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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Tinopolis | LSE:TIN | London | Ordinary Share | GB0009365692 | 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% | 45.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Tinopolis PLC
29 January 2008
TINOPOLIS PLC
("TINOPOLIS" or THE "COMPANY")
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007
Financial Highlights:
* Turnover £66.0m, up 40% on prior year (2006: £47.3m)
* Profit from Operating Activities £2.18m, up 151% (2006: £0.87m)
* Profit before tax of £2.56m, up 142% (2006: £1.06m)
* Basic Earnings Per Share 1.8p, up 50% (2006: 1.2p)
* Net cash inflow from operating activities £5.67m (2006: £1.75m)
* Cash and cash equivalents at end of period is £11.09m
* Share buy-back of £1.86m (4,650,000 shares repurchased for treasury at an
average price of 39.9p).
Operational Highlights:
* Question Time commission for the BBC renewed for a further 3 years
* Sunset +Vine renews contract for Gillette for the World Sport for a
further 2 years
* Sunset + Vine awarded contract for coverage of the Grand National for the
BBC. Sunset + Vine now cover all the BBC's racing output
* Mentorn wins its first US Network commission for four years with America's
Worst Driver
* Acquisition of Video Arts for £2.25m
* Acquisition of APP Broadcasting for an initial consideration of £1.25m
* London operations relocated to one new premises
* BBC Jam termination issues resolved
Outlook
* The progress in integrating the acquired businesses, new commissions and
the re-commissioning of our key programmes gives the Board confidence in
the outlook for the current year.
* Strong order book going into 2008
Commenting on the results, Ron Jones, Executive Chairman said:
"During a period of turmoil in the stock market and major falls in prices,
particularly in media stocks, we are pleased to report that the business remains
in good shape and is progressing in line with the plans and targets we have been
outlining over the last two years. The year has seen significant progress
across all parts of our business. The BBC's decision unilaterally to terminate
its Jam service damaged our results and our Interactive business, but momentum
has now been recovered. Elsewhere in the company we went in to the new
financial year with a strong order book across all genres and confidence in the
future of the Company"
Results for the year ended 30 September 2007
Review of operations
Turnover increased in the year by 40% to £66.0 million reflecting a full year's
contribution from the businesses acquired in 2006 and from businesses acquired
part way through 2007. On a like for like basis, adjusting for businesses
acquired and disposed of part-way through 2006 and 2007, organic growth was 9%.
Consequently Profit from Operating Activities improved from £0.87m to £2.2m.
Profit before tax of £2.56m, after allowing for £0.15m of exceptional costs
regarding the closure of our BBC Jam contracts (see below), was 142% up on prior
year. Earnings per share increased from 1.2p to 1.8p, an increase of 50%. The
second half of the year performed strongly and Profit before Tax was £1.6m
compared to £0.96m in the first half mainly due to a strong six month
contribution from Sunset + Vine, falling losses at Mentorn and the impact of
actions taken earlier in the year to reduce property costs.
The priority for 2007 was to deliver on the plans we outlined following our
acquisition of TV Corp in 2006. That acquisition gave us the scale and the
potential to become a major player in this dynamic market. However, the
management and operational problems that had been evident at TV Corp for some
years had to be put right if the underlying value of those businesses was to be
realised. The integration has gone well. The excessive cost base has been
reduced. In particular, the problems caused by occupying two unsuitable and very
expensive buildings have been removed. Sunset + Vine and Mentorn now occupy
modern purpose-built premises in Hammersmith where they are able to share the
new technical and post-production facilities they have needed . Sunset + Vine
is now growing healthily and profitably. Mentorn's results reflect a fundamental
improvement in its underlying financial performance. It is recovering in line
with our plans and market expectations.
We continue to emphasise the need for strong revenue visibility with long-term
contracts or strong returning series - key components of sustainable
profitability in this industry. Across the Company we are performing well with
significant visibility into 2008 in drama, factual programmes and sport. Mentorn
has historically been short of returning series and we are seeing major progress
with long-term projects such as Question Time and The Big Question for the BBC
being won this year. Sunset+Vine has been successful in winning new contracts
including the coverage of the Grand National for the BBC. Our Welsh television
production business continues to perform outstandingly well. Profitability is
up and our programmes have performed extremely well.
Our new media business was hit badly by the BBC's unilateral cancellation of its
Jam service to schools. It resulted in a £0.5m shortfall in our planned
operating profit for the year including £0.15m of exceptional costs, an impact
we announced in our interim results in June 2007. Our contracts with the BBC
were terminated at short notice and after prolonged negotiations all termination
issues were resolved in the financial year. Despite this Interactive was
profitable during 2007, an outstanding achievement in this fast moving market.
The diversity of our customer list and our lack of dependence on any one
customer, contract or show continues. This year we have won new broadcaster
customers in the US and taken on the large numbers of corporate customers of our
newest acquisition, Video Arts. Our business has never been dependent on
revenue streams arising from secondary rights and building a portfolio of
programmes with secondary rights value will therefore be beneficial to the group
going forward. In this, Mentorn has been leading our efforts and has already
been successful in re-establishing some of its brands in the US market.
Acquisitions
There has been considerable corporate activity in the television production
sector during the year and we have been offered or approached a number of
companies that could have been useful additions to the group. However, we are
committed to building shareholder value and will not damage this fundamental
principle by buying at values we regard as inflated. Our strategy of acquiring
companies that complement our own businesses continues and during the year we
acquired Video Arts Group Limited ("Video Arts") and APP Broadcasting Limited ("
APP").
In May we bought Video Arts for consideration of £2.25 million on a debt free
basis, payable in cash. In the year ended 31 December 2006 it generated turnover
of £4.9 million and EBIT adjusted for non-recurring management charges of £0.5
million.
Video Arts was established in 1972 and has over 200 current titles that have
been used to provide training to over 10,000 organisations world-wide, winning
over 200 major training awards. Recently, recognising that customers
increasingly need digital delivery of its products, it has launched its Digital
Content Library. This currently includes over 100 of its most popular titles,
divided into hundreds of learning chapters. Tinopolis Interactive has the skills
and scale to accelerate the creation of this library and add to its
functionality. The first products of this collaboration are being released to
the market this month. The Company believes this will prove a compelling offer
for Video Arts' existing clients, and an important feature in attracting new
customers and increasing the scope and value of existing accounts.
Video Arts' traditional business has been product-based, whilst the group's
existing business majors on bespoke new media training materials and products.
Both had identified the need to have some of the other's skills and market
presence. Both businesses have specialised in producing and delivering video
based learning, and we believe this focus will be a significant competitive
advantage in this sector as clients and consumers demand increasingly rich
content 'on demand'. The acquisition gives us a combined business bringing a
much wider range of skills to this market and better able to serve our existing
and new customers. It consolidates our position as a leading player in the
industry.
APP is a production company specialising in the coverage of yachting events, an
area already covered by Sunset +Vine with its Volvo Ocean Racing. The initial
consideration is £1.25m with a further deferred consideration of £0.3m depending
on their results for the year ended 31 December 2007. This is expected to be
paid in February 2008. In the year ended 31 December 2006 it generated turnover
of £1.53m, an EBIT of £0.29m and had net cash balances of £0.59m when acquired.
This acquisition naturally strengthens our position in yachting, but equally
importantly it brings new strengths in advertiser-funded programming, an
existing area of expertise we have identified as a priority for development.
Some 90% of APP's revenues are derived from non-broadcaster sources.
Drama
The first two productions made by our new drama brand, Daybreak Pictures, were
aired earlier this year, winning high ratings and receiving strong press
coverage. The Trial of Tony Blair for Channel 4 and Confessions of a Diary
Secretary for ITV1 have reinforced our reputation for factually-based dramas and
led to further paid development for two other series. The second half of the
year saw our two-part fictional drama aired for Channel 4, Britz. The drama was
chosen as part of the celebration of the channel's 25th anniversary and was
directed and produced by Peter Kosminsky - with whom we won three BAFTAs for The
Government Inspector. The Company has now signed a "first look" deal with Peter
for his future drama ideas.
Fiction Factory, our Welsh drama company, completed its third series of its S4C
hit series Caerdydd and the fourth series is in production at the moment. Their
new crime drama, Y Pris, was broadcast in the autumn and a second series is now
in production. The Company has been commissioned to develop a landmark drama
series for 2009 that will tell the story of modern Wales through the life
experiences of a man that lived it.
Factual programming
The Group produced over 500 hours of factual programming in the year for
broadcasters including the BBC, ITV, S4C, Channel 4, Five, Sky, Discovery and
Bravo.
In Wales, Wedi 3 and Wedi 7, S4C's live daily programmes continued and delivered
high audiences. Our success in live programming is unique in Welsh broadcasting
and has now been one of the foundations of S4C's output for 17 years. The
programmes led S4C's on-screen re-branding this year and Wedi 3 was available on
analogue for the first time and proved a great success. S4C commissioned a
factual series for children based on a vet's practice and a second series is
already in production. A major landmark modern history series has been
commissioned for 2009. For ITV Wales we produced a number of new series.
Mentorn continued its recovery, winning commissions for all five terrestrial UK
channels. In March, Mentorn beat 14 other independent producers to win a new
three year contract to provide the BBC with its flagship political programme
Question Time, a deal worth in the region of £5.5 million over three years. The
following month, the company beat 36 others to win the contract to provide the
BBC's new Sunday Morning religious programme called The Big Question, a contract
worth £1.2m in the first year. Both tenders included significant new media
elements provided by the teams at Mentorn and Tinopolis Interactive,
demonstrating the synergies available within the group.
Elsewhere, Mentorn also won from Channel 4 another 10 programmes of its current
affairs strand, The Insider, and continued to provide various editions of
Channel 4's Dispatches. Mentorn Scotland became one of only seven suppliers to
the BBC's The One Show.
In the USA, the second series of Oil, Sweat and Rigs performed well for
Discovery and led to a new six part series, Wildcatters. Discovery USA
commissioned a total of 14 hours from us in 2007. Folio won an order from the
BBC for ten editions of its long-running Traffic Cops brand. Traffic Cops was
the BBC's highest rated documentary series in 2007 and Folio's other
police-based series, Car Wars, won good ratings as well. Folio continued to grow
its business for other networks - particularly ITV - where the Half Ton Hospital
series achieved high ratings in both peak time and daytime slots.
Sport
Sunset + Vine won several significant contracts during the period.
The BBC has confirmed that we will produce the Grand National from 2008. We
already produce the remainder of its racing output. Channel 5 awarded us the
contract to produce its new Italian football coverage. Our decision to open
Sunset + Vine Cymru in October 2006 paid dividends as we won the contract to
produce more than 50 hours of coverage of the 2007 Rugby World Cup for S4C. The
company has also renewed its deal with BBC Scotland for a further two years to
provide all of its sports coverage, including Football, Bowls, Rugby and Shinty.
We have been contracted for the Dubai World Cup horse racing for 2008. The BBC
coverage of the Ashes tour was also one of ours and a new three year DVD deal
has been agreed with the ECB and distributor 2Entertain which includes the next
Ashes series in 2009. In October we tendered for and won a commission from the
BBC to cover the 2008 African Nations Cup, which began in January in Ghana.
Advertiser-funded programming (AFP) is an important revenue generator for Sunset
+ Vine, and during the period, the company won contracts to produce its Volvo
Ocean Race programme through to 2009 and a new Formula One Business series,
sponsored by Philips, for BBC World. A new two year deal has been signed with
Gillette for the successful World Sport series with the company being
responsible for the production and distribution to over 180 broadcasters around
the world.
Sunset + Vine remains the UK's biggest producer in the fast growing television
programming area of gaming. We were commissioned to produce the Grosvenor Poker
UK Tour shown on Channel 4 and sponsored by Blue Square. Tinopolis Interactive
and Sunset + Vine also produced an innovative live web cast to accompany the
television production of the final of the European Poker Tour in Monte Carlo,
again demonstrating the cross-company skills we can use to provide a
multiplatform offering to commissioners. We won a competitive tender for the
PokerStars Caribbean Adventure poker tournament this month. While the appeal of
televised celebrity poker is waning, the professional poker tours, where Sunset
+ Vine is strong, have been going from strength to strength.
Our Wales-based company, POP1, has won a commission to produce two further years
coverage of the World Rally Championship for S4C as well as a documentary series
on Welsh rugby.
Entertainment
Sunset+Vine won its first major non-sports commission, a co-production with
Splash Media, to produce a new prime time format - the Eurovision Dance Contest
for BBC1. The live broadcast involves contestants from 16 countries and was
broadcast successfully in September. It has been re-commissioned for 2008.
In the USA the success of Mentorn's reality format for the Bravo network, Work
Out, led to a commission for an extended second series of nine shows, and has
now commissioned a third series. We also won a major commission from the Fox
Reality Channel and My Network to produce a new 16 part series of our hit
reality format Paradise Hotel, to air in early 2008. The series value is $6m
with the potential for further series. The previous series of Paradise Hotel has
been sold, as a licensed or format deal, to around 30 countries worldwide and we
are confident that the new series will also sell internationally. An American
version of Mentorn's successful Britain's Worst Driver has been sold to a major
US network, our first new US network commission for four years.
Broadening its customer base further, Mentorn has won its first entertainment
series from both Sky One and Virgin Media which will be broadcast later this
year.
Interactive and Learning
Our interactive skills are in use with a wide range of customers in the
broadcast and other commercial industries as well as in the public sector. This
is an important area for synergy between all the Group companies and is a key
part of our future. Our breadth of new media and creative skills and experience
is unique in the industry.
Our new media business was hit by the BBC's decision in late March, without
consultation, to terminate its entire Jam e-education project. Despite this,
Tinopolis Interactive continues to grow its revenues, its profitability and its
customer base. This includes a commission to produce Foundation Phase
interactive learning materials for the Welsh Assembly Government, a commission
from Ufi to produce a series of short comedy based video sketches for SME
businesses, featuring the comedian Neil Mullarkey and further commissions under
our Framework agreement with the Ministry of Defence.
Tinopolis Interactive has also extended its range of strategic joint ventures
with training specialists, including Influence at Work, authors of several
best-selling books centred on social influencing and persuasion techniques.
Since the acquisition of Video Arts, the two businesses have been co-operating
in developing a number of new products and services and we expect to see the
benefits of this in 2008.
Mentorn has been active in the learning area this year. Helped by our
experience in Tinopolis Interactive it had led a consortium short-listed for the
government-funded Teachers Television. The consortium includes Channel 4, The
Guardian and the Institute of Education, a reflection of Mentorn's reputation as
a producer of quality and reliability.
Share buyback
We concluded earlier in the financial year that the interests of shareholders
were best served by buying the Company's shares in the market. During the
period 4,650,000 shares were bought for treasury at an average price of 39.9p.
It may be appropriate to return to this approach and we will continue to monitor
the position.
Cash
Cash management across the group was tightly controlled with net cash inflow
from operating activities in the period of £5.67m. Capital expenditure of £3.39m
in the period was higher than normal due to the relocation of the London based
business to new locations. We used £1.86m to purchase our own shares for
treasury and a further £2.90m was used to acquire Video Arts and APP (net of
cash acquired with those businesses).
Net cash within the business was over £11 million at the end of the year.
Conclusion and Outlook
Creatively and operationally we are in good shape. Measured against our three
long term goals we are doing well. As before, these are to build value for
shareholders by delivering organic revenue growth in excess of industry average,
delivering revenue visibility in excess of the industry average and selectively
adding further complementary businesses where we can apply our business approach
and skills.
Other than in Mentorn, where our commitment to profitability is the absolute
priority, we have shown organic growth at a time when others in the industry are
struggling. The latter part of 2007 has seen a fall-off in UK commissioning,
partly a reaction to the well-publicised integrity problems that beset the
industry and partly due to major management changes at a number of broadcasters.
Despite this our organic growth has been strong.
Our revenue visibility remains strong with a very high percentage of our planned
sales already contracted. Combined with our wide range of customers and a lack
of dependence on any one contract we are well placed for the year ahead.
Acquisitions remain difficult because of the valuation differential between
public and private companies. Nevertheless we believe there are some value and
strategic acquisitions that are possible and we have a number of potential
purchases under consideration.
At a difficult time for the industry and in a difficult market we can be
optimistic about the Company's prospects for next year and beyond.
Ron Jones Arwel Rees
Executive Chairman Managing Director
29th January 2008
Consolidated Income Statement
for the year ended 30 September 2007
Note 2007 2006
£000 £000 £000 £000
Revenue 2 65,981 47,334
Cost of sales (52,608) (37,230)
Gross profit 13,373 10,104
Administrative expenses (11,196) (9,232)
Profit from operating activities 3 2,177 872
Finance expenses 6 (14) (57)
Finance income 6 399 245
Net finance income 385 188
Profit before income tax 2,562 1,060
Income tax expense 7 (723) (89)
Profit for the year 1,839 971
Attributable to:
Equity holders of the parent company 1,728 934
Minority interests 111 37
1,839 971
Earnings per share
Basic earnings per share 8 1.8p 1.2p
Diluted earnings per share 8 1.7p 1.2p
All the results arise from continuing operations.
Consolidated Statement of Changes in Equity
for the year ended 30 September 2007
30 September 2007 Share Share Merger Reserve for Retained Total Minority Total equity
capital premium reserve own shares earnings interests
£000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 1,989 24,147 607 - 3,195 29,938 60 29,998
October 2006
Profit for the - - - - 1,728 1,728 111 1,839
period
Dividends paid - - - - - - (20) (20)
Equity settled - - - - 13 13 - 13
share based
payments
Shares issued - 10 - - - 10 - 10
Own shares - - - (1,862) - (1,862) - (1,862)
acquired
Own shares issued
on acquisition - - - 250
- 250 - 250
Balance at 30
September 2007 1,989 24,157 607 (1,612) 4,936 30,077 151 30,228
30 September Share Share Merger Reserve for Retained Total Minority Total equity
2006 capital premium reserve own shares earnings interests
£000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 October
2005 497 - 657 - 1,967 3,121 33 3,154
Profit for the - - - - 934 934 37 971
period
Dividends paid - - - - - - (10) (10)
Equity settled share
based payments - - - - 294 294 - 294
Shares issued 1,442 24,147 - - - 25,589 - 25,589
Movement in the year 50 - (50) - - - - -
Balance at 30
September 2006 1,989 24,147 607 - 3,195 29,938 60 29,998
Reserve for own shares
The reserve for the company's own shares comprises the cost of the company's
shares held by the group. At 30 September 2007 the group held 3,319,000 of the
company's shares (2006: nil).
Consolidated Balance Sheet
at 30 September 2007
Note 2007 2006
£000 £000 £000 £000
Assets
Property, plant and equipment 9 6,487 4,316
Intangible assets - goodwill 10 25,013 21,869
Intangible assets - learning content 10 643 -
Total non-current assets 32,143 26,185
Inventories - learning materials 174 -
Trade and other receivables 12 13,505 9,044
Cash and cash equivalents 13 12,418 15,101
Total current assets 26,097 24,145
Total assets 58,240 50,330
Equity
Share capital 19 1,989 1,989
Share premium 24,157 24,147
Reserves 607 607
Reserve for own shares (1,612) -
Retained earnings 4,936 3,195
Total equity attributable to equity holders of 30,077 29,938
the parent company
Minority interests 151 60
Total equity 30,228 29,998
Liabilities
Loans and borrowings 15 129 23
Other payables 14 505 677
Deferred tax liabilities 16 285 261
Total non-current liabilities 919 961
Bank overdrafts 13 1,329 1,556
Loans and borrowings 15 75 635
Current income tax payable 2,390 1,090
Trade and other payables 14 23,299 16,090
Total current liabilities 27,093 19,371
Total liabilities 28,012 20,332
Total equity and liabilities 58,240 50,330
Consolidated Statement of Cash Flows
for the year ended 30 September 2007
Note 2007 2006
£000 £000
Profit for the year 1,839 971
Adjustments for:
Depreciation and amortisation 1,150 892
Net finance income 6 (385) (188)
Gain on sale of subsidiary - (866)
Gain on sale of property, plant and equipment (2) (21)
Equity settled share-based payments 5 63 26
Taxation 7 723 89
Operating cash flow before changes in working 3,388 903
capital and provisions
Change in inventories 42 -
Change in accounts receivable (2,575) 3,402
Change in accounts payable 4,277 (1,703)
5,132 2,602
Interest paid (14) (51)
Income taxes paid (331) (797)
Income taxes received 884 -
Net cash from operating activities 5,671 1,754
Net (cash paid) cash acquired with subsidiaries (2,897) 8,896
Payments to acquire property, plant and equipment (3,390) (1,246)
Receipts from sales of property, plant and 51 47
equipment
Receipts from sale of subsidiary - 4,053
Interest received 399 245
Net cash from investing activities (5,837) 11,995
Repayment of borrowings (568) (925)
Payment of finance lease liabilities (67) (131)
Finance lease additions 207 -
Own shares acquired (1,862) -
Net cash used in financing activities (2,290) (1,056)
Net (decrease)/increase in cash and cash (2,456) 12,693
equivalents
Cash and cash equivalents at start of period 13 13,545 852
Cash and cash equivalents at end of period 13 11,089 13,545
The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 September 2007 or 2006 but is derived
from the 2007 accounts. Statutory accounts for 2006, which were prepared under
International Financial Reporting Standards as adopted by the EU, have been
delivered to the registrar of companies, and those for 2007, also prepared under
International Financial Reporting Standards as adopted by the EU, will be
delivered in due course. The auditors have reported on those accounts; their
reports were (i) unqualified, (ii) did not include references to any matters to
which the auditors drew attention by way of emphasis without qualifying their
reports and (iii) did not contain statements under section 237(2) or (3) of the
Companies Act 1985.
1 Accounting policies
Basis of preparation
Tinopolis Plc (the 'Company') is a company incorporated in the UK.
The Group financial statements consolidate those of the Company and its
subsidiaries (together referred to as the "Group"). The parent company financial
statements present information about the Company as a separate entity.
The Group financial statements have been prepared and approved by the Directors
in accordance with International Financial Reporting Standards as adopted by the
EU ("Adopted IFRS"). The Company has elected to prepare its parent company
financial statements in accordance with UK GAAP.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these Group financial
statements.
Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and its subsidiaries made up to 30 September each year.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases. Intra-group balances and any unrealised gains and losses on
income or expenses arising from intra-group transactions, are eliminated in
preparing the consolidated financial statements.
Sources of estimation/uncertainty
The preparation of the financial statements requires the group to make
estimates, judgements and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure of contingent
assets and liabilities. The Directors base their estimates on historic
experience and various other assumptions that they believe are reasonable under
the circumstances, the results of which form the basis of making judgements
about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
The Group believes that the most significant critical judgement area in the
application of its accounting policies is revenue recognition.
Revenue and revenue recognition
Revenue (which excludes VAT) represents amounts receivable for work carried out
in producing television programmes, films and other audio-visual media
productions and is recognised over the period of the production in line with the
terms of the underlying contract. Overspends are recognised as soon as they
arise and underspends are recognised on completion of the production. Where
productions are in progress and where the sales invoiced exceed the cost of the
work done, the excess is shown as deferred income. Where the value of the work
done to date exceeds the invoiced amount, the amounts are classified as accrued
income.
Development costs
Internally generated costs relating to programmes, to the extent they are not
funded by a customer, are written off to the income statement.
Translation of foreign currencies
Transactions in foreign currencies are recorded at the date of exchange ruling
at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated
to sterling at the rate of exchange ruling at the balance sheet date, and any
exchange differences taken to the income statement. Non-monetary assets are
translated to sterling at the rates of exchange ruling at the date of purchase.
Taxation
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantially enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The
following temporary differences are not provided for: goodwill not deductible
for taxation purposes, the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit, and differences relating to
investments in subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is based on the
expected manner of realisation or settlement of the carrying amount of assets
and liabilities, using tax rates enacted or substantively enacted at the balance
sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Leasing and hire purchase commitments
Where the Group enters into a lease which entails taking substantially all the
risks and rewards of ownership of an asset, the lease is treated as a "finance
lease". The asset is recorded in the balance sheet as Property, Plant and
Equipment and is depreciated over its estimated useful life or the term of the
lease, whichever is shorter. Future instalments under such leases, net of
finance charges, are included within creditors. Rentals payable are apportioned
between the finance element, which is charged to the income statement so as to
produce a constant periodic rate of interest on the remaining balance of the
liability, and the capital element which reduces the outstanding obligation for
future instalments.
All other leases are accounted for as "operating leases" and the rentals payable
are charged to the income statement on a straight line basis over the life of
the lease.
Goodwill
Goodwill represents the difference between the cost of the acquisition and the
fair value of the net identifiable assets and contingent liabilities acquired.
Identifiable assets are those which can be sold separately or which arise from
legal rights regardless of whether those rights are separable.
Goodwill is stated at cost or deemed cost less any accumulated impairment
losses. Goodwill is allocated to cash-generating units.
Other intangible assets
Other intangible assets acquired by the group are stated at cost less
accumulated amortisation except those acquired as part of a business combination
which are shown at fair value at the date of acquisition less accumulated
amortisation.
1 Accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation. The cost of
property, plant and equipment is their purchase cost, together with any
incidental costs of acquisition.
Depreciation is calculated so as to write off the cost of an asset, less its
estimated residual value, over the useful economic life of that asset as
follows:
Short life studio / post production equipment - 25% straight line
Studio equipment - 15% - 20% reducing balance
Fixtures and fittings - 15% straight line
Motor vehicles - 25% straight line
Computer equipment - 25% straight line
Leasehold property improvements - 5% - 10% straight line
Impairment
The carrying amounts of the Group's assets are reviewed at each balance sheet
date to determine whether there is any indication of impairment. If any such
indication exists, the asset's recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the income statement. Impairment losses recognised in respect of
cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to cash-generating units and then, to reduce the carrying
amount of the other assets in the unit on a pro rata basis.
Learning content
Learning content expenditure is capitalised only if the cost is commercially
feasible and future economic benefits are probable. The expenditure capitalised
includes the cost of materials, direct labour and overhead costs that are
directly attributable to preparing the asset for its intended use.
Amortisation is calculated so as to write off the cost of the asset, less its
estimated residual value, over the useful economic life of that asset which is
between 3 and 5 years.
Inventories - Learning materials
Inventories are measured at the lower of cost and net realisable value. Net
realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and bank overdrafts. The bank
overdrafts are repayable on demand and form an integral part of the Group's cash
management. They are included as a component of cash and cash equivalents for
the purpose of the statement of cash flows.
Repurchase of share capital (treasury shares)
When share capital recognised as equity is repurchased, the amount of the
consideration paid which includes directly attributable costs, is net of any tax
effects, and is recognised as a deduction from equity. Repurchased shares are
classified as treasury shares and are presented as a deduction from total
equity. When treasury shares are sold or reissued subsequently, the amount
received is recognised as an increase in equity, and the resulting surplus or
deficit on the transaction is transferred to / from retained earnings.
1 Accounting policies (continued)
Employee benefits
Equity-settled share Based Payments
The share option programme allows Group employees to acquire shares of the
Company. The fair value of options granted is recognised as an employee expense
with a corresponding increase in equity. The fair value is measured at grant
date and spread over the period during which the employee becomes
unconditionally entitled to the options. The fair value of the options granted
is measured using a Black Scholes model, taking into account the terms and
conditions upon which the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share options that vest
except where forfeiture is only due to share prices not achieving the threshold
for vesting.
Defined contribution plans
Obligations for contributions to defined contribution pension plans are
recognised as an expense in the income statement when they are due.
Recently issued standards
A number of new standards, amendments to standards and interpretations are not
yet effective for the year ended 30 September 2007, and have not yet been
applied in preparing these consolidated financial statements:
IFRS 8 Operating Segments introduces the "management approach" to segment
reporting. IFRS 8 which becomes mandatory for the Group's 2009 financial
statements will require the disclosure of segment information based on the
internal reports regularly reviewed by the Group's Operating Decision Maker in
order to assess each segment's performance and to allocate resources to them. It
is not expected to have any impact on the consolidated financial statements.
IFRIC 11 IFRS 2 - Group and Treasury Share Transactions requires a share-based
payment arrangement in which an entity receives goods or services as
consideration for its own equity-settled share-based payment transaction,
regardless of how the equity instruments are obtained. IFRIC 11 will become
mandatory for the Group's 2008 financial statements, with retrospective
application required. It is not expected to have any impact on the consolidated
financial statements.
Revised IAS 23 - Borrowing Costs, IFRIC 12 - Service Concession Arrangements,
IFRIC 13 - Customer Loyalty Programmes, IFRIC 14 IAS 19 -The Limit on a Defined
Benefit Asset, Minimum Funding Requirements will have no impact on the
consolidated financial statements.
2 Segmental information
a) Geographical analysis
No significant level of turnover arose outside of the United Kingdom.
b) Market sector analysis
The Group's operations involve the making of television, film, and other
audio-visual media productions and has only one business sector.
3 Operating activities and auditors' remuneration
2007 2006
£000 £000
Included in results from operating activities are the following;
Restructuring costs incurred (contractual and other termination costs - 1,154
involved in the removal of The Television Corporation Plc board)
Depreciation of property, plant and equipment 970 819
Depreciation of assets held under hire purchase and finance lease 174 73
agreements
Amortisation 6 -
Profit on disposal of property, plant and equipment (2) (21)
Profit on sale of Hawkeye - (866)
Foreign exchange losses 128 -
Operating lease charges - land and buildings 1,229 795
- other 29 -
Auditors' remuneration:
2007 2006
£000 £000
Audit of these financial statements 60 60
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements of subsidiaries pursuant to legislation 67 40
Services relating to corporate finance transactions entered into or
proposed to be entered into by or on behalf of the company or the
group 50 176
4 Directors' emoluments
The directors' aggregate emoluments in respect of qualifying services were:
2007 2006
£000 £000
Aggregate emoluments 961 716
Highest paid director 278 224
Options to acquire 2p ordinary shares of the Company were held by the following
Directors:
At 1 October 2006 Granted At 30 September
2007
A Rees 372,000 - 372,000
A Mair 73,000 - 73,000
J Willis - 450,000 450,000
5 Employee information
2007 2006
£000 £000
Wages and salaries 13,337 10,707
Social security costs 1,481 1,165
Equity-settled share based payments 63 26
Pension and other employee costs 329 205
15,210 12,103
5 Employee information (continued)
The average number of employees employed (including Directors) during the year
was:
Number Number
Production 322 295
Administration 82 61
404 356
6 Net finance income
2007 2006
£000 £000
Interest expense
Interest on finance lease and hire purchase 5 11
Other interest and similar charges 9 46
14 57
Interest income (399) (245)
Net finance income (385) (188)
7 Income tax expense
2007 2006
£000 £000
Current tax expense
United Kingdom corporation tax charge at rate of 30% (2006: 30%) 554 104
(Under)/over provision in respect of the previous year (1) 83
Total current tax expense 553 187
Deferred tax expense
Origination and reversal of temporary differences 170 (98)
Total deferred tax expense/(income) (see note 16) 170 (98)
Total income tax expense in income statement 723 89
7 Income tax expense (continued)
The tax assessed for the year is lower (2006: lower) than the standard rate of
corporation tax applying in the UK of 30%. The differences are explained below:
2007 2006
£000 £000
Profit before taxation 2,562 1,060
Profit on ordinary activities at the UK tax rate of 30% (2006: 30%) 769 318
Effects of
Substantial shareholding exemption on disposal of subsidiary - (260)
Expenses not deductible for tax purposes 25 10
Accelerated capital allowances and other timing differences (54) 16
Adjustments to tax charge in respect of previous period (1) 83
Utilisation of tax losses (2) (78)
Withholding tax (14) -
723 89
8 Earnings per share
2007 2006
£000 £000
Profit for the year 1,728 934
Weighted average number of shares 96,467,884 77,459,136
Dilutive potential of shares under option 3,840,570 3,585,170
Effect of potential deferred consideration shares 312,500 -
Dilutive potential of warrants issued 48,780 48,780
Dilutive weighted average number of shares 100,669,734 81,093,086
Earnings per share - Basic 1.8p 1.2p
Earnings per share - Diluted 1.7p 1.2p
9 Property, plant and equipment
Leasehold Motor Fixtures and Studio / Total
property vehicles fittings & post
improvements computer production
equipment equipment
£000 £000 £000 £000 £000
Cost
At 1 October 2006 2,447 436 2,211 3,930 9,024
Additions 1,410 31 1,041 642 3,124
Acquisitions - - 240 - 240
Disposals - (141) (355) (10) (506)
At 30 September 2007 3,857 326 3,137 4,562 11,882
Depreciation
At 1 October 2006 902 252 1,252 2,302 4,708
Charge for the year 173 62 527 382 1,144
On disposals - (104) (353) - (457)
At 30 September 2007 1,075 210 1,426 2,684 5,395
Net book value
At 30 September 2007 2,782 116 1,711 1,878 6,487
At 30 September 2006 1,545 184 959 1,628 4,316
9 Property, plant and equipment (continued)
Leasehold Motor Fixtures and Studio / Total
property vehicles fittings & post
improvements computer production
equipment equipment
£000 £000 £000 £000 £000
Cost
At 1 October 2005 2,362 459 1,191 3,427 7,439
Additions 28 170 580 523 1,301
Acquisitions 57 14 865 - 936
Disposals - (207) (40) (20) (267)
Disposal of subsidiary - - (385) - (385)
At 30 September 2006 2,447 436 2,211 3,930 9,024
Depreciation
At 1 October 2005 748 394 1,034 2,004 4,180
Charge for the year 154 61 365 312 892
On disposals - (203) (24) (14) (241)
Disposal of subsidiary - - (123) - (123)
At 30 September 2006 902 252 1,252 2,302 4,708
Net book value
At 30 September 2006 1,545 184 959 1,628 4,316
At 30 September 2005 1,614 65 157 1,423 3,259
Included within the net book value of £6,487,000 (2006: £4,316,000) is the
following relating to assets held under hire purchase and finance lease
agreements:
Fixtures & Studio / post Motor Total
fittings and production
computer vehicles
equipment equipment
£000 £000 £000 £000
At 30 September 2007 35 161 21 217
At 30 September 2006 3 136 45 184
The depreciation charged to the financial statements in the year in respect of
such assets was as follows:
Fixtures & fittings Studio / post Motor Total
and computer production vehicles
equipment equipment
£000 £000 £000 £000
Year ended 30 September 2007 5 145 24 174
Year ended 30 September 2006 3 55 15 73
10 Intangible fixed assets
Goodwill 2007 2006
Cost and net book value £000 £000
At 1 October 21,869 -
Additions 3,144 21,869
Disposals - -
Amortisation - -
At 30 September 25,013 21,869
Learning Content 2007 2006
Cost and net book value £000 £000
At 1 October - -
Additions 266 -
Acquisitions 383 -
Disposals - -
Amortisation (6) -
At 30 September 643 -
There were £2.5million other intangible asset additions and £2.5million
intangible asset disposals in 2006.
The Group conducts a formal annual review to determine whether the carrying
value of the goodwill on the balance sheet can be supported. The impairment
review comprises a comparison of the carrying amount of the goodwill with its
recoverable amount (the higher of fair value less costs to sell and value in
use). Fair value less costs to sell has been determined for the acquired cash
generating units by reference to the revenue multiples of appropriate
transactions in the industry in recent years applied to the business's own
internal estimates.
11 Acquisitions and disposals
On 3 May 2007 the group acquired 100% of the issued share capital of Video Arts
Group Ltd for a consideration of £2,250,000.
On 22 June 2007 the group acquired 100% of the issued share capital of APP
Broadcasting Ltd for an initial consideration of £1.05 million cash and 539,084
Tinopolis shares. A further deferred consideration of up to £300,000 may be
payable in January 2008 depending on the profitability achieved by APP in the
year to December 2007. The Directors believe APP will achieve this profit target
and that the deferred consideration will be payable in full.
The recognised value and fair value of assets purchased were as follows:
Video Arts Ltd APP Broadcasting Ltd
Provisional Provisional
recognised value recognised value
of acquired assets of acquired assets/
/(liabilities) (liabilities)
£000 £000
Property, plant & equipment 68 173
Intangibles - Learning content 383 -
Inventories - Learning material 216 -
Receivables 1,257 629
Cash and cash equivalents - 594
Liabilities (1,953) (509)
Net (liabilities)/assets acquired (29) 887
Goodwill 2,391 696
Transaction costs incurred (112) (33)
Consideration, satisfied by cash 2,250 1,050
Consideration, satisfied by issue of shares - 200
Deferred consideration - 300
Total consideration 2,250 1,550
The contribution to the operating profits for Video Arts Ltd since acquisition
and the historical results for the full year to 30 September 2007 are set out
below:
Post acquisition Full year unaudited 1
audited October 2006 to 30
3 May to 30 September 2007
September 2007
£000 £000
Revenue 1,482 4,253
Operating profit 13 183
The contribution to the operating profits for APP Broadcasting Ltd since
acquisition and the historical results for the full year to 30 September 2007
are set out below:
Post acquisition Full year unaudited 1
audited October 2006 to 30
22 June to 30 September 2007
September 2007
£000 £000
Revenue 709 2,182
Operating profit 171 493
Goodwill has arisen on the acquisitions because of the creative talent and
opportunities which do no meet the criteria for recognition as separate
intangible assets at the date of acquisition.
Daybreak Pictures Limited
On 29 November 2006 the group acquired the entire share capital of a shell
company, Daybreak Pictures Limited for a consideration of £11,000 satisfied by
the issue of 29,851 Tinopolis shares. Transaction costs of £46,000 were
incurred.
12 Receivables
2007 2006
£000 £000
Current
Trade receivables 10,106 7,084
Other receivables 506 81
Prepayments and accrued income 2,893 1,879
Current trade and other receivables 13,505 9,044
Trade receivables are shown net of provisions for impairment losses amounting to
£100,000 (2006: £86,000).
13 Cash and cash equivalents/bank overdrafts
2007 2006
£000 £000
Cash and cash equivalents 12,418 15,101
Bank overdrafts (1,329) (1,556)
Cash and cash equivalents in the consolidated cash
flow statement 11,089 13,545
14 Trade and other payables
2007 2006
£000 £000
Non current liabilities
Lease accrual 505 677
Current liabilities
Trade accounts payable 3,283 1,577
Other taxation and social security 2,205 1,845
Accruals and deferred income 17,811 12,668
23,299 16,090
15 Loans and borrowings
2007 2006
£000 £000
Non current liabilities
Hire purchase and finance lease agreements 129 23
Current liabilities
Secured bank loan - 568
Hire purchase and finance lease agreements 75 67
75 635
The hire purchase and finance lease obligations are payable as follows:
2007 2006
£000 £000
In one year or less 75 67
Between one and two years 78 12
Between two and five years 51 11
204 90
16 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities Net
2007 2006 2007 2006 2007 2006
£000 £000 £000 £000 £000 £000
Property, plant and equipment (160) (4) 454 313 294 309
Tax value of loss (9) (48) - - (9) (48)
carry-forwards
Net tax (assets) / (169) (52) 454 313 285 261
liabilities
Movement in deferred tax during the year
1 October Recognised Acquired on 30 September
2006 in income acquisition 2007
£000 £000 £000 £000
Property, plant and equipment 309 131 (146) 294
Tax value of loss carry-forwards utilised (48) 39 - (9)
261 170 (146) 285
Movement in deferred tax during the prior year
1 October Recognised 30 September
2005 in income 2006
£000 £000 £000
Property, plant and equipment 454 (145) 309
Tax value of loss carry-forwards utilised (95) 47 (48)
359 (98) 261
17 Financial instruments
Exposure to credit and interest rate risks arises in the normal course of the
Group's business.
Credit risk
Management has a credit policy in place and the exposure to credit risk is
monitored on an ongoing basis. Credit evaluations are performed on all customers
requiring credit over a certain amount. At the balance sheet date there were no
significant concentrations of credit risk. The maximum exposure to credit risk
is represented by the carrying amount of each financial asset in the balance
sheet.
Interest rate risk
Interest expense reflects the cost of the Group's borrowings. Interest income
arises from investment of cash and short term deposits held by the group.
Interest rate risk is managed by monitoring market rates to ensure that optimal
returns are achieved.
Liquidity risk
The Group finances its operations through a mixture of cash from retained
profits, new equity and bank borrowings. The Group has continued with its policy
of ensuring that there are sufficient funds to meet the expected funding
requirements of the Group's operations and investment opportunities. The Group
has continued to monitor its liquidity position through budgetary procedures and
cash flow analysis.
Effective interest rates
In respect of income-earning financial assets and interest-bearing financial
liabilities, the following table indicates their effective interest rates at the
balance sheet.
2007 2006
Effective
Interest 6 Months 6-12 1-2 2-5 6 months 6-12 1-2 2-5
In thousands of Rate Total or less months years years Total or less months years years
GBP £'000
Secured bank
loans:
ITV production 2% above 421 421
Loan bank base
rate
Bank loan 3% above 147 147 - - -
bank base
rate
Finance lease 10 % - 15% 204 44 31 78 51 90 39 28 12 11
liabilities
Bank overdrafts 1,329 1,329 1,556 1,556
The fair values of financial assets and liabilities shown above are not
materially different from the value stated.
18 Commitments
Financial commitments
At 30 September 2007 the Company had commitments under non-cancellable operating
leases:
2007 2006
£000 £000
Within one year 1,634 894
Within two to five years 4,638 2,175
After five years 3,269 1,460
9,541 4,529
19 Called up share capital
2007 2006
£000 £000
Authorised
130,714,290 ordinary shares of 2p each (2006: 130,714,290 ordinary
shares of 2p each) 2,614 2,614
Allotted, called up and fully paid
99,450,222 ordinary shares of 2p each (2006: 99,437,793 ordinary shares
of 2p each) 1,989 1,989
This information is provided by RNS
The company news service from the London Stock Exchange
END
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