14th Jun 2006 07:01
Tinopolis PLC14 June 2006 TINOPOLIS PLC ("TINOPOLIS" or THE "COMPANY") RESULTS FOR THE SIX MONTHS TO 31st MARCH 2006 Financial Highlights: • Turnover £14.9m, +189% on prior year (2005: £5.2m) • Strong growth in organic Operating Profit from core Tinopolis business of £467k, +16% (2005: £401k) • Net cash inflow from operating activities £2.611m • Cash and cash equivalents at end of period is £11.452 m • Intention to return cash not needed in the business to shareholders Operational Highlights: • Acquired The Television Corporation PLC ("TV Corp") in January 2006 • Integration and restructuring progress on track • Award winning productions - 6 BAFTAs won, a record for the industry Post period end: • Disposal of Hawk-Eye Innovations Limited to John Wisden & Co. Ltd. for a cash consideration of £4.4m, debt free / cash free basis • New drama contract for S4C worth £4m Commenting on the results, Ron Jones, Executive Chairman said: "This has been aperiod with strong organic growth and a major acquisition. At period end we have record revenue visibility and a record number of awards on the shelf for the excellence of our programmes. The integration of the acquired TV Corp businesses is going well and the range and scale of our Tinopolis, Sport and Mentorn Divisions now give us the opportunity to build on our strengths in advertiser funded programming and online content in the second half and beyond." For further information, please contact: Tinopolis Plc.Ron Jones, Executive Chairman 01554 880840Arwel Rees, Managing Director 01554 880807 Panmure Gordon & CoAubrey Powell, Katherine Roe 020 7459 3600 Mantra PRJessie Allen / Lawrence Dore 020 7907 7800 CHAIRMAN'S REVIEW Introduction Our long-term goals for Tinopolis 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 good performance of our pre-acquisitionbusiness we continue to meet these objectives. The order book for our TinopolisDivision shows organic growth in excess of 12% for the remainder of this yearand for 2007. With the acquisition of TV Corp in January this year Tinopolis has become one of the largest in the UK television production industry. Thisstrategic step gives us the scale and the resources to be a leader in thisfast-changing industry. The Acquisition of TV Corp TV Corp is a diversified company with brands that have consistently been marketleaders creatively. In the last four months Sunset + Vine for sport and Mentornfor current affairs and drama have won more awards than any of their productioncompany peers. However, this creative success has been accompanied by mixedfinancial performance. While Sunset + Vine continues to achieve strong revenueand earnings growth and has a healthy order book, the performance of Mentorncontinued to be a drag on its overall profitability. This has been primarily due to excessive overhead costs and poor strategic positioning and the excessively high central costs at TV Corp. While the recovery plan at Mentorn will take time to implement, its creativeteam has been strengthened since acquisition and significant re-commissions have been won. With the refocusing of this business on profitable programming further creative and management appointments will be made in the coming months.Significant progress has been made towards financial recovery of the TV Corpbusinesses. Central costs and overheads running at £1m per annum have alreadybeen removed and, following a review of the premises used by TV Corp, othersignificant savings have been identified for the 2007 financial year. 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. We do not consider that owning Hawk-Eye is a key competitive advantage inwinning sports programme commissions and it is not a core business. Consequently we have sold the business to John Wisden & Co. Limited for a cash consideration of £4.4m. The group will maintain its close working relationship with the Hawk-Eye management and continue to use the system on any appropriate sports coverage. Sales for the 5 months to 31st May for Hawk-Eye were £517k with break evenOperating Profit. Our Operating Divisions At the moment our business is run as three divisions - Tinopolis Division,Mentorn Division and Sport. Each of these is now measured against the three main guidelines for our business: • an emphasis on revenue visibility over the search for the next big hit; • building a diverse customer base and diverse revenue streams and • emphasising the trend towards new media and Advertiser Funded Programming ("AFP"). For the most part our business has above industry average revenue visibilitywith long-term contracts or strong returning series, key components ofsustainable profitability in this industry. Parts of the Mentorn Division,however, are over-dependent on one-off commissions and we are committed toachieving a better balance. Across the Company we have one of the most diverse customer groups in theindustry. With our concentration on sport and programmes in broadcasters' publicservice remit we are less dependent than other companies on revenue streamsarising from secondary rights. Building a portfolio of programmes with secondaryrights value is therefore potentially very valuable to group results and thiswill be one of the main targets for Mentorn. New media and AFP are recent additions to the required portfolio of skills forproduction companies. We have been building our skills in new media for overfour years and now have over 50 people now working exclusively and profitably inthis area. Our interactive skills are being used today throughout the Group andhave already assisted both Mentorn and Sunset + Vine with new commissions. Thisis an important area for synergy between the three divisions and is a key partof our future. Our breadth of new media and creative skills and experience isunique in the industry. AFP has been a feature of the Sunset + Vine business formany years and we plan to utilise these skills across Tinopolis' other divisionsas well. Tinopolis Division consists of the pre-acquisition businesses of Tinopolis basedin Llanelli and Cardiff producing mainly Welsh language and new media content.Sales for the six months ended 31 March 2006 were £5,310m, a 3% increase overprior year of £5.173m despite a fall-off in drama revenues as, unlike last year,they are weighted to the second half of the year. Operating Profit in the period was £467k compared to £401k in the prior year, a16% increase. Earlier this year we launched our top S4C shows on the Internet - our nightlymagazine programme Wedi 7 and major drama series Caerdydd. People around theworld can now view these programmes online at any time. (www.wedi7.com andwww.dramacaerdydd.com). Revenue visibility for the balance of 2006 is very strong and should benefitfrom the traditional increase in profitability in the second half of the year.We already have a record order book for 2007 with organic revenue growth alreadyin the teens, including a new drama contract with S4C valued at £4m. Our interactive / new media business continues to grow strongly. Two commissionswere won in the period for BBC Jam (BBC's digital curriculum for schoolsproject). Another high profile commission won in the period was an onlinelearning adaptation of the television programme The Apprentice for theUniversity for Industry. Sport consists of Sunset + Vine and Hawk-Eye Innovations. In the period sinceacquisition, Sport contributed sales of £6.3m and Operating Profits of £626k.These sales represent just less than 3 months trading within Tinopolis. Sunset + Vine is the UK's leading independent sports producer, with more than2000 hours of programming broadcast in the UK over the last year. It haslong-term contracts with Five to produce live football, overnight sports andcricket highlights, with the BBC to provide horse racing and other sports andwith ITV for the Tour de France. This year, Sunset + Vine has won two BAFTAs and four RTS (Royal TelevisionSociety) awards for its coverage of the Ashes series for Channel 4, including aspecial award for its innovative development of cricket production. The companyhas now won more than 30 awards for its cricket coverage. Sunset + Vine'spre-eminent position in sports production innovation was recognized by theindustry with the company being named the UK's most creative independent sportsproducer - second only to the BBC - by Broadcast Magazine. 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. Sunset + Vine are set to become the UK's biggest independent producer in thefast growing television programming area of gaming. In 2006 it will be producingfive new series covering poker and blackjack - more than 85 hours - with acontract value of £4 million. Advertiser Funded Programming (AFP) is an important revenue generator for Sunset+ Vine, with its programming being distributed to 220 broadcasters around theworld 52 weeks a year. The company continues to make good progress in winningnew AFP business and this year has seen the start of its coverage of the VolvoOcean Race for the first time. Sunset + Vine's Gillette World Sport is now intoits 23rd year and the company also produces and distributes AFP programmes forMartini and Allianz. There is significant growth potential in the AFP market andSunset + Vine with its existing distribution network is well placed tocapitalise on this growth. Mentorn Division consists of Mentorn, Redback, Folio and Splash. In the periodpost acquisition, Mentorn Division contributed sales of £3.4m with an OperatingLoss of £(628)k. Mentorn produced several hundred hours of programming over the last year acrossthe drama, factual, current affairs and entertainment genres for broadcastersincluding the BBC, ITV, Channel 4, Five, Sky, Discovery and National Geographic. This year the company has won four BAFTAs, two RTS awards and a BPG(Broadcasting Press Guild) award for programmes such as the Channel 4 dramas TheGovernment Inspector and A Very Social Secretary, and the Channel 4 currentaffairs strand Dispatches. Broadcast recognized this creativity by namingMentorn the UK's best independent current affairs producer and one of the topfive drama producers. Mentorn's current affairs contracts include more than 30 editions of QuestionTime for the BBC and 20 editions of 30 Minutes for Channel 4 every year. Itsfactual output includes Body Shock: Half Ton Man, which achieved a 5 millionaudience, one of the highest ever for a science programme. The company iscurrently producing a landmark series on Russia for BBC 2, presented by JonathanDimbleby. This year, Mentorn produced Discovery's first ever drama, Nostradamus,and the company has several drama developments with Channel 4 and ITV1. Folio's is one BBC 1's main suppliers of popular factual programmes, with longrunning strands Traffic Cops and Car Wars providing ratings success for thechannel. Folio has also expanded this year with new series for ITV, Sky andDiscovery. RedBack has quickly grown to become a respected factual supplier, producing fourseries for Sky One and various programmes for Channel 4 and Discovery. Thecompany is currently working on a two-hour prime time special for ABC in the US. Cash Cash generation across the group was strong in the period, with net cash inflowfrom operating activities of £2,611 k. In addition, our cash position wasfurther increased by £8,916k cash through our acquisition of TV Corp. As aresult cash and cash equivalents at the 31st of March stood at £11,452k. Post period end and following the sale of Hawk-Eye Innovations resulted in cashproceeds of £4.4m. We have concluded that the Company now has more cash than is necessary to runthe company efficiently and to develop its business. We shall therefore bereviewing the Company's requirements and options with a view to returning anyexcess cash to shareholders at the earliest possible opportunity. We are also assessing what is an appropriate dividend strategy. Since groupdistributable reserves are currently insufficient to permit the payment ofanything but a tiny dividend to holders of Tinopolis shares, we will need courtapproval for a capital reconstruction in order to implement this strategy andsteps to do this will be taken shortly. Adoption of IFRS The Group's interim financial statements for the six months ended 31 March 2006have been prepared under applicable International Financial Reporting Standardsadopted by the European Union ("IFRS") for the first time. The use of the newstandards did not have a material effect on reported results. Conclusion and Outlook Our objectives for the next 12 months are to: • restructure Mentorn to provide a base for profitable growth; and • leverage our new media and AFP skills, as well as our established practices of winning and managing profitable business, to exploit the huge changes in the industry and accelerate growth across the Company We have a strong portfolio of customers and genres and the creative andmanagement skills to complement the investments made by Tinopolis in recentyears in its new media business. We believe that the relative importance inprogramming of new media and interactivity will only increase and our businessis 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 toexploit to broaden or complement our existing business, whilst maintainingstrong financial discipline. Staff Any takeover has the potential to be unsettling to employees. In practice wehave found that our staff have handled this difficult time with enthusiasm andprofessionalism. It is through their hard work and dedication that a successfultransition has been possible and it is because of them that we are confident ofmaking the Company successful. I am grateful to them all. Ron JonesExecutive Chairman14th June 2006 TINOPOLIS PLCCONSOLIDATED INCOME STATEMENTSIX MONTHS ENDED 31 MARCH 2006 Unaudited six Restated (note Restated months ended 10) unaudited (note 10) 31 March six months ended year ended 30 Notes 2006 31 March 2005 September 2005 £000 £000 £000 Revenue 14,946 5,173 10,408Cost of sales (11,617) (3,670) (7,522) ----- ----- -----Gross profit 3,329 1,503 2,886 --------- ---------- ----------Operating expenses - restructuring costs 7 (1,155) - -- other (3,281) (1,187) (1,971) --------- ---------- ---------- Total operatingexpenses (4,436) (1,187) (1,971) ----- ----- -----Operating (loss)/profit (1,107) 316 915Interest payable (16) (36) (53)Interest receivable 57 1 - ----- ----- -----(Loss)/profit on ordinaryactivities beforetaxation (1,066) 281 862Taxation 3 73 (111) (255) ----- ----- -----Net (loss)/profitfor the period (993) 170 607 ----- ----- -----Attributable to:Equity holders of the parentcompany (1,019) 166 584Minority interest 26 4 23 Earnings/(loss) per share - basic 4 (1.7)p 0.7p 2.4pEarnings/(loss ) per share - diluted 4 (1.6)p 0.6p 2.1p ===== ===== ===== TINOPOLIS PLCCONSOLIDATED BALANCE SHEETAS AT 31 MARCH 2006 Restated (note Unaudited as Unaudited as 10) at 30 at 31 March at 31 March September 2006 2005 2005 Notes £000 £000 £000AssetsProperty, plant andequipment 5 4,878 3,363 3,259Intangible assets -goodwill 8 23,409 - -Investments 39 - 54 ----- ----- -----Total non-current assets 28,326 3,363 3,313 Current assetsInventories 282 89 178Trade and other receivables 11,145 1,026 1,195Cash and cash equivalents 11,452 595 852 ----- ----- -----Total current assets 22,879 1,710 2,225 ----- ----- -----Total assets 51,205 5,073 5,538 ===== ===== ===== EquityIssued capital 1,989 497 497Share premium 24,147 - -Merger reserve 607 625 657Retained earnings 1,242 1,573 1,967 ----- ----- -----Total equity attributableto shareholders 27,985 2,695 3,121Minority interest 49 14 33 ----- ----- -----Total equity 28,034 2,709 3,154 ----- ----- -----Non-current liabilitiesLoans and borrowings 154 322 190Long term provisions 1,690 301 359 ----- ----- -----Total non-current liabilities 1,844 623 549 ----- ----- -----Current liabilitiesCurrent portion ofloans and borrowings 1,341 354 312Current income tax payable 1,393 115 235Trade and other payables 18,233 1,272 1,288Short term provisions 360 - - ----- ----- -----Total current liabilities 21,327 1,741 1,835 ----- ----- -----Total liabilities 23,171 2,364 2,384 ----- ----- -----Total equity andliabilities 51,205 5,073 5,538 ===== ===== ===== TINOPOLIS PLCCONSOLIDATED CASH FLOW STATEMENTSIX MONTHS ENDED 31 MARCH 2006 Unaudited six Unaudited six Restated year months ended 31 months ended ended 30 March 31 March September 2006 2005 2005 £000 £000 £000 (Loss)/profit for the period (993) 170 607Adjustments for:Depreciation 393 263 516Impairment losses on goodwill - 39 39Impairment losses on investments 15 - -Amortisation of grant income - (13) -Net finance costs (41) 35 53Gain on sale of property, plant andequipment (19) (9) (2)Share-based payments 26 13 53Income tax expense (73) 111 255 ----- ----- -----Operating profit before changesin working capital and provisions (692) 609 1,521 Change in inventories (104) (13) (102)Change in trade and otherreceivables 1,175 (325) (486)Change in trade andother payables 2,692 289 231 ----- ----- ----- 3,071 560 1,164 Interest paid (29) (40) (65)Income taxes paid (431) (18) (27) ----- ----- -----Net cash from operatingactivities 2,611 502 1,072 ----- ----- -----Acquisition of subsidiary,net of cash acquired 8,916 568 631Payments to acquire property,plant and equipment (793) (112) (275)Receipts from sales ofproperty, plant and equipment 20 17 23Payments to acquire investments - - (54)Interest received 57 - 7 ----- ----- -----Net cash used in investingactivities 8,200 473 332 ----- ----- ----- Repayment of borrowings (136) (78) (157)Payment of finance leaseliabilities (75) (133) (226) ----- ----- -----Net cash used in financingactivities (211) (211) (383) ----- ----- -----Net increase in cash andcash equivalents 10,600 764 1,021 Cash and cash equivalents atstart of period 852 (169) (169) ----- ----- -----Cash and cash equivalents atend of period 11,452 595 852 ===== ===== ===== TINOPOLIS PLCCONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the six months ended 31 March 2006 March 2006 Attributable to equity holders of the parent company Share Share Merger Retained Capital Total Minority Total capital premium reserve earnings redemption interest equity reserve £000 £000 £000 £000 £000 £000 £000 £000 Balanceat 1 497 - 657 1,967 - 3,121 33 3,154October 2005 Loss/(profit) - - - (1,019) - (1,019) 26 (993)for the period Dividends - - - - - - (10) (10)paid Shareoptions - - - 294 - 294 - 294amortised Shares 1,492 24,147 (50) - - 25,589 - 25,589issued ----- ------ ----- ------ ------ ----- ----- ----- Balanceat 31 1,989 24,147 607 1,242 - 27,985 49 28,034March 2006 ====== ====== ===== ===== ===== ====== ===== ======= March 2005 Attributable to equity holders of the parent company Share Share Merger Retained Capital Total Minority Total capital premium reserve earnings redemption interest equity reserve £000 £000 £000 £000 £000 £000 £000 £000 Balanceat 1 8 - 486 1,394 2 1,890 15 1,905October 2004Profit for the - - - 166 - 166 4 170periodDividends - - - - - - (5) (5)paidShare options - - - 13 - 13 - 13amortisedShares 489 - - - - 489 - 489issuedMovement in - - 139 - (2) 137 - 137the year ------ ------ ------ ------ ------ ------ ----- -----Balanceat 31 March 2005 497 - 625 1,573 - 2,695 14 2,709 ====== ======= ====== ======= ====== ===== ==== ===== September 2005 Attributable to equity holders of the parent company Share Share Merger Retained Capital Total Minority Total capital premium reserve earnings redemption interest equity reserve £000 £000 £000 £000 £000 £000 £000 £000 Balanceat 1 8 - 486 1,330 2 1,826 15 1,841October 2004Profit for the - - - 584 - 584 23 607periodDividends - - - - - - (5) (5)paidShare options - - - 53 - 53 - 53amortisedShares 489 - - - - 489 - 489issuedMovement in - - 171 - (2) 169 - 169the year ----- ----- -------- ------ ------ ----- ----- ------ Balanceat 30 September 2005 497 - 657 1,967 - 3,121 33 3,154 ====== ====== ====== ===== ===== ====== ===== ===== Notes to the interim accounts 1 Accounting policies Basis of Preparation The condensed consolidated interim financial statements for the six months ended31 March 2006 have been prepared under applicable International FinancialReporting Standards adopted by the European Union ("IFRS") which have beenadopted and incorporated into the principal accounting policies as set outbelow. Note 10 and the subsequent pages set out detailed reconciliations to showthe differences in accounting treatment as compared to the previous UK GAAPbasis of accounting. There are reconciliations for the Group Income Statement(formerly the Group Profit and Loss Account) and Group Balance Sheet for therestated comparative results for the year ended 30 September 2005 and the GroupIncome Statement for the six months ended 31 March 2005. The financial information included in this document is unaudited and does notcomprise statutory accounts within the meaning of section 240 of the CompaniesAct 1985. The comparative figures for the financial year ended 30 September 2005are not the company's statutory accounts for that financial year. The statutoryaccounts for the year ended 30 September 2005, prepared in accordance with UKGAAP, have been filed with the Registrar of Companies. The auditor gave anunqualified report, without any statement under section 237(2) or (3) of theCompanies Act 1985. This interim financial information has been prepared on the basis of therecognition and measurement requirements of adopted IFRS as at 31 March 2006that are effective (or available for early adoption) as at 30 September 2006,which will be the Group's first annual reporting date under adopted IFRS. Basedon these adopted IFRS, the directors have applied the accounting policies whichthey expect to apply when the first annual IFRS financial statements areprepared for the year ending 30 September 2006. However, the adopted IFRSs that will be effective (or available for earlyadoption) in the annual financial statements for the year ending 30 September2006 are still subject to change and to additional interpretations and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period will be determined finally only when the annual financialstatements are prepared for the year ended 30 September 2006. Basis of consolidation The Group financial statements consolidate the financial statements of theCompany and its subsidiary undertakings made up to 30 September each year. The results of subsidiary undertakings acquired or disposed of in the year areincluded in the consolidated profit and loss account from the date ofacquisition or up to the date of disposal. 2 Segmental analysis The Group's operations involve the making of television, film, online and otheraudio-visual productions. It is currently managed in three divisions - Unaudited six Unaudited six Restated year months ended months ended 31 ended 30 31 March March 2005 September 2005 2006 £000 £000 £000SalesTinopolis Division 5,310 5,173 10,408Sport 6,260 - -Mentorn Division 3,376 - - ---- ---- ----Total Sales 14,946 5,173 10,408 ---- ---- ----Operating ProfitTinopolis Division 467 401 1,129Sport 626 - -Mentorn Division (628) - - ---- ---- ---- 465 401 1,129PLC and CentralOverheads (417) (85) (214) ---- ---- ----Group OperatingProfit beforerestructuring cost 48 316 915 ---- ---- ---- The Sport and the Mentorn divisions were acquired on 17 January 2006. 3 Taxation charge / (credit) Taxation for the six months to 31 March 2006 is based on the effective rate oftaxation which is estimated to apply for the year ending 30 September 2006. Unaudited six Unaudited six Restated year months ended months ended 31 ended 30 31 March March 2005 September 2005 2006 £000 £000 £000 UK Taxation at 30% 3 33 235Deferred taxation (76) 78 20 ---- ---- ---- (73) 111 255 ---- ---- ---- 4 Earnings per share Unaudited six Unaudited six Year ended 30 months ended months ended 31 September 2005 31 March 2006 March 2005 £000 £000 £000 (Loss)/profit for the periodattributable to equity holders 166 584 (1,019) Weighted average numberof shares - basic 60,373,452 22,816,327 23,839,532Earnings per share - basic (1.7)p 0.7p 2.4p Weighted average numberof shares - diluted 62,640,010 26,514,407 27,518,012Earnings per share -diluted (1.6)p 0.6p 2.1p 5 Property, plant and equipment - additions and disposals naudited six Unaudited six Year ended 30 months ended months ended 31 September 2005 31 March 2006 March 2005 £000 £000 £000 Additions 830 162 324Net book value of assetdisposals 1 7 22 6 Analysis of Net Cash As at Cash Flow Non-Cash Unaudited 1st October Movement as at 2005 31 March, 2006 £000 £000 £000 Cash at bank and in hand 852 12,711 0 13,563Bank overdraft 0 (2,111) 0 (2,111) ---- ---- ---- ----Net Cash 852 10,600 0 11,452 Debt due within one year (188) (935) (94) (1,217)Debt due after one year (131) (97) 94 (134)Finance Leases and HirePurchase contracts (183) 38 0 (145) ---- ---- ---- ---- (502) (994) 0 (1,496) ---- ---- ---- ----Net cash 350 9,606 0 9,956 ---- ---- ---- ----Analysed as :Cash held on behalf of client 6,932Cash held by the company 3,024 ---- 9,956 ---- 7 Restructuring costs Restructuring costs comprise the following; Unaudited six Unaudited six Year ended 30 months ended months ended 31 September 2005 31 March 2006 March 2005 £000 £000 £000 Contractualand othertermination costs involvedin the removal of TelevisionCorporation Board 1,155 - - ==== ==== ==== 8 Acquisition On 17 January 2006 the group acquired 100% of the issued share capital ofTelevision Corporation Plc on the basis of 1.73 new Tinopolis shares for eachTelevision Corporation share. The book value and provisional fair value of assets purchased were as follows: Book value of Provisional Provisional acquired assets fair value fair value at / (liabilities) adjustment date of acquisition £000 £000 £000Tangible fixed assets 1,550 (367) 1,183Goodwill 12,988 (12,988) -Stocks 1,034 (1,034) -Debtors 11,093 - 11,093Cash 10,237 - 10,237Creditors (16,977) (1,767) (18,744)Share Options - (268) (268) ------- -------- --------Net assets acquired 19,925 (16,424) 3,501Goodwill 23,409Transaction costs incurred (1,321)------------------------ ------- -------- --------Consideration, satisfied byissue of shares 25,589 -------- The provisional fair value adjustments represent the following: - Stocks - Tinopolis expenses all internal development costs as they occur rather than classify them as stock or work in progress. - Fixed Assets - Tinopolis depreciation policies are more prudent than those adopted by Television Corporation particularly concerning short life studio and computer equipment. - The adjustment to goodwill is made to write off the balance previously held in the Television Corporation's balance sheet. - Adjustment has been made to creditors to reflect appropriate dilapidations and the fact that the rent paid on one of the company's properties is significantly higher than market rent. - Share Options - an adjustment to reflect fair value of options offered to Television Corporation staff as a result of a ruling by the takeover panel. 9 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 optionOptionsgranted to directors 08-02-05 128,000 Time Period 10 YearOptions granted to employees 08-02-05 918,900 Time Period 10 Year The principal assumptions used in assessing the fair value of share options wereas follows; Unaudited six Unaudited six Year ended 30 months ended months ended 31 September 2005 31 March 2006 March 2005 £000 £000 £000 Fair value at measurementdate 79 13 53Share price 41p 41p 41pExercise price 41p 41p 41pExpected volatility 25% 25% 25%Option life 10 year 10 year 10 yearRisk-free interest rate 4.5% 4.5% 4.5% 10 Transition to IFRS As stated in the accounting policies note, these are the Group's first condensedconsolidated interim financial statements for part of the period covered by thefirst IFRS annual consolidated financial statements prepared in accordance withIFRS. An explanation of how the transition from UK GAAP to IFRS has affected theGroup's financial position, financial performance and cash flows is set out inthe following tables and notes that accompany the tables. Goodwill Under UK GAAP the Group's policy was to amortise goodwill over 20 years. UnderIFRS 3 there is no amortisation of goodwill, so goodwill amortisation charge in2005 has been excluded from the restated accounts. Share options In accordance with IFRS 2 share options granted since 7 November 2002 have beenvalued at the date of grant and this value is being amortised over the vestingperiod of the options in issue. This charge is effective from 1 October 2004 andthe equivalent amount is credited to retained profits in the balance sheet. Deferred tax The Group's policy was to discount the deferred tax liability although interimresults for the period ending 31st March 2005 were presented on an un-discountedbasis. In accordance with IFRS, the policy has been amended and discounting hasbeen excluded from the restated comparatives. UK GAAP Adjustments Adjusted IFRS £000 £000 £000Profit and loss account6 months to 31 March 2005 Turnover 5,173 - 5,173Cost of sales (3,670) - (3,670) ---- ---- ----Gross profit 1,503 - 1,503 Operating expenses (1,135) - (1,135)Goodwill impairment (39) - (39)Share based payments - (13) (13) ---- ---- ----Operating profit 329 (13) 316 Interest payable (36) - (36)Interest receivable 1 - 1 ---- ---- ----Profit before taxation 294 (13) 281Taxation (111) - (111) ---- ---- ----Profit after taxation 183 (13) 170 Equity minority interest (4) - (4) ---- ---- ----Retained profit for the period 179 (13) 166 ==== ==== ==== UK GAAP Adjustments Adjusted IFRS £000 £000 £000Profit and loss accountYear ended 30 September 2005 Turnover 10,408 - 10,408Cost of sales (7,522) - (7,522) ---- ---- ----Gross profit 2,886 - 2,886 Operating expenses (1,879) - (1,879)Goodwill impairment (39) - (39)Share based payments - (53) (53) ---- ---- ----Operating profit 968 (53) 915 Interest payable (53) - (53)Interest receivable - - - ---- ---- ----Profit before taxation 915 (53) 862Taxation (251) (4) (255) ---- ---- ----Profit after taxation 664 (57) 607 Equity minority interest (23) - (23) ---- ---- ----Retained profit for the period 641 (57) 584 ==== ==== ==== UK GAAP Adjustments Adjusted IFRS £000 £000 £000Balance sheet30 September 2005AssetsProperty, plant and equipment 3,259 - 3,259Intangible assets - - -Investments 54 - 54 ---- ---- ----Total non-current assets 3,313 - 3,313 Current assetsInventories 178 - 178Trade and other receivables 1,195 - 1,195Cash and cash equivalents 852 - 852 ---- ---- ----Total current assets 2,225 - 2,225 ---- ---- ----Total assets 5,538 - 5,538 ==== ==== ==== EquityIssued capital 497 - 497Merger reserve 657 - 657Retained earnings 2,035 (68) 1,967 ---- ---- ----Total equity attributable toshareholders 3,189 (68) 3,121Minority interest 33 - 33 ---- ---- ----Total equity 3,222 (68) 3,154 LiabilitiesLoans and borrowings 190 - 190Provisions 291 68 359 ---- ---- ----Total non-current liabilities 481 68 549 Loans and borrowings 312 312Income tax payable 235 235Trade and other payables 1,288 1,288 ---- ---- ----Total current liabilities 1,835 - 1,835 ---- ---- ----Total liabilities 2,316 68 2,384 ---- ---- ----Total equity and liabilities 5,538 - 5,538 ==== ==== ==== 11 Post Balance Sheet events In June 2006, Hawk-Eye Innovations Limited, a subsidiary, was sold to the JohnWisden & Co Ltd. for a cash consideration of £4.4 million on a debt/cash freebasis. Independent review report to Tinopolis Plc Introduction We have been instructed by the company to review the financial information forthe six months ended 31 March 2006 which comprises the consolidated incomestatement, consolidated balance sheet, consolidated cash flow statement,consolidated statement of changes in equity and the related notes. We have readthe other information contained in the interim report and considered whether itcontains any apparent misstatements or material inconsistencies with thefinancial information. This report is made solely to the company in accordance with the terms of ourengagement. Our review has been undertaken so that we might state to the companythose matters we are required to state to it in this report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the company for our review work, for thisreport, or for the conclusions we have reached. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the AIMRules which require that the interim report must be presented and prepared in aform consistent with that which will be adopted in the company's annual accountshaving regard to the accounting standards applicable to such annual accounts. As disclosed in note 1 to the financial information, the next annual financialstatements of the group will be prepared in accordance with IFRSs as adopted bythe European Union. The accounting policies that have been adopted in preparing the financialinformation are consistent with those that the directors currently intend to usein the next annual financial statements. There is, however, a possibility thatthe directors may determine that some changes to these policies are necessarywhen preparing the full annual financial statements for the first time inaccordance with IFRSs as adopted by the European Union. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the UK. A review consistsprincipally of making enquiries of group management and applying analyticalprocedures to the financial information and underlying financial data and basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Statements on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 March 2006. KPMG Audit Plc Chartered Accountants Marlborough HouseFitzalan CourtFitzalan RoadCardiffCF24 0TE Date 14th June 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Cornish Metals