable to equity holders of the parent would have been a loss of GBP1.8m.
8. Cash and cash equivalents
2010 2009
GBP'000 GBP'000
-------------------------------------------- -------- --------
Cash and cash equivalents per balance
sheet 26,429 22,947
Bank overdrafts (1,835) (3,759)
-------------------------------------------- -------- --------
Cash and cash equivalents in the statement
of cash flows 24,594 19,188
-------------------------------------------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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