31st Dec 2007 09:43
DQ Entertainment PLC31 December 2007 DQ Entertainment plc ("DQE" or the "Group") Interim Results for the six months ended 30 September 2007 DQ Entertainment plc, a leading animation and gaming content production company, announces its interim results for the six months ended 30 September 2007. Financial Highlights* •Trading in line with expectations •Revenue $8.92 m (2006: $6.61m) •Gross profit $1.69m (2006: $0.95m) •Gross profit margin 19.0% (2006: 14.4%) •Operating profit before financing costs $0.45m (2006: $0.27m) \* The financial results presented are those of DQ Entertainment Limited as DQEntertainment plc was incorporated on 19 April 2007 and only became the holdingcompany of the Group at the time of the Company's AIM IPO in December 2007 Other Highlights • Successful AIM IPO in December 2007 raising £26.8m (before expenses) • Proceeds from offering will be used mainly for expansion of productionfacilities, investment in intellectual property partnerships and possibleacquisitions and joint ventures, as well as providing a partial realisation forcertain existing shareholders • Shift towards the production of Digital Animation and game asset development relative to that of Traditional Animation • Continued development and licensing of intellectual property Tapaas Chakravarti, Chairman and Chief Executive Officer of DQE, said: "The current financial year has been dominated by DQE's successful IPO on AIM this month, which will boost the international profile of DQE and give impetus to its already established business model. DQE provides investors with the opportunity to invest in the rapidly growing global animation market. The global animation and game art industry has witnessed a paradigm shift in the use of technology to fulfil ever increasing creative needs across all platforms of distribution. The capital raised in the IPO will allow DQE to keep pace with these technological advances, manage its growth and deliver great value to the shareholders in the coming years. I'm pleased to report that DQE has traded in line with expectations in the first six months and the Directors are confident of achieving further growth in revenues and profitability in the current financial year." For further information contact: Bell Pottinger Corporate & FinancialNick Lambert / Chris Hamilton +44 (0) 20 7861 3232 Evolution Securities LimitedTom Price / Jeremy Ellis / Chris Clarke +44 (0) 20 7071 4300 Chairman and Chief Executive's Statement Introduction DQ Entertainment Ltd is a leading animation production company engaged in theproduction of Traditional / Digital Animation and Game Art development, with asubstantial workforce and a global client base. The Group currently producesanimation for films, television series and console based games for a number ofinternational production houses. The Group has around 80 clients, including WaltDisney Television Animation, Nickelodeon Animation Studios Inc., ElectronicArts, Marvel, American Greetings, NBC-Universal, BBC, Method Films and Take 2Interactive. The Group has production facilities in Hyderabad, India, andcurrently employs over 2,200 full time employees. The Directors believe that animated content has a global market appeal and anincreasing number of applications. Traditionally animation has been produced forfeature films, television programmes, advertisements and computer games.However, animation has also established a place in niche areas such as specialeffects, web entertainment programmes, film titling, 3D modelling and backgrounddevelopment. According to a report by NASSCOM entitled 'A Study on Animation and GamingIndustry in India' published in 2007, the addressable market for Indiananimators and developers rose from $215 million in 2004 to $401 million in 2006,and is forecast to reach $1.3 billion by 2010, representing a compound annualgrowth rate of 34.8 per cent. The demand for animation content has expanded with the rise in broadcastinghours by cable and satellite television broadcasters. In the past, animationseries have been aimed at children, however in recent years target audiences foranimation have been broadened to include teenagers and adults alike. Another key trend in the industry is the outsourcing of the production ofanimation content to Asia, and in particular India. This market is increasinglybeing utilised by North American and European film and television programmeproducers due to the availability of powerful computer animation platforms andmuch lower labour rates. Overview for the period We are delighted to announce DQE's first interim results for the six monthsended 30 September 2007 since joining AIM on 18 December 2007. The financialresults presented are those of DQ Entertainment Limited as DQ Entertainment plcwas incorporated on 19 April 2007 and only became the holding company of theGroup at the time of the Company's AIM IPO. In the period the Group has traded in line with expectations. Revenue was $8.92m(2006: $6.61m). Gross profit was $1.69m (2006: $0.95m), producing a gross profitmargin of 19.0% (2006: 14.4%). Operating profit before financing costs was$0.45m (2006: $0.27m). These results have been achieved through organic growthand the continued investment in the future content pipeline. Key projects during the period, which are all in the area of Digital Animation,include season two of an icon animated series for Walt Disney Television,Ironman for Marvel, Lux Animation, Method Films consortium and Pinky & Perky forBBC, France 3, Lupus, Method Films consortium, Nickelodeon Animation StudiosInc. Additionally major co-production deals for television animated series 'Casper'with Classic Media / Entertainment Rights / Moonscoop Studios, 'TwistedWhiskers' and 'Maryoku Yummy' with American Greetings were signed and productionhas commenced. DQE continues to train and continuously upgrade the skill sets of its associatesfrom its training school and knowledge sharing partnership with the variousState Governments of India to meet its growing requirement of trained manpower. AIM IPO The Company's AIM IPO on 18 December 2007 raised £26.8 million (before expenses), through a placing of 19,727,961 new ordinary shares of 0.1p each ("Ordinary Shares") at a placing price of £1.36 per share ("Placing Price"). The new Ordinary Shares represent approximately 54.9 per cent. of DQE's issued share capital pursuant to the placing. On Admission, the number of Ordinary Shares in issue was 35,966,047, giving an approximate market capitalisation of £48.9 million at the Placing Price. Proceeds from the offering will be used primarily for expansion of production facilities, investment in intellectual property partnerships and possible acquisitions and joint ventures, as well as providing a partial realisation for certain existing investors. Outlook The Directors are confident of achieving further growth in revenues andprofitability in the current financial year. Inclusive of these interim results,approximately $20.3 million of revenues are already contracted for the yearending 31 March 2008 with $2.9 million under serious negotiation. The Directors expect to see an improvement in gross margins driven by a shifttowards the production of Digital Animation and game art development relative tothat of Traditional Animation. Approximately 85 per cent. of the revenues thatare either contracted or under serious negotiation over the next 3 years andbeyond are in these higher margin product lines. In line with its strategy, the Group will continue to develop and licenseintellectual property, which the Directors believe will help to securelonger-term revenues. We are confident of announcing further major internationalstrategic deals early in the New Year. Condensed Financial Statements (Unaudited)DQ Entertainment Limited30 September 2007 Contents Page Condensed Balance Sheet (Unaudited) 1 Condensed Statement of Income (Unaudited) 3 Condensed Statement of Changes in Equity (Unaudited) 4 Condensed Statement of Cash Flows (Unaudited) 6 Notes to Condensed Financial Statements (Unaudited) 8 Condensed Balance Sheet (Unaudited)(All amounts in thousands of US Dollars unless otherwise stated) ---------------------- ------ ---------- ---------- ---------- Notes As at As at As at 30 September 2007 30 September 2006 31 March 2007---------------------- ------ ---------- ---------- ----------ASSETSCurrent assetsCash and cashequivalents D 657 397 806Restricted cash 362Financial assets atfair value throughprofit and loss E 109 - -Trade and otherreceivables 7,865 4,494 5,604Income taxreceivable 37 20 17 ---------- ---------- ----------Total currentassets 9,030 4,911 6,427 ---------- ---------- ----------Non current assetsProperty, plant andequipment 6,919 4,477 5,880Intangible assets F 4,248 1,701 3,986Advances paid fordistribution rights G 5,424 4,733 4,373Deposits 490 221 239 ---------- ---------- ----------Total non currentassets 17,081 11,132 14,478 ---------- ---------- ----------Total assets 26,111 16,043 20,905 ========== ========== ========== LIABILITIES ANDSTOCKHOLDERS' EQUITYCurrent liabilitiesBank overdraft D 713 467 1,276Interest-bearingloans andborrowings H 16,054 10,780 12,644Trade and otherpayables 2,540 1,233 1,856Provisions forretakes I 239 307 184 ---------- ---------- ----------Total currentliabilities 19,546 12,787 15,960 ---------- ---------- ----------Non currentliabilitiesInterest-bearingloans andborrowings H 5,425 3,323 4,026Employee benefits 907 485 625 ---------- ---------- ----------Total non currentliabilities 6,332 3,808 4,651 ---------- ---------- ----------Total liabilities 25,878 16,595 20,611 ---------- ---------- ---------- ---------------------- ------ ----------- ----------- ---------- Notes As at As at As at 30 September 30 September 2006 31 March 2007---------------------- ------ 2007 ----------- ---------- ----------- Stockholders' equity MIssued capital 178 174 178Additional paid incapital 1,511 1,493 1,511Equity component ofconvertibleinstruments 1,060 1,060 1,060Foreign currencytranslation reserve 53 22 46Share optionsoutstanding 793 793 793Statutory reserve 932 636 932Retained earnings (4,294) (4,730) (4,226) ----------- ----------- ----------Total stockholders'equity 233 (552) 294 ----------- ----------- ----------Total liabilitiesand stockholders'equity 26,111 16,043 20,905 =========== ========== ========== (The accompanying notes are an integral part of these condensed financialstatements) Condensed Statement of Income (Unaudited)(All amounts in thousands of US Dollars, unless otherwise stated)---------------------- ------ ---------- ---------- ---------- Notes Six months ended 30 September 2007 Six months ended 30 September 2006 Year ended---------------------- ------ ---------- ---------- 31 March 2007 ---------- Revenue 8,917 6,614 15,239Cost of sales J (7,227) (5,661) (11,688) ---------- ---------- ----------Gross profit 1,690 953 3,551 ---------- ---------- ---------- Other operating income 13 5 9Distribution expenses (113) (175) (304)Administrative expenses J (1,141) (491) (1,391)Other operating expenses - (21) (23) ---------- ---------- ----------Operating result before financing costs 449 271 1,842 ---------- ---------- ---------- Financial income 114 2 6Financial expenses (631) (559) (1,303) ---------- ---------- ----------Net financing costs K (517) (557) (1,297) ---------- ---------- ---------- Result before tax (68) (286) 545Income tax expense - - (31) ---------- ---------- ----------Result attributableto stockholdersof DQ EntertainmentLimited (68) (286) 514 ========== ========== ========== Earnings per share LBasic (in USD) (0.09) (0.38) 0.67Diluted (in USD) (0.09) (0.38) 0.48 (The accompanying notes are an integral part of these condensed financialstatements) Condensed Statement of Changes in Equity (Unaudited) (All amounts in thousands of US Dollars, unless otherwise stated) -------------------- ------- ------ ------ ------- -------- -------- ------- ------ ------ Equity Equity Additional Equity Foreign Stock Statutory Retained Total shares Shares paid in component currency options reserve earnings No of Shares Amount capital of convertible translation outstanding instruments reserve -------------------- ------- ------ ------ ------- -------- -------- ------- ------ ------Balance as at1 April 2006 757,000 174 1,493 1,060 (33) 793 636 (4,444) (321)Changes in equity forthe six months ended30 September 2006Foreign currencytranslation - - - - 55 - - - 55 ------- ------ ------ ------- -------- -------- ------- ------ -------Net incomerecognised directly in equity - - - - 55 - - - 55Result for theperiod - - - - - - - (286) (286) ------- ------ ------ ------- -------- -------- ------- ------ -------Totalrecognisedincome andexpense forthe period - - - - 55 - - (286) (231) ------- ------ ------ -------- -------- -------- ------- ------ -------Balance as at30 September 2006 757,000 174 1,493 1,060 22 793 636 (4,730) (552)-------------------- ------- ------ ------ -------- -------- -------- ------- ------ ------- (All amounts in thousands of US Dollars, unless otherwise stated) -------------------- ------- ------ ------ ------- -------- -------- ------- ------ ------ Equity Equity Additional Equity Foreign Stock Statutory Retained Total shares Shares paid in component currency options reserve earnings No of Shares Amount capital of convertible translation outstanding instruments reserve -------------------- ------- ------ ------ ------- -------- -------- ------- ------ ------Balance as at1 April 2006 757,000 174 1,493 1,060 (33) 793 636 (4,444) (321)Changes in equity forthe year ended 31March 2007Foreign currencytranslation - - - - 79 - - - 79 ------- ------ ------ ------- -------- -------- ------- ------ -------Net incomerecogniseddirectly inequity - - - - 79 - - - 79Result for the year - - - - - - - 514 514 ------- ------ ------ ------- -------- -------- ------- ------ -------Totalrecognisedincome andexpense forthe period - - - - 79 - - 514 593Issue of sharecapital 20,000 4 18 - - - - - 22Transfer tostatutoryreserve - - - - - - 296 (296) - ------- ------ ------ ------- -------- -------- ------- ------ -------Balance as at31 March 2007 777,000 178 1,511 1,060 46 793 932 (4,226) 294-------------------- ------- ------ ------ ------- -------- -------- ------- ------ -------Changes in equity forthe six months ended30 September 2007Foreign currencytranslation - - - - 7 - - - 7 ------- ------ ------- ------- -------- -------- ------- ------ -------Net incomerecogniseddirectly inequity - - - - 7 - - - 7Result for theperiod - - - - - - - (68) (68) ------- ------ ------ ------- -------- -------- ------- ------ -------Totalrecognisedincome andexpense forthe period - - - - 7 - - (68) (61) ------- ------ ------ ------- -------- -------- ------- ------ -------Balance as at30 September2007 777,000 178 1,511 1,060 53 793 932 (4,294) 233-------------------- ------- ------ ------ ------- -------- -------- ------- ------ -------(The accompanying notes are an integral part of these condensed financialstatements) Condensed Statement of Cash Flows (Unaudited)(All amounts in thousands of US Dollars, unless otherwise stated)----------------------- ------ ---------- ---------- ---------- Note Six months ended 30 September 2007 Six months ended 30 September 2006 Year ended----------------------- ------ ---------- ---------- 31 March 2007 ---------- Cash flows fromoperating activitiesResult for theperiod aftertax (68) (286) 514Adjustments for:Depreciationandamortization 1,529 1,014 2,407Interestincome K (114) (2) (6)Interestexpense K 631 559 1,303Increase inprovision fordefinedbenefit plan 91 71 143Increase inprovision forcompensatedabsences 137 50 98Provision fortaxation - - 31Provision forretakes I 90 88 (43)Gain /(Losses) onforeignexchangefluctuations 162 (58) (155)Losses on saleof property,plant andequipment - 21 23 ---------- ---------- ----------Operatingprofit beforechanges inworkingcapital 2,458 1,457 4,315 ---------- ---------- ----------Restrictedcash (362)Decrease intrade andotherreceivables (1,857) (1,675) (2,733)Decrease ininventories - 2 2Employeebenefits paid (16) (9) (4)Retakesincurred (57) - -Increase/(Decrease) in tradeand otherpayables 446 (214) 374 ---------- ---------- ---------- 612 (439) 1,954Income taxespaid (21) 13 (14) ---------- ---------- ----------Net cash from/ (used in)operatingactivities 591 (426) 1,940 ---------- ---------- ---------- Cash flows frominvesting activitiesAcquisition ofproperty,plant andequipment (1,467) (681) (3,048)Acquisitionand advancespaid fordistributionrights (635) (1,426) (3,264)Proceeds fromsale ofproperty,plant andequipment - 27 55Deposits (223) (91) (105)Finance income 2 2 9 ---------- ---------- ----------Net cash usedin investingactivities (2,323) (2,169) (6,353) ---------- ---------- ---------- (All amounts in thousands of US Dollars, unless otherwise stated)----------------------- ------ ---------- ---------- ---------- Note Six months ended 30 September 2007 Six months ended 30 September 2006 Year ended----------------------- ------ ---------- ---------- 31 March 2007 ----------Cash flows fromfinancing activitiesProceeds fromissue of sharecapital - - 22Proceeds fromterm loans 2,871 2,251 3,878Proceeds fromborrowing - 453 -Interest paid (599) (554) (285)Payment offinance leaseliabilities (104) (43) (108) ---------- ---------- ----------Net cash fromfinancingactivities 2,168 2,107 3,507 ---------- ---------- ---------- Net increase /(decrease) incash and cashequivalents 436 (488) (906)Cash and cashequivalents atbeginning ofperiod D (470) 433 433(Losses) /Gain onforeignexchangefluctuations (22) (15) 3 ---------- ---------- ----------Cash and cashequivalents atperiod end D (56) (70) (470) ---------- ---------- ---------- (The accompanying notes are an integral part of these condensed financialstatements) Notes to Condensed Financial Statements (Unaudited) (All amounts in thousands of US Dollars, unless otherwise stated) NOTE A - BASIS OF PREPARATION The accompanying unaudited condensed financial statements of DQ EntertainmentLimited (the "Company") have been presented for the six months ended 30September 2007 along with comparatives for the six months ended 30 September2006 and the year ended 31 March 2007. These unaudited condensed financialstatements have been prepared on the accrual basis of accounting usingaccounting policies consistent with International Financial Reporting Standardsand in accordance with the requirements of IAS-34 'Interim Financial Reporting'as developed and published by the International Accounting Standards Board('IASB'). These unaudited condensed financial statements have been preparedbased on the management information which is prepared and maintained underaccounting principles generally accepted in India ('Indian GAAP') andsubsequently converted using accounting policies consistent with IFRS. TheCompany transitioned to IFRS on 1 April 2005 although it continues to reportunder Indian GAAP for local regulatory purposes. In the opinion of management, all adjustments, which are of a normal recurringnature and necessary for a fair presentation, have been included. The Companyhas chosen to present the condensed balance sheet, condensed income statement,condensed statement of cash flows and condensed statement of changes instockholders' equity along with selected explanatory notes. Accordingly, certaininformation and note disclosures normally included in annual financialstatements prepared in accordance with IFRS have been condensed or omitted,although the Company believes that the disclosures made are adequate to make theinformation presented not misleading. These unaudited condensed financialstatements have been prepared using the same accounting policies that wereapplied in the preparation of the Company's historical financial information forthe year ended 31 March 2007. Accordingly, these unaudited condensed financialstatements should be read in conjunction with the historical financialinformation of the Company for the year ended 31 March 2007, which have beenincluded in the AIM Admission Document ('AAD') of DQ Entertainment Plc preparedin connection with its admission to the Alternative Investment Market ('AIM') ofthe London Stock Exchange, United Kingdom. Subsequent to 30 September 2007, the Company became a subsidiary of DQEntertainment Plc, a company registered in Isle of Man, through a grouprestructuring plan undertaken in connection with the latter's admission to AIM.The financial statements of DQ Entertainment Plc made up to 31 October 2007 havebeen included in the AAD and have therefore not been reproduced. DQEntertainment Plc has been admitted to AIM in December 2007 and these unauditedcondensed financial statements are being presented for the purposes of updatinginvestors on the trading results for the six months ended 30 September 2007. These unaudited condensed financial statements have been prepared on a goingconcern basis, which assumes the realization of assets and satisfaction ofliabilities in the normal course of business. The condensed financial statementsof the Company are prepared in Indian Rupees (INR), the Company's functionalcurrency and presented in US Dollars (USD), the presentation currency. NOTE B - STANDARDS AND INTERPRETATIONS NOT YET APPLIED The following new Standards and Interpretations, which are yet to becomemandatory, have not been applied in the Company's Financial Statements. ------------------------------------- --------------- Standard or Interpretation Effective for reporting periods starting on or after------------------------------------- --------------- -------------------------IFRIC IAS 19 - The Limit on a 1 January 200814 Defined Benefit Asset, ----------------------- Minimum Funding Requirements and their Interaction IFRIC Customer Loyalty Programmes 1 July 200813 IFRIC Service Concession 1 January 200812 Arrangements IAS Borrowing Costs (revised 2007) 1 January 200923 IFRS Operating Segments 1 January 20088 Based on the Company's current business model and accounting policies,management does not expect any material impact on the Company's financialstatements 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 internalreporting structure. Segment revenue and results include items directlyattributable to a segment as well as those that can be allocated on a reasonablebasis. Unallocated items comprise mainly corporate expenses. Business segmentsThe Company comprises the following main business segments: Animation:The production services rendered to production houses in relation to theproduction 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 ofanimated television series and movies acquired by the Company. The following is an analysis of the Company's revenue and results by operatingsegment for the periods under review:--------------- ------------------- ------------------- Revenue Segment Result--------------- ------------------- ------------------- ------- -------- -------- ------- Six months ended Six months ended Year ended Six months ended Six months ended Year ended 30 September 2007 30 September 2006 31 March 2007 30 September 2007 30 September 200631 March 2007--------------- -------- -------- ------- -------- -------- -------Revenue fromservices Animation 8,469 6,289 13,016 4,038 2,373 5,683Gaming 428 298 2,170 220 220 1,670Distribution 20 27 53 (227) (136) (309) -------- -------- ------- -------- -------- ------- Total 8,917 6,614 15,239 4,031 2,457 7,044UnallocatedExpenses (3,582) (2,186) (5,202) -------- -------- -------Results fromoperatingactivities 449 271 1,842 -------- -------- ------- NOTE D - CASH AND CASH EQUIVALENTS ---------- ---------- ---------- 30 September 30 September 31 March 2007 -------------------------- 2007 2006 ---------- ---------- ---------- Cash in hand and atbank 657 397 792Call deposits - - 14 ---------- ---------- ----------Cash and cashequivalents 657 397 806 ---------- ---------- ---------- Bank overdrafts (713) (467) (1,276) ---------- ---------- ----------Cash and cashequivalents in thestatement of cashflows (56) (70) (470) ---------- ---------- ---------- NOTE E - FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS Financial assets at fair value through profit and loss comprise of foreigncurrency option contracts held by the Company as at 30 September 2007. The fairvalue of these derivative instruments is as follows:-------------------------- ---------- ---------- ---------- 30 September 2007 30 September 2006 31 March 2007-------------------------- ---------- ---------- ---------- Foreign exchangeoption contracts 109 - - ---------- ---------- ---------- 109 - - ---------- ---------- ---------- NOTE F - INTANGIBLE ASSETS-------------------------- --------- --------- -------- 30 September 2007 30 September 2006 31 March 2007-------------------------- --------- --------- -------- CostOpening Balance 4,579 2,214 2,214Acquisitions - - 2,430Disposals - (64) (65)Translation adjustment 591 (65) - ----------- ----------- ----------Closing Balance 5,170 2,085 4,579 ----------- ----------- ---------- AmortisationOpening Balance 593 296 296Amortisation for theperiod 247 162 362Disposals - (65) (65)Translation adjustment 82 (9) - ----------- ----------- ----------Closing Balance 922 384 593 ----------- ----------- ---------- Carrying amounts ----------- ----------- ----------At beginning of period 3,986 1,918 1,918 ----------- ----------- ----------At end of period 4,248 1,701 3,986 ----------- ----------- ---------- 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 foracquisition of the distribution rights. These advances are transferred todistribution rights on completion of the entire production activities and whenthe asset is ready for exploitation. -------------------------- ---------- ---------- ---------- 30 September 2007 30 September 2006 31 March 2007-------------------------- ---------- ---------- ---------- Opening Balance 4,373 3,411 3,411Acquisitions 635 1,426 3,264Transfers todistribution rights - - (2,430)Translation adjustment 416 (104) 128 ---------- ---------- ----------Closing Balance 5,424 4,733 4,373 ---------- ---------- ---------- NOTE H - INTEREST BEARING LOANS AND BORROWINGS Interest bearing loans and borrowings comprise the following:-------------------------- ---------- ---------- ---------- 30 September 2007 30 September 2006 31 March 2007-------------------------- ---------- ---------- ---------- Current liabilities:Current portion ofsecured bank loans 2,864 326 1,315Convertible debentures 566 -Redeemable convertiblepreference shares 12,537 10,401 11,273Current portion offinance leaseliabilities 87 53 56 ---------- ---------- ---------- 16,054 10,780 12,644 ---------- ---------- ---------- Non-current liabilities:Secured bank loans 4,243 1,873 2,527Convertible debentures 1,072 1,395 1,454Finance leaseliabilities 110 55 45 ---------- ---------- ---------- 5,425 3,323 4,026 ---------- ---------- ---------- NOTE I - PROVISION FOR RETAKES-------------------------- ---------- ---------- ---------- 30 September 2007 30 September 2006 31 March 2007-------------------------- ---------- ---------- ---------- Opening Balance 184 227 227Provisions made duringthe period 195 107 307Provisions used duringthe period (57) - (91)Provisions reversedduring the period (105) (19) (259)Translation adjustment 22 (8) - ---------- ---------- ----------Closing Balance 239 307 184 ---------- ---------- ---------- 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 Companywithin a period of 3 months from the final delivery and hence the provision isnot discounted. NOTE J - PERSONNEL EXPENSES Details of personal expenses included under cost of sales and administrativeexpenses are as follows:-------------------------- ---------- --------- -------- 30 September 2007 30 September 2006 31 March 2007-------------------------- ---------- --------- -------- Wages and salaries 4,308 2,878 6,055Contributions todefined contributionplans 227 111 298Increase in liabilityfor defined benefitplans 91 71 143Increase in liabilityfor compensatedabsences 137 50 98 ----------- ----------- ---------- 4,763 3,110 6,594 ----------- ----------- ---------- Included under:Cost of sales 4,176 2,942 6,235Administrativeexpenses 587 168 359 ----------- ----------- ---------- 4,763 3,110 6,594 ----------- ----------- ----------NOTE K - NET FINANCING COSTS-------------------------- ---------- --------- -------- 30 September 2007 30 September 2006 31 March 2007-------------------------- ---------- --------- -------- Financial incomeGain on valuation offinancial assets atfair value throughprofit and loss 106 - -Interest income 8 2 6 ----------- ----------- ---------- 114 2 6 ----------- ----------- ----------Financial expensesInterest onconvertible debentures 64 53 113Interest on short termborrowings and otherfinancing costs 295 52 181Dividend onconvertible preferenceshares (Refer Note P -2) - 453 919Finance lease charges 4 3 7Interest on term loans 78 55 189Net foreign exchangeloss/(gain) 190 (57) (106) ----------- ----------- ---------- 631 559 1,303 ----------- ----------- ----------Net financing costs (517) (557) (1,297) ----------- ----------- ---------- NOTE L - EARNINGS PER SHARE Basic earnings per shareThe calculation of basic earnings per share at 30 September 2007 was based onthe loss attributable to ordinary shareholders of USD 68 thousand (30 September2006: USD 286 thousand (loss); 31 March 2007: USD 514 thousand (profit)) and aweighted average number of ordinary shares outstanding during the period ended30 September 2007 of 777 thousands (30 September 2006: 757 thousand; March 312007: 757 thousands), calculated as follows:(Loss)/profit attributable to ordinary shareholders--------------------------- ---------- --------- -------- 30 September 2007 30 September 2006 31 March 2007--------------------------- ---------- --------- -------- (Loss)/profit for theperiod (68) (286) 514 ----------- ----------- ----------(Loss)/profitattributable toordinary shareholders (68) (286) 514 ----------- ----------- ---------- Weighted average number of ordinary shares--------------------------- ---------- --------- --------In thousands of shares 30 September 2007 30 September 2006 31 March 2007--------------------------- ---------- --------- -------- Issued ordinary sharesat 1 April 777 757 757Effect of new issue of - - -shares ------------ ------------ ----------Weighted averagenumber of ordinaryshares 777 757 757 ------------ ------------ ---------- Diluted earnings per shareThe calculation of diluted earnings per share at 30 September 2007 was based onthe loss attributable to ordinary shareholders (diluted) of USD 5 thousand (30September 2006, USD 220 thousand (profit); 31 March 2007: USD 1,546 (Profit))and a weighted average number of ordinary shares (diluted) outstanding duringthe period ended 30 September 2007 of 3,266 thousands (30 September 2006, 3,246thousands; 31 March 2007, 3,246 thousands), calculated as follows: Weighted average number of ordinary shares (diluted)--------------------------- ---------- --------- --------In thousands of shares 30 September 2007 30 September 2006 31 March 2007--------------------------- ---------- --------- -------- Weighted averagenumber of ordinaryshares 777 757 757Effect of conversionof convertiblepreference shares 1,922 1,922 1,922Effect of conversionof convertibledebentures 356 356 356Employee stock optionsoutstanding 211 211 211 ------------ ------------ ----------Weighted averagenumber of ordinaryshares (diluted) 3,266 3,246 3,246 ------------ ------------ ---------- (Loss)/profit attributable to ordinary shareholders (diluted)--------------------------- ---------- --------- 30 September 2007 30 September 2006 31 March 2007--------------------------- ---------- --------- -------- Profit attributable toordinary shareholders (68) (286) 514Dividends onconvertible preferenceshares - 453 919Interest onconvertible debentures 63 53 113 ------------ ------------ ----------(Loss)/profitattributable toordinary shareholders(diluted) (5) 220 1,546 ------------ ------------ ---------- The Company's convertible instruments were anti dilutive to earnings per sharefor the period ended 30 September 2007 and 30 September 2006. NOTE M - EQUITY AND RESERVES a) Ordinary shares The Company presently has only one class of ordinary shares. For all matterssubmitted 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 equallyeligible to receive dividends and the repayment of capital in the event ofliquidation of the Company. The Company has an authorized share capital of 3,000,000 equity shares of USD0.22 each. b) Reserves Additional paid in capital - The amount received by the company over and abovethe par value of shares issued (share premium) is shown under this head. Statutory reserves - Statutory reserve represents the amounts transferred todebentures redemption reserve out of profits every year as required by theCompanies Act, 1956. This reserve is to be utilised exclusively for redemptionof the debentures and is not available for distribution until the debentures areredeemed. Translation reserve - Assets, liabilities, income, expenses and cash flows aretranslated in to USD (presentation currency) from Indian Rupees (functionalcurrency). The exchange difference arising out of the year-end translation isbeing debited or credited to Foreign Currency Translation Reserve. Accumulated earnings - Accumulated earnings include all current and prior periodresults as disclosed in the income statement. NOTE N - CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES--------------------------- ---------- --------- -------- 30 September 2007 30 September 2006 31 March 2007--------------------------- ---------- --------- -------- Capital commitments:Purchase of property,plant and equipment 393 54 26Purchase ofdistribution rights 3,391 4,777 3,942 Contingent liabilities:Outstanding letters ofcredit 3,372 - 141 NOTE O - RELATED PARTIES Related parties with whom the company has transacted during the year Key Management PersonnelMr. Tapaas Chakravarti Managing Director Summary of transactions with related parties during the year--------------------------- ---------- --------- --------Nature of Transaction 30 September 2007 30 September 2006 31 March 2007--------------------------- ---------- --------- --------Transactions with keymanagement personnelRemuneration 51 46 93 NOTE P - POST BALANCE SHEET EVENTS 1. Amalgamation of the Company with Animation and Multimedia Private Limited: On 11 December 2007, pursuant to the sanction of the amalgamation scheme by theHigh Court of Andhra Pradesh, India, DQ Entertainment Limited was amalgamatedwith Animation and Multimedia Private Limited ("AMPL"). In consideration forthis merger, AMPL is required to pay cash and/or issue its shares to theshareholders of DQ Entertainment Limited in exchange for the shares held by suchshareholders in DQ Entertainment Limited. Pursuant to this amalgamation:a) All the assets, liabilities, contractual obligations etc of DQEntertainment Limited will be automatically transferred to AMPL b) The employees of DQ Entertainment Limited shall automatically betransferred to AMPL with the same benefits and for terms no less favourable thanwhat they were receiving. c) DQ Entertainment Limited will stand dissolved without going through theprocess of winding up and all the assets and liabilities of DQ EntertainmentLimited shall vest in the hands of AMPL. 2. Compound financial instruments: Compound financial instruments issued by the Company comprise of convertiblepreference shares and convertible debentures, convertible into the equity sharesof the Company at the option of the holders, and the number of shares to beissued does not vary with changes in their fair value. The convertible preference shares stands extinguished as per the Scheme ofAmalgamation approved by High Court of Andhra Pradesh, India, between DQEntertainment Limited and AMPL. The convertible debentures stands cancelled as per the Termination Agreementbetween International Finance Corporation and DQ Entertainment Limited dated 11December 2007. The convertible preference shares have a coupon rate of 8% and the holders havethe right to cumulative dividend on these shares. The preference share holdershave waived their right to the outstanding accumulated dividend by sending theirletters of waiver dated 3 November 2007 to 10 December 2007. Therefore, theCompany does not have liability towards payment of the accumulated dividend tothese preference shareholders. Accordingly, the Company has not recorded anydividend in respect of these shares during the period ended 30 September 2007. 3. Stock Options: Stock options for 61,000 shares were granted during the year ended 31 March2005. Out of these options granted, grants for 4,000 options stand extinguishedas per the 'Option Agreement' entered into between the Company and the concernedemployees on separation from the Company. The employees who had been granted theoptions for the balance 57,000 options have sent individual letters to theCompany on 30 November 2007 waiving their rights to exercise the options grantedand to treat the 'Option Agreement' as terminated. Therefore, the Company doesnot have any obligation to issue shares on exercise of the said options. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
DQE.L