Interim Results for the periods ended 31 Dec 2011

Pinewood Shepperton plc

Interim Results for the periods ended 31 December 2011 

Pinewood Shepperton plc ("the Company"), a leading provider of services to the global film and television industry, today announces its unaudited interim results for the six and twelve months ended 31 December 2011. The Company is delivering the unaudited interim results following a change in its accounting reference date from 31 December to 31 March.

Key developments in the twelve months ended 31 December 2011

·; Revenue £50.7m, an all-time high, up 17% with film revenue up 24%

·; Operating profit before exceptional items £10.3m up 14%

·; Construction of the 30,000 sq ft stage on time and within budget

·; Committed to a transformational digital television investment programme

Financial highlights for the six months ended 31 December 2011

·; Revenue £24.6m (2010: £24.4m)

·; Operating profit before exceptional items £3.7m (2010: £6.2m)

·; Loss before tax £5.4m (2010 profit: £4.3m) after exceptional items

·; Basic earnings per share after adjusting for exceptional items and deferred tax 3.5p (2010: 7.0p)

Financial highlights for the twelve months ended 31 December 2011

·; Revenue £50.7m (2010: £43.4m)

·; Operating profit before exceptional items £10.3m (2010: £9.1m)

·; Loss before tax £3.9m (2010: profit £5.8m) after exceptional items

·; Basic earnings per share after adjusting for exceptional items and deferred tax 11.3p (2010: 8.0p)

Commenting on today's results, Ivan Dunleavy, Chief Executive, said:

"The Company has delivered a strong performance for the full year with overall revenues significantly up. Our strategy has delivered robust growth. The on-going demand from big budget films and large scale television shows for our unique facilities remains resilient. Our international strategy continues to deliver growth and further opportunity to extend the Pinewood brand overseas. Against these record results the Company is well positioned to develop its activities.

"The Company believes that Pinewood forms a vital part in driving growth in the UK's well-established and world-leading creative industry and consequently is disappointed that the Planning Inquiry did not result in a successful outcome for Project Pinewood. The Board supported by its major shareholder are determined to work with government and stakeholders to deliver the long term vision for Pinewood that it needs if it is to remain a global centre for the film and creative industries. We will therefore continue to engage to ensure that the site meets the needs for growth over the next 20-30 years.

"The Company has got off to a positive start in 2012".

Enquiries

Notes to editors

·; Pinewood Shepperton plc is Europe's largest provider of stage and studio space.

·; Pinewood, Shepperton and Teddington Studios together accommodate 34 stages, five dedicated digital television studios and five digital presentation studios.

·; Pinewood Studios is home to Europe's leading studio-based underwater filming stage, as well as one of the largest exterior water tanks in Europe.

·; Pinewood Studios has Europe's largest green screen.

·; Pinewood and Shepperton Studios have been home to over 1,500 films in the last 75 years.

·; Pinewood, Shepperton and Teddington Studios have hosted over 600 TV shows.

Forward looking statements

This announcement includes forward looking statements that are based on current expectations and assumptions. They involve risks and uncertainties and may differ, possibly materially, from actual results, performance and achievement. Neither the Company, nor any of its directors, undertakes any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

For more information

www.pinewoodgroup.com

Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website, nor any other website, is incorporated into, or forms part of this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.Operating Review

Company Overview

Pinewood Shepperton plc has three complementary revenue streams - film, television and media park.

Film

Film revenues for the six months to 31 December 2011 ("the period") were £17.8m (2010: £18.2m). For the twelve month period ended 31 December 2011 ("the twelve month period") film revenues were £35.9m (2010: £29.1m), an increase of 24%. The increase in revenues for 2011 mirrors the statement issued by the BFI on 31 January 2012 that UK production spend in 2011 was the highest ever recorded.

The largest film production based at Pinewood Studios during the period was Snow White and the Huntsman(Universal)and the largest production based at Shepperton Studios was Anna Karenina (Working Title Films/ Universal). 

Productions which used the Company's facilities and services during the period included Prometheus (Fox), Dark Shadows (Warner Bros), The Hobbit: An Unexpected Journey (New Line Cinema and MGM) and the 23rd James Bond film Skyfall (Eon Productions/ MGM/Sony Pictures). 

During 2011, the Company announced that it would provide low risk partial film funding to selected independent low budget British films. The Company, through Pinewood Films, committed to jointly fund its first such project A Fantastic Fear of Everything (Keel Films/Pinewood Films) in July 2011 and announced in September 2011 its second such investment in Last Passenger (Pinewood Films/BFI/Pathe Pictures/Future Films).

The Company welcomed the announcement on 10 November 2011 that the Government has extended its film tax relief until the end of 2015. This decision will deliver certainty for the UK's talented film makers and will provide a platform for growth, investment and jobs in a growing sector of the economy.

The Company generated Digital Content Services ("DCS") revenues during the period of £3.5m (2010: £2.8m). In the twelve month period, revenues were £6.7m (2010: £5.8m). Growth in the provision of process-based services and associated data management has been encouraging and underpins the Company's continued investment in its digital infrastructure which provides secure connections to its film, TV and gaming clients. DCS provides sound and picture post production, and media storage and distribution services for English language and internationally re-versioned content.

The long term agreement with Disney Character Voices International is performing well. The Company also provided international language versions of films to the majority of the US Studios.

The Company's digital media preservation and restoration services are delivered to world renowned archive owners, enabling their content to be appreciated by new and wider audiences. During the period the Company completed work on a number of Hammer Horror films including Dracula: Prince of Darkness, The Plague of the Zombies and The Reptile.

International

International film revenues for the period were £0.5m (2010: £0.3m). For the twelve month period, International film revenues were £0.9m (2010: £0.6m)

Pinewood is an expanding global brand, delivering premium services around the world. Its international initiatives, currently in four regions, are progressing well. The Company continues to actively explore international opportunities in other strategic regions of the world.

During the period, "Pinewood Toronto Studios" attracted a number of high profile film and television productions which included Mama (De Milo productions/Universal International) and Pacific Rim (Legendary Pictures/Warner Bros). The joint venture "Pinewood Studio Berlin Film Services" attracted its first film production Planet B Boy (Sony Screen Gems). Construction of "Pinewood Iskandar Malaysia Studios" has commenced and will open in 2013. Phase one will comprise five film and two television stages totalling 125,000 sq ft. It will be the largest purpose built facility in the region. The first phase of construction of "Pinewood Indomina Studios" in the Dominican Republic will be completed in 2012.

Television

The Company's television revenues in the period were £3.6m (2010: £3.1m). Revenues in the12 month period were £8.3m (2010: £8.2m). The Company has developed a leading television business which provides unique production facilities, often utilising its film stages to host major event television productions. This ability to interchange the Company's assets to meet market demand gives the business a competitive edge.

For the past two years there has been a down turn in television production, however, there is now evidence that this trend is reversing. As part of its on-going television investment programme, the Board has committed to a transformational programme of expanding its digital offering and television facilities, purchasing additional digital cameras and equipment in order to meet the requirements of its client base. This investment complements the recently opened 30,000 sq ft television/film stage at Pinewood Studios.

Pinewood and Teddington television studios played host to new and repeat business from Lee Mack's All Star Cast (Zepperton) and The Rob Brydon Show (talkbackTHAMES). During the period, television productions such as Don't Stop Me Now(Sky One) and Love Machine (Sky One) utilised large film stages at Shepperton Studios.

Media Park

Media Park revenues (including the Company's 50% interest in the Shepperton Studios Property Partnership) for the period were £3.2m (2010: £3.1m), and for the twelve month period revenues were £6.5m (2010: £6.2m), an increase of 5%.

The total number of Media Park companies accommodated at the Group's studios in 2011 remains stable at 287 while occupancy for the twelve month period has increased to 97% (31 December 2010: 90%). The Company continued to rationalise and refurbish its stock of buildings available for both Media Park occupiers and productions.

During the twelve month period the Company invested in a range of infrastructure projects and completed at a cost of £3.3m the electricity supply upgrade from 3.5 MVA to 15 MVA at Pinewood Studios. This has been complemented by the installation of a new infrastructure services ring around the site for electricity, gas, water and communications which when completed will enable Pinewood Studios to convert its heating plant from oil to gas with significant reductions in cost and carbon emissions.

Project Pinewood

The Company was disappointed by the decision to refuse planning permission for Project Pinewood. The Company has incurred an exceptional charge £7.1m being the previously highlighted costs incurred over the five years to 31 December 2011 in relation

to the Project Pinewood application. This non cash write off on the project is not material to the Company's future.

Dividend

The Board has determined not to pay an interim dividend for the period resulting in nil interim dividends paid for the twelve month period.

Listing Status

On 15 July 2011 the Company notified the Financial Services Authority ("FSA") that it no longer satisfied the free float requirement for listing on The London Stock Exchange as set out under Listing Rule 6.1.19. The Company has been advised by the FSA that this may lead to a unilateral listing cancellation procedure being undertaken by the FSA. However, the Board with its advisors remains in active dialogue with the listing authorities to seek a suitable resolution with regards to the Company's future status.

Outlook

The Company has again had a positive start to the calendar year in all its revenue streams and continues to invest to ensure its facilities remain the leading destinations for the international screen based industries. 

The construction of a new 30,000 sq ft television/film stage at Pinewood Studios was completed and opened on time. The stage gives the Company both a unique offering and a competitive advantage and will be attractive to both film and television productions requiring complex sets and/or large audiences.

The demand for audio visual content continues to rise worldwide. The Company is well placed to benefit from this growing demand and the Board looks to the future with confidence.

Ivan DunleavyChief Executive

Financial Review

As a result of the change to its accounting reference date from 31 December to 31 March, the Company is delivering unaudited interim results for the six months ("the period") and the twelve months ended 31 December 2011 ("the twelve month period").

The Board uses a number of key performance indicators ("KPIs") to monitor Group performance, as well as to measure progress against the Group's objectives. The KPIs used are revenue, profitability, return on capital employed, cash flow and net debt, all of which are discussed as part of the Financial Review.

Revenue

Total revenues for the period were £24.6m (2010: £24.4m) and for the twelve month period were £50.7m (2010: £43.4m).

Film revenues for the period were £17.8m (2010: £18.2m) and for the twelve month period were £35.9m (2010: £29.1m), reflecting the Company's ongoing success in winning business in a buoyant but highly competitive international market. International film revenues for the period were £0.5m (2010: £0.3m) and for the twelve month period were £0.9m (2010: £0.6m). These revenues were earned from providing international sales, marketing and studio development services in Canada, the Dominican Republic and Malaysia.

Television revenues for the period were £3.6m (2010: £3.1m) and for the twelve month period were £8.3m (2010: £8.2m) reflecting the ongoing difficult television commissioning environment and competitive market conditions.

Included within film and television revenues are Digital Content Services which cover sound and picture post production, foreign language versioning, digitisation and archival services. Digital Content Services revenues for the period were £3.5m (2010: £2.8m) and for the twelve month period were £6.7m (2010: £5.8m).

Media Park revenues, inclusive of service, utility and facility charges for the period were £3.2m (2010: £3.1m) and for the twelve month period were £6.5m (2010: £6.2m). The period included the Group's 50% interest in revenues from the Shepperton Studios Property Partnership of £0.3m (2010: £0.4m), and for the twelve month period £0.6m (2010: £0.9m).

Profit performance and earnings per share

Gross profit for the period was £9.6m (2010: £10.6m) and for the twelve month period was £21.0m (2010: £17.4m). Gross margin for the twelve month period was 41% (2010: 40%).

Operating profit before exceptional items for the period was £3.7m (2010: £6.2m) reflecting the production mix with increased operating costs. Operating profit before exceptional items for the twelve month period was £10.3m (2010: £9.1m). Operating profit margin for the twelve month period was 20% (2010: 21%).

EBITDA, (earnings before exceptional items, interest, tax, depreciation and amortisation) for the period was £5.7m (2010: £8.1m) and for the twelve month period was £14.0m (2010: £12.8m).

Loss before tax after exceptional items for the period was £5.4m (2010: profit £4.3m) and for the twelve month period the loss was £3.9m (2010: profit £5.8m).

Basic earnings per share for the period were (11.4p) (2010: 6.6p) and for the twelve month period (10.2p) (2010: 9.3p). Basic earnings per share after adjusting for exceptional items and the effects of the release of the provision for potential capital gains tax on properties for the period were 3.5p (2010: 7.0p) and for the twelve month period 11.3p (2010: 8.0p).

Diluted earnings per share for the period were (11.4p) (2010: 6.4p) and for the twelve month period (10.2p) (2010: 8.9p). Diluted earnings per share after adjusting for exceptional items and the release of the provision for the potential capital gains tax on properties were 3.5p for the period (2010: 6.7p) and for the twelve month period 11.3p (2010: 7.7p).

The diluted and weighted average number of shares in issue at 31 December 2011 was 46.8m (2010: 48.2m).

Return on capital employed

The Group measures return on capital employed by reference to annualised operating profit before exceptional items, as a percentage of average capital employed, being total equity plus interest bearing loans and borrowings, which for the twelve month period was 8.7% (2010: 7.7%).

Adjusted consolidated income statement

The following table summarises the Group's consolidated income statement for the twelve month period identifying Underlying Operations and exceptional items being the accelerated amortisation of Project Pinewood costs, expenses incurred in relation to the acquisition by Peel, Group reorganisation costs and prior period VAT refunds. Profit before tax from Underlying Operations for the twelve month period was £7.5m (2010: £5.8m). 

The Board considers that the presentation of an adjusted consolidated income statement provides a useful analysis of Underlying Operations for the twelve month period. The adjustments for exceptional items are as follows:

Project Pinewood

The Company has provided as an exceptional charge £7.1m of Project Pinewood costs incurred over the five years to 31 December 2011 following the Secretary of State's decision on 19 January 2012 to refuse planning permission for Project Pinewood.

Acquisition by Peel

The Company incurred exceptional costs of £2,400,000 in the twelve month period in relation to the acquisition of a majority shareholding in the Company by Peel Acquisitions and also incurred £1,268,000 of accelerated share based non-cash charges as a result of the Offer by Peel Acquisitions becoming unconditional on 21 June 2011.

Group reorganisation

The Company incurred exceptional reorganisation costs of £287,000 in relation to the restructuring of certain business areas in the twelve month period.

VAT claim

The Group successfully agreed a VAT refund of £541,000 relating to prior periods. This benefit has been treated in the income statement as exceptional income.

Dividend

The Board has determined not to pay an interim dividend for the period, resulting in nil interim dividends declared for the twelve month period (2010: total dividends declared were 3.6p).

Cash flow and net debt

The Company generated operating cash flow for the period of £6.0m (2010: £8.0). For the twelve month period the Company generated operating cash flow of £12.4m (2010: £13.0m). After adjusting for movements in working capital, cash generated from operations for the twelve month period was £11.6m (2010: £17.6m), from which finance costs of £3.4m (2010: £3.0m) and corporation tax £2.3m (2010: £1.9m) were paid.

Cash outflow on capital expenditure during the period was £7.8m (2010: £3.9m). During the twelve month period, cash outflow on capital expenditure amounted to £12.6m, including £6.7m of capital expenditure payable carried forward from 31 December 2010. The main items of expenditure during the twelve month period were life cycle expenditure £3.0m, power upgrade £1.8m, Project Pinewood costs of £2.1m, new stage construction costs of £3.9m and infrastructure works of £1.8m.

Net debt at 31 December 2011 was £50.1m (31 December 2010: £42.7m) which included £12.0m (31 December 2010: £12.0m) relating to the Company's 50% interest in the non-recourse Aviva loan to the Shepperton Studios Property Partnership ("SSPP").

The Company's amended banking facilities of £52m, following the successful offer for the Company by Peel Acquisitions, comprise a £40.5m revolving credit facility, a £6.5m pre-let development facility and a £5m overdraft facility, all of which are secured by a floating charge over the Group's assets.

The revolving and pre-let development facilities contain no scheduled payments and mature in August 2013. The £5m overdraft facility is also available until August 2013 and is subject to annual reviews. As at 31 December 2011, £28.5m (31 December 2010: £22.5m) of the revolving credit facility and £6.5m (31 December 2010: £6.0m) of the pre-let development facility were drawn. The overdraft facility was £1.1m drawn at 31 December 2011 and nil drawn at 31 December 2010. There are a range of covenants relating to the revolving credit facility, pre-let facility and overdraft facility. The Company was covenant compliant with adequate headroom on all covenants at 31 December 2011.

In addition to the £52m banking facilities, there are non-recourse facilities provided to SSPP by the Company's joint venture partner Aviva which total £40m, of which £24m was drawn at 31 December 2011. This loan, which is 50% consolidated at £12m (31 December 2010: £12m) is included in the Group's statement of financial position. These facilities, which are available until 2026, are covenant free with no scheduled repayments.

Investment property

Investment property is recognised in accordance with IAS 40 as a category within assets in the Company's statement of financial position. At 31 December 2011, investment property was recorded at the carrying cost of £6.2m (31 December 2010: £6.4m).

Capital commitments 

The Company had capital commitments of nil at 31 December 2011 (2010: £2.3m).

Related party transactions

The related party transactions which have taken place are set out in Note 14 to the condensed set of financial statements, together with any changes in related party transactions disclosed in the annual report for the year ended 31 December 2010 that could have a material effect on the financial position or performance of the Company.

Financial gearing

At 31 December 2011, net debt including the Group's share of the SSPP non-recourse drawn loan was £50.1m (2010: £42.7m). Financial gearing at 31 December 2011 excluding fair value and loan issue costs was 69.6% (2010: 55.8%).

Finance costs and hedging

Net finance costs for the period were £2.2m (2010: £1.6m) and for the twelve month period £3.8m (2010: £3.3m). The Company has at its disposal undrawn facilities for which it pays non-utilisation fees as a percentage of the margin. Net finance costs were covered 1.74 times by operating profit before exceptional items for the period (2010: 3.77 times) and 2.75 times for the twelve month period (2010: 2.74 times). The Company continued to use interest rate derivatives to manage interest rate exposure.

The Company has a £7.5m hedge with an effective rate of 2.89% plus a variable margin that was entered into in April 2009 and expires in July 2013. The Company also has a £15m hedge with an effective rate of 5.195% plus a variable margin that was entered into in October 2009 and expires in July 2013.

At 31 December 2011 £22.5m (2010: £22.5m) of the Company's facilities were under interest rate swaps and £1.4m (2010: £1.8m) under a fixed interest rate asset financing facility.

Taxation

The current corporation tax expense for the twelve month period, based on adjusted profit before tax of £7.5m, was £2.0m, a current adjusted tax rate of 26% (2010: 35%).

Going concern

In assessing the going concern basis, the Directors considered the Company's business activities, the financial position of the Company and the Company's financial risk management objectives and policies. The Directors considered that the Company has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing these financial statements.

Change in accounting reference date

As a result of the change in the accounting reference date, the next financial reports to be issued by the Company will be audited accounts for the 15 month period to 31 March 2012.

Patrick Garner FCAFinance DirectorINDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF PINEWOOD SHEPPERTON PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six and twelve months ended 31 December 2011 which comprises the Group Income Statement, Group Statement of Comprehensive Income, Group Statement of Changes in Equity, Group Balance Sheet, Group Cash Flow Statement and the related explanatory notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report for the six and twelve months ended 31 December 2011 based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Review Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six and twelve months ended 31 December 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Ernst & Young LLP

London

28 February 2012

Group income statement for the periods ended 31 December

1. Corporate information

Pinewood Shepperton plc is a company incorporated and domiciled in the United Kingdom whose shares are publicly traded. The interim consolidated financial statements of the Group for the six months and twelve months ended 31 December 2011 were authorised for issue by the Board of Directors on 28 February 2012.

2. Basis of preparation and accounting policies

Basis of preparation

The unaudited interim consolidated financial statements for the six months and twelve months ended 31 December 2011 have been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union.

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements as defined in Section 435 of the Companies Act 2006, and should be read in conjunction with the Group's annual financial statements as at 31 December 2010, from which comparative information included in the interim consolidated financial statements have been extracted. The financial statements for the year ended 31 December 2010, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies.

Significant accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2010, except for the adoption of new standards and interpretations as of 1 January 2011, noted below:

IAS 1 Financial Statement Presentation - Presentation of Items of Other Comprehensive Income

The amendments to IAS 1 change the grouping of items presented in OCI. Items that could be reclassified (or "recycled") to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from items that will never be reclassified. The amendment affects presentation only and has there no impact on the Group's financial position of performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012.

IAS 24 Related Party Transactions (Amendment)

The IASB has issued an amendment to IAS 24 that clarifies the definitions of a related party. The new definitions emphasise a symmetrical view of related party transactions as well as clarifying in which circumstances persons and key management personnel affect related party relationships of an entity. Secondly, the amendment introduces an exemption from the general related party disclosure requirements for transactions with a government and entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The adoption of the amendment did not have any impact on the financial position or performance of the Group.

IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)

As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The amendment becomes effective for annual periods beginning on or after 1 January 2013.

IFRS 9 Financial Instruments: Classification and Measurement

IFRS 9 as issued reflects the first phase of the IASB's work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2013. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group's financial assets, but will potentially have no impact on classification and measurements of financial liabilities. The Group will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture.

IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance. This standard becomes effective for annual periods beginning on or after 1 January 2013.

The Group has not adopted early any other standard, interpretation or amendment that was issued but is not yet effective.

Changes in accounting policies and disclosures

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2010.

Significant accounting judgements and estimates

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Going concern

Information on the Group's risks, management and exposure are set out in the "Key business risks" section and Note 26 "Financial risk management, objectives and policies" of the Group's Annual Report for the year ended 31 December 2010. The Directors, having made appropriate enquiries, consider that the Group has adequate resources to continue in the operational business for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the financial statements.

3. Segment information and revenue analysis

The chief operating decision maker is the Board of Directors. The Company operates in one principal continuing area of activity, that of media services, primarily arising in the United Kingdom. It provides studio and related services to the global film and television industry.

Revenues from these activities can be further analysed by type of customer as follows:

Other information provided to the Board of Directors is in a format consistent with that in the financial statements.

4. Exceptional income

Exceptional income for the six month period was £41,000 and for the twelve month period £541,000 and consists of:

VAT claim

The Group successfully agreed VAT refunds for the six month period of £41,000 and for the twelve month period £541,000 relating to prior periods. This benefit has been treated in the income statement as exceptional.

5. Exceptional costs

Exceptional costs for the six month period were £7,034,000 and for the twelve month period £11,025,000 and consist of:

Project Pinewood

The Company has incurred an exceptional cost of £7,100,000 of Project Pinewood costs forthe six and twelve month periods following the Secretary of State's decision on 20 January 2012 to refuse planning permission for Project Pinewood.

Acquisition by Peel

The Group incurred exceptional costs for the six month period of nil and for the twelve month period of £2,400,000 in relation to the acquisition of a majority shareholding in the Company by Peel Acquisitions.

Accelerated share option costs due to the acquisition by Peel Acquisitions

The Group also incurred share option costs for the six month period of nil and for the twelve month period of £1,268,000 of accelerated share based charges as a result of the acquisition of a majority shareholding in the Company by Peel Acquisitions becoming unconditional on 21 June 2011.

Group reorganisation

The Group incurred exceptional reorganisation costs in relation to the restructuring of certain business areas for the six month period of £240,000 and for the twelve month period £287,000.

6. Taxation

The current corporation tax expense for the 12 month period ended 31 December 2011, based on adjusted profit before tax of £7.5m, was £2.0m, a current adjusted tax rate of 26% (2010: 35%).

7. Earnings per ordinary share and dividend

Earnings per ordinary share

Basic earnings per ordinary share is calculated by dividing net profit for the year attributable to the holders of ordinary equity by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per ordinary share are calculated by dividing net profit for the period attributable to the holders of ordinary equity by the weighted average number of ordinary shares outstanding during the period adjusted for the effects of dilutive potential ordinary shares resulting from employee share schemes.

The Group presents as exceptional items on the face of the income statement those items where the cost or income is of such size or incidence that the additional disclosure is required for the reader to understand the financial statements. Basic and diluted earnings per share are also presented adjusting for the combined effect of the exceptional items andthe effects of indexation on the deferred tax provision.

The following reflects the profit and number of shares generating the basic and diluted earnings per ordinary share computations:

Dividends paid

8. Share capital and reserves

Authorised

Shares issued on the 8 July 2011 have been included in share capital at 30 June 2011 as they were issued to satisfy awards made under share-based payment plans that vested on 21 June 2011 as a result of the offer by Peel Acquisitions becoming unconditional in all respects.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the general meetings of the Company.

Share option schemes

The Company had one share-based payment plan under which options to subscribe for the Company's shares have been granted. As a result of the Offer becoming unconditional on 21 June 2011, 155,785 shares were issued under this scheme, post 30 June 2011, and the scheme closed.

Long-term incentive plan

The Company had a long-term incentive plan under which awards for the Company's shares have been granted to certain executives and senior employees. As a result of the Offer becoming unconditional on 21 June 2011, 860,892 shares were issued under this scheme. Of which 60,892 were issued after 30 June 2011 and subsequently the scheme closed.

Nature and purpose of reserve

Reserve for own shares

Included within the cash capital account are the costs of Pinewood Shepperton plc shares purchased in the market and held by the Pinewood Shepperton plc Employee Benefit Trust to satisfy future exercise of awards under the Company share option scheme. As at 31 December 2010 the Company held 127,100 (2009: nil) of its own shares at an average cost of 10p per share. As a result of the recommended cash offer by Peel Acquisitions becoming unconditional on 21 June 2011, 127,100 shares were used to satisfy the exercise of awards under the Company share option scheme. 

Share premium reserve

The share premium increased by £155,000 (2010: nil) in the period as a result of the shares issued under the share option scheme noted in the table above.

Capital redemption reserve

The capital redemption reserve arose as a result of the repurchase of shares in 2001.

9. Intangible assets and impairment testing

The goodwill of £5.6m (2010: £5.6m) has been acquired through business combinations and has been allocated to the Company's cash-generating unit. It is tested at least annually for impairment.

The recoverable amount has been determined based on a value in use calculation using cash flow projections based on the Company's long range plan. The pre-tax cash flows in this period of time support the carrying value of the goodwill.

The key assumptions used to determine the recoverable amount for the cash generating unit were discussed in the Company's annual financial statements for the year ended 31 December 2010.

10. Property, plant and equipment

Significant additions

During the twelve month period ended 31 December 2011, the Company incurred expenditure of £15.7m (31 December 2010: £6.4m). The Company has provided as an exceptional cost £7.1m of Project Pinewood costs during the period following the Secretary of State's decision on 19 January 2012 to refuse planning permission for Project Pinewood.

 11. Investment property

Investment property is stated at cost excluding the day to day expense of servicing the property. During the twelve month period ended 31 December 2011, the Company recognised an investment property with a cost of £6.2m (31 December 2010: £6.4m).

12. Commitments and contingencies

Capital commitments

At 31 December 2011, the Company had capital commitments contracted for but not provided in the interim financial statements totalling nil (31 December 2010: £2.3m).

Guarantees

At 31 December 2011, the Company had guarantees in place, in the form of documentary credits, that were not provided for in the interim financial statements totalling £155,000 (31 December 2010: £155,000) in relation to certain Section 278 highways related infrastructure.

13. Financial risk management, objectives and policies

The financial risk management, objectives and policies of the Company are disclosed in the Group's 2010 Annual Report.

14. Related party disclosures

The consolidated financial statements include the financial statements of Pinewood Shepperton plc, its subsidiaries and its 50% interest in the joint ventures listed in the following table.

Pinewood Shepperton plc is the parent entity of the Group.

Shepperton Studios Limited has a commercial property lease on the Shepperton Studios property. The net cost to the Company of principal lease rentals during the six month period ended 31 December 2011 was £499,000 (2010: £451,000) and for the twelve month period ended 31 December 2011 £1,036,000 (2010: £897,000). In addition the Company pays a top up rent to the joint venture partnership based on certain of its trading activities at the Shepperton Studios site. The net cost to the Company of the top up rent for the six month period was £100,000 and for the twelve month period £200,000 (2010: £288,000).

Shepperton Management Limited manages the assets of the joint venture partnership and charges an asset management fee based on independent valuations of the Shepperton Studios site. Asset management fees charged during the six month period ended 31 December 2011 were £60,000 (2010: £49,000) and for the twelve month period ended 31 December 2011 £117,000 (2010: £99,000). The Company's share of amounts owed by the 50% joint venture partnership at 31 December 2011 was £514,000 for the six month period ended 31 December 2011 (2010: £406,000).

Pinewood Germany Limited has entered into a 50/50 joint venture with Studio Hamburg GmbH, to market their existing studio facilities in Hamburg and Berlin.

Offer by Peel Acquisitions

On 8 July 2011 the Recommended Cash Offer ("the Offer") by Peel Acquisitions (Pegasus) Limited ("Peel Acquisitions") for the Company closed. Peel Acquisitions is now the largest shareholder with 71.1% of the Company. Warren James Holdings Ltd ("Warren James") is the second largest shareholder with 27.9% of the Company. Both major shareholders have independently stated their long-term support of the Company following conclusion of the Offer.

15. Obligations under leases

Operating lease commitments - Company as a lessee

Teddington Studios

Teddington Studios Limited has exercised an option to terminate its leasehold interest in Teddington Studios on 24 December 2014 following determination on 24 June 2011 of the rent review at a nil increase.

Future minimum rentals payable on the non-cancellable Teddington Studios operating lease as at 31 December are as follows:

Shepperton Studios

Shepperton Studios Limited entered into a commercial property lease on the Shepperton Studios property with Shepperton Studios Property Partnership, its 50% owned joint venture partnership. The lease term expires on 18 August 2026 with no break option.

Under the terms of the agreement the tenant may not assign the lease until 18 August 2016.

The net cost to the Company of future minimum rentals payable under the non-cancellable Shepperton Studios property operating lease as at 31 December is as follows:

Operating lease commitments - Group as a lessor

The Group has entered into a commercial property lease on the property classified as investment property. This non-cancellable lease has a remaining term of between 8 and 13 years. The lease includes a clause to enable upward revision of the principal rental charge on an annual basis subject to prevailing market conditions.

Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows:

16. Principal risks and uncertainties

There are no changes to the assessment and considerations of the principal risks as disclosed in the Company's 2010 Annual Report.

The principal risks to which the Company is exposed are disclosed in the "Key business risks" section and Note 26 of the Annual Report for the year ended 31 December 2010. An electronic version of the Annual Report can be found in the investor relations section of the Company's website: www.pinewoodshepperton.com

17. Directors' responsibilities

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements have been prepared in accordance with IAS 34 as adopted by the European Union and gives a true and fair view of the assets, liabilities, financial position and profit and loss of the Company as required by Disclosure and Transparency Rules (DTR) 4.2.4;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the second six months and their impact on the condensed interim financial report, and description of the principal risks and uncertainties for the twelve months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board on 28 February 2012:

Ivan Dunleavy Patrick Garner FCAChief Executive Finance Director