12th Dec 2006 07:02
Tinopolis PLC12 December 2006 TINOPOLIS PLC ("TINOPOLIS" or THE "COMPANY") RESULTS FOR THE YEAR ENDED 30th SEPTEMBER 2006 Financial Highlights:• Turnover £47.3m, up 355% on prior year (2005: £10.4m)• Profit before tax of £1.06m, up 23% (2005: £0.86m)• Adjusted Profit before tax (Excluding restructuring costs and gain on sale of Hawkeye) £1.35m, up 57% (2005: £0.86m)• Strong organic growth from the original Tinopolis business, Turnover £12m, up 15% (2005: £10.4m), Operating Profit of £1.24 m, up 11% (2005: £1.13m)• H2 Profit before tax (Excluding gain on sale of Hawk-Eye ) £1.26m, up 110% (2005: £0.6m)• Basic earnings per share 1.2p (2005: 2.4p)• Net cash inflow from operating activities £1.75m• Cash and cash equivalents at end of period is £13.55m Operational Highlights:• Acquired The Television Corporation Plc ("TV Corp") in January 2006• Integration and restructuring on track• Disposal of Hawk-Eye subsidiary for £4 million net cash• Tinopolis Interactive is the largest supplier to BBC Jam - won 5 commissions in the year with a value of £2.8m• Award winning productions - 6 BAFTAs won, a record for the industry• Sunset + Vine won poker production contracts valued at over £4m• New drama contracts worth £11m for C4, S4C and ITV going into 2007• John Willis has joined to head up Mentorn and as Tinopolis' Creative Director 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 2007 Commenting on the results, Ron Jones, Executive Chairman said: "We have managed to make significant progress across the whole of our business.Revenue and profitability in the original Tinopolis business continues to growstrongly and the integration and restructuring of the Television Corporationbusiness is going well. The results of integration feed through this yearputting us in an excellent position to take advantage of the opportunities inour dynamic market. Our companies will between them make almost 2,700 hours ofbroadcast television in calendar 2006. This, with our skills inadvertiser-funded programming and our profitable Interactive business makes usconfident of the future." For further information, please contact: Tinopolis Plc.Ron Jones, Executive Chairman 01554 880840Arwel Rees, Managing Director 01554 880807 Investec, Jeremy McKeown, Martin Smith 020 597 5067 Mantra PRLawrence Dore/Nick Bishop 020 7907 [email protected] / [email protected] Results for the year ended 30 September 2006 This has been a significant year in the Company's history and the acquisition of TV Corp has been transformational. However, our long-term goals for Tinopolis continue as before. They 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. With the acquisition of TV Corp and the strong performance of the original Tinopolis business we continue to meet these objectives. The order book for the original business already shows significant organic growth for 2007. With the acquisition of TV Corp in January this year Tinopolis has become one of the largest companies in the UK television production industry. This strategic acquisition gives us the scale and the resources to compete strongly in a fast-changing market. Turnover increased by 355% to £47.3 million. Profit before tax of £1.06mincreased by 23% in the year. Excluding one off restructuring costs of £1.15mfollowing the acquisition of TV Corp and the gain on the sale of our subsidiaryHawk-Eye, the Adjusted Profit before tax was £1.35m, up 56% on prior year. The acquisition of TV Corp in the year increased turnover significantly.Excluding the acquisition, turnover from the core Tinopolis business grew by 15% to £12 million and Operating Profit increased by 10% to £1.24m. The second half of the year performed strongly and Adjusted Profit before Taxwas £1.26m compared to £88k in the first half mainly due to a full six monthscontribution from Sunset + Vine, significantly lower losses at Mentorn andreduced central overhead costs. For the most part our business shows above industry average revenue visibility with long-term contracts or strong returning series, key components ofsustainable profitability. Revenue visibility for 2007 is very strong and wehave a record order book for 2007 including new drama contracts with C4, S4Cand ITV valued at £11million. We are now one of the most diverse companies inthe sector with a very wide spread of customers and we are not dependant forour success on any single customer, programme or series. With our strengths insport and programmes in broadcasters' public service remit we are not dependenton revenue streams arising from secondary rights. New media and advertiserfunded programming "AFP" are recent additions to the required portfolio ofskills for production companies. AFP has been a feature of the Sunset + Vinebusiness for many years and we plan to utilise these skills across Tinopolis.Tinopolis Interactive, our new media operation, continues to grow profitablyand is adding to its already impressive list of customers. This year, Sunset + Vine won two BAFTAs and four RTS (Royal Television Society)awards for its coverage of the Ashes series for Channel 4, including a specialaward for its innovative development of cricket production. The company has nowwon more than 30 awards for its cricket coverage. Sunset + Vine's pre-eminentposition in sports production innovation was recognised by the industry with thecompany being named the UK's most creative independent sports producer byBroadcast Magazine. This year Mentorn has won four BAFTAs, two RTS awards and a BPG (BroadcastingPress Guild) award and was nominated for two International Emmys for programmessuch as the Channel 4 dramas The Government Inspector and A Very SocialSecretary, and the Channel 4 current affairs strand Dispatches. Broadcastmagazine named Mentorn the UK's best independent current affairs producer andone of the top five drama producers. Mentorn has also been short-listed for the2007 Broadcast Best Independent Production Company of the Year Award. Creativity is at the heart of our business and maintaining the quality ofeverything we do is a priority. With this in mind, John Willis, one of theindustry's real heavyweights, joined us in November 2006 as Chief Executive ofMentorn and our Group Creative Director. He is one of the best known figures inthe television industry, having been Director of Programmes at Channel 4,Managing Director of LWT and United Productions, Vice President of NationalProgrammes at WGBH and most recently the BBC's Director of Factual and Learning.We are delighted to welcome John to the Board and see his appointment as a keyunderpinning to the development of the Company Acquisition and Disposals As previously stated, in January 2006 the Company acquired TV Corp, adiversified company with brands that have consistently been market leaderscreatively. However, this creative success was accompanied by mixed financialperformance. Since the acquisition, considerable time has been spent integrating TV Corp withthe rest of the Tinopolis Group and restructuring the business to achievesustainable profitability for the long term. Significant progress has been made towards financial recovery of the TV Corpbusinesses. Its creative team has been strengthened since the acquisition andsignificant re-commissions have been won. With the refocusing of this businesson profitable programming and reducing costs, losses for the second half of theyear have been considerably reduced. Central costs and overheads running at£1million per annum have already been removed and, following a review of thepremises used by TV Corp, the necessary steps to achieve other significantsavings in the 2007 financial year have now been taken. One of our smaller companies, Hawk-Eye Innovations, was created in 2000 by ajoint venture between Roke Manor Research, part of the Siemens Group, and Sunset+ Vine. Its system of ball tracking technology was first used by Sunset + Vinein their innovative and award winning coverage of cricket on Channel 4 and hassubsequently been an integral part of cricket and tennis coverage around theworld. After careful review we did not consider that owning Hawk-Eye was a keycompetitive advantage in winning sports programme commissions. Consequently wehave sold the business to John Wisden & Co. Limited for a net cash considerationof £4m in July 2006. Sales of £439k from Hawk-Eye are included within groupturnover for the year together with an operating loss of £17k. In July 2007 we disposed of the Company's 65% share in Splash, selling itsshares back to Splash management for a nominal amount. Splash was a start-upcompany created to make entertainment programmes and was loss making. Drama Winning three BAFTAs in May for the Channel 4 drama The Government Inspectortogether with other awards has boosted the appeal of Mentorn as a dramaproducer. Mentorn's drama output has expanded significantly with new contractsto produce its first ever ITV1 prime time drama - on the Prescott affair; andits first fully fictional drama - a major two part series with Peter Kosminskyfor Channel 4. Following the success of its satire on David Blunkett, Channel 4ordered a follow up film, called The Trials of Tony Blair, which will transmitin January. It also produced Discovery's first ever drama, Nostradamus. With the success of Mentorn drama, we have decided to spin off its current dramaslate into a new company Daybreak Pictures, to be run by Mentorn Head of DramaDavid Aukin and Executive Producer Hal Vogel. Daybreak will build on Mentorn'sreputation for high profile and critically acclaimed dramas based oncontemporary events but will also branch out to include fictional dramas andserials. Mentorn's skills and resources in factual research have been integral to ourdrama successes. Channel 4 has recently commissioned Daybreak to produce a dramaon the Litvinenko poisoning demonstrating our ability to react quickly toevents. In Wales our Fiction Factory subsidiary produced a second series of Caerdydd forS4C. This has also been re-commissioned for a third series in 2007 together witha new 21 part detective series again for S4C. Factual programming The Group produced over 500 hours of factual programming in the year forbroadcasters including the BBC, ITV, S4C, Channel 4, Five, Sky, Discovery andNational Geographic. Mentorn's current affairs contracts include Question Time for the BBC and 30Minutes for Channel 4. Its factual output includes Body Shock: Half Ton Man,which achieved a 5 million audience, one of the highest ever for a scienceprogramme for C4. The Company is currently producing a landmark series on Russiafor BBC 2, presented by Jonathan Dimbleby. Our US productions - Oil, Sweat andRigs for Discovery USA and Work Out for Bravo in Los Angeles have beenrecommissioned for second series. We also have a new formatted series for theBBC called Make Me a Baby, which has already been sold internationally. Theratings success of Sven: The Coach, The Cash and His Lovers led to another More4 commission for Ten Years of Tony Blair, to air in 2007. Our programming for S4C continues strongly with two daily 50-week magazineprogrammes re-commissioned for 2007. The afternoon live magazine programme Wedi3 will be broadcast on analogue for the first time, having previously beenconfined to digital. The evening show, Wedi 7, has consistently been one of thehighest rating programmes on S4C during 2006. Tinopolis has also beencommissioned to produce a number of other factual programmes and co-productionsfor S4C. Folio is one of BBC 1's main suppliers of popular factual programmes, with longrunning strands Traffic Cops and Car Wars providing ratings success for thechannel. Folio has expanded this year by winning contracts for new prime timeseries for ITV1, Discovery USA and Sky One. With ratings success of fastturnaround documentaries on the McCartney divorce and death of Australiannaturalist Steve Irwin, have led to a raft of further commissions from ITV1 andITV2, Folio is building a reputation for popular factual programmes. Sport Sunset + Vine is the UK's leading independent sports producer, with more than2000 hours of programming broadcast in the UK over the year. It has long-termcontracts with Five to produce live football, overnight sports and crickethighlights, with the BBC to provide horse racing and other sports and with ITVfor the Tour de France and with Flextech to provide gaming coverage. When Channel 4 lost the rights to cover the 2006 England home test matches toSky it was inevitable that Sunset + Vine would lose the production contractworth some £4 million p.a. (Sky produces all its major sport coverage in-house).Partially offsetting this, Sunset + Vine was appointed by Five in February toproduce coverage of their Test Match and One-Day International highlights forthe next four years. More recently the BBC turned to Sunset + Vine to producethe highlights for the current Ashes series in Australia this autumn. Advertiser Funded Programming (AFP) is an important revenue generator for Sunset+ Vine, and 2006 was its busiest year so far for AFP. Gillette FIFA World Cupwas sold to 183 broadcasters in 108 countries, Gillette World Sport to more than220 broadcasters, Formula 1 weekly series Inside Grand Prix to 58 broadcasters,and Volvo Ocean Race has also been distributed globally. Sunset + Vine renewedits contract with Gillette to produce a further year of Gillette World Sport -the first AFP deal signed by Gillette since it was taken over by Procter andGamble. There is significant growth potential in the AFP market and Sunset +Vine with its existing distribution network is well placed to capitalise on thisgrowth. Sunset + Vine is set to become the UK's biggest independent producer in the fastgrowing television programming area of gaming. In 2006 it will be producing fivenew series covering poker and blackjack - more than 85 hours - with a contractvalue of £4 million. Its most recent success was being commissioned to producethe Grosvenor Poker Tour, a monthly series to be shown on Channel 4 sponsored byBlue Square. Another success in the year was a new four year deal with ITV for coverage ofthe Tour de France. Our Wales-based companies produced Ralio, coverage of the World RallyChampionship, and Le Rygbi, coverage of French rugby for S4C. Both commissionswill continue into 2007. Sunset + Vine has opened a new office in Cardiffreflecting the potential value of sport programming available in Wales. Interactive We have been building our skills in new media for over four years and now haveover 50 people working exclusively and profitably in this area. Our interactiveskills are being used today throughout the Group and a number of 360degreescommissions have been won from broadcasters. This is an important area forsynergy between all the Group companies and is a key part of our future. Ourbreadth of new media and creative skills and experience is unique in theindustry. This business continues to grow strongly. Sales grew by 62% in 2006 to £2.6million. We are now the largest supplier to BBC Jam (BBC's digital curriculumfor schools project) and have won five commissions in the year worth £2.8million. Another high profile commission won in the period was an onlinelearning adaptation of the television programme The Apprentice for theUniversity for Industry. Earlier this year we launched two of our S4C shows onthe Internet - our nightly magazine programme Wedi 7 and major drama seriesCaerdydd. People around the world can now view these programmes online at anytime. Alongside Sunset + Vine an agreement has been entered into with a leading sportsgoverning body to establish and manage its broadband television channel. Othersignificant clients include the Ministry of Defence where X-listing status hasnow been achieved. The business is working alongside specialist partners toachieve growth in new vertical markets such as Pharmaceutical and Healthcare. Wealso aim to achieve significant growth in Defence by offering new managedservices such as blended learning and working alongside System Integrators onlong term contracts. Cash Cash generation across the group was strong in the period. Cash within the business was over £13.5 million at the end of the year. Net cash from operating activities was £1.75 million. We believe that targeted acquisitions remain a valuable component of building a better company and enhancing shareholder value. We continue to look for businesses that achieve these objectives. However, the market continues to be overheated with prices being asked -- and too often paid -- that reflect poor value. We have a strict acquisitions policy and will only make acquisitions that we consider are in the best interests of shareholders. As a result we believe that the Company now has more cash than is necessary to run the company efficiently and to develop its business. At the time of our Interim results we indicated that a reorganisation of our balance sheet was necessary to give the Company the flexibility it needs to address this issue. This exercise has now been completed giving us significant distributable reserves. We have also considered how best to use the surplus cash so as to enhance shareholder value. Accordingly, at the Annual General Meeting to be held on 21 December 2006, a resolution has been presented giving the Board the authority to purchase up to 15% of the Company's shares in the open market. In reaching a decision to purchase ordinary shares, the Directors will take into account the Company's cash resources and capital and the effect of such purposes on the Company's business and will only make market purchases if satisfied that they would be earnings enhancing and be in the best interests of shareholders generally, Adoption of IFRS The Group has prepared its financial statements in accordance with applicableInternational Financial Reporting Standards adopted by the European Union("IFRS") for the first time. The use of the new standards did not have amaterial effect on reported results. An explanation of how the transition toAdopted IFRS has affected the reported financial position, financial performanceand cash flows of the Group was provided in the half year announcement. Conclusion and Outlook Our objectives for the next 12 months are to: • continue our restructuring of Mentorn to provide a base for profitable growth;• leverage our new media and AFP skills, as well as our established practice of winning and managing profitable business, to exploit the huge changes in the industry and accelerate growth across the Company and• find acquisitions that enhance shareholder value and strengthen the Company's skills and business. We have a strong portfolio of customers and genres and the creative and management skills to complement the investments made by Tinopolis in recent years in its new media business. We believe that the relative importance in programming of new media and interactivity will only increase and our business is well placed to take advantage of these changes as they arise. Creatively Tinopolis is in good shape and we will continue to grow organically, hiring creative and management talent, and look for new business areas to exploit to broaden or complement our existing business, whilst maintaining strong financial discipline. Staff The integration of our various businesses is now well under way and Mentorn and Sunset + Vine will shortly be moving to new premises that offer better and more appropriate accommodation. Our staff have taken the acquisition and the restructuring in their stride. Their hard work and professionalism has made a successful transition possible and it is because of them that we are confident of making the Company successful. We are grateful to them. Ron Jones Arwel ReesExecutive Chairman Managing Director Consolidated Income Statementfor the year ended 30 September 2006 Note 2006 2005 £000 £000 £000 £000 Revenue 2 47,334 10,408Cost of sales (37,230) (7,522) ------- ------Gross profit 10,104 2,886Administrative costs - restructuring (1,154) -- other (8,944) (1,971)- profit on sale of Hawkeye 11 866 - ------ ------ ------ ------Total net administrative costs 3 (9,232) (1,971) ------ ------Operating profit 872 915Financial expenses 6 (57) (60)Financial income 6 245 7 ------ ------ ------ ------Net financing income/(costs) 188 (53) ------ ------Profit before taxation 1,060 862Taxation 7 (89) (255) ------ ------Profit for the year 971 607 ------ ------ Attributable to:Equity holders of the parent 934 584companyMinority interests 37 23 ------ ------ 971 607 ====== ====== ====== ======Basic earnings per share 8 1.2p 2.4p ====== ======Diluted earnings per share 8 1.2p 2.1p ====== ====== All the results arise from continuing operations. Consolidated Statement of Changes in Equityfor the year ended 30 September 2006 30 September Share Share Merger Retained Total Minority Total2006 capital premium reserve earnings interest equity £000 £000 £000 £000 £000 £000 £000 Balance at 1October 2005 497 - 657 1,967 3,121 33 3,154Profit for theperiod - - - 934 934 37 971Dividends paid - - - - - (10) (10)Equity settledshare based payments - - - 294 294 - 294Shares issued 1,442 24,147 - - 25,589 - 25,589Movement inthe year 50 - (50) - - - - --- --- --- --- --- --- ---Balance at 30September 2006 1,989 24,147 607 3,195 29,938 60 29,998 === === === === === === === 30 September Share Merger Retained Capital Total Minority Total2005 capital reserve earnings redemption interest equity £000 £000 £000 £000 £000 £000 £000 Balance at 1October 2004 8 486 1,330 2 1,826 15 1,841Profit for theperiod - - 584 - 584 23 607Dividends paid - - - - - (5) (5)Equity settledshare basedpayments - - 53 - 53 - 53Shares issued 489 - - - 489 - 489Movement inthe year - 171 - (2) 169 - 169 --- --- --- --- --- --- ---Balance at 30September 2005 497 657 1,967 - 3,121 33 3,154 === === === === === === === Consolidated Balance Sheetat 30 September 2006 Note 2006 2005 £000 £000 £000 £000AssetsProperty, plant 10 4,316 3,259and equipmentIntangible assets 9 21,869 -- goodwillDeferred tax asset 16 52 95 -------- ------- Total non-current 26,237 3,354assets Trade and other 12 9,044 1,427receivablesCash and cash 13 15,101 852equivalents -------- -------- Total current assets 24,145 2,279 -------- --------Total assets 50,382 5,633 ======== ========EquityIssued share capital 1,989 497Share premium 24,147 -Reserves 607 657Retained earnings 3,195 1,967 -------- --------- Total equity attributable 29,938 3,121to equity holders ofthe parentMinority interest 60 33 --------- ---------Total equity 29,998 3,154 --------- ---------LiabilitiesInterest bearing loans 15 23 190and borrowingsOther payables 14 677 -Deferred tax liabilities 16 313 454 --------- ------- Total non-current 1,013 644liabilities --------- --------Bank overdraft 13 1,556 - Interest bearing loans 15 635 312and borrowingsCurrent income tax 1,090 235payableTrade and other 14 16,090 1,288payables -------- -------- Total current liabilities 19,371 1,835 --------- ----------Total liabilities 20,384 79 --------- ----------Total equity and liabilities 50,382 5,633 ========= ========== Consolidated Cash Flow Statementfor the year ended 30 September 2006 Note 2006 2005 £000 £000 Profit for the year 971 607Adjustments for:Depreciation 3 892 516Impairment losses on goodwill 9 - 39Net finance costs 6 (188) 53Gain on sale of subsidiary 11 (866) -Gain on sale of property, plant and equipment (21) (2)Equity settled share-based payments 5 26 53Taxation 7 89 255 --- ---Operating cash flow before changes in workingcapital and provisions 903 1,521Change in accounts receivable 3,402 (642)Change in accounts payable (1,703) 231 --- --- 2,602 1,110 Interest paid (51) (65)Income taxes paid (797) (27) --- ---Net cash from operating activities 1,754 1,018 --- ---Net cash acquired with subsidiary 8,896 631Payments to acquire property, plant and equipment (1,246) (275)Receipts from sales of property, plant and 47 23equipmentReceipts from sale of subsidiary 4,053 -Interest received 245 7 --- ---Net cash from investing activities 11,995 386 --- ---Repayment of borrowings (925) (157)Payment of finance lease liabilities (131) (226) --- ---Net cash used in financing activities (1,056) (383) --- ---Net increase in cash and cash equivalents 12,693 1,021 Cash and cash equivalents at start of period 13 852 (169) --- ---Cash and cash equivalents at end of period 13 13,545 852 === === The financial information set out above does not constitute the company'sstatutory accounts for the years ended 30 September 2006 or 2005 but is derivedfrom the 2006 accounts. Statutory accounts for 2005, which were prepared underUK GAAP, have been delivered to the registrar of companies, and those for 2006,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 anymatters to which the auditors drew attention by way of emphasis withoutqualifying their reports and (iii) did not contain statements under section 237(2) or (3) of the Companies Act 1985. Notes(forming part of the financial statements) 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 itssubsidiaries (together referred to as the "Group"). The parent company financialstatements present information about the Company as a separate entity and notabout its Group. The Group financial statements have been prepared and approved by the Directorsin accordance with International Financial Reporting Standards as adopted by theEU ("Adopted IFRS"). The Company has elected to prepare its parent companyfinancial statements in accordance with UK GAAP. The accounting policies set out below have, unless otherwise stated, beenapplied consistently to all periods presented in these Group financialstatements and in preparing an opening IFRS balance sheet at 1 October 2004 forthe purposes of the transition to Adopted IFRS. Transition to adopted IFRS The Group is preparing its financial statements in accordance with Adopted IFRSfor the first time and consequently has applied IFRS 1. An explanation of howthe transition to Adopted IFRS has affected the reported financial position,financial performance and cash flows of the Group is provided in note 21. In addition to exempting companies from the requirement to restate comparativesfor IAS 32 and IAS 39, IFRS 1 grants certain exemptions from the fullrequirements of IFRS in the transition period. The following exemptions havebeen taken in these financial statements: * Business combinations - business combinations that took place prior to 1 October 2004 have not been restated. * Equity settled transactions - options granted prior to 7 November 2002 have not been restated. Basis of consolidation The Group financial statements consolidate the financial statements of theCompany and its subsidiaries made up to 30 September each year. Subsidiaries are entities controlled by the Group. Control exists when the Grouphas the power, directly of indirectly, to govern the financial and operatingpolicies of an entity so as to obtain benefits from its activities. In assessingcontrol, potential voting rights that are currently exercisable or convertibleare taken into account. The financial statements of subsidiaries are included inthe consolidated financial statements from the date that control commences untilthe date that control ceases. Intra-group balances and any unrealised gains andlosses on income or expenses arising from intra-group transactions, areeliminated in preparing the consolidated financial statements. In the previous year, an acquisition was accounted for as a reverse acquisitionin accordance with IFRS 3. As a consequence of applying reverse acquisitionaccounting, the results for the year ended 30 September 2005 comprise those ofAgenda Television Limited for the year ended 30 September 2005 plus those ofAcquisitor Plc from 8 February 2005. The consolidated balance sheet comprisesthe combined balances of Agenda Television Limited and Acquisitor Plc at 30September 2005. Sources of estimation uncertaintyThe preparation of the financial statements requires the group to makeestimates, judgements and assumptions that affect the reported amounts ofassets, liabilities, revenues and expenses and related disclosure of contingentassets and liabilities. The Directors base their estimates on historicexperience and various other assumptions that they believe are reasonable underthe circumstances, the results of which form the basis of making judgementsabout the carrying value of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates underdifferent assumptions or conditions. The Group believes that the most significant critical judgement area in theapplication of its accounting policies is revenue recognition. Revenue and revenue recognitionRevenue (which excludes VAT) represents amounts receivable for work carried outin producing television programmes, films and other audio-visual mediaproductions and is recognised over the period of the production in line with theterms of the underlying contract. Overspends are recognised as soon as theyarise and underspends are recognised on completion of the production. Whereproductions are in progress and where the sales invoiced exceed the cost of thework done, the excess is shown as deferred income. Where the value of the workdone to date exceeds the invoiced amount, the amounts are classified as accruedincome. Development costsInternally generated costs relating to programmes, to the extent they are notfunded by a customer, are written off to the income statement. Translation of foreign currenciesTransactions in foreign currencies are recorded at the date of exchange rulingat the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translatedto sterling at the rate of exchange ruling at the balance sheet date, and anyexchange differences taken to the income statement. Non-monetary assets aretranslated to sterling at the rates of exchange ruling at the date of purchase. TaxationTax is recognised in the income statement except to the extent that it relatesto items recognised directly in equity, in which case it is recognised inequity. 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, andany adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes. Thefollowing temporary differences are not provided for: goodwill not deductiblefor taxation purposes, the initial recognition of assets or liabilities thataffect neither accounting nor taxable profit, and differences relating toinvestments in subsidiaries to the extent that they will probably not reverse inthe foreseeable future. The amount of deferred tax provided is based on theexpected manner of realisation or settlement of the carting amount of assets andliabilities, using tax rates enacted or substantively enacted at the balancesheet date. A deferred tax asset is recognised only to the extent that it is probable thatfuture taxable profits will be available against which the asset can beutilised. Deferred tax assets are reduced to the extent that it is no longerprobable 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 therisks and rewards of ownership of an asset, the lease is treated as a "financelease". The asset is recorded in the balance sheet as Property, Plant andEquipment and is depreciated over its estimated useful life or the term of thelease, whichever is shorter. Future instalments under such leases, net offinance charges, are included within creditors. Rentals payable are apportionedbetween the finance element, which is charged to the income statement so as toproduce a constant periodic rate of interest on the remaining balance of theliability, and the capital element which reduces the outstanding obligation forfuture instalments. All other leases are accounted for as "operating leases" and the rentals payableare charged to the income statement on a straight line basis over the life ofthe lease. Goodwill All business combinations are accounted for by using the purchase method.Goodwill has been recognised in acquisitions of subsidiaries. In respect ofbusiness acquisitions that have occurred since 1 October 2004, goodwillrepresents the difference between the cost of the acquisition and the fair valueof the net identifiable assets and contingent liabilities acquired. Identifiableassets are those which can be sold separately or which arise from legal rightsregardless of whether those rights are separable. In respect of acquisitions prior to this date, goodwill is included on the basisof its deemed cost, which represents the amount recorded under previous GAAP. Goodwill is stated at cost or deemed cost less any accumulated impairmentlosses. Goodwill is allocated to cash-generating units (CGUs) and is testedannually for impairment. Impairment The carrying amounts of the Group's assets are reviewed at each balance sheetdate to determine whether there is any indication of impairment. If any suchindication exists, the asset's recoverable amount is estimated. For goodwill the recoverable amount is tested annually for impairment. An impairment loss is recognised whenever the carrying amount of an asset or itscash-generating unit exceeds its recoverable amount. Impairment losses arerecognised in the income statement. Impairment losses recognised in respect ofcash-generating units are allocated first to reduce the carrying amount of anygoodwill allocated to cash-generating units and then, to reduce the carryingamount of the other assets in the unit on a pro rata basis. Property, plant and equipment Property, plant and equipment are stated at cost less depreciation. The cost ofproperty, plant and equipment is their purchase cost, together with anyincidental costs of acquisition. Depreciation is calculated so as to write off the cost of an asset, less itsestimated residual value, over the useful economic life of that asset asfollows: Short life studio equipment - 25% straight lineStudio equipment - 15% - 20% reducing balanceFixtures and fittings - 15% straight lineMotor vehicles - 25% straight lineComputer equipment - 25% straight lineLeasehold property improvements - 5% straight line Employee benefits Equity-settled share Based Payments The share option programme allows Group employees to acquire shares of theCompany. The fair value of options granted is recognised as an employee expensewith a corresponding increase in equity. The fair value is measured at grantdate and spread over the period during which the employee becomesunconditionally entitled to the options. The fair value of the options grantedis measured using a Black Scholes model, taking into account the terms andconditions upon which the options were granted. The amount recognised as anexpense is adjusted to reflect the actual number of share options that vestexcept where forfeiture is only due to share prices not achieving the thresholdfor vesting. Defined contribution plans Obligations for contributions to defined contribution pension plans arerecognised as an expense in the income statement when they are due. 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 otheraudio-visual media productions and has only one business sector. 3 Operating expenses and auditors' remuneration 2006 2005 £000 £000Included in operating profit are the following; Restructuring costs incurred (contractual and othertermination costs involved in the removal of The Television 1,154 -Corporation Plc board.)Depreciation of property, plant and equipment 819 437Depreciation of assets held under hire purchase andfinance lease 73 79agreementsProfit on disposal of property, plant and equipment (21) (2)Operating lease charges - land and buildings 795 20 - other - 5 ==== ====Auditors' remuneration: 2006 2005 £000 £000 Audit of these financial statements 60 15 Amounts receivable by auditors and their associates in respectof:Audit of financial statements of subsidiaries pursuant tolegislation 30 10Services relating to corporate finance transactions enteredinto or proposed to be entered into by or on behalf of thecompany or the group 176 - 4 Directors' emoluments The directors' aggregate emoluments in respect of qualifying services were: 2006 2005 £000 £000 Aggregate emoluments 716 408 ===== ====Highest paid director 224 161 ===== ==== Information on share options held by directors is shown in the directors'report. 5 Employee information 2006 2005 £000 £000 Wages and salaries 10,707 3,727Social security costs 1,165 391Equity-settled share based payments 26 53Pension and other employee costs 205 - ----- ------ 12,103 4,171 ===== ====== The average number of employees employed (including Directors) during the yearwas: Number Number Production 295 123Administration 61 19 ----- ----- 356 142 ====== ===== 6 Net financing income 2006 2005 £000 £000Interest expenseInterest on finance lease and hire purchase 11 24Other interest and similar charges 46 36 ---- ---- 57 60 === ===Interest (income) (245) (7) ===== =====Net financing (income)/costs (188) 53 ====== ===== 7 Income tax expense 2006 2005 £000 £000Current tax expenseUnited Kingdom corporation tax charge at rate 104 235of 30 % (2005:30%)Over provision in respect of the previous year 83 - ---------------- ---------------Total current tax expense 187 235 ---------------- ---------------Deferred tax expenseOrigination and reversal of temporary (98) 20differences ---------------- ---------------Total deferred tax expense (98) 20 ---------------- ---------------Total income tax expense in income statement 89 255 ================ =============== The tax assessed for the year is lower than the standard rate of corporation taxapplying in the UK of (30%). The differences are explained below: 2006 2005 £000 £000 Profit before taxation 1,060 862 ================ =============== Profit/ on ordinary activities at the UK taxrate of 30% (2005: 30%) 318 259 Effects of Substantial shareholding exemption on disposal (260) -of subsidiaryExpenses not deductible for tax purposes 10 28Accelerated capital allowances and other timing 16 35differencesTax at marginal rates - (2)Adjustments to tax charge in respect of 83 -previous periodUtilisation of tax losses (78) (65) ---------------- --------------- 89 255 ================ =============== 8 Earnings per share Year ended 30 Year ended 30 September September 2006 2005 £000 £000 Profit for the period 934 584 Weighted average number of shares 77,459,136 23,839,532 Dilutive potential of shares under option 3,585,170 1,129,700Effect of deferred consideration shares - 2,500,000Dilutive potential of warrants issued 48,780 48,780Dilutive weighted average number of shares 81,093,086 27,518,012 EPS - Basic 1.2p 2.4pEPS - Diluted 1.2p 2.1p 9 Intangible fixed assets Goodwill Goodwill Other Other 2006 2005 2006 2005Cost and net £000 £000 £000 £000book valueAt 1 October - - - -Additions 21,869 39 2,500 -Disposals - - (2,500) -Impairment - (39) - - ------------- ---------------- ---------------- ---------------At 30 September 21,869 - - - ============= ================ ================ =============== Other intangibles relate to Hawkeye technology acquired at the time ofacquisition of The Television Corporation plc. This was subsequently disposed ofduring the year. The Group conducts a formal annual review to determine whether the carryingvalue of the goodwill on the balance sheet can be supported. The impairmentreview comprises a comparison of the carrying amount of the goodwill with itsrecoverable amount (the higher of fair value less costs to sell and value inuse). Fair value less costs to sell has been determined for the acquired cashgenerating units by reference to the revenue multiples of appropriatetransactions in the industry in recent years applied to the business's owninternal estimates. 10 Property, plant and equipment Leasehold Motor Fixtures and Studio Total property vehicles fittings & equipment provements computer equipment £000 £000 £000 £000 £000CostAt 1 October 2005 2,362 459 1,191 3,427 7,439Additions 28 170 580 523 1,301Acquisitions 57 14 865 - 936Disposals - (207) (40) (20) (267)Disposal of subsidiary - - (385) - (385) --- --- --- --- ---At 30 September 2006 2,447 436 2,211 3,930 9,024 --- --- --- --- ---DepreciationAt 1 October 2005 748 394 1,034 2,004 4,180Charge for the year 154 61 365 312 892On disposals - (203) (24) (14) (241)Disposal of subsidiary - - (123) - (123) --- --- --- --- ---At 30 September 2006 902 252 1,252 2,302 4,708 --- --- --- --- ---Net book valueAt 30 September 2006 1,545 184 959 1,628 4,316 === === === === ===At 30 September 2005 1,614 65 157 1,423 3,259 === === === === === Cost At 1 October 2004 2,351 511 1,133 3,248 7,243Additions 12 54 62 196 324Disposals (1) (106) (4) (17) (128) --- --- --- --- ---At 30 September 2005 2,362 459 1,191 3,427 7,439 --- --- --- --- --- DepreciationAt 1 October 2004 628 449 938 1,755 3,770Charge for the year 120 37 99 260 516On disposals - (92) (3) (11) (106) --- --- --- --- ---At 30 September 2005 748 394 1,034 2,004 4,180 --- --- --- --- ---Net book valueAt 30 September 205 1,614 65 157 1,423 3,259 === === === === ===At 30 September 2004 1,723 62 195 1,493 3,473 === === === === === Included within the net book value of £4,316,000 (2005: £3,259,000) is thefollowing relating to assets held under hire purchase and finance leaseagreements: Fixtures & fittings Studio Motor Total and computer equipment equipment vehicles £000 £000 £000 £000 At 30 September 2006 3 136 45 184 === === === ===At 30 September 2005 9 265 31 305 === === === === The depreciation charged to the financial statements in the year in respect ofsuch assets was as follows: Fixtures & fittings Studio Motor Total and computer equipment vehicles equipment £000 £000 £000 £000 Year ended 30 September 2006 3 55 15 73 === === === ===Year ended 30 September 2005 5 57 17 79 === === === === 11 Acquisitions and disposals On 17 January 2006 the group acquired 100% of the issued share capital of TheTelevision Corporation plc on the basis of 1.73 new Tinopolis shares for each ofThe Television Corporation plc shares. The recognised value and fair value of assets purchased were as follows: Recognised value of Fair Fair acquired assets/ value value at date (liabilities) adjustments of acquisition £000 £000 £000Property, plant & equipment 936 - 936Intangible assets - 2,500 2,500Inventories 1,034 (1,034) -Receivables 10,829 - 10,829Cash and cash equivalent 10,237 - 10,237Liabilities (17,328) (1,845) (19,173) --- --- ---Net Assets Acquired 5,708 (379) 5,329Goodwill 21,869Transaction costs incurred (1,341)Share options (268) ---Consideration, satisfied by issue of shares 25,589 === The fair value adjustments represent the following: * Intangible assets - value of the ball tracking technologies known as "Hawkeye". * Inventories - the accounting policy for capitalising unfunded internal development costs as they occur rather than classify them as inventories. * Trade and other payables - adjustment has been made to reflect the fair value of the property leases acquired. The share options were issued to staff as a result of a ruling by The TakeoverPanel. Goodwill has arisen on the acquisition of The Television Corporation plc becauseof the creative talent and opportunities which do not meet the criteria forrecognition as separate intangible assets at the date of acquisition. The Television Corporation plc's contribution to the operating profits sinceacquisition and the historical results for the full year to 30 September 2006are set out below: Post Full Year acquisition unaudited 1 audited October 2005 to 17 January to 30 September 2006 September 2006 £000 £000 Revenue 35,369 51,628Net profit/(loss) 101 (1,732) The group disposed of Hawkeye Innovations in June 2006. 12 Receivables 2006 2005 £000 £000CurrentTrade receivables 7,084 780Other receivables 81 57Prepayments and accrued income 1,879 590 --- ---Current trade and other receivables 9,044 1,427 === === Trade receivables are shown net of provisions for impairment losses amounting to£86,000 (2005: £nil). 13 Cash and cash equivalents/bank overdrafts 2006 2005 £000 £000 Cash and cash equivalents 15,101 852Bank overdrafts (1,556) - --- ---Cash and cash equivalents in the consolidated cash flow 13,545 852statement === === 14 Trade and other payables 2006 2005 £000 £000Non current liabilitiesLease accrual 677 - ====== ======Current liabilitiesTrade accounts payable 1,577 218Other taxation and social security 1,845 387Accruals and deferred income 12,668 683 ------ ------ 16,090 1,288 ======= ====== 15 Interest bearing loans and borrowings 2006 2005 £000 £000Non current liabilitiesSecured bank loan - 131Hire purchase and finance lease agreements 23 59 ------ ------ 23 190 ====== ======Current liabilitiesSecured bank loan 568 188Hire purchase and finance lease agreements 67 124 ------ ------ 635 312 ====== ====== The hire purchase and finance lease obligations are payable as follows: 2006 2005 £000 £000 In one year or less 67 124Between one and two years 12 56Between two and five years 11 3 ------- ----- 90 183 ======= ====== The bank loan and overdraft are secured on certain assets of the group. Interestis payable at 3% over the bank's base rate. The bank loan is repayable as follows: 2006 2005 £000 £000 In one year or less 568 188Between one and two years - 131 ------ ------ 568 319 ======= ====== 16 Deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets Liabilities Net 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 Property, plant and (4) - 313 454 309 454equipmentTax value of loss (48) (95) - - (48) (95)carry-forwards ------ ------ ------ ------ ------ ------Net tax(assets) / (52) (95) 313 454 261 359liabilities ====== ====== ====== ====== ===== ===== Movement in deferred tax during the year 1 October Recognised Recognised 30 September 2005 in income in equity 2006 £000 £000 £000 £000 Property, plant and equipment 454 (141) - 313Tax value of loss carry-forwardsutilised (95) 43 - (52) --- --- --- --- 359 (98) - 261 === === === === Movement in deferred tax during the prior year 1 October Recognised Recognised 30 September 2004 in income in equity 2005 £000 £000 £000 £000 Property, plant andequipment 474 (20) 454Tax value of losscarry-forwards utilised (135) 40 (95) --- --- --- --- 339 20 359 === === === === 17 Financial instruments Exposure to credit and interest rate risks arises in the normal course of theGroup's business. Credit risk Management has a credit policy in place and the exposure to credit risk ismonitored on an ongoing basis. Credit evaluations are performed on all customersrequiring credit over a certain amount. At the balance sheet date there were nosignificant concentrations of credit risk. The maximum exposure to credit riskis represented by the carrying amount of each financial asset in the balancesheet. Interest rate risk Interest expense reflects the cost of the Group's borrowings. Interest incomearises from investment of cash and short term deposits held by the group.Interest rate risk is managed by monitoring market rates to ensure that optimalreturns are achieved. Liquidity risk The Group finances its operations through a mixture of retained profits, newequity and bank borrowings. The Group has continued with its policy of ensuringthat there are sufficient funds to meet the expected funding requirements of theGroup's operations and investment opportunities. The Group has continued tomonitor its liquidity position through budgetary procedures and cash flowanalysis. Effective interest rates In respect of income-earning financial assets and interest-bearing financialliabilities, the following table indicates their effective interest rates at thebalance sheet. 2006 2005 ------------------------------ --------------------------------- thousands of GBP Effective 6 6-12 1-2 2-5 Effective 6 6-12 1-2 2-5 Interest months mon ye ye Interest mon mon ye ye Rate Total or less ths ars ars rate Total ths ths ars ars or less £'000 Secured bank loans: ITV 2% 421 421production above -Loan bank base rate Bank 3% 147 147 319 94 94 131 -Loan above bank Financelease 90 39 28 12 11 183 74 50 56 3liabilities*Bank 1,556 1,556 -overdrafts * These assets / liabilities bear interest at a fixed rate. The fair values of financial assets and liabilities shown above are notmaterially different from the value stated. 18 Commitments Financial commitments At 30 September 2006 the Company had commitments under non-cancellable operatingleases: 2006 2005 £000 £000 Within one year 894 20Within two to five years 2,175 80After five years 1,460 220 ------ ------- 4,529 320 ====== ======= 19 Called up share capital 2006 2005 £000 £000Authorised130,714,290 ordinary shares of 2p each (2005: 130,714,290ordinary shares of 2p each) 2,614 2,614 === ===Allotted, called up and fully paid99,437,793 ordinary shares of 2p each (2005: 24,857,145ordinary shares of 2p each) 1,989 497 === === On 17 January 2006, Tinopolis plc issued 72,080,648 ordinary shares of 2p to theshareholders of The Television Corporation Plc on the basis of 1.73 newTinopolis share for each Television Corporation share. A further 2,500,000 ordinary shares were issued on 30 December 2005 as deferredpayment to the shareholders of Agenda Television Ltd as a result of the reversetakeover by Tinopolis plc. 20 Share based payments The fair values of services received in return for share options granted toemployees are measured by reference to the fair value of share options granted.The estimate of the fair value of the services received is measured based on aBlack Scholes model (with the contractual life of the option and expectations ofearly exercise incorporated into the model). The terms and conditions of the share options granted were as follows; Grant date Number of share Vesting Contractual options conditions life of option Options granted todirectors 07-02-05 128,000 Service 10 Year conditionOptions granted toemployees 07-02-05 899,300 Service 10 Year conditionOptions granted toemployees 15-05-06 2,557,870 Service 6 Year condition The number and exercise prices of the share options are as follows: No. of Shares Exercise Price Date Granted Vesting date Lapse DateEMI Plan 777,300 41p 7/2/2006 7/2/2006 6/2/2015EMI Plan 122,000 41p 7/2/2006 30/12/2005 6/2/2015Unapproved 128,000 41p 7/2/2006 30/12/2005 6/2/2015PlanUnapproved 2,557,870 34p 15/5/2006 50% by 14/5/2012Plan 14/5/2007 50% by 14/05/2008 The principal assumptions used in assessing the fair value of share options wereas follows; Year ended 30 Year ended 30 September 2006 September 2005 £000 £000 Share price 34p - 41p 41pExercise price 34p - 41p 41pExpectedvolatility 25% 25%Option life 6 - 10year 10 yearRisk-freeinterest rate 4.5% 4.5% Share options are granted under a service condition for each of the grants. Suchconditions are not taken into account in the grant date fair value measurementof the services received. There are no market conditions associated with theshare option grants. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Cornish Metals