CTEA.L Regulatory News (CTEA)

13 Feb 2007 07:01

Milestone Group PLC13 February 2007 MILESTONE GROUP PLC RESULTS FOR THE 12 MONTHS ENDED 30TH SEPTEMBER 2006 AIM listed Milestone Group PLC ("Milestone" or "the Group"), announces resultsfor the year ended 30th September 2006. Highlights •Group operating loss of £2.8 million (£2.1 million after excluding goodwill amortisation and impairment) •Disposal of assets in traditional publishing and analogue radio sectors for aggregate consideration of £3.5 million •Improvement in performance of continuing television division £€1.1 million of cash reserves at 30 September 2006 •Review of strategy entering final stages with Group exploring new digital media opportunities Andy Craig, Chief Executive, said: "The Board is advanced in exploring potential opportunities to position itselfas a dedicated digital media group, in line with its decision to move away fromits exposure to traditional media platforms." For further information: MilestoneAndy Craig, Chief Executive Tel: 07785 274 490Brian Chester, Finance Director Tel: 07776 302 274 Registered office 270 Woodstock Road, Oxford OX2 7NW Arden Partners Tel: 020 7398 1632Richard Day Attached: Chairman's statementChief Executive's reviewConsolidated profit and loss accountConsolidated balance sheetCompany balance sheetConsolidated cash flow statementNotes forming part of the financial statements Results for the year ended 30 September 2006 The financial information set out below does not constitute the company'sstatutory accounts for the years ended 30 September 2006 or 2005, but is derivedfrom those accounts. Statutory accounts for 2005 have been delivered to theRegistrar of Companies and those for 2006 will be delivered following thecompany's annual general meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain statements under s. 237(2) or(3) Companies Act 1985. Chairman's statement Following the successful disposal this year of the Group's assets in thetraditional print and radio sectors, Milestone is now a "clean" holding companywith the following assets: • Positive cash reserves standing at £1.1 million at 31 September 2006 (2005: net debt of £0.4 million) • A wholly owned television division • Tax losses which, dependent upon the outcome of the Board's strategic review, may be utilisable in the future by relevant broadcasting businesses As the Group announced on 11 September 2006, it is minded to seek to identifyrelevant new businesses to acquire and develop or, alternatively, to scale downoperations and return cash to shareholders. A range of options exist and arebeing carefully examined with the assistance of the Group's nominated adviserand broker, Arden Partners PLC. I believe the Board has worked well together during the year to identify thestructural changes that are now impacting on many of the traditional localadvertising outlets and to take decisive action to restructure the Group'sbusiness. As the Group's non executive Chairman and independent director, realising fullvalue for shareholders has to always be paramount in my mind. At present, around80 per cent of the Company's shares are privately controlled which reflects, inpart, the strong support that exists for the Group's management from privateshareholders. In preliminary discussions, it has become clear that someshareholders are expecting to be asked to provide additional finance to theGroup to allow the management team to exploit new opportunities. There is no doubt that an opportunity exists for Milestone to position itself tobenefit from the long term growth in digital media, using its current assets andexpertise to exploit the demand for quality niche content and new platforms. TheBoard is currently evaluating a number of potential investment opportunitiesprimarily, but not wholly, in the field of digital media content and delivery. The Board recognises that digital media can be a high risk sector, and it willonly lend its support to any new business plan which it believes offers theserious prospect of substantial growth in value for current shareholders. I look forward to talking further to shareholders over the coming weeks andencourage all shareholders to contribute to our discussions at this importanttime for the Group. John SandersonChairman Chief Executive's review Overview The consolidated result for the year was impacted by the stated strategy ofasset disposals. Group turnover on operating activities was £3.0 million (2005:£4.5 million) which produced a gross profit of £0.5 million (2005: £1.5million). The operating loss (excluding goodwill amortisation and impairment)was £2.1 million (2005: £2.6 million). The loss for the year including goodwillamortisation and impairment was £4.0 million (2005: £6.5 million), resulting ina basic and diluted loss per share from continuing activities of 4.4p (2005:7.3p). Strategic Review Following its major review of strategy, the Group was largely focused during theyear on rationalising its traditional media assets. As a consequence, the Boardis pleased to have been able to successfully protect the interests ofshareholders by disposing of loss making businesses and establishing a "clean"holding company capable of being exploited to develop new businessopportunities. In my 30 years in broadcasting, I have never witnessed as much businesspotential as I do now in the embryonic stages of internet protocol television(IPTV). IPTV is an area which will further disrupt traditional media andrevolutionise the way the consumer can access audio visual content on a range ofdevices, with niche advertising providing the level of accountability thatinternet based platforms offer. The Board is advanced in exploring potential opportunities to position itself asa dedicated digital media group, in line with its decision to move away from itsexposure to traditional media platforms. No final decisions have been taken, and at the present time, the Board continuesto explore a wide range of options for the future of the business acrossdifferent sectors, under the direction of the Group's Chairman and independentdirector, John Sanderson. Publishing division Despite the difficult trading environment for traditional local newspapers, thedivision managed to successfully reduce its losses from operating activities inthe period prior to disposal, as set out below: Company Turnover for period Operating loss for period to date of disposal to date of disposal 15 September 2006 15 September 2006Courier Newspapers (Oxford)Limited (unaudited managementaccounts)* £1,896,000 (£470,000)* (2005: £2,332,000) (2005: loss of £762,000)Basingstoke Observer Limited(unaudited management accounts) £413,000 (£84,000) (2005: £600,000) (2005: loss of £152,000) \* These figures exclude the exceptional income gained as a result of the disposalof the Property Weekly titles, as set out below. Overall, Property Weeklyadvertising sales contributed approximately £1.0 million to the reportedturnover of Courier Newspapers and a further exceptional net gain of £1.2million upon its disposal. I believe it was a real achievement for the Group to achieve an aggregateconsideration of £1.45 million for its publishing assets. •Property Weekly Business - titles sold for £1.4 million on 11 September 2006. Minimal warranties given as assets transferred rather than shares sold. Proceeds part used to reduce net liabilities of publishing division to zero and repay inter-company debt. •Tri Media Publishing Limited - sale of Group's wholly owned publishing holding company (inclusive of its subsidiaries) for nominal consideration of £50,000 on 15 September 2006. Minimal warranties were given as the company was sold to existing divisional management. The total consideration achieved for the sale of the publishing operationsrepresented a significant premium over the offers for the division as a wholewhich had also been received. The Board believe this partly reflects thesignificant work taken by the Group to expand and develop its publishing brands.During the year, management launched a sophisticated property web portal forreaders and customers (January 2006) and Newbury Property Weekly (May 2006 -profitable from its first week), reflecting the Group's commitment to exploitall opportunities to maximise shareholder value in a challenging marketplace. Radio division Having successfully developed popular locally focused radio brands, I am verypleased to report that the Group managed to obtain what was, in my view, anextremely fair consideration for its analogue radio assets at a time ofgenerally declining industry valuations: Date of Turnover for period Operating profit/(loss) Beneficial percentage Final consideration disposal to date of disposal for period to date of owned by Milestone achieved by Milestone (based on unaudited disposal (based on at disposal for disposal of shares management accounts unaudited management loans and net assets for station) accounts for station) in company Kestrel FMLimited,Basingstoke 17/2/06 £204,000 (£11,000) 54 £704,000 (including deferred consideration (2005 full year: (2005 full year: now received) £515,000) loss of £10,000) West BerkshireRadio Limited 17/2/06 £100,000 (£51,000) 55 £670,000 (includingLimited (2005 full year: (2005 full year: defered considerationt/a Kick FM £343,000) loss of £119,000) now received) Rugby BroadcastingCompany Limited t/a Rugby FM 28/2/06 £181,000 (£37,000) 52 £645,000 (2005 full year: (2005 full year: £466,000) profit of £6,000) Passion Radio(Oxford)Limited, 7/6/06 £96,000 (£200,000) 100 £300,000*Oxford (2005 full year: (2005 full year: £178,000) loss of £284,000) *As part of the disposal agreement, Milestone committed to spend £25,000 on advertising airtime on Passion Radio Three of the four stations had minority shareholders sitting alongsideMilestone. In all three instances, Milestone sold its shares to these existingpartners who were already familiar with the operations allowing ongoing warrantycommitments to be kept to an absolute minimum. The aggregate consideration achieved of £2.3 million for four small radiooperations (only one of which was wholly owned), is all the more impressive inthe context of the strategic reviews being carried out across an industry inwhich revenues have been declining. Only recently, Ofcom has revoked its firsttwo small scale licences at the request of the licence holders. In contrast,over the past three years, Milestone has managed to successfully raise £4.1million in gross proceeds from the managed disposal of its small scale radioassets. Television division Having disposed of its interests in newspapers and radio, the Board agreed toretain its television business, for which it continues to see significant growthpotential. Milestone is Southern England's only terrestrial commercial local TVsupplier, operating two "SIX TV" branded channels (one in Oxford and one inSouthampton). The results for Milestone's TV operating subsidiary, Oxford BroadcastingLimited, have improved significantly over the past three years, as set outbelow. This is primarily a result of the continuous programme of cost reductionsimplemented by management during this period. Year ended 30/9/04 Year ended 30/9/05 Year ended 30/9/06Sales (excludingrental income) £253,000 £181,000 £138,000 Profit/(Loss) (£469,000) (£260,000) (£150,000) Milestone's analogue local TV licences have now been extended by Ofcom untilaround 2011, providing an enhanced opportunity for the Group to evaluate a rangeof options for rolling out local channels on digital platforms. The Group iscontributing to ongoing discussions with Ofcom and the Government in which itstrongly advocates dedicated local channels (providing advertising opportunitiesto local businesses) on the UK's fastest growing digital platform, Freeview. TheBoard hope to gain further clarity on the Government's position on introducinglocal TV on Freeview and other digital platforms in the current financial year.During this period of long term strategic planning and lobbying, the Board isfocusing on implementing strict cost controls. Management expects advertisingrevenue from existing operations to be subdued for the current year. Post Balance Sheet events The Group was generally required, at the time of negotiating to sell its assets,to enter into agreements to provide management support services to the newowners' post-disposal. All such commitments have now ceased and, post-balancesheet, the Group has recently been able to reduce its head office count. To savefurther costs, the Group has moved all staff from its former offices in Abingdonto share SIX TV's Oxford based broadcast and office facilities. The Boardintends to monitor its operations with a view to maintaining strict control ofcosts. Finance As a result of the Board's strategic review the Group has disposed of themajority of its loss making businesses - in line with its key objectives for theyear. The Group's remaining central office function and television division,whilst still loss making, have been substantially scaled down. The Group startedthe financial year with a positive cash balance of approximately £1.1 million.The Board does not envisage the Group seeking to raise further finance forcurrent activities in the foreseeable future. If the Group chooses to expandorganically or to acquire new businesses this may require further funding. Anysuch requirement will be carefully evaluated as part of the Board's ongoingassessment of future options. The Company no longer guarantees any of the debt held by its current or formersubsidiaries. The proceeds from asset sales have been partially used to repayGroup debt. This includes the repayment of loans provided to the Group fromassociated parties of the Company's major beneficial shareholder, ElliottAdvisors (UK) Limited. The Board again expresses its thanks to the Elliott groupfor its financial support during the year. Assessment of financial risk The main financial risks arising from the Group's activities are credit risk,interest rate risk and liquidity risk. These are monitored by the Board and werenot considered to be significant at the balance sheet date. Dividend policy The Board's policy has been for the Group to re-invest any net earnings tofinance and support its businesses. The Board is reviewing the appropriatenessof its dividend policy as part of its current review of ongoing businessstrategy. Staff It has been a challenging year for both the media industry and for Milestone,but the loyalty and affection shown to the Group by its current and former staffhas been unstinting and, indeed, touching. I would like to take this opportunityto thank all staff for their dedication and support during the year. Board changes The Board and I place on record our gratitude to the Group's founding Chairman,Julian Blackwell, who retired in January 2006. The Group's new Chairman, JohnSanderson, has brought to the Board the benefit of his significant experience asa City analyst and media specialist and his support during Milestone's review ofstrategy has been most welcome. Investor relations As the Board has implemented its strategic review, it has undertaken a series offormal and informal communications with shareholders including the issuing ofannouncements and circulars and the holding of the requisite general meetings toapprove asset disposals. I am grateful to shareholders for the overwhelmingsupport provided for the resolutions proposed by the Board and for the actionswe have taken this year. Extraordinary General Meeting Following various disposals during the year, the aggregate value of thecompany's net assets is under fifty per cent of the company's nominal called upshare capital. The Board is calling an extraordinary general meeting, to be heldimmediately following the Group's annual general meeting on 8 March 2007 inorder to enable shareholders to consider this, as required under Section 142 ofthe Companies Act 1985. Outlook Throughout its strategic review, Milestone has been careful to structure thedisposal of its loss making businesses to minimise the Company's risk of ongoingexposure. The Board is confident this has been achieved. The Group now faces twobroad choices (i) to wind down continuing operations and distribute anyoutstanding cash to shareholders, or, (ii) to seek to develop new businessopportunities whether in media or any other sector utilising the Group'sexisting reserves as working capital and to part-fund any future transactions.Whilst all options remain under careful review, initial discussions with majorshareholders indicate a strong preference in favour of continued trading with aparticular focus on exploring expansion opportunities in the digital mediasector. The Board intends to conclude its review as soon as possible andanticipates making further announcements to shareholders in due course. Andy CraigChief Executive Officer Consolidated profit and loss account for the year ended 30 September 2006 Note Continuing Discontinued Total Total 2006 2006 2006 2005 £ £ £ £ Turnover 2,3 137,719 2,825,183 2,962,902 4,469,261 Cost of sales 110,156 2,312,082 2,422,238 2,925,009 _________ _________ _________ _________ Gross Profit 27,563 513,101 540,664 1,544,252 Distribution costs - 55,295 55,295 118,375Administrative expenses: 4,5---------------------------------------------------------------------------------------Impairment of goodwill 7 - 471,538 471,538 3,316,960Other administrativeexpenses 1,293,165 1,549,123 2,842,288 3,956,054--------------------------------------------------------------------------------------- 1,293,165 2,020,661 3,313,826 7,273,014 _________ _________ _________ _________ (1,265,602) (1,562,855) (2,828,457) (5,847,137) Other operating income 6 5,120 14,768 19,888 13,826 _________ _________ _________ _________ Group operating loss 7 (1,260,482) (1,548,087) (2,808,569) (5,833,311) Share of operatingloss in associatedundertakings - - - (171,253)Loss on disposal ofgroup operations 8 - (1,227,652) (1,227,652) (365,360) _________ _________ _________ _________ Loss on ordinaryactivities before interest (1,260,482) (2,775,739) (4,036,221) (6,369,924) _________ _________ _________ _________ Interest receivable - group 9 8,295 26,093 - associated undertakings - 354Interest payable - group 10 (68,933) (102,998) - associated - (23,042) _________ _________ Loss on ordinaryactivities before taxation (4,096,859) (6,469,517) Taxation on lossfrom ordinary activities 11 8,885 - _________ _________ Loss on ordinaryactivities after taxation (4,087,974) (6,469,517)Minority interest 47,717 49,902 _________ _________ Loss for the financial year 22 (4,040,257) (6,419,615) ========== ==========Basic and diluted lossper share from continuingoperations 12 (4.4)p (7.3)p =========== ========== All recognised gains and losses are included in the profit and loss account The notes that follow form part of these financial statements Consolidated balance sheet at 30 September 2006 Note 2006 2006 2006 2005 £ £ £ £ Fixed assetsIntangible assets 13 - 4,777,799Tangible assets 14 7,535 752,594Fixed asset investments 15 - 22,529 _________ _________ 7,535 5,552,922Current assetsDebtors 16 163,743 1,023,910Cash at bank and in 1,221,181 680,815hand _________ ________ 1,384,924 1,704,725Creditors: amounts fallingdue within one year 17 511,045 2,138,448 _________ ________ Net current assets/ 873,879 (433,723)(liabilities) _________ _________ Total assets less 881,414 5,119,199current liabilities Creditors: amounts fallingdue after more than one 18 3,063 133,970year Provisions for 20 - 22,523 _________ _________ 878,351 4,962,706 ========= =========Capital and reservesCalled up share capital 21 2,760,510 2,760,510Share premium account 22 7,692,985 7,692,985Merger reserve 22 11,119,585 11,119,585Profit and loss account 22 (20,694,729) (16,654,472) _________ _________ Shareholders' funds 23 878,351 4,918,608 Minority interests - 44,098 _________ _________ 878,351 4,962,706 ========= ========= The notes that follow form part of these financial statements Company balance sheet at 30 September 2006 Note 2006 2006 2006 2005 £ £ £ £ Fixed assetsTangible assets 14 4,158 221,518Investments 15 - 18,379 _________ ________ 4,158 239,897Current assetsDebtors 16 111,459 1,107,564Cash at bank and in hand 1,220,961 500,780 _________ _________ 1,332,420 1,608,344Creditors: amounts fallingdue within one year 17 403,806 285,313 _________ _________ Net current assets 928,614 1,323,031 _________ _________ Total assets less 932,772 1,562,928current liabilities Creditors: amounts fallingdue after more than one 18 - 3,585,342year _________ _________ 932,772 (2,022,414) ========= ========= Capital and reservesCalled up share capital 21 2,760,510 2,760,510Share premium account 22 7,692,985 7,692,985Profit and loss account 22 (9,520,723) (12,475,909) _________ Shareholders' funds 23 932,772 (2,022,414)/(deficit) ========= ========= The notes that follow form part of these financial statements Consolidated cash flow statement for the year ended 30 September 2006 Note 2006 2006 2006 2005 £ £ £ £Net cash outflowfrom operating 28 (1,338,318) (1,599,691)activities Returns on investments and servicing of financeInterest received 8,295 26,093Interest paid (68,933) (102,998) ________ _________ Net cash outflowfrom returns oninvestments and servicing of finance (60,638) (76,905) Taxation 8,885 - Capital expenditurePayments to acquire tangible fixed assets (1,744) (15,166)Receipts from sale of tangible fixed assets 500 - __________ _________ Net cash outflow fromcapital expenditure (1,244) (15,166) Acquisitions and disposalsSale of business operations 8 3,394,066 514,768Cash disposed of withbusiness operations (210,887) -Costs of disposal of business operations 8 (333,662) -operations _________ _________Net cash inflow fromacquisitions and disposals 2,849,517 514,768 __________ _________ Cash inflow/ 1,458,202 (1,176,994)(outflow) beforefinancing FinancingIssue of share capital - 1,100,000Cost of issuing share - (79,250)capitalNew loans advanced 211,400 -Loan repayments (213,737) (2,501)Capital element offinance leases repaid (11,882) (15,815)(Repayment)/advances under (283,321) 283,321invoice discounting ________ _________agreements Cash (outflow)/ (297,540) 1,285,755inflow from financing _________ _________ Increase in cash 29,30 1,160,662 108,761in the year ========= ========= The notes that follow form part of these financial statements Milestone Group PLC Notes forming part of the financial statements for the year ended 30 September2006 1 Accounting policies The financial statements have been prepared under the historical costconvention, and are in accordance with applicable United Kingdom accountingstandards. In preparing these financial statements the group has adopted for thefirst time, FRS 22 "Earnings per share", FRS 25 "Financial Instruments:Disclosure and Presentation" and FRS 28 "Corresponding amounts". These newfinancial reporting standards have had minimal impact on these group financialstatements. The company has taken advantage of the exemption allowed under Section 230 ofthe Companies Act 1985 from presenting its own profit and loss account in thesefinancial statements. The company's own profit for the year ended 30 September2006 is £2,955,186 (2005 - (£7,071,337)). The following principal accounting policies have been applied: Basis of consolidation The consolidated financial statements incorporate the results of Milestone GroupPLC and all of its subsidiary undertakings as at 30 September 2006 using theacquisition method of accounting. Under the acquisition method, the results ofsubsidiary undertakings are included from the date of acquisition. Investments Investments in subsidiaries are stated at cost (being the par value of sharesissued where merger relief applies) less impairment. Other investments held asfixed assets are stated at cost less any provision for impairment in value. Goodwill Goodwill arising on an acquisition of a subsidiary or associated undertaking isthe difference between the fair value of the consideration paid and the fairvalue of the assets and liabilities acquired. Positive goodwill is capitalised and amortised through the profit and lossaccount over the directors' estimate of its useful economic life. This has beenestimated as follows: Publishing Division - 20 yearsRadio Division - over the licence periodTelevision Division - over the licence period Impairment tests on the carrying value of goodwill are undertaken: • at the end of the first full financial year following acquisition; • in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable. Associates An entity is treated as an associated undertaking where the group has aparticipating interest and exercises significant influence over its operatingand financial policy decisions. In the group financial statements, interests in associated undertakings areaccounted for using the equity method of accounting. The consolidated profit andloss account includes the group's share of the operating results, interest,pre-tax results and attributable taxation of such undertakings based on auditedfinancial statements. In the consolidated balance sheet, the interests inassociated undertakings are shown as the group's share of the identifiable netassets including any unamortised premium paid on acquisition. The premium onacquisition is dealt with under the goodwill policy. Turnover Turnover represents sales to external customers at invoiced amount less valueadded tax. Turnover represents advertising income from the group's radio, television andpublishing divisions. Airtime is recognised on the date of broadcast andadvertising revenues from publishing are recognised on publication of therelated advert. Income relating to invoices raised in advance of the airing or publication of anadvert are treated as deferred income and are carried forward on the balancesheet. Depreciation Depreciation is provided to write off the cost, less estimated residual values,of all tangible fixed assets, evenly over their expected useful lives. It iscalculated at the following rates: Leasehold improvements 10-20% per annum, or over the period of the lease or LicenceFixtures, fittings, computer and office 10-50% per annum, or over the period ofequipment & machinery the licenceProduction and studio equipment 20% per annumMotor vehicles 25-33% per annum Finance costs Finance costs are charged to profit over the term of the debt so that the amountcharged is at a constant rate on the carrying amount. Finance costs includeissue costs which are initially recognised as a reduction in the proceeds of theassociated capital instrument. Pension costs Contributions to the group's defined contribution pension scheme and thedirectors' personal pension scheme are charged to the profit and loss account inthe year in which they become payable. Taxation The charge for taxation is based on the result for the year and taken intoaccount taxation deferred. Current tax is measured at amounts expected to be paid using the tax rates andlaws that have been enacted or substantively enacted by the balance sheet date. Deferred tax balances are recognised in respect of all timing differences thathave originated but not reversed by the balance sheet date except that therecognition of deferred tax assets is limited to the extent that the companyanticipates it will make sufficient taxable profits in the future to absorb thereversal of the underlying timing differences. Deferred tax balances are notdiscounted. Leased assets Where assets are financed by leasing agreements that give rights approximatingto ownership (finance leases), the assets are treated as if they had beenpurchased outright. The amount capitalised is the present value of the minimumlease payments payable over the term of the lease. The corresponding leasingcommitments are shown as amounts payable to the lessor. Depreciation on therelevant assets is charged to the profit and loss account, over the period ofthe lease. Lease payments are analysed between capital and interest components. Theinterest element of the payment is charged to the profit and loss account overthe period of the lease and is calculated so that it represents a constantproportion of the balances of capital repayments outstanding. The capitalelement reduces the amounts payable to the lessor. All other leases are treatedas operating leases. Their annual rentals are charged to the profit and lossaccount on a straight line basis over the term of the lease. Share based employee remuneration When shares and share options are awarded to employees a charge is made to theprofit and loss account based on the difference between the market value of thecompany's shares at the date of grant and the option exercise price inaccordance with UITF Abstract 17 (Revised 2003) 'Employee Share Schemes'. Thecredit entry for this charge is taken to the profit and loss reserve andreported in the reconciliation of movements in shareholders' funds. National Insurance on Share Options To the extent that the share price at the balance sheet date is greater than theexercise price on options granted under unapproved schemes after 19 May 2000,provision for any National Insurance contribution has been made based on theprevailing rate of National Insurance. The provision is accrued over theperformance period attaching to the award. Impairment of fixed assets and goodwill The need for any fixed asset impairment write down is assessed by comparing thecarrying value of the asset against the higher of its realisable value and valuein use. Liquid resources For the purposes of the cash flow statement, liquid resources are defined ascurrent asset investments and short term deposits. 2 Turnover, (loss)/profit and net assets The turnover, pre tax (loss)/profit and net assets at the balance sheet date areattributable to the principal activities of the group. These categories havebeen analysed by class of business as set out below. The United Kingdom is theonly geographical market. Pre-tax Turnover (loss)/profit Turnover Pre-tax loss 2006 2006 2005 2005 £ £ £ £Analysis by class ofbusiness: *Publishing Division -group 2,267,481 (1,084,641) 2,855,785 (3,705,636)*Radio Division:Group 557,702 (2,342,227) 1,437,732 (1,447,331)Associated undertakings - - - (193,940)Television Division -group 137,719 183,348 175,744 (239,708) ________ _________ ________ _________ 2,962,902 (3,243,520) 4,469,261 (5,586,615) Head office costs - (853,339) - (882,902) ________ _________ ________ _________ 2,962,902 (4,096,859) 4,469,261 (6,469,517) ========= ========= ========= ========== * The publishing and radio divisions have been discontinued during the year. Net assets Net assets 2006 2005 £ £Net assets: Publishing Division - group - 2,274,490Radio Division:Group - 2,211,575Associated undertakings - (22,523)Television Division - group (54,212) (82,782) _________ _________ (54,212) 4,380,760 Head office assets 932,563 581,946 _________ _________ 878,351 4,962,706 ========= ========== 3 Discontinued operations - corresponding figures The analysis between continuing and discontinued operations for the year ended30 September 2005 is shown below. Activities discontinued in the year to 30September 2006 are shown as part of discontinued activities. Continuing Discontinued Total 2005 2005 2005 £ £ £ Turnover 175,744 4,293,517 4,469,261 Cost of sales 137,331 2,787,678 2,925,009 _________ _________ _________ Gross Profit 38,413 1,505,839 1,544,252 Distribution costs - 118,375 118,375 Administrative expenses:-------------------------------------------------------------------------------Impairment of goodwill - 3,316,960 3,316,960Other administrative expenses 1,284,828 2,671,226 3,956,054------------------------------------------------------------------------------- 1,284,828 5,988,186 7,273,014 _________ _________ _________ (1,246,415) (4,600,722) (5,847,137)Other operating income 770 13,056 13,826 _________ _________ _________ Group operating loss (1,245,645) (4,587,666) (5,833,311) ========= ========= ========= 4 Employees The average number of employees of the group and company during the year,including executive directors, was as follows: Group Company Group Company 2006 2006 2005 2005 Number Number Number Number Sales, operations andadministration 70 5 100 7Management 6 3 9 3 _________ ________ _________ ________ 76 8 109 10 ========= ======== ========= ======== Staff costs for all employees, including executive directors, consist of: 2006 2005 £ £ Wages and salaries 1,716,853 2,585,389Social security costs 163,539 245,343Pension costs 21,000 23,335 _________ ________ 1,901,392 2,854,067 ========= ========= 5 Directors' remuneration 2006 2005 £ £ Directors' emoluments and fees 224,136 291,000Benefits in kind 28,451 23,235 _________ ________ 252,587 314,235 ========= ======== Company contributions to money purchase pension schemes 21,000 21,000 ========= ======== There were two directors in the company's defined contribution pension schemeduring the year (2005 - 2). 6 Other operating income 2006 2005 £ £ Other operating income 14,768 13,056Rental income 5,120 770 ________ _______ 19,888 13,826 ======== ======= Other operating income relates to premium lines (telephone) and readers offers. 7 Operating loss 2006 2005 £ £This is arrived at after charging/(crediting): Depreciation charge andimpairment of fixed assets 368,430 283,933(Profit)/loss on disposal of fixed assets (500) 791Amortisation of goodwill arising on consolidation 231,745 591,450Hire of plant and machinery - operating leases 14,093 128Hire of other assets - operating leases 16,649 31,034Hire of land and buildings - operating leases 134,855 138,000Auditors' remuneration - audit (2006: company £53,908)services (2005: company £55,333) 79,228 139,763 - taxation services 22,750 30,000 - other services 29,574 21,837Impairment of goodwill 471,538 3,316,960 ========= ========= Other services reflect the level of work undertaken in respect to the fivedisposals and the reorganisation of the group during the period. In the course of the year the directors considered the carrying value ofgoodwill in accordance with FRS 11 "Impairment of Fixed Assets and Goodwill".Based on their review they concluded that the goodwill was impaired and hadtherefore written it down to the recoverable amount based on net realisablevalue. During the year all the remaining goodwill was written down as a resultof the disposal of the group's subsidiary undertakings. 8 Disposal of group operations During the year, the group disposed of its Radio and Publishing divisions. Theloss on disposal has been calculated as follows: West Rugby Passion Berkshire Kestrel Broadcasting Radio Tri Media Radio FM Company (Oxford) Publishing Limited Limited Limited Limited Limited Total £ £ £ £ £ £Cash proceeds 489,920 594,185 644,961 275,000 1,450,000 3,454,066Costs of disposal (62,793) (62,793) (49,025) (26,422) (132,629) (333,662) ________ ________ ________ ________ _________ _________ 427,127 531,392 595,936 248,578 1,317,371 3,120,404Net assets disposed of:Tangible fixed assets (49,459) (16,691) (63,584) (67,907) (180,731) (378,372)Debtors (67,614) (200,146) (82,815) (49,075) (408,612) (808,262)Cash (44) (56,504) (42,119) (329) (111,891) (210,887)Creditors 272,205 258,850 65,639 20,736 510,172 1,127,602Minority interest (69,790) 7,184 58,985 - - (3,621)Unamortisedgoodwill (note 13) (562,989) (470,416) (624,215) (235,676) (2,181,220) (4,074,516) ________ ________ ________ ________ _________ _________ Loss on disposal ofgroup operations (50,564) 53,669 (92,173) (83,673) (1,054,911) (1,227,652) ======== ======== ======== ======== ========= ========= The net inflow of cash in respect to these disposals is as follows: Cash consideration 489,920 594,185 644,961 275,000 1,450,000 3,454,066Costs of disposal of group operations (62,793) (62,793) (49,025) (26,422) (132,629) (333,662)Cash transferredon disposal (44) (56,504) (42,119) (329) (111,891) (210,887) ________ ________ ________ _________ _________ _________ Net cash inflow 427,083 474,888 553,817 248,249 1,205,480 2,909,517 ========= ======== ======== ========= ========= ========= No corporation tax arises on the loss on disposal of group operations. 9 Interest receivable 2006 2005 £ £ Bank interest 8,295 5,121Interest from associated undertaking - 20,972 ________ _______ 8,295 26,093 ======== ======= 10 Interest payable and similar charges 2006 2005 £ £ Bank loans and overdrafts 21,611 45,313Finance lease and hire purchase interest 812 -Interest on overdue tax 5,345 -Invoice discounting charges 41,165 57,685 ________ _______ 68,933 102,998 ======== ======= 11 Taxation on loss from ordinary activities 2006 2005 £ £UK corporation taxCurrent tax on losses of the year (8,885) - ________ _______ Taxation on loss from ordinary activities (8,885) - ======== ======= The tax assessed for the year is different than the standard rate of corporationtax in the UK. The differences are explained below: 2006 2005 £ £ Loss on ordinary activities before tax (4,096,859) (6,469,517) ========= ========= Loss on ordinary activities at the standard rateof corporation tax in the UK of 30% (2005 - 19%) (1,229,057) (1,229,208) Effects of:Expenses not deductible for tax purposes 584,848 789,597Depreciation for year in excess of capitalallowances 93,691 41,925Unutilised tax losses 526,106 487,790Income not taxable for tax purposes 24,412 (80,669)Utilisation of tax losses - (6,461)Other items (8,885) (2,974) ________ _________ Current tax credit for the year (8,885) - ========= ========= Factors that may affect future tax charges Deferred tax assets of approximately £1.8 million (group) and £750,000 (company)(2005 - £1.8 million (group) and £500,000 (company)) have not been recognised inthe financial statements as there is currently insufficient evidence that anydeferred tax assets would be recoverable. The group has unutilised tax losses of approximately £5.7 million (2005 - £9.1million) available for relief against future profits, subject to agreement by HM Revenue & Customs. 12 Loss per share Basic loss per share has been calculated in accordance with FRS 22. Basic lossper share has been calculated by dividing the loss on ordinary activities aftertaxation by the weighted average number of ordinary shares in issue during theyear. The weighted average number of equity shares in issue was 27,605,095 (2005- 25,118,794) and the loss was £4,040,257 (2005 - £6,419,615). The effect of allpotential ordinary shares is antidilutive. 2006 2005Basic and diluted loss per share:Continuing activities (4.4) p (7.3) pDiscontinued activities (10.3) p (18.3) p 13 Intangible assets Group Goodwill on consolidation £CostAt 1 October 2005 and at 30 September 2006 14,347,031 ========== Amortisation and impairmentAt 1 October 2005 9,569,232Provided for the year 703,283Written off on disposal of subsidiary undertakings 4,074,516 _________ At 30 September 2006 14,347,031 =========Net book valueAt 30 September 2006 - ========= At 30 September 2005 4,777,799 ========= Included within the amortisation charge for the year is an amount of £471,538(2005 - £3,316,960) in respect of the impairment in value of goodwill, asdetailed in note 7. 14 Tangible assets Fixtures, fittings, Production Leasehold equipment and studio MotorGroup improvements & machinery equipment vehicles Total £ £ £ £ £CostAt 1 October 2005 394,203 1,133,431 568,395 78,091 2,174,120Additions - 1,744 - - 1,744Disposals (329,006) (951,834) - (78,091) (1,358,931) _______ ________ _______ _______ ________ At 30 September 2006 65,197 183,341 568,395 - 816,933 _______ ________ _______ _______ ________DepreciationAt 1 October 2005 243,006 749,080 353,132 76,308 1,421,526Provided for the year 52,858 100,341 57,610 1,783 212,592Impairment for the year - - 155,838 - 155,838Disposals (230,667) (671,800) - (78,091) (980,558) _______ _______ _______ _______ ________ At 30 September 2006 65,197 177,621 566,580 - 809,398 _______ _______ _______ _______ ________ Net book valueAt 30 September 2006 - 5,720 1,815 - 7,535 ======= ======= ======= ======= ======== At 30 September 2005 151,197 384,351 215,263 1,783 752,594 ======= ======= ======= ======= ======== The net book value of tangible fixed assets for the group includes an amount of£854 (2005 - £27,798) in respect of assets held under finance leases or hirepurchase contracts, all of which relate to fixtures and fittings held. Thedepreciation charge in respect of such assets amounted to £466 (2005 - £7,122)for the year. Production Computer and studio Fixtures and officeCompany equipment and fittings equipment Total £ £ £ £ CostAt 1 October 2005 275,000 12,759 132,415 420,174and 30 September 2006 ________ _______ _______ _______ DepreciationAt 1 October 2005 64,162 11,837 122,657 198,656Charge for the year 210,838 888 5,634 217,360 ________ _______ _______ _______ At 30 September 2006 275,000 12,725 128,291 416,016 ________ _______ _______ _______Net book valueAt 30 September 2006 - 34 4,124 4,158 ======== ======= ======= ======= At 30 September 2005 210,838 922 9,758 221,518 ======== ======= ======= ======= 15 Fixed asset investments OtherGroup investment £CostAt 1 October 2005 and 30 September 2006 22,529 ========Provision for impairment At 1 October 2005 -Impairment charge in the year (22,529) _______ At 30 September 2006 (22,529) ========Net book valueAt 30 September 2006 - ======== At 30 September 2005 22,529 ======== The other investment represented a 13% shareholding of Milestone Radio HoldingsLimited in CKFM Kernow Limited. An application for strike off of the company wasmade in the year. Shares in subsidiaryCompany undertakings £CostAt 1 October 2005 2,645,385Disposals (1) _________ At 30 September 2006 2,645,384 ==========Provision for diminution in valueAt 1 October 2005 2,627,006Written off in the year 18,379Disposals (1) _________ At 30 September 2006 2,645,384 ==========Net book valueAt 30 September 2006 - ========== At 30 September 2005 18,379 ========== During the year the company disposed of its shareholding in Tri Media PublishingLimited, for a total consideration of £1,450,000 (see also note 8). Subsidiary and associated undertakings During this year, the principal investments of the group, all of which have beenincluded in the consolidated financial statements were as stated below: Principal subsidiary undertakings Proportion of voting rights and ordinary shareName Nature of business capital held Tri Media Publishing Limited (1) ~ Holding Company 100Basingstoke Observer Limited (2) ~ Newspaper Publishing 100Courier Newspapers (Oxford) Limited (2) ~ Newspaper Publishing 100Milestone Television Company Limited (1) Holding Company 100Six TV Limited (2) * Holding Company 100Aroma Broadcasting Limited (2) * Holding Company 100Oxford Broadcasting Limited (1) Television Broadcasting 100Soundview Investments Limited (1) * Holding Company 100Listenear Limited (2) * Media Consultancy 100Milestone Radio Holdings Limited (2) Holding Company 100Milestone Radio Group Limited (2) ** Holding Company 100Links Investments Limited (2) * Holding Company 100Passion Radio (Oxford) Limited (2) @ Radio Broadcasting 100Jazztech Limited (2) * Holding Company 100Milestone Radio Stations Limited (2) ** Holding Company 100Milestone Radio Sales Limited (2) * Radio Advertising & Management Services 100Milestone FM Limited (2) * Holding Company 100The Milestone Radio Company Limited (2) * Holding Company 100Milestone Pictures Limited (2) * Holding Company 100Newbury Community Radio(Investments) Limited (2)* Holding Company 100Rugby Broadcasting Company Limited (2) { Radio Broadcasting 52Kestrel FM Limited (2) } Radio Broadcasting 54West Berkshire Radio Limited (2) } Radio Broadcasting 55 Principal associated undertakingThe Burn FM Limited (2) *** Radio Broadcasting 44 All undertakings listed above were incorporated or registered in the UnitedKingdom. ~ disposed of on 15/09/2006* application made for strike off on 1/2/2007** application made for strike off on 10/11/2006*** struck off on 21/11/2006{ disposed of on 28 February 2006@ disposed of on 7/06/2006} disposed of on 17/02/2006 1. Direct subsidiary undertakings of Milestone Group PLC.2. Indirect subsidiary undertakings of Milestone Group PLC. 16 Debtors Group Company Group Company 2006 2006 2005 2005 £ £ £ £ Trade debtors 55,940 17,683 680,881 1,560Amounts due from subsidiaryundertakings - - - 962,603Other debtors 76,903 76,303 120,354 114,953Prepayments and accrued income 30,900 17,473 222,675 28,448 ________ ________ ________ ________ 163,743 111,459 1,023,910 1,107,564 ======== ======== ========= ========= All amounts fall due for payment within one year. 17 Creditors: amounts falling due within one year Group Company Group Company 2006 2006 2005 2005 £ £ £ £ Bank loans and overdrafts 134,101 125,545 754,397 -(secured)Trade creditors 89,039 59,811 469,793 126,588Other creditors 13,626 3,750 96,779 4,888Taxation and social security 17,852 16,694 163,341 40,965Directors' loan account - - 13,950 -Obligations under finance leases and hire purchase contracts - - 11,882 -Advances under invoice - - 283,321 -discounting arrangementsAccruals and deferred income 256,427 198,006 344,985 112,872 ________ ________ ________ _______ 511,045 403,806 2,138,448 285,313 ======== ======== ========= ======= The bank loans and overdrafts are secured by a fixed and floating charge overall the current and future assets of the group and the company. The amount of factored debtors outstanding at 30 September 2006 was £nil (2005 -£377,761). This was due to the invoice discounting arrangement being terminatedon 15 September 2006. The obligations under finance leases and hire purchase contracts carriedinterest at an effective rate of 10.2% over the life of the contract. 18 Creditors: amounts falling due after more than one year Group Company Group Company 2006 2006 2005 2005 £ £ £ £ Bank loan 3,063 - 5,400 -Amounts owed to subsidiaryundertakings - - - 3,585,342Other loans - - 128,570 - _________ ________ ________ ________ 3,063 - 133,970 3,585,342 ========= ======== ======== ========= The bank loan commenced in 1999 and is repayable in monthly instalments over a10 year term. Interest is payable at 3.35% per annum above Barclays Bank baserate. The other loans represented interest-free shareholder loans that were repaidduring the year. Group Finance leases Bank Bank and hire loans and loans and purchase overdrafts overdrafts contracts 2006 2005 2005 £ £ £Maturity of debt: In one year or less, or on demand 134,101 754,397 11,882 ======== ======= =======In more than one yearbut not more than two years 3,063 3,118 -In more than two yearsbut not more than five years - 2,282 - ________ _______ _______ 3,063 5,400 - ======== ======= ======= 19 Financial instruments The group holds or issues financial instruments to finance its operations and tomanage the interest rate risks arising from its operations and from its sourcesof finance. In addition various financial instruments such as trade debtors andtrade creditors, arise directly from the group's operations. The board have not treated short term debtors and creditors as financial assetsand financial liabilities respectively for the purposes of the disclosuresrequired by FRS 25 "Derivatives and other Financial Instruments: Disclosures". The group's financial instruments, all of which are denominated in sterling,comprised financial assets and financial liabilities, details of which are asfollows: Financial assets The group's financial assets were: Floating rate financial assets 2006 2005 £ £ Cash at bank and in hand 1,221,181 680,815 ========= ========= As at 30 September 2006, £1,221,181 (2005 - £680,815) of the group's financialassets was money held in bank current and reserve accounts, which were instantaccess. This money is used to provide the necessary finance for the group'soperations. The group does not undertake any foreign currency transactions and therefore isnot susceptible to exchange rate fluctuations. The group does not hold or issuederivative financial instruments. Financial liabilities The group's financial liabilities were: Floating rate Interest free financial financial liabilities liabilitiesAs at 30 September 2006 £ £ Bank loans and overdrafts - due in less than 1 year 134,101 -Bank loans - due in more than 1 year 3,063 -Other loans - due in more than 1 year - - ======= ======= Floating rate Interest free financial financial liabilities liabilitiesAs at 30 September 2005 £ £ Bank loans and overdrafts - due in less than 1 year 754,397 -Amounts due under invoice discounting arrangements- due in less than 1 year 283,321 -Bank loans - due in more than 1 year 5,400 -Other loans - due in more than 1 year - 128,570 ======= ======= Financial liabilities The group's financial liabilities falling due within one year of £134,101 at 30September 2006 (2005 - £1,037,718) comprised of three bank overdrafts. Theoverdrafts were provided by National Westminster Bank Plc, Barclays Bank Plc andHSBC. At the year end the amounts outstanding in respect of each of theseoverdrafts was £125,545 (2005 - £670,582), £5,438 (2005 - £27,390) and £nil(2005 - £53,307) respectively. All of the overdrafts were repayable on demand.At 30 September 2006 the remaining balance of £3,118 related to a flexiblebusiness bank loan, as referred to below. The overdraft facility provided by National Westminster Bank Plc was given tocover Milestone Group PLC and Milestone Radio Holdings Limited and itssubsidiary companies and carried interest at 3% per annum over the bank's baserate. At 30 September 2006 the bank rate was 4.75% (2005 - 4. 5%). The overdraftwas secured by a fixed and floating charge over the assets of Milestone GroupPLC and Milestone Radio Holdings Limited and its subsidiary companies. Thisfacility was due for renewal on 30 November 2005 at which time the facility wasextended and remained at £550,000 until February 2006 when it was fully paiddown. There was no facility in place at the year end. During the year the group had an invoice discounting arrangement with The RoyalBank of Scotland Commercial Services. This arrangement provided a maximuminvoice discounting facility of £550,000 for Courier Newspapers (Oxford) Limitedand £200,000 for Basingstoke Observer Limited. The maximum facility available isbased on a draw down of 75% of the value of gross invoices raised by therespective companies, capped at £733,333 for Courier Newspapers (Oxford) Limitedand £266,667 for Basingstoke Observer Limited. This arrangement was secured by afixed and floating charge over the assets of each company. During the year thegroup was discharged of its obligations under an invoice discounting arrangementon disposal of its publishing subsidiaries. The overdraft facility of £25,000 provided by Barclays Bank Plc, carriedinterest at 3% per annum over the bank's base rate. At 30 September 2006 thebank base rate was 4.75% (2005 - 4.5%). The overdraft was secured by a fixed andfloating charge over the assets of Oxford Broadcasting Limited and a letter ofcomfort from Milestone Group PLC. This facility was available to the group until31 October. The account with Barclays has now been closed. As at 30 September 2005 the group also had available to it a further facility of£50,000 (2005 - £50,000) from HSBC. This facility was due for review in January2006 when it was reduced to £20,000 and remained available to the group untilthe disposal of Courier Newspapers on 15 September 2006. The group's financial liabilities falling due after more than one year at 30September 2006 of £3,063 (2005 - £5,400) comprised a flexible business bankloan, from Barclays Bank Plc. This loan carried interest at 3.5% over BarclaysBank's base rate and is due for repayment by 2009. The bank loan is secured by afloating charge over all the current and future assets of Oxford BroadcastingLimited. The loan was repaid in January 2007. The other loans represented interest - free shareholder loans and were repaidduring the year. During the year, as explained above, the group's operations were funded largelyby the provision of bank overdraft facilities and invoice discountingarrangements. The group was subject to interest rate risk to the extent that theoverdraft facilities provided bore interest at approximately 3% above the bankbase rate. This interest rate was subject to change. The directors consideredthe fair value of the group's financial assets and liabilities to be the same astheir book values. 20 Provision for liabilities and charges AssociatedGroup undertakings £Net book valueAt 1 October 2005 7,788Provided for in the year (7,788) ________ At 30 September 2006 - ========Share of retained lossesAt 1 October 2005 (30,311)Written back on liquidation 30,311 ________ At 30 September 2006 - ========Provision requiredAt 30 September 2006 - ======== At 30 September 2005 (22,523) ======== The interest in The Burn FM Limited was provided for in full in the year. Theassets were liquidated and distributed amongst the shareholders. The company wassubsequently struck off on 21 November 2006. 21 Share capital Group and Group and Group and Group and company company company company 2006 2006 2005 2005 £ Number £ NumberAuthorised Ordinary shares of 10p each 5,000,000 50,000,000 5,000,000 50,000,000 ========= ========== ========= ========== Group and Group and Group and Group and company company company company 2006 2006 2005 2005 £ Number £ NumberAllotted, called up and fully paid Ordinary shares of 10p each 2,760,510 27,605,095 2,760,510 27,605,095 ========= ========== ========= ========== Share options At 30 September 2006 there were two share option schemes in place - the"Milestone Group PLC 2003 Unapproved Share Option Scheme" and the "MilestoneGroup PLC 2003 Approved Share Option Scheme". At 30 September 2006, the following share options were outstanding under theMilestone Group PLC 2003 Unapproved Share Option Scheme: Option Holder Date of Ordinary Exercise Exercise Grant Shares Price Period (p) Andy Craig 25/06/2003 1,404,000 100 26/06/2006 to 24/06/2013Brian Chester 25/06/2003 432,000 100 26/06/2006 to 24/06/2013Dan Cass 25/06/2003 216,000 100 26/06/2006 to 24/06/2013 The company also granted Collins Stewart an option over 432,000 ordinary shares.This option was exercisable at any time during the three year period followingthe group's admission to the Alternative Investment Market at an exercise priceof £1. This option expired in July 2006. At 30 September 2006, no share options had been issued under the Milestone GroupPLC 2003 Approved Share Option Scheme. 22 Reserves Share Profit premium Merger and loss account reserve accountGroup £ £ £ At 1 October 2005 7,692,985 11,119,585 (16,654,472)Loss for the year - - (4,040,257) _________ __________ __________ At 30 September 2006 7,692,985 11,119,585 (20,694,729) ========= ========== ========== Share Profit premium and loss account accountCompany £ £ At 1 October 2005 7,692,985 (12,475,909)Profit for the year - 2,955,186 _________ _________ At 30 September 2006 7,692,985 (9,520,723) ========= ========= 23 Reconciliation of movements in shareholders' funds Group Company Group Company 2006 2006 2005 2005 £ £ £ £ (Loss)/profit for the year (4,040,257) 2,955,186 (6,419,615) (7,071,337)Shares issued in the year - - 550,000 550,000Premium on shares issuedin the year - - 550,000 550,000Share issue costs - - (79,250) (79,250) _________ ________ _________ ________Net (reduction in)/addition toshareholders' funds (4,040,257) 2,955,186 (5,398,865) (6,050,587)Opening shareholders' funds 4,918,608 (2,022,414) 10,317,473 4,028,173 _________ ________ _________ ________ Closing shareholders' funds 878,351 932,772 4,918,608 (2,022,414) ========= ========= ========= ========= 24 Pensions The group companies operate defined contribution pension schemes. The assets areheld separately from those of the companies in independently administered funds.Pension contributions are also paid into directors' personal pension schemes. 25 Commitments under operating leases As at 30 September 2006, the group had annual commitments under non-cancellableoperating leases as set out below: Land and Land and buildings Other buildings Other 2006 2006 2005 2005 £ £ £ £Operating leases which expire: Within one year - - 5,847 25,688In two to five years 28,750 52,212 182,250 93,569 ________ ______ _______ _______ 28,750 52,212 188,097 119,257 ======== ======= ======= ======= 26 Related party transactions During the year, subsidiary undertakings of Milestone Group PLC made purchasesamounting to £6,000 (2005 - £14,000) from MGH Investments Limited. No amountswere owed by these companies to MGH Investments Limited at 30 September 2006(2005 - £3,440). Mr A T Craig is an executive director of the company and MGHInvestments Limited is a company in which he has a controlling interest. During September 2006, the company wrote off a loan of £5,450 due from JulianBlackwell a former non-executive director of the group. This was the maximumamount outstanding at any time during the year. No interest was charged inrespect of this balance. On 31 January 2006, the company was provided with £200,000 funding by way of anissue of loan notes of the company to Manchester Securities Corporation, aconnected company of Elliott International L.P. and Elliott Associates L.P.substantial shareholders in the company. The loan was secured by way of ageneral debenture and guarantee entered into by the company and two of itssubsidiaries, Jazztech Limited and The Milestone Radio Company Limited. The loannotes bore interest at 15 per cent. per annum and were repayable (subject to arepayment fee of 5 per cent. of the value of the notes) out of the proceeds ofany asset disposal by the company. In accordance with these terms, on 17February 2006, £211,400 of the monies received on the disposal of the company'sshares in West Berkshire Radio Limited and Kestrel FM Limited were used todischarge this loan. The directors (other than Mark Levine who was deemed to beconnected to the loan note holder) considered that these arrangements were madeat arms' length and on normal commercial terms and, having consulted with thecompany's nomad, Arden Partners Limited, considered that the terms of thisfinancing were fair and reasonable. Mark Levine, a non-executive director of the company, is an employee of ElliottAdvisors (UK) Limited. Elliott Advisors (UK) Limited are connected to ElliottInternational L.P. and Elliott Associates L.P. As at 30 September 2006,6,280,413 and 1,466,285 ordinary shares of 10p each in the company were held byElliott International L.P. and Elliott Associates L.P., respectively. Furtherdetails are provided in the Report of the Directors. Details of other material transactions with related parties are disclosed innotes 18 and 19 to these financial statements. 27 Contingent liabilities Milestone Group PLC with certain subsidiaries, has a gross group overdraftfacility of £1million with a net limit (2005 - £350,000). At 30 September 2006the liabilities covered by this facility totalled £134,101 (2005 - £670,582).This facility expired in October 2006. 28 Reconciliation of operating loss to net cash outflow from operatingactivities 2006 2005 £ £ Operating loss (2,808,569) (5,833,311)Amortisation and impairment of intangible fixedassets 703,283 3,908,410(Profit)/loss on disposal of fixed assets (500) 791Depreciation of tangible fixed assets 368,430 283,933Decrease in debtors 111,910 368,150Increase/(decrease) in creditors 287,128 (327,664) _________ ________ Net cash outflow from operating activities (1,338,318) (1,599,691) ========= ========== 29 Reconciliation of net cash outflow to movement in net funds/(debt) 2006 2005 £ £ Increase in cash 1,160,662 108,761Cash outflow/(inflow) from changes in debt, leasefinancingand advances under invoice discounting agreements 297,540 (265,005) _________ _______ Movement in net debt resulting from cashflows 1,458,202 (156,244)Inception of finance leases - (11,084) _________ _______ Movement in net funds/(debt) 1,458,202 (167,328)Opening net debt (374,185) (206,857) _________ _______ Closing net funds/(debt) 1,084,017 (374,185) ========= ======== 30 Analysis of net funds/(debt) At 30 At 30 September Cash September 2005 flow 2006 £ £ £ Cash at bank and in hand 680,815 540,366 1,221,181Bank overdrafts (754,397) 620,296 (134,101) ________ _________ _________ ( 73,582) 1,160,662 1,087,080 Bank loan due after one year (5,400) 2,337 (3,063)Finance leases (11,882) 11,882 -Advances under invoice discountingarrangements (283,321) 283,321 - ________ _________ _________ Total (374,185) 1,458,202 1,084,017 ======== ========= ========== 31 Cash flows relating to disposals Disposals £ Operating activities (143,365) ========= Returns on investments and servicing of finance (55,825) ========= Taxation 8,885 ========= Capital expenditure (1,244) ========= Financing (295,058) ========= This information is provided by RNS The company news service from the London Stock Exchange