31st Mar 2010 07:00
Pinewood Shepperton plc
Results for the Year Ended 31 December 2009
Pinewood Shepperton plc (the "Company"), a leading provider of services to the global film and television industry, today announces 2009 full year results reflecting resilient performance in Film and Television revenues, robust Media Park revenues and strategic international growth.
Overview
·; Revenue £40.3m (2008: £42.9m)
·; Operating profit before exceptional items £7.7m (2008: £8.4m)
·; Basic earnings per share of 9.1p (2008: 12.3p)
·; Diluted earnings per share of 8.8p (2008: 12.0p)
·; Recommended increased final dividend of 2.40p (2008: 2.30p) resulting in a total dividend for 2009 of 3.45p (2008: 3.35p)
·; Won a major contract with Canal+ Image to digitise and preserve its extensive film and television library
·; Renewed foreign versioning contract with Disney Character Voices International
·; Signed long term agreements with Pinewood Toronto Studios, Canada, Pinewood Iskandar Malaysia Studios and, since the year end, Pinewood Studio Berlin Film Services
·; Project Pinewood: appeal to be submitted by 21 April 2010
Commenting on today's results, Ivan Dunleavy, Chief Executive, said:
"Our strategy has delivered a solid performance. We are well positioned to cater for the growing demand for creative content and have made substantial progress in all areas of our UK business. We are encouraged by the growth opportunity in television, our leading position in film and television studios in the UK, the performance of our Media Park revenues and the long term potential of our international branding partnerships".
Enquiries
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Pinewood Shepperton plc |
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Ivan Dunleavy - Chief Executive |
+44 (0) 1753 656 183 |
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Brunswick Group LLP |
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James Olley/Oliver Hughes |
+ 44 (0) 20 7404 5959 |
A presentation of the results will be available at www.pinewoodgroup.com from 12pm today.
Operating review
The Group provides studio and related services to the global film and television industry. The year ended 31 December 2009 was challenging for a number of reasons including the impact of the protracted Screen Actors Guild negotiations and the downturn in the general economic environment. This was reflected in total revenue results of £40.3m (2008: £42.9m). We continued to provide a quality service at a competitive price to our customers and, through careful cost management, margins were maintained. Diversifying and enhancing our business with our international offering is providing an extra platform for future growth.
The performance of the business is reviewed and analysed as Film, Television and Media Park.
Film
Pinewood Shepperton's Film revenues £22.7m (2008: £24.2m) recovered towards the end of 2009, with solid utilisation of the Group's facilities. This demonstrates film's ongoing ability to deliver resilient revenues in times of wider economic uncertainty.
We had anticipated that 2009 would reflect the impact of the protracted negotiations between the US studios and the Screen Actors Guild which were resolved in June 2009, for a further period of two years. Overall demand for content was strong, however wider economic pressures have tightened access to financing for all producers, which in turn has meant that they are focussed on successful 'big film' franchises, a market the Group is well placed to compete in.
The cinema industry enjoyed a successful year in 2009 (this relates to films that were largely produced in 2008) with cinema admissions at their highest level since 2002. The appeal of film in uncertain economic times has not diminished and has boosted demand for new productions for the coming year. The Group's facilities include 32 film stages which range from 2,000 sq ft to 59,000 sq ft (any of which can be used for television), an exterior water tank, three 'backlots' for outdoor filming, workshops, art departments, digital content services, sound studios and film production offices.
Our studios provide customers with unique facilities and a quality service offering, setting us apart from temporary warehouse facilities. Pinewood Shepperton benefitted from the continued strong reputation of the UK as an appealing environment and a fiscally attractive location to make films, partly due to the tax credits available. Demand was also driven by the favourable exchange rate for US producers during the latter part of 2009.
Productions using Pinewood Shepperton's facilities during the year included: Robin Hood (Universal) - the largest production based at the studios, Gulliver's Travels (Fox), Nanny McPhee & The Big Bang (Working Title/Universal), Clash of the Titans (Warner Bros), Cemetery Junction (Sony International), Hereafter (Dombey/Warner productions) and Harry Potter and the Deathly Hallows (Warner Bros).
Gulliver's Travelswas in part filmed digitally. With 'digital films', motion pictures are captured as digital images rather than on traditional 35mm film. There is growing demand for digital film production and our stages are well equipped to service these new techniques.
Following the operational restructuring in audio post production in 2008, as well as our growing reputation, in part attributable to the success of Slumdog Millionaire, film and television digital content services revenues have risen significantly to £6.4m (2008: £5.3m). During the year we provided digital content services to a number of high profile film and television productions including Harry Potter and the Half-Blood Prince, Nine, Looking for Eric, ZingZillas, Would I Lie to You and Guinness World Records Smashed. We recently renewed our contract with Disney Character Voices International to provide its international language versions.
In November 2009, the Group entered into an agreement with Canal+ Image to digitise and preserve its extensive library of film and television audio and picture assets at Pinewood Studios. The Canal+ library consists of some 140,000 items including the renowned Ealing film library.
In the latter part of 2009, the Group opened its media restoration and preservation facilities and won the contract for the 1973 theatrical release 'Ladies and Gentlemen: The Rolling Stones', a feature length restored film scheduled for digital release during 2010. Media restoration and preservation is a new service which became fully operational in early 2010.
The Pinewood brand is well regarded and respected internationally. Our international offering seeks to build on that reputation and selectively leverage our brand strength and expertise.
Two long term international agreements were signed during 2009. The first agreement resulted in the launch of 'Pinewood Toronto Studios', and gives the Group a presence at newly built studios in Toronto, the third largest film and television production centre in North America. The second agreement concerns 'Pinewood Iskandar Malaysia Studios' and involves the development, sales, marketing, and operational management of new studio facilities that will service the growing Asia Pacific markets. The new studios in Malaysia should be constructed by late 2012.
Both of these agreements demonstrate important progress in the Group's strategy to build meaningful new film service offerings by exploiting our expertise and brand internationally. We continue to explore further international opportunities in selected growth markets.
Television
Television revenues were down on last year at £11.3m (2008: £12.7m) due to the general economic environment resulting in reduced television advertising revenues and pressure on broadcasters production budgets. Despite this, the Group has seen continued strong demand for its television offering. We remain able to deliver an attractive solution to broadcasters and an increasing number of independent production companies, even with the unprecedented reductions in production budgets, by focussing on high quality, cost effective solutions. The Group's operating model gives us the advantage of being able to control variable costs and allows us to maintain competitive rates whilst maintaining margins.
We successfully attracted repeat business from My Family, Wogan's Perfect Recall, Dragon's Den, Would I Lie to You and new productions including Perrin, It's Only a Theory, Bear Behaving Badly and Ant & Dec's Christmas Special as well as a number of CBeebies productions including Show Me Show Me.
The Group's facilities include five television studios that range from 2,000 sq ft to 9,000 sq ft plus editing suites, sound and picture galleries, bespoke client facilities, set storage areas and television production offices. The Group also provides six channel hosting presentational suites and support facilities for this 24 hour, seven days a week operation.
Continuing the diversification strategy, we broadened our television offering into major corporate advertising and have hosted commercials for Ford, Johnson & Johnson, Pepsi and Stella Artois. The studios continue to build on the full service offering that proved successful in 2008 with Little Dorrit with the hosting of ZingZillas in 2009.
Our studios are well positioned to host all forms of television productions from one off events with large studio based audiences such as Ant & Dec's Christmas Special to light entertainment series including Perrin and Guinness World Records Smashed.
Our blend of bespoke technical facilities allied to the scale and breadth of stages and studios is a unique offering for television producers and is unmatched in the UK. The Group's transmission facilities at Teddington provide additional services attractive to smaller channels.
Media Park
Media Park revenues for 2009 increased to £6.3m (2008: £6.0m) including the Group's 50% interest in the Shepperton Studios Property Partnership.
The Media Park facilities, including Shepperton Studios Property Partnership, comprise 400,000 sq ft of tenanted areas used by technology, digital service companies, a film processing laboratory and numerous other support businesses related to the film and television industry.
The Group continues to progress its master plan development using its planning consents to expand each of the Pinewood and Shepperton Studios sites. These consents provide for a further 1.8m sq ft comprising 0.6m sq ft of modern replacement space plus 1.2m sq ft of additional space. The implementation of these master planning consents will be occupier led.
The Media Park is a unique asset offering a variety of complementary services for film and television productions utilising our studios. Media Park is an important component of the Group's strategy as producers look to benefit from a full service offering. It now comprises over 300 businesses, offering services to the film and television industry.
Our Media Park enjoyed occupancy levels of 88% during the year (2008: 93%). We will continue to target prospective media tenants as we seek to expand our unique network of related services and businesses. The benefits of creative clusters are well known and our Media Park is an integral part of the creative industries cluster that exists at our Studios.
Our joint venture partnership with Aviva for the Shepperton Studios Property Partnership is well established and performed satisfactorily during 2009.
Project Pinewood
On 1 June 2009, following extensive public consultation, the Group submitted its planning application to South Bucks District Council for Project Pinewood, a long term scheme of national significance to expand Pinewood Studios and create the world's first living and working community for the creative industries.
As expected, the first stage of the planning application was refused on 21 October 2009 principally on the grounds that it comprised development in the Green Belt. The Group remains committed to pursuing its application for the relevant permissions for this important project. The Group will be lodging its appeal by 21 April 2010. Total costs incurred to 31 December 2009 were £4.8m (to 31 December 2008: £3.4m).
The Group was notified on 4 November 2009 of an application to register a part of the proposed site as a Town or Village Green. The Group is contesting that application vigorously.
Dividend
The Board is recommending an increased final dividend of 2.40p (2008: 2.30p) making a total dividend for the year of 3.45p (2008: 3.35p), reflecting our continued confidence in Pinewood Shepperton's future prospects.
Current trading and outlook
We are encouraged that contracted revenues to date are ahead of the same period in 2009.
In Film there is a good level of visibility for 2010 with a number of film productions contracted to use the Group's facilities. Film producers continue to be attracted by our world-class offering, the government's film tax credits and, for US Studios, the relatively favourable exchange rate. The Group's international offering was further enhanced by the joint venture agreement signed with Studio Hamburg GmbH on 17 February 2010 creating 'Pinewood Studio Berlin Film Services'.
Trading to date in Television is encouraging. During March we simultaneously hosted two major television productions, Ant & Dec's Push The Button and The Whole 19 Yards, with studio audiences of 700 and 400 respectively. These productions were hosted on large film stages, highlighting our ability to cope with the exceptional technical and logistical issues involved.
We expect Media Park revenues to remain resilient for 2010.
The Board views the Group's prospects with confidence.
Ivan Dunleavy Chief Executive
Financial review
The Board use a number of key performance indicators ("KPIs") to monitor Group performance against budget as well as to measure progress against the Group's strategic objectives. The KPIs used are revenue, profitability, cash flow and net debt. These are discussed as part of the following Financial review.
Revenue
Total revenues for the year were £40.3m (2008: £42.9m), the reduction reflects the global economic climate and pressure on broadcaster production budgets.
Film revenues of £22.7m (2008: £24.2m) demonstrated a resilient performance. Revenues were generated from services including stages, workshops, wardrobes, dressing rooms, production offices, outdoor filming facilities, ancillary services and digital content services. Film revenues of £0.5m were earned from providing international sales and marketing advice.
Television revenues of £11.3m (2008: £12.7m) reflected the ongoing pressure on television production budgets with fewer high end filmed television dramas and commercials commissioned during 2009. The Group provides dedicated digital television studios on a fully serviced basis which includes contractors, lighting, camera, technical equipment, dressing rooms and production offices, all of which are priced into the contract in accordance with the requirements of each customer.
Included within Film and Television revenues are revenues generated from digital content services, which in 2009 increased to £6.4m (2008: £5.3m).
Media Park revenue increased to £6.3m (2008: £6.0m), including our 50% interest of £0.9m (2008: £1.0m) from the Shepperton Studios Property Partnership. Technicolor Limited took occupancy of their purpose built facility in December 2008 under a long term lease. The tenants are contracted to a range of terms from six months to fifteen years which supports the sustainability and robustness of Media Park revenues.
Profit performance and earnings per share
Gross profit was £15.6m (2008: £16.7m) with gross margins held at a consistent 39%. Operating profit, before exceptional items, was £7.7m (2008: £8.4m) at a 19% margin (2008: 19%). Lower energy costs and increased operational efficiencies were the main contributors towards maintaining margins.
Profit before tax was £4.5m (2008: £5.9m) after accounting for exceptional items. Earnings before interest, tax, depreciation and amortisation were £11.3m (2008: £12.0m), after accounting for exceptional items.
Basic earnings per share were 9.1p (2008: 12.3p). Basic earnings per share, after adjusting for the effects of indexation on the deferred tax provision and exceptional items, were 7.5p (2008: 11.8p).
Diluted earnings per share were 8.8p (2008: 12.0p). Diluted earnings per share, after adjusting for the effects of indexation on the deferred tax provision and exceptional items, were 7.3p (2008: 11.5p).
The diluted and weighted average number of shares in issue was 47.3m (2008: 47.1m).
Exceptional income
Exceptional income amounted to £0.8m.
During the year additional insurance proceeds were received as final settlement regarding the 007 Stage fire on 30 July 2006. The final amount received, after deducting professional fees directly associated with the claim, was £0.4m.
Following a review of the Total Shareholder Return component of the Group's Long-Term Incentive Plan awards, granted in 2007 and 2008, £0.4m of the IFRS 2 charges to the Group income statement were reversed as an exceptional credit in the year.
Exceptional costs
Exceptional costs for the year amounted to £0.9m.
Provision was made against two advances for film and television projects amounting to £0.4m. These have been recognised as exceptional as they were not in the normal course of business.
The Board incurred restructuring costs which led to an exceptional charge for the year of £0.5m. Ongoing annual cost savings of a comparable amount are anticipated.
Dividend
The Board is recommending a final dividend of 2.40p per share (2008: 2.30p). Taken together with the interim dividend of 1.05p (2008: 1.05p) the total dividend is 3.45p (2008: 3.35p). The dividend for 2009 is covered 2.6 times (2008: 3.7 times, restated) by total earnings after tax. Subject to approval by shareholders at the Annual General Meeting to be held on 29 June 2010, the final dividend will be paid on 9 July 2010 to shareholders on the register on 4 June 2010 (ex-dividend date of 2 June 2010). It remains the Board's intention to continue its progressive dividend policy.
Cash flow and net debt
The Group generated operating cash flow of £10.7m (2008: £12.5m), before a working capital outflow of £2.2m predominantly due to current year trading results and the timing of contracted revenues resulting in a reduction in trade payables, accruals and deferred income. After adjusting for movements in working capital, cash generated from operations was £8.5m (2008: £9.6m) from which finance costs of £2.8m (2008: £1.8m) and corporation tax of £1.5m (2008: £0.8m) were paid.
During the year cash expended on capital expenditure amounted to £6.3m (2008: £16.6m). The main items were the completion of the Technicolor building £0.7m (2008: £5.6m), Project Pinewood costs £2.0m (2008: £2.0m), investment in archival storage facilities of £0.5m (2008: nil) and lifecycle and infrastructure capital expenditure of £3.1m (2008: £6.4m). In 2008, £2.6m was also expended on the completion of the Gainsborough building at Shepperton and the Gatehouse at Pinewood.
Net debt at 31 December 2009 was £46.1m (31 December 2008: £42.6m), which included £12.0m (2008: £11.4m) relating to the Group's 50% interest in the non-recourse Aviva loans to the Shepperton Studios Property Partnership ("SSPP").
The Group has banking facilities of up to £70.0m which comprise a £35.0m revolving credit facility, a £30.0m pre-let development facility and a £5.0m overdraft facility. These facilities are secured by a floating charge over the Group's assets. The revolving and pre-let development facilities contain no scheduled repayments and mature in August 2013. The £5.0m overdraft facility is available until August 2013 and is subject to an annual review. At the year end £26.0m (2008: £24.0m) of the revolving credit facility, £6.0m (2008: £6.0m) of the pre-let development facility and £0.9m (2008: £1.2m) of the overdraft facility were drawn. During the year the Group also completed an asset financing agreement totalling £1.0m.
There are a range of covenants appropriate for the revolving credit facility, pre-let development facility and overdraft facility. The Group remains covenant compliant with adequate headroom.
In addition to the £70.0m banking facilities there are non-recourse loans and facilities provided to SSPP by our joint venture partner Aviva which total £40.0m, of which £24.0m was drawn at the year end. This loan, which is 50% consolidated at £12.0m (2008: £11.4m), is included in the Group's statement of financial position. These facilities are available until 2026 and are covenant free with no scheduled repayments.
Investment property
Investment property is recognised in accordance with IAS 40 as a category within assets in the Group statement of financial position. At 31 December 2009, investment property with a carrying value of £6.3m (31 December 2008: £6.1m as restated) has been recognised which was previously included within 'Property, plant and equipment' on the statement of financial position. This compares to a Directors assessment of the fair value of £6.8m (31 December 2008: £6.1m).
Financial gearing
At 31 December 2009, net debt including the Group's share of the SSPP non-recourse drawn loan was £46.1m (2008: £42.6m), increasing financial gearing to 63.2% (2008: 60.8% restated).
The Group measures Return on Capital Employed ("ROCE") by reference to operating profit, before exceptional items, as a percentage of average capital employed, being total equity plus interest-bearing loans and borrowings, which for 2009 was 6.6% (2008: 8.0%).
Finance costs and hedging
Net finance costs were £3.2m (2008: £2.4m). The increased costs reflect a full year of the £70.0m banking facilities secured in August 2008 and the relevant fees and margins under this facility. In addition, the completion of the Technicolor building in December 2008 has resulted in a reduction in capitalised interest, £0.1m was capitalised during the year (2008: £0.5m). Net finance costs were covered an overall 2.4 times (2008: 3.4 times) by operating profit.
The Group continued to use interest rate derivatives to manage its interest rate exposure. The £7.5m hedge with an effective rate of 5.525%, plus a variable margin, that expired on 31 March 2009 was replaced with a new £7.5m hedge with an effective rate of 2.89%, plus a variable margin. In addition, the Group has a £15.0m hedge with an effective rate of 5.195%, plus a variable margin.
At the end of the year £22.5m (2008: £22.5m) of the Group's facilities were under interest rate swaps and £0.9m was under a fixed interest rate asset financing facility. At 31 December 2009, 51% (2008: 53%) of the Group's borrowings were at a fixed rate of interest. The Board regularly review hedging arrangements in place to manage interest rate exposure.
Project Pinewood
Included in 'Freehold land', within 'Property, plant and equipment' on the statement of financial position, is £4.8m of costs incurred to 31 December 2009 (£3.4m to 31 December 2008) in relation to Project Pinewood. Capitalisation of costs is based on management judgement that the economic benefits expected from the asset will exceed the carrying value. Costs are reviewed monthly by the Board which is committed to Project Pinewood and believes that it is a viable project. Taking into consideration all aspects of the project, the Board views the carrying value of the capitalised costs incurred up to 31 December 2009 to be appropriate.
Taxation
The current corporation tax expense for the year ended 31 December 2009, based on profit before tax and exceptional items of £4.5m, was £1.0m, a current tax rate of 21% (2008: 22%). After adjusting for exceptional items and the effect indexation has on deferred tax, the effective rate was 6% (2008: 5%).
Deferred tax in the comparative figures for 31 December 2008 has been restated to reflect correctly a deferred tax asset and an adjustment to the fair value of the cash flow hedge reserve of £384,000 relating to the shortfall in the fair value of the cash flow interest rate hedge at that date. The restatement had no impact on the income statement or cash flow of the Group.
Patrick Garner FCA Finance Director
Group income statement
for the year ended 31 December 2009
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Year ended 31 December 2009 |
Year ended 31 December 2008 |
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|
Notes |
|
£000 |
£000 |
|
Revenue |
|
|
|
|
|
|
Rendering of services |
2 |
|
40,321 |
42,867 |
|
|
Cost of sales |
|
|
(24,742) |
(26,167) |
|
|
Gross profit |
|
|
15,579 |
16,700 |
|
|
Selling and distribution expenses |
|
|
(1,573) |
(2,044) |
|
|
Administrative expenses |
|
|
(6,337) |
(6,299) |
|
|
Operating profit before exceptional items |
|
|
7,669 |
8,357 |
|
|
Exceptional income |
4 |
|
804 |
- |
|
|
Exceptional costs |
4 |
|
(851) |
- |
|
|
Operating profit |
|
|
7,622 |
8,357 |
|
|
Finance costs |
5 |
|
(3,171) |
(2,424) |
|
|
Profit before tax |
|
|
4,451 |
5,933 |
|
|
Current tax expense |
|
|
(955) |
(1,287) |
|
|
Deferred tax credit |
|
|
115 |
782 |
|
|
Effect of indexation on deferred tax provision |
|
|
571 |
224 |
|
|
Total corporation tax expense |
6 |
|
(269) |
(281) |
|
|
Profit for the year |
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|
4,182 |
5,652 |
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Attributable to: |
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Equity holders of the parent |
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4,182 |
5,652 |
|
|
Earnings per share |
|
|
|
|
|
|
- |
basic for result for the year |
7 |
|
9.1p |
12.3p |
|
- |
diluted for result for the year |
7 |
|
8.8p |
12.0p |
Group statement of other comprehensive income
at 31 December 2009
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Year ended 31 December 2009 |
Year ended 31 December 2008 (restated) |
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|
|
|
|
£000 |
£000 |
|
|
|
|
|
|
|
|
Profit for the year |
|
|
4,182 |
5,652 |
|
|
|
|
|
|
|
|
|
Net gain/(loss) on cash flow hedges |
|
|
(672) |
(1,372) |
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Transfer of cash flow hedge interest to income statement |
|
757 |
- |
||
|
Taxation |
|
|
(24) |
384 |
|
|
Other comprehensive income/(loss) for the year, net of tax |
61 |
(988) |
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|
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|
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Total comprehensive income for the year, net of tax |
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4,243 |
4,664 |
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Attributable to: |
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Equity holders of the parent |
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4,243 |
4,664 |
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Deferred tax in the comparative figures for 31 December 2008 has been restated to reflect correctly a deferred tax asset and an adjustment to the fair value of the cash flow hedge reserve of £384,000 relating to the shortfall in the fair value of the cash flow interest rate hedge at that date. The restatement had no impact on the income statement or cash flow of the Group.
Group statement of financial position
at 31 December 2009
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As at 31 December 2009
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As at 31 December 2008 (restated) |
As at 1 January 2008
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Notes |
£000 |
£000 |
£000 |
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Assets |
|
|
|
|
|
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Non-current assets |
|
|
|
|
|
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Property, plant and equipment |
8 |
112,570 |
111,117 |
102,257 |
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Investment property |
9 |
6,342 |
6,122 |
- |
|
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Intangible assets |
10 |
5,604 |
5,604 |
5,604 |
|
|
|
|
|
124,516 |
122,843 |
107,861 |
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Current assets |
|
|
|
|
|
|
Inventories |
|
337 |
413 |
411 |
|
|
Trade and other receivables |
|
2,424 |
3,383 |
4,148 |
|
|
Prepayments |
|
2,771 |
2,064 |
2,121 |
|
|
Cash |
|
- |
- |
834 |
|
|
|
|
|
5,532 |
5,860 |
7,514 |
|
Total assets |
|
130,048 |
128,703 |
115,375 |
|
|
Equity and liabilities |
|
|
|
|
|
|
Equity attributable to equity holders of parent |
|
|
|
||
|
Share capital |
11 |
4,610 |
4,594 |
4,591 |
|
|
Share premium |
11 |
43,692 |
43,692 |
43,615 |
|
|
Capital redemption reserve |
11 |
135 |
135 |
135 |
|
|
Merger reserve |
11 |
348 |
348 |
348 |
|
|
Fair value of cash flow hedge |
11 |
(927) |
(988) |
- |
|
|
Retained earnings |
|
24,692 |
22,220 |
17,616 |
|
|
Total equity |
|
72,550 |
70,001 |
66,305 |
|
|
Non-current liabilities |
|
|
|
|
|
|
Interest-bearing loans and borrowings |
12 |
45,149 |
41,427 |
30,894 |
|
|
Deferred tax liabilities |
|
1,894 |
2,557 |
3,921 |
|
|
|
|
|
47,043 |
43,984 |
34,815 |
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
|
8,548 |
12,012 |
12,913 |
|
|
Interest-bearing loans and borrowings |
12 |
944 |
1,198 |
- |
|
|
Tax payable |
|
963 |
1,508 |
971 |
|
|
Provisions |
|
- |
- |
371 |
|
|
|
|
|
10,455 |
14,718 |
14,255 |
|
Total liabilities |
|
57,498 |
58,702 |
49,070 |
|
|
Total equity and liabilities |
|
130,048 |
128,703 |
115,375 |
|
Investment property in the comparative years has been restated to recognise the category separately; it was previously included within 'Property, plant and equipment'.
Deferred tax in the comparative figures for 31 December 2008 has been restated to reflect correctly a deferred tax asset and an adjustment to the fair value of the cash flow hedge reserve of £384,000 relating to the shortfall in the fair value of the cash flow interest rate hedge at that date.
The financial statements were approved by the Board of Directors on 30 March 2010 and are signed on its behalf by:
Patrick Garner FCA
Finance Director
Group statement of cash flows
for the year ended 31 December 2009
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|
|
|
Year ended 31 December 2009
|
Year ended 31 December 2008 (restated) |
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
Notes |
£000 |
£000 |
|
Cash flow from operating activities |
|
|
|
|
|
Profit before tax |
|
4,451 |
5,933 |
|
|
Adjustments to reconcile profit before tax to net cash flows |
|
|
|
|
|
Exceptional income |
4 |
(804) |
- |
|
|
Depreciation |
|
3,699 |
3,594 |
|
|
Share-based payment charges |
|
196 |
516 |
|
|
Finance costs |
5 |
3,171 |
2,424 |
|
|
Cash flow from operating activities before changes in working capital |
|
10,713 |
12,467 |
|
|
Decrease in trade and other receivables |
|
252 |
822 |
|
|
Decrease/(increase) in inventories |
|
76 |
(2) |
|
|
Decrease in trade and other payables |
|
(2,537) |
(3,683) |
|
|
Cash generated from operations |
|
8,504 |
9,604 |
|
|
Finance costs paid |
|
(2,831) |
(1,801) |
|
|
Corporation tax paid |
|
(1,499) |
(750) |
|
|
Net cash flow from operating activities |
|
4,174 |
7,053 |
|
|
Cash flow from/(used in) investing activities |
|
|
|
|
|
Proceeds from insurance for 007 Stage |
4 |
439 |
- |
|
|
Purchase of property, plant and equipment |
|
(5,652) |
(10,967) |
|
|
Additions to investment property |
|
(696) |
(5,646) |
|
|
Net cash flow used in investing activities |
|
(5,909) |
(16,613) |
|
|
Cash flow (used in)/from financing activities |
|
|
|
|
|
Proceeds from the issue of shares |
|
- |
80 |
|
|
Payment of asset financing liabilities |
|
(77) |
- |
|
|
Payment of loan issue fees |
|
(24) |
(1,385) |
|
|
Dividends paid |
7 |
(1,541) |
(1,538) |
|
|
Proceeds from asset financing |
|
1,000 |
- |
|
|
Proceeds from borrowings of joint venture |
|
631 |
1,371 |
|
|
Repayment of bank borrowings |
|
- |
(26,000) |
|
|
Proceeds from bank borrowings |
|
2,000 |
35,000 |
|
|
Net cash flow from financing activities |
|
1,989 |
7,528 |
|
|
Net increase/(decrease) in cash |
|
254 |
(2,032) |
|
|
(Overdraft)/cash at the start of the year |
|
(1,198) |
834 |
|
|
Overdraft at the end of the year |
|
(944) |
(1,198) |
|
Investment property is now recognised as a separate category within 'Assets' on the statement of financial position. The cash flow statement for the year ended 31 December 2008 has been restated to reflect the additions to investment property.
Group reconciliation of movement in net debt
for the year ended 31 December 2009
|
|
|
|
Year |
Year |
|
|
|
|
ended |
ended |
|
|
|
|
31 December |
31 December |
|
|
|
|
2009 |
2008 |
|
|
|
Notes |
£000 |
£000 |
|
Reconciliation of net cash flow to movement in net debt |
|
|
|
|
|
Increase/(decrease) in cash |
|
254 |
(2,032) |
|
|
Repayments of asset financing obligations |
|
77 |
- |
|
|
Proceeds from asset financing |
|
(1,000) |
- |
|
|
Loan issue costs |
|
24 |
1,385 |
|
|
Amortisation of loan issue costs |
|
(277) |
(175) |
|
|
Proceeds from borrowings of joint venture |
|
(631) |
(1,371) |
|
|
Repayment of bank borrowings |
|
- |
26,000 |
|
|
Proceeds from bank borrowings |
|
(2,000) |
(35,000) |
|
|
Movement in fair value of cash flow hedge |
|
85 |
(1,372) |
|
|
Movement in net debt |
|
(3,468) |
(12,565) |
|
|
Net debt at start of year |
|
(42,625) |
(30,060) |
|
|
Net debt at end of year |
|
(46,093) |
(42,625) |
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Interest-bearing loans and borrowings |
12 |
(944) |
(1,198) |
|
|
Non-current liabilities |
|
|
|
|
|
Revolving credit facility loan |
12 |
(26,000) |
(24,000) |
|
|
Pre-let development facility loan |
12 |
(6,000) |
(6,000) |
|
|
Drawn facility loan |
|
(32,000) |
(30,000) |
|
|
Fair value of cash flow hedge |
12 |
(1,287) |
(1,372) |
|
|
Unamortised loan issue costs |
12 |
1,063 |
1,316 |
|
|
Asset financing |
12 |
(923) |
- |
|
|
Share of joint venture loan |
12 |
(12,002) |
(11,371) |
|
|
Interest-bearing loans and borrowings |
|
(46,093) |
(42,625) |
|
|
Net debt at end of year |
|
(46,093) |
(42,625) |
|
Group statement of changes in equity
From 1 January 2009 to 31 December 2009
|
|
Share capital |
Share premium |
Capital redemption reserve |
Merger reserve |
Fair value of cash flow hedge reserve |
Retained earnings |
Total equity |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
At 1 January 2009 |
4,594 |
43,692 |
135 |
348 |
(988) |
22,220 |
70,001 |
|
Profit for the year |
- |
- |
- |
- |
- |
4,182 |
4,182 |
|
Other comprehensive income |
- |
- |
- |
- |
61 |
- |
61 |
|
Total comprehensive income |
- |
- |
- |
- |
61 |
4,182 |
4,243 |
|
Equity dividends (Note 7) |
- |
- |
- |
- |
- |
(1,541) |
(1,541) |
|
New shares issued (Note 11) |
16 |
- |
- |
- |
- |
- |
16 |
|
Share-based payments |
- |
- |
- |
- |
- |
(169) |
(169) |
|
At 31 December 2009 |
4,610 |
43,692 |
135 |
348 |
(927) |
24,692 |
72,550 |
From 1 January 2008 to 31 December 2008
|
|
Share capital |
Share premium |
Capital redemption reserve |
Merger reserve |
Fair value of cash flow hedge reserve (restated) |
Retained earnings |
Total equity (restated) |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
At 1 January 2008 |
4,591 |
43,615 |
135 |
348 |
- |
17,616 |
66,305 |
|
Profit for the year |
- |
- |
- |
- |
- |
5,652 |
5,652 |
|
Other comprehensive loss |
- |
- |
- |
- |
(1,372) |
(26) |
(1,398) |
|
Total comprehensive income |
- |
- |
- |
- |
(1,372) |
5,626 |
4,254 |
|
Equity dividends (Note 7) |
- |
- |
- |
- |
- |
(1,538) |
(1,538) |
|
New shares issued Note 11) |
3 |
77 |
- |
- |
- |
- |
80 |
|
Share-based payments |
- |
- |
- |
- |
- |
516 |
516 |
|
At 31 December 2008 |
4,594 |
43,692 |
135 |
348 |
(1,372) |
22,220 |
69,617 |
|
Restated other comprehensive loss |
- |
- |
- |
- |
384 |
- |
384 |
|
Restated at 31 December 2008 |
4,594 |
43,692 |
135 |
348 |
(988) |
22,220 |
70,001 |
Deferred tax in the comparative figures for 31 December 2008 has been restated to reflect correctly a deferred tax asset and an adjustment to the fair value of the cash flow hedge reserve of £384,000 relating to the shortfall in the fair value of the cash flow interest rate hedge at that date. The restatement had no impact on the income statement or cash flow of the Group.
Publication of non-statutory accounts
The financial information contained herein does not constitute the Group's statutory accounts for the year ended 31 December 2009, as defined in Section 435 of the Companies Act 2006, but have been extracted from the statutory accounts, upon which the auditors issued an unqualified opinion. Statutory
accounts for 2008 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 December 2009 will be delivered following the Company's Annual General Meeting.
Forward-looking statements
The business review contains forward-looking statements that are made by the Directors in good faith. This information is based on the view of the Board of Directors at the date of approval of this Annual Report and based on knowledge and information at that time together with what are considered to be reasonable judgements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors outside of the Group's control which could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including factors outside of the Group's control. Any forward-looking statements speak only as of the date that they are made, and the Group gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes to events, conditions or circumstances on which any such statement is based.
Extracts of notes to the financial statements
1. Basis of preparation and changes in accounting policy and disclosures
The consolidated financial statements of Pinewood Shepperton plc and all of its subsidiaries and joint ventures have been prepared in accordance with IFRSs as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2009 and applied in accordance with the Companies Act 2006.
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2009. The Group financial statements are presented in UK sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.
Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those of the previous financial year except as follows:
|
|
Effective date |
|
|
IFRS 2 |
Amendment to IFRS 2 - Vesting Conditions and Cancellations |
1 January 2009 |
|
IFRS 7 |
Amendments to IFRS 7 - Financial Instrument disclosures |
1 January 2009 |
|
IFRS 8 |
Operating Segments |
1 January 2009 |
|
IAS 1 |
Presentation of Financial Statements (revised September 2007 and February 2008) |
1 January 2009 |
|
IAS 23 |
Borrowing Costs (revised) |
1 January 2009 |
|
IAS 32 |
Amendment to IAS 32 - Financial Instruments |
1 January 2009 |
|
IAS 40 |
Investment Property |
1 January 2009 |
The Group adopted the amendments and revisions as outlined below.
Share-based payments
IFRS 2, Share-based payments (revised), clarifies the definition of vesting conditions and prescribes the treatment for an award that is cancelled. The Group adopted this amendment and it did not have an impact on the financial position or performance of the Group. The IASB also issued an amendment to IFRS 2 that clarified the scope and the accounting for group cash-settled share-based payment transactions. The Group has not issued cash-settled share-based payment instruments. This revision had no impact on the financial position or performance of the Group.
Financial instruments: disclosures
IFRS 7, Financial instrument disclosures (revised), requires additional disclosure about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value hierarchy, by class, for all financial instruments recognised at fair value. The amendments also clarify the requirements for liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. This revision had no impact on the financial position or performance of the Group.
Operating segments
IFRS 8, Operating Segments, requires reporting of segmental results. Management review revenue as Film, Television and Media Park and review profitability of the business as a whole. Under the terms of IFRS 8 the Group is deemed to have one segment. This revision had no impact on the financial position or performance of the Group.
Presentation of financial statements
IAS 1, Presentation of Financial Statements, requires the separation of owner and non-owner changes in equity and also introduces the statement of comprehensive income. It presents all items of recognised income and expense either in one single statement or in two linked statements. The Group has elected to present two statements. When an accounting policy is retrospectively applied or a restatement is made, the Group will provide a statement of financial position at the beginning of the earliest period being presented together with notes where the change has a material impact. This revision had no impact on the financial position or performance of the Group.
Borrowing costs
IAS 23, Borrowing costs (revised), requires capitalisation of borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. The Group applied the conditions of this standard earlier than the effective date and borrowing costs have been capitalised on qualifying assets with a commencement date of 1 January 2007. No changes have been made for borrowing costs incurred prior to this date that have been expensed. This revision had no impact on the financial position or performance of the Group.
Financial instruments: presentation
IAS 32, Financial instruments: presentation, and IAS 1, Puttable financial instruments and obligations arising on liquidation, have been amended to allow a limited scope exception for puttable financial instruments to be classified as equity if they fulfil a number of specified criteria. This revision had no impact on the financial position or performance of the Group.
Investment property
During the year the Group recognised 'Investment property' as an asset category. As defined by IAS 40, investment property is property held to earn rental income and/or for capital appreciation. Investment property assets are carried at cost (including transaction costs) less accumulated depreciation and any recognised impairment in value. The depreciation policies for investment property are in accordance with the Group depreciation policy. This revision had no impact on the financial performance or overall financial position of the Group.
Improvements to IFRS's
The IASB has issued amendments to its standards, primarily with a view to remove inconsistencies and clarify wording. There are separate transitional provisions for each standard. The following standards did not have any impact on the accounting policies, financial position or performance of the Group:
|
IFRS 5 |
Non-current assets held for sale and discontinued operations |
|
|
IAS 7 |
Statement of cash flows |
|
|
IAS 8 |
Accounting policies, change in accounting estimates and error |
|
|
IAS 10 |
Events after the reporting date |
|
|
IAS 16 |
Property, plant and equipment |
|
|
IAS 18 |
Revenue |
|
|
IAS 19 |
Employee benefits |
|
|
IAS 20 |
Accounting for government grants |
|
|
IAS 27 |
Consolidated and separate financial statements |
|
|
IAS 28 |
Investments in associates |
|
|
IAS 31 |
Interests in joint ventures |
|
|
IAS 36 |
Impairment of assets |
|
|
IAS 38 |
Intangible assets |
|
|
IFRIC 9 |
Reassessment of embedded derivatives |
|
|
IFRIC 13 |
Customer Loyalty Programmes |
|
|
IFRIC 16 |
Hedges of a Net Investment in a Foreign Operation |
|
2. Segment information and revenue analysis
The chief operating decision maker is the Board of Directors. The Group operates in one principal continuing area of activity, that of media services, primarily arising in the United Kingdom. It provides studio and related services to the film and television industry.
Revenues from these activities can be further analysed by type of customer as follows:
|
|
|
|
Year ended 31 December 2009 |
Year ended 31 December 2008 |
|
|
|
|
£000 |
£000 |
|
Film |
|
|
22,635 |
24,159 |
|
Television |
|
|
11,339 |
12,742 |
|
Media Park |
|
|
6,347 |
5,966 |
|
|
|
|
40,321 |
42,867 |
Other information provided to the Board of Directors is in a format consistent with that in the financial statements.
Revenue from three customers of £4.0m, £3.9m and £3.9m (2008: three customers of £5.7m, £5.3m and £4.5m) was recognised in the year.
3. Interest in a joint venture
The Group has a 50% interest in Shepperton Studios Property Partnership, an entity controlled jointly with a third party, Aviva Group, which holds a 996 year lease on the Shepperton Studios property.
The Group's share of the joint venture's assets, liabilities and results, which are proportionately consolidated in the consolidated financial statements, are as follows:
|
|
|
|
|
2009 |
2008 |
|
|
|
|
|
£000 |
£000 |
|
Share of joint ventures balance sheet |
|
|
|
|
|
|
Property, plant and equipment |
|
|
|
20,623 |
20,995 |
|
Current assets |
|
|
|
73 |
157 |
|
|
|
|
|
20,696 |
21,152 |
|
Interest-bearing loans and borrowings |
|
|
(12,002) |
(11,371) |
|
|
Current liabilities |
|
|
|
(511) |
(548) |
|
|
|
|
|
(12,513) |
(11,919) |
|
Share of joint ventures income and expenses |
|
|
|
||
|
Revenue |
|
|
|
852 |
968 |
|
Cost of sales |
|
|
|
(507) |
(575) |
|
Administrative expenses |
|
|
|
(10) |
6 |
|
Finance costs |
|
|
|
(739) |
(751) |
|
Net loss |
|
|
|
(404) |
(352) |
The Group's share of the capital commitments in respect of property, plant and equipment was £256,000 (2008: nil).
4. Exceptional items
Exceptional income
Exceptional income for the year was £804,000 and consists of:
007 Stage Fire
During the year additional insurance proceeds were received as final settlement of the 30 July 2006 fire incident. The final amount received, after deducting professional fees directly associated with the claim, was £439,000.
Share-based payment
Following a review of the Total Shareholder Return component of the Groups Long-Term Incentive Plan awards, granted in 2007 and 2008, £365,000 of the IFRS 2 charges to the Group income statement were reversed as an exceptional credit in the year.
Exceptional costs
Exceptional costs for the year were £851,000 and consist of:
Provisions against advances
The Group has provided against two advances for film and television projects amounting to £350,000. These have been recognised as exceptional as they were not in the normal course of business.
Group reorganisation
The Board incurred restructuring costs which led to an exceptional charge for the year of £501,000. Ongoing annual cost savings of a comparable amount are anticipated.
5. Finance costs
|
|
|
|
|
2009 |
2008 |
|
|
|
|
|
£000 |
£000 |
|
Bank loans and overdrafts |
|
|
|
1,543 |
1,617 |
|
Interest rate hedging |
|
|
|
759 |
- |
|
Share of joint venture loan |
|
|
|
739 |
751 |
|
Bank charges |
|
|
|
27 |
33 |
|
Finance charges payable under asset financing |
|
43 |
- |
||
|
Other loans |
|
|
|
60 |
23 |
|
|
|
|
|
3,171 |
2,424 |
Finance costs of £120,000 (2008: £479,000) directly attributable to the construction of certain capital items have been capitalised based on LIBOR plus a variable margin consistent with the Group's secured bank loan. The capitalisation rate was 6.0% (2008: 7.05%).
6. Taxation
|
|
Year ended 31 December 2009
|
Year ended 31 December 2008 (restated) |
|
|
£000 |
£000 |
|
Consolidated income statement |
|
|
|
Current corporation tax |
|
|
|
UK corporation tax |
1,122 |
1,565 |
|
Amounts (over)/under provided in previous years |
(167) |
(278) |
|
Total current corporation tax |
955 |
1,287 |
|
Deferred tax |
|
|
|
Relating to origination and reversal of temporary differences |
(558) |
(250) |
|
Amounts (over)/under provided in previous years |
(128) |
(756) |
|
Tax charge in the income statement |
269 |
281 |
|
The tax charge in the income statement comprises: |
|
|
|
Tax on profit before exceptional items |
492 |
281 |
|
Tax provision adjustments relating to exceptional items |
(223) |
- |
|
Tax charge in the income statement |
269 |
281 |
|
Tax relating to items charged or credited to equity |
|
|
|
Deferred tax: |
|
|
|
Deferred tax charge reported in equity on cash flow hedges |
24 |
(384) |
|
Deferred tax reported in equity on share-based payments |
- |
26 |
|
Tax charge in the statement of changes in equity |
24 |
(358) |
The deferred tax charge recognised in equity is also reflected in the Group statement of other comprehensive income for the year together with the post tax effect in the Group statement of changes in equity.
7. Earnings per ordinary share and dividend
Earnings per ordinary share
Basic earnings per ordinary share are calculated by dividing net profit for the year attributable to the holders of ordinary equity of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per ordinary share are calculated by dividing net profit for the year attributable to the holders of ordinary equity of the parent by the weighted average number of ordinary shares outstanding during the year adjusted for the effects of dilutive potential ordinary shares resulting from employee share schemes.
The Group presents as exceptional items on the face of the income statement those items where the cost or income is of such size or incidence that the additional disclosure is required for the reader to understand the financial statements. Basic and diluted earnings per share are also presented on this basis.
Basic and diluted earnings per share are also presented adjusting for the combined effect of the exceptional items and the effects of indexation on the deferred tax provision.
The following reflects the profit and number of shares generating the basic and diluted earnings per ordinary share computations:
|
|
2009 |
2008 |
|
|
£000 |
£000 |
|
Profit attributable to equity holders of the parent |
4,182 |
5,652 |
|
Adjustments to profit for calculation of adjusted earnings per share |
|
|
|
Exceptional income |
(804) |
- |
|
Exceptional costs |
851 |
- |
|
Taxation adjustments on exceptional items |
(223) |
- |
|
Adjusted profit for adjusted earnings per share |
4,006 |
5,652 |
|
Effect of indexation on deferred tax provision |
(571) |
(224) |
|
Adjusted profit for adjusted earnings per share |
3,435 |
5,428 |
|
|
|
|
|
|
Thousands |
Thousands |
|
Basic weighted average number of ordinary shares |
45,985 |
45,929 |
|
Dilutive potential ordinary shares resulting from employee share schemes |
1,342 |
1,186 |
|
Diluted weighted average number of ordinary shares |
47,327 |
47,115 |
|
|
|
|
|
Earnings per share |
2009 |
2008 |
|
- basic for result for the year |
9.1p |
12.3p |
|
- diluted for result for the year |
8.8p |
12.0p |
|
- basic for result for the year adjusted for exceptional items |
8.7p |
12.3p |
|
- diluted for result for the year adjusted for exceptional items |
8.5p |
12.0p |
|
- basic for result for the year adjusted for exceptional items and effect of indexation on deferred tax provision |
7.5p |
11.8p |
|
- diluted for result for the year adjusted for exceptional items and effect of indexation on deferred tax provision |
7.3p |
11.5p |
Dividend paid
|
|
2009 |
2008 |
|
|
£000 |
£000 |
|
Final dividend for 2007 paid at 2.30p per share |
- |
1,056 |
|
Interim dividend for 2008 paid at 1.05p per share |
- |
482 |
|
Final dividend for 2008 paid at 2.30p per share |
1,057 |
- |
|
Interim dividend for 2009 paid at 1.05p per share |
484 |
- |
|
|
1,541 |
1,538 |
The Board is recommending a final dividend of 2.40p per ordinary share for approval at the Annual General Meeting and, based on the shares in issue at the date the Board approved the Group financial statements, this would amount to a total dividend payment of £1,106,518. This has not been recognised as a liability at 31 December 2009.
8. Property, plant and equipment
|
|
Freehold land |
Freehold buildings and improvements (restated) |
Leasehold improvements |
Fixtures, fittings and equipment |
Assets under construction (restated) |
Total (restated) |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Cost: |
|
|
|
|
|
|
|
At 1 January 2008 |
46,910 |
49,446 |
637 |
22,672 |
4,194 |
123,859 |
|
Additions |
276 |
2,565 |
473 |
2,011 |
7,129 |
12,454 |
|
Transfers |
3,782 |
4,443 |
- |
500 |
(8,725) |
- |
|
At 31 December 2008 |
50,968 |
56,454 |
1,110 |
25,183 |
2,598 |
136,313 |
|
Additions |
1,598 |
1,426 |
314 |
788 |
931 |
5,057 |
|
Disposals |
- |
- |
- |
(54) |
- |
(54) |
|
Transfers |
326 |
611 |
353 |
110 |
(1,400) |
- |
|
At 31 December 2009 |
52,892 |
58,491 |
1,777 |
26,027 |
2,129 |
141,316 |
|
Depreciation: |
|
|
|
|
|
|
|
At 1 January 2008 |
- |
7,350 |
150 |
14,102 |
- |
21,602 |
|
Provided during the year |
- |
1,439 |
229 |
1,926 |
- |
3,594 |
|
At 31 December 2008 |
- |
8,789 |
379 |
16,028 |
- |
25,196 |
|
Provided during the year |
- |
1,579 |
242 |
1,754 |
|
3,575 |
|
Depreciation on disposals |
- |
- |
- |
(25) |
|
(25) |
|
At 31 December 2009 |
- |
10,368 |
621 |
17,757 |
- |
28,746 |
|
Net book value: |
|
|
|
|
|
|
|
At 31 December 2009 |
52,892 |
48,123 |
1,156 |
8,270 |
2,129 |
112,570 |
|
At 31 December 2008 |
50,968 |
47,665 |
731 |
9,155 |
2,598 |
111,117 |
|
At 1 January 2008 |
46,910 |
42,096 |
487 |
8,570 |
4,194 |
102,257 |
During the year, property, plant and equipment has been restated for the year ended 31 December 2008 to reclassify certain assets as 'Investment property' in accordance with IAS 40. Details are presented in Note 9. The restatement had no impact on the Group income statement and Group statement of cash flows.
Included within 'Freehold land' is £4,779,000 of capitalised costs in relation to Project Pinewood.
Assets under construction at 31 December 2009 primarily relates to building refurbishment and infrastructure costs, these are not depreciated.
The Group's long-term loan is secured by a floating charge over the Group's assets.
Shepperton Studios Property Partnership's ("SSPP") long leasehold interest in the Shepperton Studios site was valued at £32,830,000 by an independent firm of Chartered Surveyors in December 2009 (2008: £34,750,000). The Group carries its' 50% interest in the long leasehold of SSPP of £20,623,000 (2008: £21,527,000) at depreciated cost.
9. Investment property
|
|
|
|
|
2009 |
2008 |
|
|
|
|
|
|
(restated) |
|
Cost: |
|
|
|
£000 |
£000 |
|
Opening balance at 1 January |
|
|
|
6,122 |
- |
|
Additions |
|
|
|
344 |
6,122 |
|
Closing balance at 31 December |
|
|
6,466 |
6,122 |
|
|
|
|
|
|
|
|
|
Depreciation: |
|
|
|
|
|
|
Opening balance at 1 January |
|
|
|
- |
- |
|
Provided during the year |
|
|
|
124 |
- |
|
Closing balance at 31 December |
|
|
124 |
- |
|
|
|
|
|
|
|
|
|
Net book value: |
|
|
|
6,342 |
6,122 |
During the year the Group recognised 'Investment property' as an asset category. Investment property assets are carried at cost (including transaction cost) less accumulated depreciation and any recognised impairment in value. During the year ended 31 December 2009, the Group recognised an investment property with a cost of £6.5m. The year ended 31 December 2008 has been restated to reflect the comparable additions. At 1 January 2008, the value of investment property on the Group statement of financial position was nil.
No independent valuation has been undertaken. A Directors valuation was carried out to determine the fair value of the investment property. A yield based valuation has been used which provided a fair value of £6.8m at 31 December 2009 using a 7.25% yield and allowing for purchasers costs of 5.75%. The fair value at 31 December 2008, again using the yield based valuation method provided a fair value of £6.1m, assuming an 8.0% yield and allowing for purchaser's costs of 5.75%.
10. Intangible assets and impairment testing
|
|
Goodwill £000 |
|
At 31 December 2009 and 2008 |
5,604 |
The goodwill of £5,604,000 (2008: £5,604,000) has been acquired through business combinations and has been allocated to the Group's cash-generating unit.
The recoverable amount of the cash-generating unit is based on a value in use calculation and is tested at least annually for impairment. Other than goodwill there are no intangible assets with indefinite lives.
Outcome of impairment review
The recoverable amount of the Group's cash-generating unit exceeds its carrying value and no impairment charge has been recognised (2008: no impairment charge recognised).
Key assumptions
The value in use calculations use five year cash flow projections derived from the Board approved budget for the next year and the Board approved long range plan and do not include non-cash generating assets, any activities that the Group is not yet committed to or significant future investments that will enhance the asset's performance of the cash generating unit. The key assumptions used in the value in use calculations are:
Discount rate
The discount rate reflects the current market assessment of the risks specific to the cash-generating unit. The discount rate was calculated using the Group's cost of debt together with an estimate based on the average cost of equity for the industry, adjusted to reflect the market assessment of any risk specific to the cash-generating unit for which future estimates of cash flows have not been adjusted. The pre-tax discount rate used is 11.4% (2008: 12.9%).
Perpetuity growth rate
The cash flows subsequent to the Board approved period are based on the long term growth rate prospects of the industry in which the Group operates. The perpetuity growth rate used is 2.5% (2008: 2.5%).
Cash flow from operations
Cash flow projections have been estimated using a combination of assumptions including, but not limited to, facility utilisation, income growth and Media Park void ratios and rent increases. Considering previously achieved trading levels and the anticipated future operating environment for the business and taking into account any cost efficiencies which may be achieved, management have retained the assumptions used in its Board approved budget and its long range plan.
Sensitivities
The Group's impairment review is sensitive to a change in the key assumptions used, most notably the discount rate. The discount rate would need to move to 13.7% to result in a breakeven position and, should the discount rate remain at 11.4%, the perpetuity growth rate would need to be a negative 0.7% to reach a breakeven point. Based on the Group's sensitivity analysis, a reasonable possible change in a single factor would not cause an impairment charge.
11. Share capital and reserves
Authorised
|
|
2009 £000 |
2008 £000 |
|
Ordinary shares of 10p each |
7,000 |
7,000 |
Issued, called up and fully paid
|
|
|
2009 |
|
2008 |
|
|
No. |
£000 |
No. |
£000 |
|
Ordinary shares of 10p each |
45,944,791 |
4,594 |
45,908,596 |
4,591 |
|
Shares issued under the Pinewood Shepperton plc Sharesave scheme: |
|
|
|
|
|
10p ordinary shares issued on 25 January 2008 |
- |
- |
4,630 |
- |
|
10p ordinary shares issued on 24 June 2008 |
- |
- |
31,565 |
3 |
|
10p ordinary shares issued on 14 September 2009 |
101,990 |
10 |
- |
- |
|
10p ordinary shares issued on 30 October 2009 |
58,125 |
6 |
- |
- |
|
|
46,104,906 |
4,610 |
45,944,791 |
4,594 |
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the general meetings of the Company.
Share option schemes
The Group has two share-based payment plans under which options to subscribe for the Group's shares have been granted. At 31 December 2009, 356,679 shares were outstanding (2008: 240,510).
Long-term incentive plan
The Group has a long-term incentive plan under which awards for the Group's shares have been granted to certain executives and senior employees. At 31 December 2009, 1,299,461 share awards were outstanding (2008: 1,902,651).
Nature and purpose of reserve
Share premium reserve
The share premium reserve increased by nil (2008: £77,000) in the year as a result of the share issues noted in the table above.
Capital redemption reserve
The capital redemption reserve arose as a result of the repurchase of shares in 2001.
Merger reserve
On acquiring Shepperton Studios Limited the Group issued ordinary shares as part of the consideration. Merger relief was taken in accordance with Section 131 of the Companies Act 1985 (since succeeded by Section 612 of the Companies Act 2006), and hence £348,000 was credited to the merger reserve.
Fair value of cash flow hedge reserve
The cash flow hedge reserve is used to record the fair value gains or losses, and related deferred tax, on the hedging instruments used by the Group to manage interest rate risk. The cash flow hedges are determined to be effective hedges.
12. Interest-bearing loans and borrowings
|
|
Effective interest rate |
|
2009 |
2008 |
|
|
Current borrowings |
% |
Maturity |
£000 |
£000 |
|
|
Bank overdraft |
Base rate + 2.25% margin |
Annual renewal |
944 |
1,198 |
|
|
|
|
|
944 |
1,198 |
|
|
|
|
|
|
|
|
|
Non-current borrowings |
|
|
|
|
|
|
Revolving credit facility |
LIBOR + variable margin |
15 August 2013 |
26,000 |
24,000 |
|
|
Pre-let development facility |
LIBOR + variable margin |
15 August 2013 |
6,000 |
6,000 |
|
|
Secured drawn facility loan |
|
|
32,000 |
30,000 |
|
|
Asset financing |
Implicit rate of 7.3% |
30 May 2014 |
923 |
- |
|
|
Share of joint venture loan |
Base rate + 2% margin |
30 September 2026 |
12,002 |
11,371 |
|
|
Non-current drawn loan facilities |
|
|
44,925 |
41,371 |
|
|
Cash flow hedge |
5.525% + variable margin |
31 March 2009 |
- |
46 |
|
|
Cash flow hedge |
2.89% + variable margin |
1 July 2013 |
42 |
- |
|
|
Cash flow hedge |
5.195% + variable margin |
1 July 2013 |
1,245 |
1,326 |
|
|
Secured bank loan arrangement costs |
|
(1,063) |
(1,316) |
||
|
|
|
|
45,149 |
41,427 |
|
|
|
|
|
|
|
|
|
Total current and non-current interest-bearing loans and borrowings |
46,093 |
42,625 |
|||
Banking facilities
The Group has agreements with a syndicate of banks, which provides facilities as follows:
Overdraft
A £5,000,000 (2008: £5,000,000) overdraft facility to support the future operating activities of the business, secured by a floating charge over the Group's assets. This facility is in place until August 2013 and is subject to annual review with interest charged at 225 basis points over bank base rate.
Revolving credit facility
A revolving credit facility of up to £35,000,000 to support the operating activities of the business, secured by a floating charge over the Group's assets. Interest is charged at LIBOR plus a variable margin of between 175 and 275 basis points based on specific covenant levels. This facility is in place until August 2013.
Pre-let development facility
A pre-let development facility of up to £30,000,000 to support the pre-let Media Park development strategy. Interest is charged at LIBOR plus a variable margin of between 175 and 225 basis points based on the status of the pre-let development. This facility is in place until August 2013.
Long-term loan facilities become repayable on demand following a change in control of the Group.
The overdraft, revolving credit facility and pre-let development facility are secured by a floating charge over the assets of the Group.
Covenants
The banking agreements contain a range of covenants appropriate for the revolving credit facility, pre-let development facility and overdraft facility. The Group was covenant compliant at 31 December 2009.
Cash flow hedge
At 31 December 2009, the Group held interest rate swaps designated as hedges against drawn debt obligations amounting to £22,500,000 (2008: £22,500,000).
Asset financing facility
The asset financing facility is a £923,000 chattel mortgage facility over a fixed term with fixed monthly payments and is secured over identifiable assets of an equal value. These assets are classified as 'Fixtures, fittings and equipment' within 'Property, plant and equipment' on the statement of financial position.
Share of joint venture loan
This relates to the Group's 50% interest, £12,002,000 (2008: £11,371,000) of the joint venture's £24,004,000 investor and development loans (2008: £22,742,000). These loans are secured by a fixed charge on the assets of Shepperton Studios Property Partnership, are non-recourse to the Group and are repayable in full on 30 September 2026. Interest on the loans is at base rate plus a 2% margin with an interest rate floor of 6.5%. The interest rate floor is an embedded derivative in the loan agreement; however the derivative has not been separated from the loan agreement as it satisfies the criteria for non-separation in IAS 39. This facility is covenant free.
13. Commitments and contingencies
Capital commitments
At 31 December 2009 and 31 December 2008, the Group had no capital commitments contracted for but not provided in the accounts in relation to the completion of certain capital expenditure projects.
Guarantees
At 31 December 2009, the Group had guarantees in place, in the form of documentary credits, that were not provided for in the accounts totalling £163,250 (2008: £557,345) in relation to certain Section 278 highways related infrastructure.
14. Related party disclosures
The consolidated financial statements include the financial statements of Pinewood Shepperton plc, its subsidiaries and its 50% interest in the joint ventures listed in the following table.
|
|
|
|
% equity interest |
|
|
Country of incorporation |
2009 |
2008 |
|
Pinewood Studios Limited |
United Kingdom |
100 |
100 |
|
Shepperton Studios Limited |
United Kingdom |
100 |
100 |
|
Pinewood-Shepperton Studios Limited |
United Kingdom |
100 |
100 |
|
Studiolink Limited |
United Kingdom |
100 |
100 |
|
Teddington Studios Limited |
United Kingdom |
100 |
100 |
|
The Studio Broadcasting Company Limited |
United Kingdom |
100 |
100 |
|
Baltray No.1 Limited |
United Kingdom |
100 |
100 |
|
Baltray No.2 Limited |
United Kingdom |
100 |
100 |
|
Shepperton Management Limited |
United Kingdom |
100 |
100 |
|
Saul's Farm and Stables Limited |
United Kingdom |
100 |
100 |
|
Saul's Farm Limited |
United Kingdom |
100 |
100 |
|
Pinewood Malaysia Limited |
United Kingdom |
100 |
- |
|
Pinewood Germany Limited |
United Kingdom |
100 |
- |
Pinewood Shepperton plc is the parent entity of the Group.
|
Joint ventures |
|
% Joint venture interest |
|
|
Shepperton Studios (General Partner) Limited |
United Kingdom |
50 |
50 |
|
Shepperton Studios Property Partnership |
United Kingdom |
50 |
50 |
During the year the Group entered into transactions with the following related parties, involving the utilisation of media facilities at normal market rates and settlement terms. No impairment was recognised against the amounts owed at each year end.
|
|
|
Sales to related party £000 |
Amounts owed by related party £000 |
|
Entity with which Michael Grade was associated during the year: |
|
|
|
|
ITV plc |
2009 |
425 |
33 |
|
ITV plc |
2008 |
175 |
2 |
During the year Michael Grade was Non-Executive Chairman of Pinewood Shepperton plc and Executive Chairman of ITV plc. Effective as of 31 December 2009, Michael Grade resigned as Chairman and Director of ITV plc.
Joint ventures:
Shepperton Studios Limited has a commercial property lease on the Shepperton Studios property. The net cost to the Group of principal lease rentals during the year ended 31 December 2009 was £892,000 (2008: £802,000). In addition the Group pays a top up rent to the joint venture partnership based on certain of its trading activities at the Shepperton Studios site. During the year the net cost to the Group of the top up rent was nil (2008: £62,000). The Group's share of amounts owed to the 50% joint venture partnership at 31 December 2009 was £511,000 (2008: £548,000).
Shepperton Management Limited manages the assets of the joint venture partnership and charges an asset manager fee based on independent valuations of the Shepperton Studios site. Asset manager fees charged during the year ended 31 December 2009 were £95,000 (2008: £120,000).
15. Principal risks and uncertainties
The Board views effective risk management as a primary part of the Group's wider strategy and is fully committed to the identification, evaluation and management of significant risks facing the Group. The table below outlines the key risks and uncertainties identified by the Board together with an outline of mitigation activities.
A. General risks
|
Risk |
Description |
Mitigation |
|
Importance of key customers and big budget films |
The Group's largest customers account for a high percentage of revenues. If 'big budget' filmmakers cease to choose the Group's facilities this would reduce revenues. |
Maintaining strong, long-standing relationships through consistent levels of service and retaining employees to offer continuity. Diversification of revenues through the development of the Group's strategy. |
|
Loss of reputation |
Providing services to the worldwide film industry and representing studios internationally requires a robust reputation. Damage to the reputation could have an adverse impact on the Group. |
Maintaining strong relationships and an open line of communication with customers and international 'partners' through the Directors and executive management team. |
|
Guild disruptions |
Members of the various trade guilds work on a high proportion of UK inward investment films. |
No direct mitigating actions can be taken. |
|
Delay in the recovery of the economy |
A delay in the recovery of the economic environment may lead to a reduction in customers and revenue. |
The Board monitors the external environment and its impact on the industry and has a number of strategic initiatives to respond to anticipated changes. |
B. Financial risks
|
Risk |
Description |
Mitigation |
|
Fiscal incentives |
The UK's film tax incentives help ensure the UK is a competitive location for film production. |
No direct mitigating actions can be taken. Reasoned evidence-based arguments are put forward to the Government highlighting the economic contribution that film makes to the economy. |
|
Exchange rates |
The majority of international film customers are in the US and an adverse movement in exchange rates may result in a reduction in the Group's competitive edge versus other European or international locations. |
No direct mitigating actions can be taken however, the reputation of the Group and the long-standing relationships assist in reducing this risk. |
|
Treasury |
Risk is in a number of areas including credit risk, liquidity risk, interest rate risk and market risk. |
These are discussed in detail in the Annual Report. |
|
Increases to business rates and valuation |
Potential increase in business rates and valuation would adversely impact the business. |
No direct mitigating actions can be taken albeit representations would be made to Government. |
C. Operational risks
|
Risk |
Description |
Mitigation |
|
Health and safety, environmental and disaster recovery |
A significant incident could put people and/or the environment at risk as well as damage the Group's reputation. A major incident such as a fire or explosion may result in a number of issues including revenue loss and reputational damage. |
A dedicated health, safety and fire team carries out regular risk evaluation. Further details can be found in the Corporate responsibility section of the Annual Report. A Business Continuity Team has been established and a policy is in place to ensure that operational business continues as far as possible in the event of a major incident. Adequate insurance cover is in place to mitigate the risk of the business suffering no permanent long term detrimental effects from a significant negative event.
|
|
Planning |
The Group has exposure to risk if not able to commercially exploit existing assets to the fullest potential in accordance with long range plans. |
The Group would assess alternative uses that are in line with the wider Group strategy should such a situation occur. |
|
Failure of key suppliers |
The current economic climate could result in key suppliers to the Group being unable to maintain an effective supply chain. |
The Group retains good supplier relationships and alternative suppliers for generic services could be sourced in the medium term.
|
|
Health risk of pandemics, acts of terrorism and natural disasters |
Diseases, terrorist threats and natural disasters may reduce the appeal to customers to travel and may impact local operational capability. |
With UK based studios and operational partners in a number of international locations the Group consider that the availability of location options would reduce the risk in this area.
|
16. Date of approval of the preliminary announcement
The preliminary announcement was approved by the Board of Directors on 30 March 2010.
17. Responsibility statement
We confirm that to the best of our knowledge:
(a) the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the issue and the undertakings included in the consolidation taken as a whole; and
(b) the management report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
By order of the Board on 30 March 2010:
Ivan Dunleavy Patrick Garner FCA
Chief Executive Finance Director
|
|
|
|
|
|
Company Secretary |
|
Auditors |
|
|
D M Richardson |
|
Ernst & Young LLP |
|
|
|
|
1 More London Place |
|
|
Head Office, Registered office and Director's address |
|
London SE1 2AF |
|
|
Pinewood Shepperton plc |
|
|
|
|
Pinewood Road |
|
Registrars and Receiving Agents |
|
|
Iver Heath |
|
Equiniti Limited |
|
|
Buckinghamshire SL0 0NH |
|
Aspect House |
|
|
|
|
Spencer Road |
|
|
Company registration number |
|
Lancing |
|
|
3889552 |
|
West Sussex BN99 6DA |
|
|
|
|
|
|
|
Investor relations website |
|
Principal Bankers |
|
|
available at www.pinewoodgroup.com |
|
The Royal Bank of Scotland plc |
|
|
|
|
135 Bishopsgate |
|
|
Corporate Broker |
|
London EC2M 3UR |
|
|
JPMorgan Cazenove & Co. Ltd |
|
|
|
|
20 Moorgate |
|
Lloyds TSB Bank plc |
|
|
London EC2R 6DA |
|
25 Gresham Street |
|
|
|
|
London EC2V 7HN |
|
|
Financial Adviser |
|
|
|
|
Lazard & Co. Limited |
|
Allied Irish Banks, p.l.c. |
|
|
50 Stratton Street |
|
St Helen's |
|
|
London W1J 8LL |
|
1 Undershaft |
|
|
|
|
London EC3A 8AB |
|
|
Legal Advisers to the Company |
|
||
|
Travers Smith LLP |
|
|
|
|
10 Snow Hill |
|
|
|
|
London EC1A 2AL |
|
|
|
Related Shares:
PWS.L