4th Nov 2005 07:00
VTR PLC04 November 2005 VTR plc Preliminary Results Announcement VTR plc announces its preliminary results for the year ended 31 August 2005 Results: - Group Turnover £21.5m (2004: £25.3m)- Pre-tax loss £0.78m (2004: £0.25m)- Cash Positive in Financial Year- Net Debt Reduced- Shareholder approval to be sought for move to AIM- Positive reaction to launch of E-TITLE- New Group Managing Director appointed- New Group Operations Director appointed- New subsidiary managing directors appointed Philip Lovegrove, Chairman, commented, "This has been a difficult year and theindications from the industry suggest that next year the markets in which VTRoperates will not alter significantly. I believe that the actions taken by theBoard to develop new sources of business, in addition to the substantial costreductions which have been implemented in the second half of this year, haveplaced the Group in a greatly improved position to return to profitability." For further information please contact: Paul Tracey, Managing Director, VTR plc 020 7437 0026Peter Samengo-Turner, Finance Director, VTR plc 020 7437 0026 Chairman's Statement Shareholders will be aware from the trading update released on 27 September 2005that this has been a difficult year for the VTR Group. In the year to 31 August2005, turnover decreased from £25,344,737 to £21,505,511 against the previousyear, resulting in an operating loss before exceptional item, interest andtaxation of £279,356 compared to an operating profit last year of £1,380,560.After the exceptional credit, the loss before taxation is £779,939 compared to aloss of £251,830 last year. Overview After a satisfactory first half of the year, the Group experienced a severedownturn in trading which started in April 2005 and continued throughout thesecond half, affecting all parts of the business. The reasons for thisdeterioration were multiple and cumulative. The external contributory factorsincluded the recession in UK advertising, exacerbated by the General Election, areduction in programme budgets, an unfavourable economic and fiscal climate forthe UK film industry and greatly increased competition. Each of these factorscontributed to a marked reduction in activity and considerable pressure onprices. In addition to these pressures, it is now clear to your Board that therestructuring which took place at the end of last year did not go far enough inaddressing the structural changes that face the Group in today's market. Theprevious exercise concentrated on the cost base without taking account of themanagement structure of the Group and the workflow processes that also needed tobe addressed. I believe that your Board has now taken the corrective action inre-aligning the Group to enable it to respond to a marketplace which has changedfundamentally in terms of activity and economic dynamics over the last fiveyears. Your Board believes that there is considerable future growth potential for awide range of industries in the new media areas of asset management, contentcreation and distribution for mobile telephony. We are actively considering howthe Group may benefit from the rapid expansion in these areas. Management Changes In May 2005, founding Managing Director John Banks announced his intention toretire and left the company after 21 years. The Board would like to acknowledgeJohn's considerable contribution in building the VTR Group from a small playerin an embryonic industry to one of the best recognised names in the postproduction sector today. We wish him well in his retirement. On 31 August 2005, Peter Newbald left the Board, having been a non-executivedirector since the early days of VTR plc. He played a major role in funding thecompany at its outset. The Board has valued his wise counsel over the years. On John Banks' departure, Paul Tracey, Corporate Development Director, wasappointed Group Managing Director. Paul, a barrister, has been involved withmany aspects of the development of the Group. The company he formerly owned andwhich was acquired by the Group now exists as blue post production. Neil Lane, former Managing Director of The Machine Room (now TMR) was appointedto the Board on 30 June 2005 as Operations Director, bringing his considerableexperience and knowledge of the industry to the board. Further changes to the management team involve the operating companies of theGroup. New managing directors have been appointed in VTR, TMR, the hive and K<POST and each has already brought new energy and focus to his or her area ofresponsibility. Operations During the year, expenses decreased to £20,261,844 (2004: £22,187,884)representing savings of £1.9m, a figure which was £150,000 greater than the£1.75m I forecast in my statement last year. The Board anticipates furthersavings being achieved during the current year and reductions in staff costshave already been made. I believe that these initiatives are beginning to take effect and the beginningof the year has produced results which may be seen as encouraging, compared tothe disappointing trading record of the second half of the previous year. It istoo early to determine whether this pleasing start is indicative of a sustainedrecovery, but I believe that we are now building on a solid base for the future. In September, eTITLE, the Group's subtitling and automated translation product,whose development has been partially funded by an EU Grant, was launched at theInternational Broadcast Convention in Amsterdam (having been previewed there theprevious year) and received a very positive reaction from potential customers.The product will now begin the beta testing phase of its development with theintention of securing the first contracts with customers during the first halfof next year. eTITLE has now been transferred out of TMR into a separatedivision. Dividend No dividend has been declared for this year. Your Board will continue to keepthe matter under review and the payment of future dividends will be subject toresults and the outlook for the media sector as a whole. Cashflow and Gearing I am pleased to report that total indebtedness has fallen to £5,773,215 (2004:£6,239,499) its lowest level since 1995 and that the Group was cash positiveduring the period. Gearing was 111% (2004: 107%) and capital additions were £1.8m. Capitalexpenditure for 2006 is budgeted at £2m. Stock Exchange Listing For some time now your Board has increasingly taken the view that it would bemore appropriate for the Company's shares to be traded on the AIM Market than toremain fully listed on the London Stock Exchange. Accordingly, the Board intendsto seek shareholder approval at the earliest opportunity for VTR plc to move toAIM. Shareholders will be contacted by a separate letter at a later dateexplaining the move in detail. Staff We have always expected, and received, a high degree of professionalism and hardwork from our staff. Our employees have exceeded our expectations in rising tothe many challenges asked of them this year and, on your behalf, I would like tothank them warmly for their support. Outlook This has been a difficult year and the indications from the industry suggestthat next year the markets in which VTR operates will not alter significantly. Ibelieve that the actions taken by the Board to develop new sources of business,in addition to the substantial cost reductions which have been implemented inthe second half of this year, have placed the Group in a greatly improvedposition to return to profitability. Philip LovegroveChairman4 November 2005 Consolidated Profit and Loss AccountFOR THE YEAR ENDED 31 AUGUST 2005 Notes 2005 2004 £ £ Turnover 2(a) 21,505,511 25,344,737 Cost of sales (1,523,023) (1,776,293) ------------------ ------------------ Gross profit 19,982,488 23,568,444 Administrative expenses (20,261,844) (22,187,884) ------------------ ------------------Operating (loss) / profit (279,356) 1,380,560 Exceptional item 4 37,358 (1,153,384) Interest receivable 166 43 Interest payable and similar charges (538,107) (479,049) ------------------ ------------------ Loss on ordinary activities before taxation (779,939) (251,830) Tax credit / (charge) on loss on ordinary activities 5 117,130 (200,310) ------------------ ------------------ Retained loss for the year (662,809) (452,140) ------------------ ------------------ Basic and diluted loss per share 6 (6.0p) (4.1p) Turnover and operating results are derived from the Group's continuingoperations. Consolidated Balance SheetAT 31 AUGUST 2005 2005 2004 £ £ £ £Fixed assetsTangible assets 10,319,974 11,808,821Investments 83,283 109,783 ---------------- ---------------- 10,403,257 11,918,604Current assetsStock 23,970 27,267Debtors 4,394,220 6,036,815Cash at bank and in hand 11,611 13,336 ---------------- ---------------- 4,429,801 6,077,418 ---------------- ----------------Creditors: amounts falling due withinone yearBank loans and overdrafts 1,785,033 1,933,621Hire Purchase creditors 1,566,622 1,991,102Trade and other creditors 3,518,664 5,052,250Corporation tax 120,867 284,105 ---------------- ---------------- 6,991,186 9,261,078 ---------------- ---------------- Net current liabilities (2,561,385) (3,183,660) ---------------- ----------------Total assets less current liabilities 7,841,872 8,734,944 Creditors: amounts falling due after (2,433,171) (2,658,214)more than one yearProvisions for liabilities and chargesDeferred taxation (227,114) (232,334) ---------------- ---------------- 5,181,587 5,844,396 ---------------- ---------------- Capital and reservesShare capital 551,928 551,928Share premium account 4,071,241 4,071,241Capital redemption reserve 270,000 270,000Profit and loss account 288,418 951,227 ---------------- ----------------Funds attributable to equity 5,181,587 5,844,396shareholders ---------------- ---------------- Consolidated Cash Flow StatementFOR THE YEAR ENDED 31 AUGUST 2005 Notes 2005 2004 £ £ Net cash flow from operating activities A 3,195,340 4,136,427 Returns on investments and servicing of finance B (537,941) (479,006) Taxation (51,326) (443,561) Capital expenditure and financial investment B (118,995) (712,647) --------------- ---------------Cash inflow before financing 2,487,078 2,501,213 Financing B (2,340,215) (2,307,698) --------------- ---------------Increase in cash in the year 146,863 193,515 --------------- --------------- Reconciliation of net cash flow to movement in net debt Increase in cash in the year 146,863 193,515 Cash flow from decrease in debt and lease financing B 2,340,215 2,307,698 --------------- ---------------Change in net debt resulting from cash flows 2,487,078 2,501,213 New hire purchase agreements (2,020,794) (1,638,301) --------------- ---------------Movement in net debt in the year 466,284 862,912 Net debt at 31 August 2004 (6,239,499) (7,102,411) --------------- ---------------Net debt at 31 August 2005 C (5,773,215) (6,239,499) --------------- --------------- Notes to the Consolidated Cash Flow StatementFOR THE YEAR ENDED 31 AUGUST 2005 A Reconciliation of operating profit to net cash inflow from 2005 2004 operating activities £ £ Operating (loss)/profit (279,356) 1,380,560 Depreciation 3,276,024 3,399,542 Profit on disposal of tangible fixed assets (53,252) (30,083) Decrease/(increase) in debtors 1,642,595 (514,522) Decrease in creditors (705,397) (108,721) Cashflow relating to previous period's restructuring provision (715,071) - Decrease in stock 3,297 7,766 Amount written of investments 26,500 1,885 -------------- -------------- 3,195,340 4,136,427 -------------- -------------- B Analysis of cash flows for headings netted in the cash flow Returns on investments and servicing of finance Interest received 166 43 Interest paid (266,528) (214,191) Interest element hire purchase payments (271,579) (264,858) -------------- -------------- Net cash outflow for returns on investments and servicing of (537,941) (479,006) finance -------------- -------------- Capital expenditure and financial investment Purchase of tangible fixed assets (172,247) (742,730) Sale of tangible fixed assets 53,252 30,083 -------------- -------------- Net cash outflow for capital expenditure and financial investment (118,995) (712,647) -------------- -------------- Financing Issue of ordinary share capital - - Capital element of hire purchase payments (2,340,215) (2,307,698) -------------- -------------- Net cash outflow from financing (2,340,215) (2,307,698) -------------- -------------- C Analysis of net debt At Cash flow Other non At 1 September Cash 31 August 2004 Changes 2005 £ £ £ £ Cash in hand, at bank 13,336 (1,725) 11,611 Bank loans (1,933,621) 148,588 (1,785,033) ---------------- 146,863 ---------------- Debt due after 1 year (1,150,000) - (1,150,000) Hire purchase obligations (3,169,214) 2,340,215 (2,020,794) (2,849,793) ---------------- ---------------- ---------------- ---------------- Total (6,239,499) 2,487,078 (2,020,794) (5,773,215) ---------------- ---------------- ---------------- ---------------- D Major non-cash transactions During the year the Group entered into hire purchase arrangements in respect ofassets with a total capital value at the inception of the agreements of£2,020,794 (2004 £1,638,301). Statement of Total Recognised Gains and Losses No separate Statement of Total Recognised Gains and Losses has been presented asall such material gains and losses have been dealt with in the Profit and LossAccount. NOTES FOR THE YEAR ENDED 31 AUGUST 2005 1. The results have been prepared on the basis of the accounting policiesset out in the Group accounts for the year ended 31 August 2004. The financialinformation included in this announcement does not constitute statutory accountsfor the years ended 31 August 2004 or 2005 within the meaning of Section 240 ofthe Companies Act 1985. The statutory accounts of VTR plc for the year ended 31August 2004 have been filed with the Registrar of Companies for England andWales and those for the year ended 31 August 2005 will be delivered followingpublication. The Auditors have reported on those accounts; their reports in eachcase for the years ended 31 August 2004 and 31 August 2005 were unqualified anddid not include a statement under Section 237(2) or (3) of the Companies Act1985. 2. Turnover and net assets (a) Turnover by geographical markets 2005 2004 £ £ United Kingdom 20,694,909 24,138,643Rest of Europe 160,517 447,116Other 650,085 758,978 --------------- ---------------Total 21,505,511 25,344,737 --------------- ---------------(b) Loss before taxation by geographical markets United Kingdom (750,541) (239,846)Rest of Europe (5,821) (4,443)Other (23,577) (7,541) --------------- ---------------Total (779,939) (251,830) --------------- ---------------(c) Net assets by geographical markets United Kingdom 5,181,587 5,844,396 --------------- --------------- 3. Dividends No dividend has been declared for the year (2004: Nil). 4. Exceptional item The exceptional item in 2005 represents the net cost of redundancies and otherexpenses relating to a fundamental restructuring of the Group in 2004 and 2005. 5. Taxation The tax credit in 2005 represents the reversal on timing differences on theexceptional item made in 2004 and the carry back of losses incurred in the year. The tax charge in 2004 represents a tax credit for the losses incurred in theyear offset by a portion of the exceptional item being deferred as some of thepayments would be made more than nine months after the year end. 6. Loss per share Basic loss per share is based on a loss of £662,809 (2004: loss £452,140) and11,038,550 (2004: 11,038,550) weighted average ordinary 5p shares that were inissue during the year. Diluted loss per share is based on a loss of £662,809 (2004: loss £452,140) and11,038,550 (2004: 11,038,550) weighted average ordinary 5p shares that were inissue during the year. As the average fair value of a VTR plc share throughout the year has been lessthan the average exercise price for all outstanding share options, there is nodilution effect this year and basic and diluted loss per share are the same. 7. The annual report and accounts for 2005 will be posted toshareholders on 15 December 2005. Further copies will be available after thatdate on request from The Secretary, VTR plc, 64 Dean Street, London, W1D 4QQ. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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