Coretx Holdings Regulatory News (COR)

14 Mar 2006 07:00

Chorion PLC14 March 2006 14th March 2006 Chorion PLC Results for the year end 31st December 2005 STRONG GROWTH AHEAD OF PERIOD OF INVESTMENT Waheed Alli, Chairman of Chorion, said: "This has been a strong year for Chorion, with pre-tax profits beforeexceptional items growing by 45% and all three of our divisions of TV and Film,Literary Estates and Children's achieving significant successes. The year aheadwill see the need for considerable investment in new properties, and we lookforward to an exciting and challenging period for the company." • Pre-tax profits (before exceptional costs) up 45% to £5.9 million against £4.1 million for 2004 • Adjusted pre-tax profits (before exceptional costs) up 41% to £7.4m (2004: £5.2m) • Adjusted EPS (before exceptional costs) up 3.6p to 16.0p • Basic EPS 5.9p (2004: 7.1p) reflects exceptional costs of £1.5m • 85% growth in merchandising revenues driven by growth in Noddy merchandise • Acquisition of Silver Lining Productions Ltd completed, bringing rights to Eric Carle, Olivia the Pig and Gaspard & Lisa into Chorion stable • Make Way for Noddy launched in US and licensed to Germany • Ratings successes for Agatha Christie TV films broadcast on ITV Key figures Chorion 2005 2004 2003 2002 £m £m £m £mTurnover 32.6 23.9 18.6 9.3Gross Profit 17.5 12.7 10.1 8.1Operating Profit * 7.2 4.8 3.5 0.7Profit before Tax 4.4 4.1 3.2 0.4Profit before Tax* 5.9 4.1 3.2 0.4Adjusted profit before tax* 7.4 5.2 4.0 1.3 (before amortisation of intangible assets)Basic earnings per share 5.9p 7.1p 6.8p (4.6)pAdjusted earnings per share* 16.0p 12.4p 11.9p 0.27p(before amortisation of intangible assets) * excluding exceptional items Chorion PLC Chairman's Statement Overview This has been a strong year for Chorion. I am very pleased with the eight AgathaChristie TV films we have produced and our ability to attract the best of actingtalent to star in them. Four of these new films have already been broadcast onITV and all have achieved the highest ratings in their time slots. Our TV andLiterary Estate activities are strong and continue to be steady revenuegenerators for us. In our Children's Division, Noddy merchandising has grown significantly inEurope and the development of Mr Men is well underway. The acquisition of SilverLining Productions gives us further new children's properties with significantdevelopment potential. Looking forward, new technology is bringing very significant challenges andopportunities to our businesses requiring new business models to be developed.Our task now is to fund the significant development costs required to bring ourportfolio of new properties to market and to successfully manage theinternational rollout of them. Changing Consumer Trends The effect of new technology on consumer entertainment trends was verynoticeable in 2005. As a result of changes in technology, the consumer isincreasingly able to make the decision about what entertainment to consumerather than the traditional model of the choice being made by a broadcaster ordistributor. We need to adapt our business models to accommodate this changingenvironment. This was particularly apparent in pre-school entertainment in the USA in 2005.The year saw the proliferation of consumer choice take off through the increasein the number of 24 hour children's TV channels offered free on basic cable, theemergence of video on demand for children offered as part of the cable package,the growing use of viewing time shifting devices such as TIVO (a service similarto Sky Plus in the UK), the fast growing consumer desire to have a more directrelationship with a favourite character or brand through the internet and theincreasing expectation that a brand should serve its consumers with differentcontent formats through television, the internet, mobile phones and homeentertainment. The USA felt the effect first; the rest of the world will quickly follow forboth children's and non-children's brands and content. One of the immediateeffects in the USA of the increase in children's channels, TIVO devices andvideo on demand was a significant decrease in the sales of DVD's forpre-schoolers that contained episodes or programming that were the same as thosethat had, and could continue to be, viewed on television and on video on demand. In order to compete with the increasing number of rival children's channels, theleading US children's networks sharpened the focus of their programme content tocreate a unique brand or "on air" content image and broadened the range ofcontent commissioned for TV series to include short form downloadableprogramming. This has a direct effect on what programmes each network will buyin the future. The Future The acquisition by Chorion of Silver Lining Productions, together with the EnidBlyton and Mr Men properties, now gives the company a significant range ofchildren's brands to develop. This has achieved our stated objective to broadenour portfolio of children's brands so as not to be wholly dependent on oneparticular brand or on one particular territory. In order to develop our portfolio it is necessary to have a dynamic productionpipeline that will enable the company to bring new brands to market each year.This will require significant investment in new programming in 2006, 2007 and2008. In early 2006 we have seen signs that Noddy is growing more slowly thananticipated in the USA and Japan, emphasising the impact that dependency on onebrand in our children's business can have. We will ensure that we continue toexpand and invest in our portfolio of brands, both in children's andnon-children's, in order to provide the company with a wider range of revenuegenerating brands and a greater stability in times of changing consumer trends. The shift in choice from the broadcaster and distributor to the consumer favoursbrands with strong consumer history and appeal. Chorion's portfolio canparticularly benefit from this trend and we will work to further refine ourbusiness models across all our brands to ensure we can benefit from the changinglandscape. Staff I would like to thank all our staff for their hard work and enthusiasm. It isthrough their imagination and dedication that we continue to be innovative withour brands, finding new avenues to exploit them in the interests of ourshareholders. Dividend The Directors believe that, at present, the shareholders would be best served bycontinuing to focus resources on investment in the Company's portfolio of brandswith a view to bringing more brands to market more quickly. Therefore we do notintend to propose a dividend for 2005. Offer for the Company Shareholders have received details of the recommended proposals for theacquisition of the Company to be effected by means of a scheme of arrangement ata price of 425p per share. These proposals have been put forward by PlanetAcquisitions Limited, a new company formed for the purpose of implementing theproposals and indirectly owned by 3i Group plc (and its investors) together withthe Company's management team (namely, Nicholas James, Sue Murphy, William Astorand me). Shareholders are reminded that a meeting of shareholders has been convened bythe Court for 9.30am on 24th March 2006 and an Extraordinary General Meeting ofthe Company has been convened for 9.45am on 24th March 2006, both to take placeat the Waldorf Hotel, Aldwych, London when the proposals will be considered byshareholders. The Company has also announced that it has received an approach from HITEntertainment Limited as a potential offeror and has made information on theCompany available to HIT. There can be no certainty whether or not a competingoffer for the Company will be forthcoming. Waheed Alli, Chairman 14th March 2006 Chorion PLC Results for the year ended 31st December 2005 Chief Executive's Review Overview of 2005 I am very pleased that 2005 proved to be another excellent year for the Companywith pre-tax profits, excluding exceptional costs, 45% higher than 2004 at £5.9million. Adjusted profits before tax, excluding amortisation of intangibleassets and exceptional items, increased 41% to £7.4 million (2004: £5.2million). Our Literary Estates and Television and Film businesses continue to deliver goodsteady growth producing a combined 7% increase in gross profit to £8.1 million.The Company produced eight new Agatha Christie TV films in the year, six ofwhich were delivered in 2005, and two of which were delivered in the firstquarter of 2006. Four of these films have now been shown by ITV and were thehighest rating programmes during their slot on each evening. Our Literary Estates business continued its solid performance and ended the yearwith the successful regional launch of the Poirot DVD collection Partwork. Chorion's children's business had an exceptionally strong year showing a 76%increase in revenue and 84% increase in gross profit to £9.4 million. Keyachievements included the acquisition of Silver Lining Productions and thelicensing and merchandising rights that came with that acquisition, the virtualdoubling of our Noddy business in Europe and the very positive response we havehad from television companies and licensees, in particular in the United States,for Mr Men. Television and Film We set two key objectives in 2005: 1. To increase, above four, the number of television films commissioned in2005 We were very pleased to receive the order for eight Agatha Christie TV films in2005 and were able to secure compelling casts including Timothy Dalton and GretaScacchi. Due to the order not being confirmed until March 2005, only six ofthese were delivered in 2005, with the remaining two being delivered in Q1 of2006. Four of the new Christie films had their first screening in January andFebruary 2006, where the ratings ranged from 33% to 37% audience share, beingconsistently the top rated programmes in their time slots. The Christie TV films are successfully licensed to a large number ofbroadcasters worldwide. Sales to France and Germany had, however, provedelusive. Late in the year, the Poirot TV series was finally licensed tobroadcasters in both France and Germany, thus introducing these films for thefirst time to a TV audience in countries that are already strong consumers ofAgatha Christie books. 2. To develop new television films outside the Poirot and Marple franchise for2006/07 During the year we have put into development three new potential TVfranchises, Maigret (Georges Simenon's detective), Gervase Fen (Edmund Crispin'sdetective) and Edmond Campion (Margery Allingham's detective). This involvesthe commissioning of scripts, including a script by the award-winning writer A LKennedy, and discussions with key talent. Whilst the particular requirements ofindividual broadcasters change from year to year, including both the balance ofreality and drama programmes and the balance between period and modernprogrammes, we now have a good opportunity to have one of these three franchisescommissioned during 2006. We have strong interest from the United States for a new take on thedetective Philip Marlowe. Discussions are progressing and we hope to be able toannounce a pilot for a new series during 2006. Other TV and Film News It has been an active year for the licensing of foreign language versions ofAgatha Christie TV films. A total of five titles have been licensed forJapanese language production and, in France, the feature film 'By The PrickingOf My Thumbs' was a highlight of the French film calendar. Additionally,licenses were granted for feature films in France based on four of the Simenonnovels and the long running French Maigret TV series was commissioned foranother season. Literary Estates We set two key objectives in 2005: 1. To acquire more literary estates with growth potential The acquisition of the Raymond Chandler Estate was completed in February.During the remainder of the year we identified a number of further estates topurchase. However, we intend to take our time in acquiring them whilst wedevelop our wider business plan as outlined in the update section below. 2. To establish an in-house partwork resource to launch or develop aminimum of one new partwork each year We established our Partwork department, led by a partwork specialist, andsuccessfully launched a Poirot DVD partwork in Scotland in September 2005. Thispartwork was subsequently launched in the rest of the UK in January 2006 and iscurrently performing ahead of our expectations. Other Literary Estates News Our Agatha Christie business continued to perform well in 2005. Highlightsincluded the return to the West End stage of a Christie play, And Then ThereWere None, for which a US national tour option has now been taken up, a deal tomake Christie available in hard back through retail in the United States for thefirst time for many years and the international release of the first of a newrange of CD-Rom games based on Christie novels. The highlight of the year in our Georges Simenon business was the launch of thefirst Simenon partwork in France featuring the detective Maigret. This DVDpartwork did so well that we plan to relaunch it again in 2006. On a general note, 2005 saw the continuing trend of backlist titles beingincreasingly less well stocked in bookshops. In contrast, the percentage ofbooks sold by mail order and the Internet has increased, and backlist titles arean increasing percentage of such sales. This gradual decline in retail sales ofbacklist titles does point to both the need and the opportunity to exploitpublishing rights through all available channels in the future, not just tradechannels, especially for any newly acquired estates. In response to these developments in publishing, and given the very high loyaltyfactors surrounding our brands, the company must focus on building a more indepth understanding of consumer buying behaviours, whether this is throughtraditional retail channels or via the internet. By focusing on delivering theneeds of end users we are looking to develop more effective partnerships withlicensees and other specialist distribution channels with the sole objective ofimproving margins and exploiting the fan base for our brands more efficiently. With the above in mind, we recruited Jane Turner, a 20 year direct marketingveteran, to join us as Managing Director of Literary Estates in November with aview to developing an integrated retail and digital distribution strategy forChorion across all of its Literary and Children's brands. Our Children's Business We set 5 key objectives in 2005. 1. To secure co-production partners for the new Mr Men television seriesand to put the series into physical production for 2006/07 launch Our focus this year was to ensure that the new television series for Mr Menwould have co-production support from both a US broadcaster and at least onebroadcaster in Europe. Initial responses were enthusiastic. However, as theyear progressed, it became clear that the changes in the children'sentertainment landscape, particularly in the USA, would require a revisedapproach for Mr Men. As a result we have fine-tuned the creative development of our new Mr Mentelevision series and focused it on the particular requirements of one of theleading children's channels in the USA. I hope to be able announce shortly thatthis channel has agreed to be the US co-producer of the new Mr Men series. Our fine-tuning exercise also involved revisiting the formats for the newseries, taking into account the three distinct content formats for new seriesthat have emerged. It is now our intention to include in the new Mr Mentelevision series both short form and television episodic length programmes inthe initial phase. We now expect to launch the series in Q4 2007 or Q1 2008. We did not fully achieve our objective in 2005, but we now have a betterunderstanding of the way the children's market is changing and have adapted ourplans accordingly. A new television series requires significant investment, andit is vital that we get this right. 2. To raise the global retail value of Noddy from £45 million to £65million Noddy had a very strong year in 2005 and we comfortably exceeded our globalretail value target with over £80 million of sales at retail. Growth in theyear primarily came from Europe, with the UK, France and Portugal being thestrongest performers. For the first time ever, Noddy revenues in Franceexceeded those in the UK, which is a significant indicator of the brand'sgrowing international appeal. 3. To successfully launch Noddy in the United States Make Way for Noddy launched on PBS Plus in July 2005. This was followed by afurther launch on the new cable channel PBS Sprout in September 2005. Noddy iscurrently broadcast on both PBS Plus and PBS Sprout. Noddy has been performing very strongly on PBS Sprout and now features fourtimes per day between 7.00am and 8.00pm. Currently PBS Sprout is in some 20% ofUS households and has ambitious plans to expand. Noddy is a major success forthe channel, and thus will expand its audience as the channel expands. PBS Plus is a menu style service and the PBS affiliate stations all over theUnited States can choose what programmes to take from PBS Plus and include intheir individual schedules. The number of stations taking Noddy grew to 63% inOctober, including stations in eight of the top ten television markets. Sincethen however, there has been a decline to 44% in stations taking Noddy by theend of February 2006. We have launched a renewed campaign to further buildNoddy on PBS Plus, however, we have not yet reached the level of broadcast onPBS stations to attract major licensees. This will result in Noddy revenuesgrowing more slowly in the United States in 2006 and 2007 than had originallybeen projected. 4. To put a new Children's TV series into production for 2006/7 launch During the year we entered into an agreement with Marathon, a leading Frenchanimation studio, to develop a new Famous Five television series. This is thefirst time that Famous Five has been produced in an animated version. We have aco-production commitment from Marathon and a broadcaster in France and stronginterest from other European broadcasters who will buy the programmes once theyare completed. The new Famous Five TV series, made up of 26 half hour programmeswill commence production in April 2006. 5. To identify additional children's properties for launch in 2007/8 The acquisition of Silver Lining Productions during the year has added a numberof very interesting properties to our existing stable of children's brands. Olivia was identified as a property for launch during the course of the year andwe commenced development on a DVD special featuring Olivia in December. Weexpect the DVD special to be the pre-cursor to a television series. We havestrong interest in the United States, the UK and France, and we anticipate beingable to announce co-producers for Olivia shortly. In 2006 we plan to carry out initial development on Gaspard and Lisa, onprogramming relating to the Eric Carle properties and on a property from theBlyton stable. We will review this initial development with broadcasters during2006 and will make a final decision on the 2007 and 2008 production slate by theend of 2006. Other Children's News During 2006 we delivered a Noddy DVD special entitled 'Noddy and the IslandAdventure', delivered 100 two minute short programmes introducing children toother languages, titled Say It With Noddy, and launched a brand new Englishlanguage Noddy website that is linked to other language versions aimed at thekey territories where Noddy has a large audience. The website won the 'BestWebsite' award at the British Interactive Media Awards. All of these newprogramming initiatives have been very well received by our licensees around theworld and will continue to keep Noddy on television. During the year we concluded a sale of Say It With Noddy to five (Channel Five),the UK broadcaster of Noddy. As a condition of this sale five has guaranteedthat Noddy will be broadcast for a minimum of 30 weeks a year until 2012, thusproviding a significant broadcast platform in the UK for Noddy for many years tocome. Say It With Noddy launched in January 2006 on five and has been asignificant success, leading five to double the broadcasting plans for thisseries of programmes during the first half of 2006. France 5 is having a similarsuccess with Say It With Noddy in France, where the focus is on teachingEnglish. Elsewhere in Europe, Noddy continues to grow with significant success inPortugal and there have been very promising developments in Scandinavia and theBenelux countries, where Noddy was launched in 2005. Make Way For Noddy has nowbeen sold to Germany, the third largest European pre-school market, andcommenced broadcast there in February 2006. In the rest of the world, Noddy launched on television in Japan in March 2005and in China in August 2005. Whilst the launch in Japan was an initial success,the licensing element has not developed. As a result, our master licensing agentin Japan has recently reduced its revenue expectations for 2006 and 2007. Weintend to focus our efforts in 2006 on re-invigorating Noddy in this importantmarket. Following the successful termination of the worldwide master licensing agencyagreement in mid 2005, we have been directly managing the Mr Men brand. Inaddition to strengthening the traditional licensing programme in the UK andFrance, we have also been promoting the brand in other territories including theUSA. As a result of our activities, we expect to be able to increase revenuefor Mr Men before the effect of the new TV series is felt. We have been very pleased with the strength of the licensing programme forGaspard & Lisa and Olivia in Japan, two brands that were acquired as part of theSilver Lining Productions acquisition. We expect both of these brands toperform well in 2006. The second half saw the launch of a licensing rangefeaturing the works of Eric Carle. This has been well received with a number oflicenses being signed in the USA. Overseas Offices As a result of the Company's continuing expansion, accelerated this year by theacquisition of Silver Lining Productions, the long term growth of the Company isdependent on success in the USA and Japan, as well as in Europe. Silver LiningProductions is based in New York. We intend to consolidate and further build theSilver Lining company in order to directly manage our US operations from thatterritory, utilising the key personnel we have inherited with the acquisition.In Japan, where we now have three brands for children that are operating at aconsumer level, Noddy, Gaspard & Lisa and Olivia, we have recruited a Japanesenational to open a Representative Office for us in Tokyo to allow us to moredirectly coordinate our opportunities there. The Year Ahead We have set the following key objectives for 2006: Television and Film 1. To increase, above four, the number of Agatha Christie television films commissioned in 2006 2. To agree a new Agatha Christie television output deal for 2007 onwards. 3. To obtain interest from a broadcaster in one new TV franchise for pilot production in 2007. Literary Estates 1. To test in 2006 a partwork for launch in Q1 2007. 2. To build an in-house consumer insight and digital distribution capacity. Children's 1. To continue to build Noddy's presence in the USA and Japan. 2. To establish Noddy in Germany. 3. To secure a co-production partner for the new Mr Men television series and to put it into production in 2006. 4. To secure a co-production partner for the new Olivia DVD Special and put it into production in 2006. Conclusion 2005 was an excellent year across the company as a whole. Our brands alreadyestablished in the market are performing well and we have identified the brandsthat we will invest in to further build our future. I remain confident about thecompany's ability to continue to grow its brands. Nicholas James 14th March 2006 FINANCE DIRECTOR'S REVIEW Overview The 2005 financial results show good growth in both revenue and profits. • Turnover increased 37% • Gross profit up 38% • Operating profits, before exceptional items 51% higher • Profits before tax and exceptional items up 45% • Adjusted profits before tax and exceptional items up 41% to £7.4m • Profit before tax up 8% Presentation of financial results The financial results for 2005 include a few presentational changes. Firstly, the adoption of the presentation requirements of UK accounting standardFRS 25 has changed the presentation of the preference shares from equity to debtdue after more than one year. Additionally, the dividend payable on thepreference shares is now shown as interest. Development costs for film/TV assets have previously been included withindebtors (and therefore within current assets), up to the point that they arecompleted, when they are then capitalised. Assets which are in the course ofproduction, (defined as commencement of principal photography or the signing ofa production agreement) are now included as assets under construction withinFilm / TV assets. Finally, stock appears on our balance sheet for the first time. This is as aresult of the partworks and other direct to the consumer projects, which we arenow managing directly. At the year-end, this stock amounted to £0.6 million andrelated principally to the stock for the Poirot DVD Partwork which was launchedin the UK at the end of December 2005. Results Turnover on existing operations before acquisitions increased 33% to £31.8million, while total turnover increased 37% to £32.6 million compared with 2004.Revenue in the children's business increased 76% with the crime business growingnearly 20%. Television / Video / Film turnover increased by £5m (35%) over 2004and merchandising revenues increased £2.8m (85%). Publishing revenues were levelwith the previous year, but partworks projects resulted in a 5% increase in ourPublishing/Audio/Magazines/Partwork revenue segment. Other revenue includesplays, multimedia and music income and doubled year on year to £1.1m. Gross profits increased 38% to £17.5 million. Our children's business generated£9.4 million gross profit, 84% higher than the previous year, while grossprofits from the crime business were 7% higher at £8.1 million. As a result, before exceptional costs, operating profits increased to £7.2million from £4.8 million and profits before tax increased to £5.9 million from£4.1 million, an increase of 44%. Administrative expenses, excluding amortisation of intangible assets andexceptional items, increased from £6.7 million to £8.8 million. Around half ofthis increase was accounted for by staff costs, which increased 28% year onyear; average staff numbers increased 25% from 52 in 2004 to 65 during 2005. Theremaining increase in administration costs was due to higher sales and marketingcosts, increased office running costs and higher development project costscharged to the profit and loss account. Exceptional costs of £1.5 million were incurred during the year for the earlytermination of the master licensing agency agreement with Copyright PromotionsGroup for the Mr Men/Little Miss properties. These properties are now beingdirectly managed by Chorion. After exceptional costs, Profits after Tax were£2.9 million, compared with £2.5 million in 2004. Acquisitions and Investments In February, Chorion acquired the Raymond Chandler estate, and in July, SilverLining Productions Limited. The vendors of Raymond Chandler retain a 25%minority shareholding in the new company. During 2005, a further investment of £21.9 million was made in Film, TV andrelated assets. Six new Agatha Christie films were produced and delivered to ITVand a further two films were in progress at the year-end and have since beendelivered. Work has also started on the development of the 2006 Poirot andMarple films. In addition to the Agatha Christie films, investment was made inChildren's TV assets - 100 two-minute short programmes titled "Say It With Noddy" and a Noddy Special "Noddy and the Island Adventure" were completed.Development expenditure continues on the new Mr Men animation. Cash Flow The net cash inflow from operating activities was £17.4 million compared with£13.3million in 2004. Other cash flow differences between the two years are:- • Interest payments were £1 million higher • Taxation was lower by £1.5 million • Capital expenditure and investment increased by £10.6 million • Acquisitions were £0.7 million compared to £24 million in 2004. • In 2004 £15.7 million was raised from a share placing Funding At the year-end, bank borrowings were £30.1million, an increase over December2004 of £8.8 million. Year-end loans consisted of £20.7 million of term loan andrevolving credit facilities and £9.4 million of short-term Agatha Christie filmfinancing loans. The total bank facilities available at the year-end, excludingthe Agatha Christie film financing loans, were £28.2 million. Ends Enquiries: Tim Allan 020 7404 5344 Portland CHORION PLC Consolidated Profit and Loss Accountfor the year ended 31 December 2005 2005 2004 Excluding Exceptional Total Total exceptional item item Notes £'000 £'000 £'000 £'000 as restated (note3) (note 1) Turnover: Existing operations 31,829 - 31,829 23,862 Acquisitions 753 - 753 -Total turnover 2 32,582 - 32,582 23,862 Cost of sales (15,112) - (15,112) (11,205) Gross profit 17,470 - 17,470 12,657 Administrative expenses before amortisation of intangible assets (8,760) (1,506) (10,266) (6,708) Amortisation of intangible assets 6 (1,479) - (1,479) (1,156)Administrative expenses (10,239) (1,506) (11,745) (7,864)Group operating profit Existing operations 7,086 (1,506) 5,580 4,793 Acquisitions 145 - 145 - Group operating profit 7,231 (1,506) 5,725 4,793Income from other fixed asset investments - - - 131Interest receivable and similar income 68 - 68 72Interest payable and similar charges (1,392) - (1,392) (911)Profit on ordinary activities before taxation 3 5,907 (1,506) 4,401 4,085Tax charge on profit on ordinary activities 4 (2,003) 452 (1,551) (1,548)Profit on ordinary activities after taxation 3,904 (1,054) 2,850 2,537Equity minority interests (1,375) - (1,375) (992)Retained profit for the financial year 2,529 (1,054) 1,475 1,545 Earnings per share - (Note 5) Basic 5.9 p 7.1p Diluted 5.9 p 7.1p There are no differences between the results shown in the consolidated profit and loss account and those on an historical cost basis. All activities of the Group are continuing. CHORION PLC Consolidated Balance Sheetat 31 December 2005 2005 2004 Notes £'000 £'000 as restated (note 1) Fixed assetsIntangible fixed assets 6 59,191 58,914Tangible fixed assets 1,795 1,219Film & TV related investments 8 28,813 19,730 89,799 79,863 Current assetsDebtors due within one year 23,836 17,397Stock and work in progress 624 -Cash at bank and in hand 3,640 2,367 28,100 19,764Creditors: amounts falling due within one year (22,978) (13,766)Net current assets 5,122 5,998Total assets less current liabilities 94,921 85,861Creditors: amounts falling due after morethan one year (23,378) (18,086)Provisions for liabilities and charges (2,560) (1,312)Total net assets 68,983 66,463 Capital and reserves:Called up ordinary share capital 7,646 7,622Share premium account 13,399 13,269Merger reserve 31,795 31,795Profit and loss account 6,452 5,310Equity shareholders' funds 59,292 57,996Equity minority interests 9,691 8,467 68,983 66,463 The accounts were approved by the Board of Directors on 14 March 2006 and were signed on its behalf by: Waheed AlliChairman Sue MurphyFinance Director CHORION PLC Statement of total recognised gains and lossesfor the year ended 31 December 2005 2005 2004Group £'000 £'000Profit for the financial year 1,475 1,545Currency translation differences on foreign currency net - (35)investmentsTotal recognised gains 1,475 1,510 Reconciliation of movements in shareholders' fundsfor the year ended 31 December 2005 2005 2004Group £'000 £'000 as restated (note 1)Retained profit for the financial year 1,475 1,545Issue of shares 25 2,447Share premium arising on issue of shares 129 13,269Charge in relation to share awards 481 420Shares acquired by ESOP trust (814) (708)Exchange differences - (35) Net addition to shareholders' funds 1,296 16,938At 1 January 57,996 41,058At 31 December 59,292 57,996 CHORION PLC Consolidated Cash Flow Statementfor the year ended 31 December 2005 2005 2004 Notes £'000 £'000 Net cash inflow from operating activities 9 17,375 13,301 Returns on investments and servicing of finance Dividends paid to minority shareholders (664) (656) Bank charges and interest paid (1,598) (575) Finance lease interest paid (6) (5) Income from other fixed asset investments - 131 Interest received 66 73 (2,202) (1,032) Taxation 167 (1,290) Capital expenditure and financial investment Purchase of tangible fixed assets (1,077) (335) Purchase of intangible assets (665) (95) Investment in Films & TV (15,692) (10,317) Investment in assets under construction (4,097) - Other Investments 69 (120) (21,462) (10,867) Acquisitions and disposals Acquisition of subsidiary undertakings 7 (739) (24,004) (739) (24,004) Net cash outflow before financing (6,861) (23,892) Financing New bank loans 17,083 34,914 Bank loans repaid (8,289) (26,037) Issue of ordinary shares (net of costs) 154 15,716 Purchase of shares by ESOP trust (814) (708) 8,134 23,885 Increase/(decrease) in cash in the period 10 1,273 (7) CHORION PLC Notes to the financial statements for the year ended 31 December 2005 1 Principal Accounting Policies Basis of preparation These financial statements have been prepared under the historical cost convention and in accordance with the Companies Act 1985 and applicable United Kingdom accounting standards. The accounting policies adopted by Chorion PLC are consistent with those disclosed in the Report and Accounts of Chorion PLC for the year ended 31 December 2004, except as noted below. Changes in accounting policies (a) Presentation of preference shares Chorion PLC adopted the presentation provisions of FRS 25 "Financial instruments: Disclosure and presentation" during the year, in accordance with which the 6% cumulative redeemable non-convertible preference shares have been presented wholly as debt due after more than one year. Prior to this they were included in equity. The impact of recognising the preference shares as debt on both the group and company balance sheet is to increase creditors falling due after more than one year by £4,500,000; (31 December 2004: £4,500,000) and to reduce non-equity share capital by the same amount for each period. The impact on the group and company profit and loss account for the year ended 31 December 2005 is to increase the interest charge by £270,000 (year ended 31 December 2004: £161,000), and to decrease the dividends paid to non-equity shareholders by the same amount for each year. The change in presentation has had no impact on retained profit for the years ended 31 December 2005 or 31 December 2004. Following a review of accounting policies, the directors have concluded that it is more appropriate to (a) present certain items previously capitalised as tangible fixed assets as other investments related to Film & TV; (b) capitalise certain development costs by transferring the costs from current assets to assets under construction at the earlier of commencement of principal photography or the date of a fully executed production agreement and (c) transfer assets under construction to Film & TV investments on the delivery of the master negative. The effect of the above changes in presentation on the group balance sheet has been (a) to increase the net book value of other investments related to Film & TV investments by £458,000 at 31 December 2005 (31 December 2004: £536,000) and decrease the net book value of tangible fixed assets by the same amount for each period end. The effect on the profit and loss account has been to increase the amortisation of other investments related to Film & TV by £79,000 for the year ended 31 December 2005 (year ended 31 December 2004: £47,000 ) and decrease the depreciation of tangible fixed assets by the same amount for each period, (b) to increase assets under construction by £646,000 at 31 December 2005 (31 December 2004: £266,000); to increase current assets by £668,000 at 31 December 2005 (31 December 2004: £1,180,000) and to decrease Film & TV assets by £1,314,000 at 31 December 2005 (31 December 2004: £1,446,000). The changes did not have any impact on either the group or company operating profit, retained profit or net assets for the years ended 31 December 2005 or 31 December 2004. The group adopted FRS 21 "Events after the balance sheet date" and FRS 22 "Earnings Per Share" during the year. These did not have any impact on the profit and loss account or balance sheet in either the group or the company balance sheet. 2 Segmental information (a) Turnover, profit before taxation and net assets by class of business The Group only has one class of business, which is the exploitation of intellectual property rights. The Group's turnover has been analysed by revenue stream as follows: 2005 2004 £'000 £'000 Publishing / Audio / Magazines / Partworks 6,015 5,721 Television / Video / Films 19,281 14,253 Merchandising 6,185 3,339 Other 1,101 549 32,582 23,862 (b) Turnover by geographical segment The Group's operations are based in the United Kingdom but royalty income is derived from worldwide sales. Turnover by destination is analysed as follows: 2005 2004 £'000 £'000 United Kingdom 19,064 14,757 Other European Community 8,206 5,877 Americas 3,693 2,095 Asia and Australia 1,493 1,064 Other 126 69 32,582 23,862 3 Profit on ordinary activities before taxation Profit on ordinary activities before taxation includes an exceptional operating cost of £1,506,000, being a one-off payment in full and final settlement of all commissions due to Copyright Promotions Licensing Group Limited for the early termination of its management contract as licensing agent for the Mister Men properties. £1,504,000 was paid as at 30 June 2005 and a further £2,000 thereafter. The tax effect of this exceptional item has been to decrease the tax charge by £452,000. 2005 2004 £'000 £'000 Profit on ordinary activities before taxation is stated after charging: Directors' remuneration 744 673 KPMG Audit Plc remuneration for audit work 100 80 - Group KPMG Audit Plc remuneration for audit work 8 8 - Company Other fees paid to KPMG Audit plc and their 22 64 associates Operating lease rentals - 205 276 property Depreciation 351 320 Amortisation - Film & TV related 12,660 10,223 investments Amortisation - Intangible 1,479 1,156 assets Exchange (gains) / losses (18) 44 The auditors' fees for other services shown primarily consist of fees for tax advisory services 4 Tax on profit on ordinary activities 2005 2004 £'000 £'000 Analysis of charge in year UK corporation tax Current tax on income for the year 870 711 Adjustment in respect of prior years 13 (313) 883 398 Double taxation relief (174) (198) Foreign tax 187 198 Total current tax 896 398 Deferred tax Origination of timing 719 differences 1,005 Adjustment in respect of previous years (350) 431 Total deferred tax 655 1,150 Tax on profit on ordinary activities 1,551 1,548 The Group's effective tax rate in 2005 was 35% (2004: 38%). The effective rate for 2005 was greater than the standard corporate rate due primarily to expenses not allowable for tax purposes and tax losses not utilised. 5 Earnings per share 2005 2004 £'000 £'000 Earnings Basic and diluted earnings 1,475 1,545 Add amortisation of 1,479 1,156 intangible assets Add exceptional item 1,506 - Less tax effect of (452) - exceptional item Adjusted earnings before amortisation of intangible assets and 4,008 2,701 exceptional item Earnings per share Basic 5.9 p 7.1 p Diluted 5.9 p 7.1 p Adjusted (before amortisation of intangible assets and 16.0 p 12.4 p exceptional item) The calculation of basic earnings per share is based on profit after tax and minority interests. The calculation of adjusted earnings uses the basic earnings before amortisation of intangible assets and is presented to show more clearly the underlying performance of the group. The weighted average number of ordinary shares used in the calculation of the basic, diluted and adjusted earnings per share is as follows: 2005 2004 £'000 £'000 Weighted average number of shares in issue during the year used in the 24,948,368 21,845,545 calculation of basic and adjusted earnings per share Dilutive effect of options treated as excercisable at the 184,580 45,668 period end 25,132,948 21,891,213 6 Intangible fixed assets Goodwill Copyrights Trademarks Total £'000 £'000 £'000 £'000 Group Cost: At 1 January 2005 713 61,506 1,094 63,313 Additions 950 703 103 1,756 At 31 December 2005 1,663 62,209 1,197 65,069 Amortisation: At 1 January 2005 336 3,655 408 4,399 Charged in period 108 1,256 115 1,479 At 31 December 2005 444 4,911 523 5,878 Net book value: At 31 December 2005 1,219 57,298 674 59,191 At 31 December 2004 377 57,851 686 58,914 The copyrights principally relate to Agatha Christie Ltd, Georges Simenon Ltd and Mister Men Ltd. These estates are being written off in equal instalments over the remaining copyright period, which is due to expire in 2046, 2059 and 2058 for Agatha Christie, Georges Simenon and Mister Men respectively. On 10 February 2005, the group acquired all the rights to the fictional works of Raymond Chandler. The group established a new entity Raymond Chandler Limited, of which the Group owns 75% and the vendor, Raymond Chandler Estate, retains the remaining equity stake. The Group paid a total consideration of £703,000 which was capitalised as copyright and will be written off over 25 years, the remaining period of the copyright. The addition to goodwill arose due to the acquisition of Silver Lining Productions Ltd (note 7). 7 Acquisitions On 22 July 2005, the company acquired the entire share capital of Silver Lining Productions Limited for a total consideration of £514,000. Goodwill arising on consolidation will be written off over 20 years. Total Book Fair value Total Value of adjustments- Fair Net Assets revaluation value £'000 £'000 £'000 Net liabilities acquired Debtors 34 70 104 Cash in bank 60 - 60 Creditors (388) (212) (600) Net liabilities (294) (142) (436) Goodwill arising on 950 consolidation Purchase consideration and costs of 514 acquisition The purchase consideration of Silver Lining Productions Limited was satisfied by £343,000 in cash. The total costs of acquisition were £171,000. The net cash outflow in relation to the acquisitions of subsidiary undertakings comprised: £'000 Consideration paid in year, including expenses, for Silver Lining 514 Productions Limited Cash acquired (60) Consideration paid in year - Mister Men 285 Limited 739 8 Film & TV related investments Film & TV Assets under Other Total construction £'000 £'000 £'000 £'000 as restated as restated as restated as restated (note 1) (note 1) (note 1) (note 1) Group Cost: At 1 January 2005 (as restated -note 1) 40,103 266 2,119 42,488 Additions 82 21,730 61 21,873 Transfers 17,493 (17,493) - - Disposal - - (130) (130) At 31 December 2005 57,678 4,503 2,050 64,231 Amortisation: At 1 January 2005 (as restated -note 1) 22,364 - 394 22,758 Charged in period 12,489 - 171 12,660 At 31 December 2005 34,853 - 565 35,418 Net book value: At 31 December 2005 22,825 4,503 1,485 28,813 At 31 December 2004 (as restated-note 1) 17,739 266 1,725 19,730 9 Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 £'000 £'000 Group operating profit 5,725 4,793 Amortisation of intangible 1,479 1,156 assets Amortisation of Film & TV related 12,660 10,223 investments Depreciation 350 320 Charge in relation to share awards under the Long Term 481 420 Incentive Plan Increase in debtors (6,419) (3,554) Increase in stock and work in progress (479) - Increase / (decrease) in 3,578 (22) creditors Currency translation differences on net currency investments - (35) Net cash inflow from operating activities 17,375 13,301 10 Reconciliation of net cash flow to movement in net debt 2005 2004 £'000 £'000 as restated (note 1) Increase / (Decrease) in cash in period 1,273 (7) New bank loans (17,083) (34,914) Bank loans repaid 8,289 26,037 Repaid / (New) finance 65 (31) leases Movement in net debt from (7,456) (8,915) cash flow Net debt at start of period (19,080) (10,165) Net debt at end of period (26,536) (19,080) 11 Analysis of changes in net debt during the year As at Cash As at 1 January Flow 31 December £'000 £'000 £'000 Cash at bank and in hand 2,367 1,273 3,640 Bank loans (21,277) (8,794) (30,071) Finance leases < 1 year (72) 9 (63) Finance leases > 1 year (98) 56 (42) (19,080) (7,456) (26,536) 12 Post balance sheet events Offer for the Company Shareholders have received details of the recommended proposals for the acquisition of the Company to be effected by means of a scheme of arrangement at a price of 425p per share. These proposals have been put forward by Planet Acquisitions Limited, a new company formed for the purpose of implementing the proposals and indirectly owned by 3i Group plc (and its investors) together with the Company's management team (namely, William Astor, Nicholas James, Sue Murphy and Waheed Alli). A meeting of shareholders has been convened by the Court for 9.30am on 24 March 2006 and an Extraordinary General Meeting of the Company has been convened for 9.45am on 24 March 2006, both to take place at the Waldorf Hotel, Aldwych, London when the proposals will be considered by shareholders. The Company has also announced that it has received an approach from HIT Entertainment Limited as a potential offeror and has made information on the Company available to HIT. There can be no certainty whether or not a competing offer for the Company will be forthcoming. 13 Statutory Accounts The financial information contained in this announcement does not constitute the company's statutory accounts for the years ended 31 December 2005 and 2004 but has been derived from them. Statutory accounts for 2005 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on those accounts; their report was unqualified and did not contain statements under s237(2) or (3) of the companies Act 1985. Statutory accounts for the year ended 31 December 2004, containing an unqualified auditor's report, have been filed with the Registrar of companies. Copies of the 2005 Annual Report and Accounts will be available from the company's registered office at Aldwych House, 81 Aldwych, London, WC2B 4HN This information is provided by RNS The company news service from the London Stock Exchange