Interim Results

24th Nov 2008 07:00



For Immediate Release

24 November 2008

DQ ENTERTAINMENT PLC

('DQE' or the 'Group')

Interim Results for Six Months ended 30 September 2008

DQ Entertainment plc, a leading animation and game art content production company, today announces its interim results for the six months ended 30 September 2008.

Financial Highlights

Revenue up 62 per cent. to US $14.4m (Previous period*: US $8.9m**)

EBIDTA up 115 per cent. to US $4.1m (Previous period*: US $1.9m**)

Profit before Tax of US$ 0.4m (Previous period*: US$ 0.1m Loss).

Adjusted Profit before Tax of US$ 1.5m (Previous period*: US$ 0.1m Loss) after excluding a non-cash financial expense of US$ 1.1m (Previous period*: Nil) relating to foreign exchange.

Order book currently at US $95m including amounts already billed in the current year

Cash and cash equivalents of US $8.5m (Previous period*: US $0.7m**)

*  Previous Period is referred to as six months ended 30th September 2007

** The comparative information reflects the results and financial position of DQ Entertainment Limited, an Indian company which was acquired by the Group, and accounted for as a reverse acquisition.

Operating Highlights

Tapaas Chakravarti, Chairman & CEO of DQE, commented:

"Demand for our work continues to remain high with levels of new business referrals and contract renewals strong. The market for animation and gaming content has been largely unaffected by the current banking crisis with the majority of our contracts running over a 2-3 year period with budgets already agreed and allocated.

We do however remain ever mindful of the pressures facing the broader media sector at present and continue to evaluate our cost base and focus on delivering the highest levels of customer service and operational excellence."

  For further information please contact:

DQ Entertainment Plc Tapaas Chakravarti, Chairman & CEO Niranjan Prasad, VP Corporate Affairs	Tel: +91 40 235 53726
Evolution Securities Limited Tom Price Jeremy Ellis Chris Clarke	Tel +44 20 7071 4300
Buchanan Communications Mark Edwards Jeremy Garcia Miranda Higham	Tel: +44 20 7466 5000

Chairman's Statement

Overview

I am pleased to present the interim results for the six months ended 30 September 2008. Despite a backdrop of uncertainly within the global capital markets the demand for entertainment content remains strong and continues to present a number of opportunities for our industry. 

However, we continue to be frugal and make every dollar/pound/rupee go that extra mile. I strongly believe that our culture of frugality, commitment to quality and hard work will keep us in good stead in these tough economic times. 

We are well on our way to fulfil our vision to be a world class animation and game content production and distribution company. We continue to expand beyond our Indian operations working alongside global clients and partners establishing good earnings visibility and delivering value to stock holders and employees alike.

Growth Strategy

Our strategy for growth continues to be driven by four clear strategic goals:

Broaden our capabilities to combine taking shares in global intellectual property ("IP") rights for iconic brands and developing and co-developing original Indian and international IP content

Expand animation and live-action footprint in Indian and in other emerging markets 

Broaden our product and service base to ensure sustainable growth

Invest and develop training programs in order to support the growing needs of our business

Financial summary

The performance in the first half has been largely driven by continued demand of our services through a combination of new and repeat orders across major markets. DQE's consistent strategy to invest in co-productions, coupled with our long term strategy to create IPR and explore new markets continues to drive the business forward.

The first six months has seen turnover increase 62 per cent. to US$14.4 million (Sept 2007 - US$ 8.9 million) derived chiefly from projects of comparatively higher quality and margin?. The growth of EBIDTA to US$ 4.1 million (being the sum of 'operating result before financing costs' of US$1.9 million and 'depreciation/amortization' cost of US$2.2 million) validates the group's growth strategy in the current term.  

The "net financing costs" of US$ 1.5 million (Sept 2007 - US$ 0.4 million) consists of a non-cash foreign exchange expense of US$ 1.1 million. This has arisen due to the restatement of a US Dollar Term Loan to a subsidiary within the Group, whose functional currency is Indian Rupees. In compliance with International Accounting Standards, the outstanding balance of this loan has been restated at the US Dollar / Indian Rupee exchange rate, at the reporting date, and the resulting unrealised loss been recognised and subsequently reported under the reporting currency. 

By continuing to expand our co-production portfolio we anticipate our Licensing and Distribution division will begin to generate greater sales growth in the near future. We have established excellent relationships with distributors, broadcasters and producers worldwide and believe increased participation and partnering will underpin our long term growth prospects. Our relationships with these key partners continue to create opportunities for generating increased revenue for the group. DQE's order book now stands at $95 million.

  Operational Highlights:

Global content and production:

Capitalising on its strong position in the area of animation production, the Group expanded its current line up of productions in children's entertainment across a range of demographics from pre-school children's to pre-teens productions of leading brands. 

Current productions include CGI animated series, traditional animated series and digital animated productions for features, TV and various game platforms. Some of our major current productions include:

Property Name	Co-producers and Clients
Twisted Whiskers	DQE, American Greetings, USA and Taffy Ent. USA
Casper's Scare school	DQE, Classic Media-USA, Entertainment Rights-UK, Moonscoop-France
Ironman	DQE, Marvel, USA and Method Animation, France
Pinky and Perky	DQE, Pinky and Perky enterprises, UK, Lux Animation, Luxemburg and Method Films, France
Mikido	DQE and Method Animation, France
Maryoku Yummy	DQE and American Greetings, USA
Pet Pals season 4	DQE and Gruppo Alcuni, Italy
Donkey Ollie	DQE and Car Angels, USA
Sandra	DQE and Imira Entertainment, Spain
Geronimo Stilton	Atlantyca-Italy
The Penguins of Madagascar	Nickelodeon-USA
Fanboy and Chum Chum	Nickelodeon-USA
Mickey Mouse Club House Season 3	Walt Disney Television-USA
Battleforge PC,	Electronic Arts - Phenomics, Germany
Sims Animals Wii	Electronic Arts - Redwoodshores, USA
Fifa 2009	Electronic Arts - Canada
Zubo	Electronc Arts - UK
CSI	Telltale Games, USA
Maestro	Chevy Soft, USA

DQE recently concluded major deals on some of the world's best known iconic brands. These include:

Co-production agreement with M6 Studio, the animation production subsidiary of M6, the second largest private French broadcaster and Method Animation SA, France for production of a CGI TV series based on iconic "Le Petit Nicolas" (Little Nick). Created by the famous René Goscinny and illustrated by Jean-Jacques Sempé in 1959, this iconic French property has sold over 10 million copies in 30 countries.

A co-production agreement with LPPTV, France and Method Animations SA, France for production of a TV series "Little Prince", backed by French television major, France 3. "The Little Prince" is based on the world famous books of Antoine de Saint-Exupery and has been translated into over 180 languages, selling more than 130 million copies worldwide.

A co-production agreement for the second season of "The Large Family". The co-production, involves Coolabi Productions, UK, Go-N productions, France, Cbeebies UK, TF1 France and BBC Worldwide. 

A service agreement for production of the animation for the TV series "Geronimo Stilton". The animated children's TV series, Geronimo Stilton, which is based on the best selling book range of the same name, is being produced by Atlantyca Entertainment together with MoonScoop Productions, France. The adventures of Geronimo Stilton have entertained generations for years with over 14 million books sold in Italy alone and additional sales to approximately 175 countries. 

  IP Development

Focusing on creation of content for Asian markets and IP development. Recent highlights include:

Producing 2 animated TV features of Indian content with Turner Entertainment Networks Asia. Turner and DQE will have joint involvement in the creative process for development of scripts, storylines etc. The TV features "Balkand" and "Ravan" are in production and will go on air from the second quarter of 2009.

In advanced discussions with major broadcasters for two working titles "Shivpuran" and "Kathmandu Capers", A detective Animated series, based on Nobel laureate Satyajit Ray's famous detective stories.

Developing "Jungle Book" for CGI television series. DQE is handling the entire creative process from pre to post production, whilst the script is being developed in London separately. This has generated considerable interest with broadcasters and producers in UK, Germany, France and Asia for a possible association for co-production. 

Animated feature film "Suryaputra" is currently under development supported by a leading US film producer and  distributor.

Licensing and Distribution

DQE is currently co- producing several iconic international brands such as Iron Man, Casper, Pinky & Perky, Twisted Whiskers, Mikido, Leonardo, PetPals IV, as well as several service productions. The Group now boasts a library of over 300 hours of international animated programs in its Licensing Division.

Major TV licensing deals have been concluded with leading broadcasters including CBeebies, Turner, Nickelodeon and Disney. This includes IP agreements for projects that are expected to generate significant sales in the near future.

Listed below are a number of recent agreements:

Twisted Whiskers, a CGI animated TV series, 52x11', co-produced by DQE, American Greetings and Taffy Entertainment, USA. This has been acquired by Disney Channel India for India, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan, and Sri Lanka. 

Disney, Singapore has also acquired Twisted Whiskers, a CGI animated TV series, 52x11', co-produced by DQE with American Greetings and Taffy Entertainment, USA for Singapore, Brunei, Malaysia, The Philippines, Indonesia, East Timor, Cambodia, Laos, Macau, Mongolia, Myanmar, Thailand, Vietnam, Papua New Guinea, and the People's Republic of China as well as non exclusive rights for South Korea and Hong Kong.

Ratman an animated TV series in traditional 2D animation, 52x11', co-produced by DQE and Stranemani, Italy. This has been acquired by Disney Channel India for India, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan, and Sri Lanka. 

Sandra an animated TV series, 52x11', co-produced by DQE and Imira Entertainment, Spain. This has been acquired by Disney Channel India for India, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan, and Sri Lanka. 

Nickelodeon has acquired Broadcast rights for the TV Series Casper's -Scare School for India, and non exclusive rights for Pakistan, Bangladesh, Sri Lanka, Nepal, Burma and the Maldives.

Major licensing agreements are currently under negotiations for TV, home video and publishing in India and other Asian countries.

Vertical growth

DQE's strategic move into live action and CGI film making continues to progress with the release of "Meerabai Not Out", the Bollywood romantic cricket comedy. This is due for release in the first week of December 2008. Income from the film is already being generated is expected to continue during the current financial year. The film is being distributed globally by Sony Pictures Entertainment and is a co-production of DQE and Pritish Nandy Communications.

The acquisition of a stake in Method Animation, France continues to help both Method and DQE to jointly pitch for prestigious projects  and leverage our combined strengths. The recent collaboration on "Little Nick" and "Little Prince", a circa Euro 25.5 million global budget production validates the synergistic benefits of this relationship.

Indian operations

The expansion of our facilities in Mumbai, Chennai and Kolkata is now complete. These facilities are staffed in line with DQE's philosophy of supporting local talent in order to meet delivery requirements of projects and bring down overall costs.

The ever increasing demand for high quality animation and gaming professionals continue to fuel our training objectives. We believe in nurturing creative talent in a stimulating environment. In our experience, this approach brings out the full potential of our trainees/students. 

To this end, DQE has established a world class, comprehensive training program for the animation and gaming arena. The Group has successfully established the DQ Schools of Visual Arts enabling students to develop the right skill sets designed to match international quality standards and whilst underpinning DQE's growth strategy.

Outlook

DQE continues to gain market traction and distinguish itself from the competition through a combination of creativity, technical innovation, delivery excellence and large production capacity. Our core markets continue to remain buoyant and largely unaffected by recent global economic volatility. The board is therefore confident that the momentum of growth currently being experienced will continue resulting in 2008/9 being another year of progress.

Animation films we believe are expected to see increased demand from audiences, driven significantly by latest advances in 3D technology & special effects. The observations from the big leaders of entertainment industry during 3DX festival in Singapore is a reaffirmation of our belief. This is further strengthened with the fact that Walt Disney has 17 movies in the pipeline - 11 of which are animated 3D films and 6 with live-action 3D!. Having invested in the "state of art" facilities, DQE will be able to leverage on its capabilities and strong pipeline management in 3D and VFX production.

DQE will continue to build its global presence and maximize revenue opportunities to deliver increased shareholder value. We are dedicated to doing our best for our shareholders, customers, partners, and employees as we continue to prepare ourselves for the forthcoming months. 

I want to thank the members of the Board for their continued confidence in DQE and for our staff for all their efforts delivering another high quality performance.

  INDEPENDENT REVIEW REPORT TO DQ ENTERTAINMENT PLC.

Introduction

We have been engaged by the Company to review the condensed consolidated (unaudited) interim financial statements in the half-yearly financial report for the 6 months ended 30 September 2008 which comprises the condensed consolidated (unaudited) income statement, the condensed consolidated (unaudited) Company balance sheets, the condensed consolidated (unaudited) Company statement of changes in equity, the condensed consolidated (unaudited) cash flow statements and related notes A to O.

This report is made solely to the Company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibility 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note A, the annual financial statements of the group are prepared in accordance with IFRSs. The condensed set of financial statements included in the half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed consolidated (unaudited) interim financial statements in the half-yearly financial report based on our review.

Scope of Review 

We conducted our review in accordance with 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 for use in the United Kingdom. A review of interim financial information consists of making inquiries, 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 an 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.

  

INDEPENDENT REVIEW REPORT TO DQ ENTERTAINMENT PLC. - continued

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 half-yearly financial report for the 6 months ended 30 September 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the AIM Rules of the London Stock Exchange.

Deloitte & Touche

Chartered Accountants

Grosvenor House

66/67 Athol Street

Douglas

Isle of Man

IM99 1XJ

20 November 2008

  Condensed Consolidated (unaudited) Statement of Income

GROUP	Note	Six months ended 30 September 2008 USD'000	Six months ended 30 September 2007 USD'000	Year ended  31 March 2008 USD'000
Revenue		14,406	8,917	24,133
Cost of sales		(10,854)	(7,227)	(17,651)
Gross profit		3,552	1,690	6,482
Other gains and losses		847	118	365
Distribution expenses		(273)	(113)	(219)
Administrative expenses		(2,036)	(1,141)	(2,922)
Other operating expenses		(165)	(189)	(26)
		(1,627)	(1,325)	(2,802)
Operating result before financing costs		1,925	365	3,680
Financial income		303	8	428
Financial expenses		(1,785)	(441)	(1,110)
Net financing costs	K	(1,482)	(433)	(682)
Share of profit of associate		3	-	-
Profit on extinguishment of liability		-	-	4,409
Profit/ (loss) before tax		446	(68)	7,407
Income tax credit/(expense)		1	-	(222)
Profit/ (loss) after tax		447	(68)	7,185
Basic and diluted earnings per share for profit attributable to the equity holders of the company during the year (expressed as cents per share)	L
Basic earnings per share		1¢	-	60¢
Diluted earnings per share		1¢	-	60¢

  Condensed Consolidated (unaudited) Balance Sheet

GROUP	Note	As at 30 September 2008 USD'000	As at 30 September 2007 USD'000	As at 31 March 2008 USD'000
ASSETS
Non current assets
Property, plant and equipment		12,766	7,503	11,543
Goodwill		10,818	-	10,818
Intangible assets	F	8,039	4,248	7,127
Advances paid for distribution rights	G	7,384	5,424	6,520
Investment in associate		3,541	-	3,884
Deposits		665	490	518
Total non current assets		43,213	17,665	40,410
Current assets
Trade and other receivables		12,119	7,612	12,508
Income tax receivable		82	23	-
Financial assets at fair value through profit and loss	E	-	109	177
Cash and cash equivalents	D	8,528	702	17,510
Total current assets		20,729	8,446	30,195
Total assets		63,942	26,111	70,605

  

Condensed Consolidated (unaudited) Balance Sheet

GROUP	Note	As at 30 September 2008 USD'000	As at 30 September 2007 USD'000	As at 31 March 2008 USD'000
EQUITY AND LIABILITIES
Equity	M
Issued capital		73	178	73
Share Premium		49,017	1,511	49,017
Reverse acquisition reserve		1,218	-	1,218
Equity component of convertible instruments		1,158	1,060	1,158
Foreign currency translation reserve		(7,900)	53	(1,660)
Share options outstanding		-	793	-
Statutory reserve		-	932	-
Retained earnings		4,385	(4,294)	3,938
Total shareholders' equity		47,951	233	53,744
Non current liabilities
Interest-bearing loans and borrowings	H	2,763	5,425	5,450
Provisions		1,135	886	1,289
Total non current liabilities		3,898	6,311	6,739
Current liabilities
Trade and other payables		6,362	2,540	4,706
Bank overdraft	D	695	713	730
Interest-bearing loans and borrowings	H	4,530	16,054	4,073
Income Tax Payable		-	-	114
Provisions		506	260	499
Total current liabilities		12,093	19,567	10,122
Total liabilities		15,991	25,878	16,861
Total shareholders' equity and liabilities		63,942	26,111	70,605

Condensed Consolidated (unaudited) Statement of Changes in Equity

GROUP	Equity shares - No of Shares	Equity Shares - Amount USD'000	Share premium USD'000	Reverse acquisition reserve USD'000	Equity component of convertible instruments USD'000	Foreign currency translation reserve USD'000	Stock options outstanding USD'000	Statutory reserve USD'000	Retained earnings USD'000	Total USD'000
Balance as at 1 April 2007	777,095	178	1,511	-	1,060	36	793	932	(4,080)	430
Changes in equity for the six months ended 30 September 2007
Foreign currency translation	-	-	-	-	-	7	-	-	-	7
Loss for the period	-	-	-	-	-	-	-	-	(68)	(68)
Effect of correction of errors	-	-	-	-	-	10	-	-	(146)	(136)
Balance as at 30 September 2007	777,095	178	1,511	-	1,060	53	793	932	(4,294)	233

  Condensed Consolidated (unaudited) Statement of Changes in Equity

GROUP	Equity shares - No of Shares	Equity Shares - Amount USD'000	Share premium USD'000	Reverse acquisition reserve USD'000	Equity component of convertible instruments USD'000	Foreign currency translation reserve USD'000	Stock options outstanding USD'000		Statutory reserve USD'000		Retained earnings USD'000		Total USD'000
Balance as at 1 April 2007	777,095	178	1,511	-	1,060	36	793		932		(4,080)		430
Changes in equity for the year ended 31 March 2008
Profit for the year	-	-	-	-	-	-	-		-		7,185		7,185
Changes in equity due to reverse acquisition	(777,095)	(178)	(293)	-	-	-	-		(932)		932		(471)
Transfer to Reverse acquisition reserve	-	-	(1,218)	1,218	-	-	-		-		-		-
Issue of share capital	35,966,047	73	54,449	-	-	-	-		-		-		54,522
Share issue expenses	-	-	(5,432)	-	-	-	-		-		-		(5,432)
Issue of convertible preference shares	-	-	-	-	98	-	-		-		-		98
Stock options written back	-	-	-	-	-	-	(793)		-		-		(793)
Foreign currency translation	-	-	-	-	-	(1,696)	-		-		-		(1,696)
Effect of correction of errors	-	-	-	-	-	-	-		-		(99)		(99)
Balance as at 31 March 2008	35,966,047	73	49,017	1,218	1,158	(1,660)	-		-		3,938		53,744
Changes in equity for the six months ended 30 September 2008
Profit for the period	-	-	-	-	-	-	-	-		447		447
Foreign currency translation	-	-	-	-	-	(6,240)	-	-		-		(6,240)
Balance as at 30 September 2008	35,966,047	73	49,017	1,218	1,158	(7,900)	-	-		4,385		47,951

Condensed Consolidated (unaudited) Statement of Cash Flows

GROUP	Note	Six months ended 30 September 2008 USD'000	Six months ended 30 September 2007 USD'000	Year ended  31 March 2008 USD'000
Cash flows from operating activities
Profit/(loss) for the period before tax		447	(68)	7,407
Adjustments for:
Depreciation and amortization		2,230	1,529	3,555
Interest income	K	(303)	(8)	(428)
Interest expense	K	1,785	441	1,205
Provisions for employee benefits		11	228	584
Employee stock options waived		-	-	(793)
Loss/(gain) on revaluation of fair value through profit or loss on financial assets		165	(106)	(177)
Provision for retakes	I	141	33	229
Profit on extinguishment of liability		-	-	(4,409)
(Gain) / losses on foreign exchange fluctuations		(612)	162	(239)
Share of profit of associate		(3)	-	-
Other provisions		-	-	(13)
Gain on sale of property, plant and equipment		(54)	-	-
Operating cash flows before changes in working capital		3,807	2,211	6,921
Increase in trade and other receivables		(1,479)	(1,612)	(6,678)
Employee benefits paid		(5)	(16)	(39)
Increase in trade and other payables		2,811	446	2,901
		5,134	1,029	3,105
Income taxes paid		(226)	(7)	(94)
Net cash from operating activities		4,908	1,022	3,011

  

Condensed Consolidated (unaudited) Statement of Cash Flows

GROUP	Note	Six months ended 30 September 2008 USD'000	Six months ended 30 September 2007 USD'000	Year ended  31 March 2008 USD'000
Cash flows from investing activities
Acquisition of property, plant and equipment		(4,764)	(2,035)	(8,600)
Acquisition and advances paid for distribution rights		(4,442)	(635)	(5,901)
Proceeds from sale of property, plant and equipment		54	-	-
Investment in associate		-	-	(3,884)
Goodwill		-	-	(10,818)
Deposits		(253)	(223)	(279)
Finance income		297	2	346
Net cash used in investing activities		(9,108)	(2,891)	(29,136)
Cash flows from financing activities
Proceeds from issue of share capital		-	-	54,522
Payments to equity shareholders on capital restructuring		-	-	(471)
(Repayments)/proceeds from term loans		(1,954)	2,871	5,405
Payment to preference shareholders		-		(9,692)
Proceeds from issue of preference shares		-		265
Share issue expenses		-		(5,432)
Interest paid		(612)	(410)	(1,127)
Payment of finance lease liabilities		(39)	(104)	(67)
Net cash (used in) / from financing activities		(2,605)	2,357	43,403
Net (decrease) / increase in cash and cash equivalents		(6,805)	488	17,278
Net cash and cash equivalents at beginning of period	D	16,780	(470)	(470)
Gain on foreign exchange fluctuations		(2,142)	(29)	(28)
Net cash and cash equivalents at period end	D	7,833	(11)	16,780

 

  Notes to Condensed Consolidated (unaudited) Financial Statements

 

NOTE A - BASIS OF PREPARATION

1. General information

DQ Entertainment plc (the 'Company') is a company domiciled and incorporated in the Isle of Man on on 19 April 2007 and was admitted to the Alternative Investment Market of London Stock Exchange on 18 December 2007. The Company raised approximately USD 54 million (£26.83 million) at listing (before Admission costs).

The condensed consolidated unaudited financial statements of the Company for the six months ended 30 September 2008, comprises the financial statements of the Company and its subsidiaries (together referred to as the 'Group').

As on 30 September 2008 the following companies formed part of the Group:

Company	Immediate Parent	Country of Incorporation	% of Interest
DQ Entertainment (Mauritius) Limited (DQM)	DQ Entertainment Plc	Mauritius	100
DQ Entertainment (International) Private Limited (DQ India) was formerly known as "Animation and Multimedia Private Limited"	DQ Entertainment (Mauritius) Limited	India	100

The Company's registered address is 15-19, Athol Street, Douglas, Isle of Man.

The Group is primarily engaged in the business of providing Traditional and Digital Animation for Television, Home Video, Feature Films and the like, and game art development. The Group also is engaged in exploitation of its Distribution Rights to broadcasters, television channels, home video distributors and others.

The functional currency of the Company is Great British Pound (GBP) and of its subsidiaries DQ Entertainment (Mauritius) Limited and DQ Entertainment (International) Private Limited is US Dollar (USD) and Indian Rupee (INR) respectively.

The amounts disclosed in the previous period column as at 30 September 2007 relate to DQ Entertainment Limited, which was the Legal Subsidiary accounted for under the reverse acquisition method and hence are not comparable to the current period.

2. Significant accounting policies

The accompanying unaudited condensed consolidated financial statements of the Company have been presented for the six months ended 30 September 2008 along with comparatives for the six months ended 30 September 2007 and the year ended 31 March 2008. These unaudited condensed consolidated interim financial statements have been prepared on accrual basis of accounting using accounting policies consistent with IAS-34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB'). In preparing this information management have used the accounting policies set out in the Group's 2007-08 financial statements.

  

BASIS OF PREPARATION - continued

In the opinion of management, all adjustments, which are of a normal recurring nature and necessary for a fair presentation, have been included. The Company has chosen to present the condensed consolidated balance sheet, condensed consolidated income statement, condensed consolidated statement of cash flows and condensed consolidated statement of changes in shareholders' equity along with selected explanatory notes. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with IFRS have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements have been prepared using the same accounting policies that were applied in the preparation of the Company's annual financial statements for the year ended 31 March 2008. 

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and satisfaction of liabilities in the normal course of business.

 

NOTE B - STANDARDS AND INTERPRETATIONS NOT YET APPLIED

The following new Standards and Interpretations, which are yet to become mandatory, have not been applied in the Company's Financial Statements.

Standard or Interpretation		Effective for reporting periods starting on or after
IAS 1	Presentation of Financial Statements - Comprehensive revision including requiring a statement of comprehensive income	1st January 2009
IAS 1	Presentation of Financial Statements - Amendments relating to disclosure of puttable instruments and obligations arising on liquidation	1st January 2009
IAS 1	Presentation of Financial Statements - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 16	Property, Plant and Equipment - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 19	Employee Benefits - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 20	Government Grants and Disclosure of Government Assistance - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 23	Borrowing Costs - Comprehensive revision to prohibit immediate expensing	1st January 2009
IAS 23	Borrowing Costs - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 27	Consolidated and Separate Financial Statements - Consequential amendments arising from amendments to IFRS 3	1st January 2009
IAS 27	Consolidated and Separate Financial Statements - Amendment relating to cost of an investment on first-time adoption	1st January 2009
IAS 27	Consolidated and Separate Financial Statements - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 28	Investments in Associates - Consequential amendments arising from amendments to IFRS 3	1st January 2009
IAS 28	Investments in Associates - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 29	Financial Reporting in Hyperinflationary Economies - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009

  

STANDARDS AND INTERPRETATIONS NOT YET APPLIED - continued

IAS 31	Interests in Joint Ventures - Consequential amendments arising from amendments to IFRS 3	1st January 2009
IAS 31	Interests in Joint Ventures - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 32	Financial Instruments: Presentation - Amendments relating to puttable instruments and obligations arising on liquidation	1st January 2009
IAS 36	Impairment of Assets - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 38	Intangible Assets - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 39	Financial Instruments: Recognition and Measurement - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 40	Investment Property - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IAS 41	Agriculture - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st January 2009
IFRS 1	First-time Adoption of International Financial Reporting Standards - Amendment relating to cost of an investment on first-time adoption	1st January 2009
IFRS 2	Share-Based Payment - Amendment relating to vesting conditions and cancellations	1st January 2009
IFRS 3	Business Combinations - Comprehensive revision on applying the acquisition method	1st July 2009
IFRS 5	Non-current Assets Held for Sale and Discontinued Operations - Amendments resulting from May 2008 Annual Improvements to IFRSs	1st July 2009
IFRS 8	Operating segments	1st January 2009
IFRIC 13	Customer Loyalty Programme	1st July 2008
IFRIC 15	Agreements for the construction of real estate	1st January 2009
IFRIC 16	Hedges of a net investment in a foreign operation	1st October 2008

Based on the Company's current business model and accounting policies, management does not expect any material impact on the Company's financial statements when any of the other standards or interpretations becomes effective.

The Company does not intend to apply any of these pronouncements early.

  NOTE C - SEGMENT REPORTING

Segment information is presented in respect of the Company's business segments, the primary format, which is based on the Company's management and internal reporting structure. Segment revenue and results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate expenses.

Business segments

The Company comprises the following main business segments:

Animation:

The production services rendered to production houses and training rendered for acquiring skills for production services in relation to the production of animation television series and movies.

Gaming:

The services provided for the contents in Console / Mobile / Other platforms.

Distribution: 

The revenue generated from the exploitation of the distribution rights of animated television series and movies acquired by the Company.

The following is an analysis of the Company's revenue and results by operating segment for the periods under review:

	Revenue			Segment Result
GROUP	Six months ended 30 September 2008 USD'000	Six months ended 30 September 2007 USD'000	Year ended 31 March 2008 USD'000	Six months ended 30 September 2008 USD'000	Six months ended 30 September 2007 USD'000	Year ended 31 March 2008 USD'000
Animation	13,845	8,469	21,398	7,337	4,038	9,946
Gaming	556	428	1,774	226	220	1,214
Distribution	5	20	961	(413)	(227)	267
Total	14,406	8,917	24,133	7,150	4,031	11,427
Unallocated Expenses				(5,225)	(3,666)	(7,747)
Results from operating activities before financing costs				1,925	365	3,680

NOTE D - CASH AND CASH EQUIVALENTS

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Cash in hand and at bank	1,089	657	3,163
Call deposits	7,439	45	14,347
Cash and cash equivalents	8,528	702	17,510
Bank overdrafts	(695)	(713)	(730)
Cash and cash equivalents in the statement of cash flows	7,833	(11)	16,780

 

NOTE E - FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at fair value through profit or loss comprise of foreign currency option contracts held by the Company. The fair value of these derivative instruments is as follows:

GROUP	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Foreign exchange option contracts	-	109	177
	-	109	177

 

NOTE F - INTANGIBLE ASSETS 

GROUP	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Cost
Opening Balance	8,492	4,738	4,738
Acquisitions	2,664	-	3,311
Disposals	-	-	-
Translation adjustment	(1,588)	432	443
Closing Balance	9,568	5,170	8,492
Amortisation
Opening Balance	1,365	612	612
Amortisation for the period	418	247	694
Disposals	-	-	-
Translation adjustment	(254)	63	59
Closing Balance	1,529	922	1,365
Carrying amounts
At beginning of period	7,127	4,126	4,126
At end of period	8,039	4,248	7,127

The amortisation is recognised as cost of sales in the income statement.

NOTE G - ADVANCE PAID FOR DISTRIBUTION RIGHTS

Advances paid for distribution rights include amounts paid to the producers for acquisition of the distribution rights. These advances are transferred to intangible assets on completion of the entire production activities and when the asset is ready for exploitation.

GROUP	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Opening Balance	6,520	4,373	4,373
Acquisitions	4,685	635	5,061
Transfers to intangible assets	(2,598)	-	(3,311)
Translation adjustment	(1,223)	416	397
Closing Balance	7,384	5,424	6,520

 

NOTE H - INTEREST BEARING LOANS AND BORROWINGS

Interest bearing loans and borrowings comprise the following:

GROUP	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Non-current liabilities:
Secured bank loans	2,573	4,243	5,200
Convertible debentures	-	1,072	-
Redeemable convertible preference shares	143	-	170
Finance lease liabilities	47	110	80
	2,763	5,425	5,450
Current liabilities:
Current portion of secured bank loans	4,483	2,864	4,000
Convertible debentures	-	566
Redeemable convertible preference shares	-	12,537	-
Current portion of finance lease liabilities	47	87	73
	4,530	16,054	4,073

 

NOTE I - PROVISION FOR RETAKES

GROUP	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Opening Balance	435	184	188
Provisions made during the period	286	195	489
Provisions used during the period	(25)	(57)	(105)
Provisions reversed during the period	(120)	(105)	(155)
Translation adjustment	(82)	22	18
Closing Balance	494	239	435

Retakes include creative changes to the final product delivered to the customer, performed on the specific request of the customer at the Company's own cost. Requests for retakes from customers are expected to be received by the Company within a period of 3 months from the final delivery and hence the provision is not discounted.

 

NOTE J - PERSONNEL EXPENSES

Details of personal expenses included under cost of sales and administrative expenses are as follows:

GROUP	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Wages and salaries	7,345	4,308	11,790
Contributions to defined contribution plans	523	227	897
Increase in liability for defined benefit plans	52	91	224
(Decrease)/increase in liability for compensated absences	(41)	137	360
Equity settled Transactions	-	-	(793)
	7,879	4,763	12,478
Included under:
Cost of sales	6,707	4,176	11,334
Administrative expenses	1,172	587	1,144
	7,879	4,763	12,478

 

NOTE K - NET FINANCING COSTS

GROUP	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Financial income
Interest income	303	8	428
	303	8	428
Financial expenses
Interest on convertible debentures	-	(64)	(71)
Interest on short term borrowings and other financing costs	(247)	(295)	(322)
Finance lease charges	(6)	(4)	(12)
Interest on term loans	(358)	(78)	(693)
Net foreign exchange loss	(1,174)	-	(12)
	(1,785)	(441)	(1,110)
Net financing costs	(1,482)	(433)	(682)

NOTE L - EARNINGS PER SHARE

Basic earnings per share

The calculation of basic earnings per share at 30 September 2008 was based on the profit attributable to ordinary shareholders of USD 447 thousand (30 September 2007: USD 68 thousand (loss); 31 March 2008: USD 7,185 thousand (profit)) and a weighted average number of ordinary shares outstanding during the period ended 30 September 2008 of 35,966 thousands (30 September 2007: 777 thousand; March 31 2008: 11,902 thousands), calculated as follows:

  EARNINGS PER SHARE - continued

Profit/ (loss) attributable to ordinary shareholders

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Profit/ (loss) for the period	447	(68)	7,185
Profit/ (loss) attributable to ordinary shareholders	447	(68)	7,185

Weighted average number of ordinary shares

In thousands of shares	30 September 2008 In thousands of shares	30 September 2007 In thousands of shares	31 March 2008 In thousands of shares
Issued ordinary shares at 1 April	35,966	777	-
Effect of new issue of shares	-	-	11,902
Weighted average number of ordinary shares	35,966	777	11,902

The weighted average number of shares of 11,902 thousands reported under 31 March 2008 represents shares aggregating to 35,966 thousands allotted on various dates during the previous year.

Diluted earnings per share

The calculation of diluted earnings per share at 30 September 2008 was based on the profit attributable to ordinary shareholders (diluted) of USD 447 thousand (30 September 2007: USD 4 thousand (loss); 31 March 2008: USD 7,185 (Profit)) and a weighted average number of ordinary shares (diluted) outstanding during the period ended 30 September 2008 of 35,966 thousands (30 September 2007, 3,266 thousands; 31 March 2008, 11,902 thousands), calculated as follows:

Weighted average number of ordinary shares (diluted)

In thousands of shares	30 September 2008 In thousands of shares	30 September 2007 In thousands of shares	31 March 2008 In thousands of shares
Weighted average number of ordinary shares	35,966	777	11,902
Effect of conversion of convertible preference shares	-	1,922	-
Effect of conversion of convertible debentures	-	356	-
Employee stock options outstanding	-	211	-
Weighted average number of ordinary shares (diluted)	35,966	3,266	11,902

Weighted average number of shares as on 30 September 2007 relate to DQ Entertainment Limited which was acquired by the Group, and accounted for under reverse acquisition.

Profit/ (loss) attributable to ordinary shareholders (diluted)

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Profit/(loss) attributable to ordinary shareholders	447	(68)	7,185
Interest on convertible debentures	-	64	-
Profit/ (loss) attributable to ordinary shareholders (diluted)	447	(4)	7,185

The Group does not have any dilutive instruments for the period ended 30 September 2008 and 30 September 2007.

 

NOTE M - EQUITY

Ordinary shares

The Company presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders meeting, every holder of ordinary shares, as reflected in the records of the Company on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Company.

The Company has an authorized share capital of 50,000,000 equity shares of 0.1 pence aggregating to USD 99.755 Thousand.

Issue of ordinary shares

	30 September 2008 In thousands of shares	30 September 2007 In thousands of shares	31 March 2008 In thousands of shares
Number of shares
Opening balance	35,966	777	777
Changes due to reverse acquisition	-	-	(777)
Issued for cash	-	-	35,966
Closing balance	35,966	777	35,966

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Share capital
Opening balance	73	178	178
Changes due to reverse acquisition	-	-	(178)
Issued for cash	-	-	73
Closing balance - fully paid	73	178	73

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Share premium
Opening balance	49,017	1,511	1,511
Changes due to reverse acquisition	-	-	(293)
Transfer to reverse acquisition reserve	-	-	(1,218)
Issued for cash	-	-	54,449
Share issue expenses	-	-	(5,432)
Closing balance	49,017	1,511	49,017

 

b) Reserves

Share premium - The amount received by the company over and above the par value of shares issued is shown under this head.

  

EQUITY - continued

Reverse acquisition reserve

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Opening balance	1,218	-	-
Increase during the year	-	-	1,218
Closing balance	1,218	-	1,218

Equity component of convertible instruments

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Opening balance	1,158	1,060	1,060
Increase during the year	-	-	98
Closing balance	1,158	1,060	1,158

Share options outstanding

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Opening balance	-	793	793
Decrease during the year	-	-	(793)
Closing balance	-	793	-

Statutory reserve

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Opening balance	-	932	932
Decrease during the year	-	-	(932)
Closing balance	-	932	-

Translation reserve - Assets, liabilities, income, expenses and cash flows are translated in to USD (presentation currency) from Indian Rupees (functional currency of DQ Entertainment (International) Private Limited, India) and Great British Pounds (functional currency of the Company). The exchange difference arising out of the year-end translation is being debited or credited to Foreign Currency Translation Reserve, which is amounting to USD (7,900) Thousand (30 September 2007: USD 53 Thousand and 31 March 2008: USD (1,660) Thousand).

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Opening balance	(1,660)	36	36
Increase/(decrease) during the year	(6,240)	7	(1,696)
Closing balance	(7,900)	43	(1,660)
Effect of correction of errors	-	10	-
Closing balance - as restated	(7,900)	53	(1,660)

EQUITY - continued

Accumulated earnings - Accumulated earnings include all current and prior period results as disclosed in the income statement.

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Opening balance	3,938	(4,080)	(4,080)
Profit/(loss) for the year	447	(68)	7,185
Transfer from / (to) statutory reserve	-	-	932
Closing balance	4,385	(4,148)	4,037
Effect of correction of errors	-	(146)	(99)
Closing balance - as restated	4,385	(4,294)	3,938

NOTE N - CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

GROUP	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Capital commitments:
Purchase of property, plant and equipment	52	393	55
Purchase of distribution rights	1,592	3,391	2,232
Contingent liabilities:
Outstanding letters of credit	6,423	3,372	6,723
Bonds executed in favour of Indian customs and excise authorities	708	561	879
Claims not acknowledged as debts*	204	-	-

*Claims against DQ India not acknowledged as debts amounting to US$ 204 Thousand comprise of demand from Indian Income Tax authorities on account of non deduction of withholding tax relating to certain overseas payments. DQ India is contesting the demand and has gone on appeal with the relevant appellate authorities.

NOTE O - RELATED PARTIES

Identity of related parties

The Company has a related party relationship with its directors, executive officers, subsidiaries and associate.

Related parties and their relationships

Subsidiaries

DQ Entertainment (Mauritius) Limited (with effect from 27 November 2007)

DQ Entertainment (International) Private Limited (with effect from 18 February 2008)

 

b. Associate

Method Animation SAS (with effect from 28 March 2008)

  RELATED PARTIES - continued

c. Key management personnel

Mr. Tapaas Chakravarti - Director

Mr. K. Balasubrahmanyam - Director

Mr. Michael Herlihy - Director (upto 28 August 2008)

Mr. Rusi Brij - Director

Ms. Theresa Plummer - Director

Mr. Anthony BM Good - Director (with effect from 28 August 2008)

 

d. Relatives of Key Management Personnel with whom DQ India had transactions during the year - Mrs. Rashmi Chakravarti (wife of Mr. Tapaas Chakravarti)

Trading transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

	Revenue from Animation	Amounts owed by related party
	30 September 2008 USD'000	31 March 2008 USD'000
Associate	4,051	3,302

Revenue from production from related parties were at prices arising out of the Group's usual trade practices. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties.

Compensation of key management personnel

Directors of the company and their immediate relatives control 14.47 per cent of the voting shares of the company.

The remuneration of directors and other members of key management during the year was as follows:

	30 September 2008 USD'000	30 September 2007 USD'000	31 March 2008 USD'000
Short term benefits	258	51	390
Post employment benefits	-	-	-
Other long term benefits	-	-	-
Share-based payments	-	-	-
	258	51	390
Outstanding balance	117	6	56

Other related party transactions

Remuneration paid to relatives of key management personnel during the year was USD 33 Thousand (30 September 2007: USD 10 Thousand; 31 March 2008: USD 19 Thousand) and the outstanding balance as at 30 September 2008 was USD 3 Thousand (30 September 2007: USD nil; 31 March 2008: USD 1 Thousand).

ENDIR DFLFLVFBZFBE

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Related Shares:

DQE.L