8th Sep 2009 07:00
Prime Focus London plc
AUDITED RESULTS
FOR THE YEAR ENDED 31 MARCH 2009
Chairman's Statement
The Board of Prime Focus London plc (formerly VTR plc) (the Group) is pleased to announce the results for year ending 31 March 2009 presented according to International Financial Reporting Standards (IFRS).
This past year has been a difficult trading year with the effects of the 'credit crunch' filtering through the global economy. Business conditions have been difficult in all sectors and Media and Entertainment services have been no exception. According to PricewaterhouseCoopers, Global Entertainment and Media (E&M) Outlook 2009-2013 report, growth in the UK E&M market slowed to 1.5% in 2008 and it is expected that the market will experience a cumulative 7.2% decline in revenue from 2008-2010, from USD 92 billion to USD 85 billion.
Advertising spends were reduced impacting TV and print sectors which depend on advertising revenues. Film production spend was also down, by 23% to GBP 578million, in 2008 according to the World Film Market Trends Focus 2009 report. This was compounded by the US writer's strike and actor's dispute in the US.
In line with the above, the year to 31 March 2009 the Group made a profit before tax of £ 216,913 on a turnover of £15,895,832 compared to a profit before tax of £472,538 on a turnover of £17,964,406 for the year ended 31 March 2008. Earnings per share were 1.48 pence per ordinary share based on share capital as at 31 March 2009 compared with earnings per share of 2.11 pence for the year ended 31 March 2008.
We had informed the market that we were predicting a trading loss for the year ended 31 March 2009. The above profit before tax is as a result of exceptional and extra-ordinary income, and recognition of deferred tax asset, additional details of which form part of the accounts and notes thereof.
Net debt was £4,158,205 at 31 March 2009 compared to £4,049,010 as at 31 March 2008 and gearing at the year end was 50.67% compared to 37.32% as at 31 March 2008.
The integration with other acquisitions made by the Prime Focus Limited, a company incorporated in India ("Parent Company"), over the last few years in North America (Frantic Films VFX Inc. and Post Logic Studios Inc.) is now complete giving the Parent Company a strong presence in every major market in India, North America and Europe. This will enable us to build a platform for strong growth in the years to come. Our worldsourcingTM model allows us to leverage the Group, using the Parent company's global network, to provide unique access to the best global talent and the most cost effective solutions to clients across the world, without compromising on quality, timing or accountability.
Corporate Restructuring
As at the end of the last financial year, we were keen to streamline the UK group structure to get clear identifiable trading businesses which are distinct from each other and offer greater visibility to all stakeholders. During the year, as a result of the restructuring, Outpost Post Production Limited (formerly known as Video Tape Recording Limited) and Clear (Post Production) Limited were placed in administration and liquidation respectively.
Our challenge this year was to marry this aim with the Parent Company's global strategy to use the same brand names for all the Group businesses to allow for better integration and clarity.
Consequently, we are in the process of structuring all our Soho based businesses into distinct business lines which will operate within a single company Prime Focus London Plc. The business lines are;
In addition to the above, the Group has separate companies for joint ventures partnerships and non post-production related businesses such as K-POST, which is with JWT based out of Knightsbridge.
The remaining dormant companies whose activities have already ceased or have been merged into one of our five new business units will be liquidated.
Management
I had mentioned in the previous year annual report that Anshul Doshi (member of the Board) took over the role of Group Managing Director, but would still retain his prior role as Finance Director until such time as a suitable replacement was identified for the role of either Group Managing Director or Finance Director.
I am pleased to announce that Neil Barnett joined in January 2009 as the Group Chief Financial Officer. Neil is a member of the Chartered Institute of Management Accountants and his previous experience includes 10 years as Chief Financial Officer and Company Secretary of Cinesite, where he oversaw its growth into one of the world's largest and leading companies providing film services.
Effective from February 2009, Michael Constantine has joined as the Director of Global Marketing. Michael has over 25 years experience in marketing and is a former agency leader at the prestigious Leo Barnett agency. Michael is to be instrumental in the development of the company's market and brand positioning, helping to build the group's business and reputation worldwide and oversee partner and supplier relationships
Strategic appointments were made into the commercials, broadcast and Digital Asset Management areas of the UK business. Daniel Sapiano (Commercial Director) and Beth Vander (Head of Production) were recruited from respected commercial post house, The Mill whilst Tareq Kubaisi returned to Prime Focus. His appointment was a major statement of intent to the industry as he is one of the top colourists and creative talents in the UK today.
Outlook
The current year has seen a difficult start as confidence in the economy remains fragile. However, despite operating in trying times, I feel that we have made strategic moves which will put us in prime position to take advantage of the imminent recovery. As per the above mentioned PricewaterhouseCoopers report, the global E&M market is estimated to grow at 2.7% annually to reach a size of USD 1.6 trillion in 2013.
In particular, we are excited by the roll out of our above mentioned worldsourcingTM model and the positive impact it will have on all aspects of the business. The coming year should see the strength of Prime Focus as a global brand fuel our recovery and put us in a position of strength going forward.
Namit Malhotra
Chairman
7 September 2009
Managing Director's Review
Leading on from the chairman's comments, I would like to begin by echoing his sentiments pertaining to this being a difficult trading year as a consequence of the prevalent economic conditions. This has impacted our financial performance this year; however, a strong sales drive and important cost reduction steps, including salary reductions for staff, will mitigate the negative impact going forward. Looking at the individual elements of our business:
The year saw a major restructure of the commercials business with a revitalisation of the operational and technical infrastructure of the division and a renewed commercial strategy that saw brand development and market awareness increase immeasurably.
An aggressive sales initiative on the commercials side of the business led to us winning work on major brands such as Herbal Essences, Citroën, Macleans, Kenco, Nike, Givenchy and McDonalds for some of the world's biggest agencies including JWT, M&C Saatchi, DDB and Euro RSCG.
We have recently won prestigious accounts for 118118 and AVIVA, and concluded successful projects such as the 'Rubberduckzilla' used in the Oasis advertising campaign and a series of indents for the rebranding of UKTV style channel amongst others.
On the music side, work was completed over the year on promos for Prince, Kanye West, Girls Aloud and U2 as well as the full HD post production and effects on the concert film of Madonna's worldwide 2008/2009 tour.
The broadcast division continued to reinforce its already strong reputation in the industry by providing full picture and sound post production services on major projects such as Great British Menu, EMMY Award winning - The Beckoning Silence, The Hottest Place on Earth, Criminal Justice, The American Future, Jamie Oliver's Ministry of Food and Piers Morgan series.
These were delivered to a variety of broadcasters including Discovery Channel, National Geographic, Sky, BBC, BBC HD, ITV and five.
Machine Fx will move into the Group's headquarters on 64 Dean Street. They have continued their work to position themselves in the international and local markets, leveraging on the scale of the Parent Company. Recent films they have worked on include the," the British film "Franklyn" which involved completing 45 shots in just six weeks. They have now completed their work on films, such as 10,000 BC, Fred Clause and the latest James Bond flick "Quantum of Solace."
Key hires
As has been mentioned in the Chairman's report, Neil Barnett was appointed as Chief Financial Officer and Michael Constantine is now our Director of Global Marketing.
Daniel Sapiano (Commercial Director) and Beth Vander (Head of Production) were recruited from respected commercial post house, The Mill whilst Tareq Kubaisi returned to Prime Focus.
Paul Willey was appointed into a senior sales role in the broadcast business, joining from rival post house Pepper whilst Dafydd Upsdell joined from Beam TV to head up the UK sales arm of the technology business.
Share Option Scheme
On 12 August 2009, the Company announced its plan and received Board Approval to setup a share option scheme for all employees of the Group who participated in the salary reduction scheme. The options have not yet been granted and are pending the submission of the final accounts for the year ending 31 March 2009. Please refer to note 33 to the accounts for more detail.
Financial Highlights
The group turnover for the year was £15,895,832 and the gross profit for the year was 89.34%. The net profit before tax of £216,913 reflects exceptional and extraordinary income of £1,601,917.
Key Performance Indicators
Following a slowdown in the previous year, there has been a concerted effort to boost sales this year; in particular, on the commercials side of the business. Despite the fall in overall market activity due to poor economic conditions, we are now starting to see an increase in the projects won as a direct result of this strong sales drive and hence increasing our market share. A survey of the top London post production houses in a recent Televisual magazine article puts us at fourth position in terms of size and quality (as per producer votes).
The gross margin increased to 89.34% as compared to 86.05% for the previous period. The main reason being reduced cost of sales.
The profit for the year was a direct result of exceptional and extra ordinary income which included profit on the sale of software, the liquidation of Outpost Post Production Limited and Clear (Post Production) Limited.
Risks are formally reviewed by the Board and appropriate processes put in place to monitor and mitigate them. If more than one event occurs, it is possible that the overall effect of such events would compound the possible adverse effects on the company. The directors consider the following to be the principal risks faced by the Group
The Group's performance depends largely on the retention of key creative staff. The group has successfully retained its key staff by ensuring that it gives them the necessary tools and working atmosphere such that they can maximize their creative energies and output.
The Group operates in highly competitive markets with several companies, small and large, competing for the same market share. Investment in the latest technology and a reputation of consistently delivering high quality services are a prime asset in the market. The Group continues to operate a programme for investment in the latest technology to bring the Group up to speed and ahead of competition in terms of technology
Business EnvironmentBusiness environment risks considered by the Group include a downturn in film production activity in the UK, potential delay in revenue generation from the Group's media asset management business, the timing of television production and the cut in advertising spend by blue chip clients.
The Company's policy in relation to the use of financial instruments and its exposure to price risk, liquidity risk and cash flow risk is given in the annual accounts.
Anshul Doshi
Director
7 September 2009
For further information please contact:
Anshul Doshi / Neil Barnett
Prime Focus London plc 020 7565 1000
Philip Davies
Charles Stanley Securities
Nominated Adviser & Broker 020 7149 6000
Consolidated Income Statement for the year ended 31 March 2009
|
2009 |
2008 |
|
|
£ |
£ |
|
|
Revenue |
15,895,832 |
17,964,406 |
|
Cost of sales |
(1,694,689) |
(2,506,228) |
|
Gross profit |
14,201,143 |
15,458,178 |
|
Net operating charges |
(15,625,182) |
(14,124,734) |
|
Operating (loss)/profit |
(1,424,039) |
1,333,444 |
|
Other Income |
399,057 |
120,349 |
|
Finance income |
- |
3,480 |
|
Finance costs |
(360,022) |
(380,274) |
|
Exceptional income |
960,111 |
(604,461) |
|
Extraordinary income |
641,806 |
- |
|
Profit before tax |
216,913 |
472,538 |
|
Corporation tax on profit |
264,757 |
163,792 |
|
Profit for the year |
481,670 |
636,330 |
|
Basic and diluted profit per share |
1.48 |
2.11 |
The above results are derived from continuing activities.
The Company has elected to take exemption under Section 230 of the Companies Act 1985 not to present the Company's profit and loss account. The loss for the Company for the year was 2,175,282 (2008 loss: 294,152)
Consolidated Balance Sheet at 31 March 2009
|
Notes |
2009 |
2008 |
|
|
£ |
£ |
||
|
ASSETS |
|||
|
Non-current assets |
|||
|
Intangible Assets |
15 |
1,975,919 |
3,182,546 |
|
Property, plant and equipment |
16 |
7,916,315 |
10,325,350 |
|
Other receivables |
17 |
1,922,000 |
120,000 |
|
Available for sale investments |
18 |
28,875 |
858,750 |
|
11,843,109 |
14,486,646 |
||
|
Current assets |
|||
|
Inventories |
19 |
32,164 |
30,341 |
|
Trade and other receivables |
20 |
9,355,625 |
5,415,994 |
|
Deferred tax assets |
21 |
401,564 |
20,149 |
|
Cash and cash equivalents |
1,501,861 |
2,392,840 |
|
|
11,291,214 |
7,859,324 |
||
|
Total assets |
23,134,323 |
22,345,970 |
|
|
EQUITY |
|||
|
Capital and reserves attributable to equity shareholders |
|||
|
Share capital |
22 |
1,631,577 |
1,505,314 |
|
Share premium account |
23 |
6,498,787 |
9,383,624 |
|
Capital redemption reserve |
23 |
270,000 |
270,000 |
|
Fair Value Reserve |
23 |
- |
365,395 |
|
Retained earnings |
23 |
(193,952) |
(675,622) |
|
Total equity |
8,206,412 |
10,848,711 |
|
|
LIABILITIES |
|||
|
Current liabilities |
|||
|
Borrowings |
24 |
4,225,582 |
5,775,186 |
|
Trade and other payables |
25 |
6,993,317 |
5,028,909 |
|
Current income tax liabilities |
26 |
1,475 |
26,500 |
|
11,220,374 |
10,830,595 |
||
|
Non-current liabilities |
|||
|
Borrowings |
27 |
3,707,537 |
666,664 |
|
3,707,537 |
666,664 |
||
|
Total liabilities |
14,927,911 |
11,497,259 |
|
|
Total equity and liabilities |
23,134,323 |
22,345,970 |
Consolidated Cash Flow Statement for the year ended 31 March 2009
|
Notes |
12 months |
12 months |
|
|
31-Mar |
31-Mar |
||
|
2009 |
2008 |
||
|
£ |
£ |
||
|
Cash Flows from operating activities |
|||
|
Cash generated from operations |
28 |
(863,716) |
1,801,276 |
|
Net Interest Paid |
(360,022) |
(376,794) |
|
|
Tax Recovered/(paid) |
- |
25,559 |
|
|
Net cash generated from operating activities |
(1,223,738) |
1,450,040 |
|
|
Cash flows from investing activities |
|||
|
Purchases of equipments & subsidiaries |
(415,663) |
(3,110,456) |
|
|
Proceeds from Sale of Assets |
520,102 |
224,907 |
|
|
Net cash absorbed from investing activities |
104,439 |
(2,885,549) |
|
|
Cash flows from financing activities |
|||
|
Issue of shares |
1,010,102 |
944,500 |
|
|
Net cash used in financing activities |
1,010,102 |
944,500 |
|
|
Increase in cash & cash equivalents |
(109,197) |
(491,009) |
|
|
Cash and cash equivalents at the beginning of the year |
(4,049,008) |
(3,557,999) |
|
|
Cash and cash equivalents at the end of the year |
(4,158,205) |
(4,049,008) |
|
Analysis of net debt |
At |
At |
||
|
31 March |
31 March |
|||
|
2008 |
Cash flow |
2009 |
||
|
£ |
£ |
£ |
||
|
Cash in hand, at bank |
2,392,840 |
(890,978) |
1,501,862 |
|
|
Net Parent & Associate Company Loans |
(4,012,000) |
3,023,490 |
(988,510) |
|
|
Bank and other loans |
(1,275,671) |
1,014,406 |
(261,266) |
|
|
Long Term Bank Loans |
- |
(3,069,074) |
(3,069,074) |
|
|
Hire Purchase obligations (more than 1 year) |
(666,664) |
28,201 |
(638,463) |
|
|
Hire purchase obligations (less than 1 year) |
(487,513) |
(215,241) |
(702,754) |
|
|
(4,049,008) |
(109,197) |
(4,158,205) |
||
Shareholders' funds and statement of changes in shareholders' equity
|
Group |
Share capital |
Share premium |
Capital Redemption Reserve |
Fair Value Reserve |
Special Reserve |
Retained earnings |
Total Equity |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
At 1 April 2008 |
1,505,314 |
9,383,624 |
270,000 |
365,395 |
(675,622) |
10,848,711 |
|
|
Shares Issued (Note 22) |
126,2643 |
883,838 |
|
1,010,101 |
|||
|
Creation of special reserve following court application for reduction in share capital |
3,768,675 |
3,768,675 |
|||||
|
Revaluation of financial assets |
(365,395) |
(365,395) |
|||||
|
Retained profit for the year |
481,670 |
481,670 |
|||||
|
Adjustment for capital reduction |
(3,768,675) |
(3,768,675) |
(7,537,350) |
||||
|
At 31 March 2009 |
1,631,578 |
6,498,787 |
270,000 |
- |
- |
(193,952) |
8,206,412 |
The retained earnings reserve represents the cumulative profit of the Group.
|
Company |
Share capital |
Share premium |
Capital Redemption Reserve |
Merger Reserve |
Special Reserve |
Retained earnings |
Total Equity |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
At 1 April 2008 |
1,505,314 |
9,383,624 |
270,000 |
729,160 |
888,658 |
12,776,756 |
|
|
Share Issued |
126,263 |
883,838 |
|
1,010,101 |
|||
|
Creation of special reserve following court application for reduction in share capital |
3,768,675 |
3,768,675 |
|||||
|
Revaluation of financial assets |
|
|
|||||
|
Retained profit for the year |
(2,175,282) |
(2,175,282) |
|||||
|
Adjustment for capital reduction |
(3,768,675) |
(3,768,675) |
(7,537,350) |
||||
|
At 31 March 2009 |
1,631,578 |
6,498,787 |
270,000 |
729,160 |
- |
(1,286,624) |
7,842,900 |
Capital Reduction
On 25 March 2009, the Company obtained court approval for reducing its share premium account by a sum of £3,768,675. This reflects a reduction of £1,410,590.53 in the carrying value of the Company's investment in Clear (Post Production) Limited, Outpost Post Production Limited (previously known as Prime Focus London Limited and before that Video Tape Recording Limited), The Hive Animation Limited, a reduction of £2,148,768 in the carrying value of the debt owed to the Company by its subsidiary Outpost Post Production Limited and a sum of £209,316.49 being the amount owed by the Company to Soho Estates Limited in connection with the surrender of certain leases relating to 54-58 Wardour Street, London and 74-76 Old Compton Street, London.
Notes to the Accounts
1.
The statutory accounts for the year ended 31 March 2008 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 March 2009 are expected to be posted to shareholders today will be delivered to the Registrar of Companies after they have been laid before the Company at the annual general meeting on 30 September 2009.
Copies of the audited Report & Accounts will be posted to all shareholders today and will be available from the Company's office at 64 Dean Street, London. An electronic copy of the Report & Accounts will be available this afternoon from the Company's website - www.pflplc.com.
2. Segmental Reporting
Turnover
The revenue of the Group is all attributable to the one principal activity, that of the post production and related services.
An analysis of turnover, profits before taxation and net assets of the Group by geographical market is shown below:
|
Turnover by geographical markets |
|||||||
|
2009 |
2008 |
||||||
|
£ |
£ |
||||||
|
United Kingdom |
14,341,016 |
17,028,991 |
|||||
|
Europe |
46,349 |
140,973 |
|||||
|
Rest of the world |
1,508,467 |
794,442 |
|||||
|
15,895,832 |
17,964,406 |
||||||
|
Profit before taxation by geographical markets |
|||||||
|
2009 |
2008 |
||||||
|
£ |
£ |
||||||
|
United Kingdom |
171,661 |
447,933 |
|||||
|
Europe |
- |
3,708 |
|||||
|
Rest of the world |
45,252 |
20,897 |
|||||
|
216,913 |
472,538 |
||||||
|
Net asset by geographical market |
|||||||
|
2009 |
2008 |
||||||
|
£ |
£ |
||||||
|
United Kingdom |
8,171,891 |
10,755,369 |
|||||
|
Europe |
- |
- |
|||||
|
Rest of the world |
39,226 |
93,342 |
|||||
|
8,211,117 |
10,849,423 |
||||||
3. (a) Exceptional income
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
Legal Fees relating to Employment dispute |
- |
164,406 |
||
|
Legal Fees relating to abortive property purchase |
53,441 |
- |
||
|
Professional Fees in respect of administration and liquidation of subsidiaries |
82,390 |
- |
||
|
Net Balance on liquidation of subsidiaries |
(1,386,610) |
|||
|
Damages for loss of employment |
102,073 |
440,055 |
||
|
Dilapidations on surrender of leasehold properties |
188,595 |
- |
||
|
(960,111) |
604,461 |
Net balance on liquidation of subsidiaries relate to excess liabilities not payable by the Group upon liquidation of the subsidiaries
(b) Extraordinary Income
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
Profit on sale of eTITLE |
(641,806) |
- |
||
|
(641,806) |
- |
During the year the Company entered into a software acquisition agreement with My Info-Tech Pvt. Limited, a company incorporated in India for the sale of the Company's software 'e-TITLE' to be used as an integral component of My Info-Tech's workflow, archival management and live Video on Delivery tool. The Company had developed 'e-TITLE' as a consortium of 5 pan-European companies funded initially by an European Union grants.
4. Tax expense
There is no charge to corporation tax due to the availability of capital allowances and tax losses brought forward. The Group has tax losses available to carry forward against future taxable income and profits of approximately £4,177,313 (2008 : £1,610,000).
Where it is anticipated that future taxable profits will be available against which these losses will be utilised a deferred tax asset is recognised.
|
2009 |
2008 |
|||||||
|
£ |
£ |
|||||||
|
Current tax |
||||||||
|
UK Corporation tax |
- |
- |
||||||
|
Adjustments in respect of prior years |
(22,659) |
(37,048) |
||||||
|
(22,659) |
(37,048) |
|||||||
|
Deferred tax |
||||||||
|
Origination and reversal of timing differences |
(242,098) |
(126,744) |
||||||
|
Total tax on profit on ordinary activities |
(264,757) |
(163,792) |
||||||
The difference between the current tax charge and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is shown below.
|
2009 |
2008 |
|||||||||
|
£ |
£ |
|||||||||
|
Group profit on ordinary activities before tax |
216,995 |
472,538 |
||||||||
|
Tax on Group profit on ordinary activities at the standard UK corporation tax |
|
|||||||||
|
Rate of 28% (2008: 28%) |
90,430 |
141,762 |
||||||||
|
Effects of: |
|
|||||||||
|
Expenses Not Deductible for tax purposes |
|
|||||||||
|
- Ordinary Activities |
28,824 |
40,225 |
||||||||
|
Capital allowances in excess of Depreciation |
(39,775) |
(210,646) |
||||||||
|
Losses utilised |
(212,819) |
45,481 |
||||||||
|
Exceptional item adjustment |
133,340 |
- |
||||||||
|
Adjustment to tax charge in respect of prior periods |
(22,659) |
(53,870) |
||||||||
|
Tax charge for the year |
(22,659) |
(37,048) |
||||||||
5. Profit per share
The profit per share is based on a profit for the year attributable to equity holders of the parent of £481,670 (2008: £636,330) and the weighted average of the ordinary shares in issue for the year of 32,631,528 (2008: 30,106,276)
At 31 March 2009, there were no outstanding share options.
6. Dividends
No dividend has been declared for the current year (2008: £nil).
7. Acquisitions
During the year, the Group acquired the business interest and goodwill of Outpost Post Production Limited (in Liquidation). The book and fair values at date of acquisition were as follows:
|
|
|
|
|
|
Book value |
Adjustments |
Fair value |
|
|
|
|
|
|
£ |
£ |
£ |
||
|
Tangible fixed assets |
|
|
|
775,000 |
- |
775,000 |
||
|
Goodwill |
|
|
|
|
175,000 |
|
175,000 |
|
|
Consideration |
|
|
|
|
950,000 |
- |
950,000 |
|
|
Considering satisfied by: |
|
|
|
|
|
|
||
|
Cash consideration |
|
|
|
|
|
950,000 |
||
The income and expenditure of the trading activities of Outpost Post Production Limited post-acquisition forms part of the Group accounts.
Related Shares:
PFO.L