CTEA.L Regulatory News (CTEA)

31 Mar 2006 15:04

Milestone Group PLC31 March 2006 For Immediate Release 31 March 2006 MILESTONE GROUP PLC RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2005 Milestone Group PLC, the AIM listed media group, announces results for the yearended 30 September 2005. FINANCIAL HIGHLIGHTS • Turnover on continuing activities: £4.5 million (2004: £5.9 million) • Gross Profit: £1.5 million (2004: £2.5 million) • Loss before tax: £6.5 million, in line with expectations (2004: loss of £6.9 million) STRATEGIC REVIEW • 36.8% shareholding in Reading 107 FM sold for cash consideration of £514,000 • Completion of disposal of controlling shareholdings in all remaining non wholly owned radio assets - Kick FM, Kestrel FM and Rugby FM - for a cash consideration of approximately £1.7 million subsequent to year end • Focus on four wholly-owned media businesses: Courier Newspapers, Basingstoke Observer, Passion Radio and SIX TV DIVISIONAL PERFORMANCE • Publishing • Sales £2.9 million (2004: £3.8 million) • Operating loss £0.9 million (2004: loss £0.2 million) • Comprehensive division review following resignation of Group Publishing Director Tom McGowran• Radio • Sales £1.5 million (2004: £1.8 million) • Operating loss £0.4 million (2004: loss £0.2 million)• Television • Sales £0.2 million (2004: £0.2 million) • Operating loss £0.3 million (2004: loss £0.5 million) Commenting on the results, Andy Craig, Chief Executive, said: "The Board is continuing to review all opportunities to maximise shareholdervalue. The Board has two complementary aims: to enhance value for shareholderstoday and to position the group's brands for long term growth. The Board isfurther exploring opportunities to develop its media presence, particularly inand around Oxfordshire, on both traditional and digital platforms." For further information: Milestone Group PLC Tel: 01235 547 800Andy Craig, Chief Executive Arden Partners Limited Tel: 020 7398 1632Richard Day Buchanan Communications Tel: 020 7466 5000Bobby Morse/Suzanne Brocks/Eleanor Williamson Results for the year ended 30 September 2005 The financial information set out in these statements does not constitute thecompany's statutory accounts as set out in section 240 of the Companies Act 1985for the year ended 30 September 2005. The financial information for the yearended 30 September 2004 set out in this statement has been extracted from thegroup accounts delivered to the Registrar of Companies for that period. Thefinancial statements for the year ended 30 September 2005 will be deliveredfollowing the company's annual general meeting. The auditors have reported onthe accounts for the year ended 30 September 2005 and their report isunqualified. However, it does contain a statement regarding a fundamentaluncertainty in respect to the ability of the group to achieve its forecastlevels of cashflow that has been used to support the going concern basis ofpreparation. Chairman's Statement My first statement as Chairman of Milestone, since appointment in February 2006,comes at a crucial time for the company. I agreed to join Milestone because I am convinced there is a role forentrepreneurial media businesses in the future of local content delivery. Milestone has current operational experience in local print, radio andtelevision in a single geographic locality. With this unique understanding andexperience, the Board's task is to position the group to exploit fully theopportunities presented by multi platform delivery of local news andentertainment content in a digital environment. It has indisputably been a challenging time for the group. As independentChairman, my principal responsibility is to shareholders. I look forward tomeeting as many shareholders as possible over the coming months. John SandersonChairman Chief Executive's review Overview Group turnover on operating activities for the year was £4.5 million (2004: £5.9million) and gross profit was £1.5 million (2004: £2.5 million). Operatinglosses for the year (excluding goodwill amortisation and impairment) were £2.6million (2004: £2.4 million), in line with expectations at the time of thegroup's interim announcement. Losses for the year including goodwillamortisation and impairment were £6.5 million (2004: £6.9 million), resulting ina basic and diluted loss per share of 25.6p: (2004:31.11p). In June 2005, the Board announced a comprehensive review of strategy, which wasquickly followed in August 2005 by the disposal of the group's 36.8%shareholding in Reading 107 FM for a cash consideration, including repayment ofMilestone loans and interest, of £571,000. Subsequent to the year-end, inFebruary 2006, the group announced the completion of the disposal of itscontrolling shareholdings and loans in all remaining non-core radio assets: KickFM, Kestrel FM and Rugby FM, securing a further cash consideration, inaggregate, of approximately £2 million. Milestone now has four continuing local media businesses all of which are whollyowned: Courier Newspapers, Basingstoke Observer, Passion Radio and SIX TVcontributed £3.3 million (75%) of the total turnover of the group in 2004/5. The Board is continuing to review all opportunities to maximise shareholdervalue. The Board has two complementary aims: to enhance value for shareholderstoday and to position the group's brands for long-term growth in years to come.The Board is further exploring opportunities to develop its media presence,particularly in and around Oxfordshire, on both traditional and digitalplatforms. Publishing Sales £2.9 million (2004: £3.7 million), operating loss £0.9 million (2004: loss£0.2 million). The performance of the division's two publishing companies is set out in thetable below. These amounts are stated net of any intra group transactions. Company Sales Sales Operating loss Operating loss Audited Distribution Figures 2005 2004 2005 2004 £ £ £ £ Courier 2,332,000 2,998,000 (762,000) (147,000) Courier Journal: 56,276 VFD Jul-DecNewspapers 2005 (door-to-door excluding(Oxford) Limited pick-up) Property Weekly: 21,945 VFD Jul-Dec 2005 (South Oxfordshire edition door-to-door excluding pickup)Basingstoke 600,000 768,000 (152,000) (103,000) Basingstoke Observer: 20,585 ABCObserver Limited Jul-Dec 2005 (pick-up only) Following the resignation of Tom McGowran as Group Publishing Director in May2005, the Board implemented a comprehensive review of the division, taking thefollowing action over the second half of calendar 2005 to enhance profitability.These measures have been introduced against a deteriorating publishing market. • The re-launch of the Oxford City Journal as a separate weekly 'pick up' title; • The expansion of Property Weekly into two separate editions in the north and south of Oxfordshire; • The initiation of new contracts for national revenue and ongoing action to restore lost leaflet revenue; • The placement of the monthly Oxfordshire Living under new specialist lifestyle magazine management; • Production of a 'new media' revenue plan, which will shortly offer, for the first time, the opportunity to book advertisements and submit or amend copy on-line. Whilst the policy of previous management to rationalise staffing has had asignificant impact on short-term revenues, the board believes there are a numberof reasons to be cautiously confident about the future potential of thebusiness: • Long-term contracts remain strong and continue to be renewed; • Pick-up rates from dispensers are extremely high, reflecting the popularity of the group's publications; • The group's market-leading property title in Oxfordshire remains highly profitable; • The group remains the largest distributor of free newspapers in Oxfordshire. Radio Sales attributable to the group from the four Milestone-controlled FM stations£1.5 million (2004: £1.8 million), operating loss £0.4 million (2004: £0.2million). The performance of the four licensed radio stations that were majoritycontrolled by the group during the financial year is detailed in the tablebelow. These amounts are stated net of any intra group transactions. Station Sales Sales Operating Operating Milestone RAJAR weekly Consideration 2005 2004 profit / profit / beneficial adult audience achieved for (loss) 2005 (loss) 2004 ownership reach (Q4/05) disposal of Milestone shares and loans (Feb 2006) approx. £ £ £ £ Per cent £ Passion 107.9 178,000 320,000 (284,000) (156,000) 100 23,000 N.A.(Oxford) Kick FM (West 343,000 428,000 (119,000) (94,000) 55 18,000 658,000Berkshire) Kestrel FM 515,000 606,000 (10,000) 81,000 54 32,000 704,000(NorthHampshire) Rugby FM 466,000 432,000 6,000 (47,000) 52 27,000 645,000 Following the group's restructuring, completed in February 2006, Milestone'ssenior management expertise and resources are being concentrated on Passion107.9 in Oxford. In February 2006, following an enhanced transmission agreementwith Ofcom, Passion significantly increased the size of its Total Survey Area as measured by RAJAR (now encompassing 236,000 adults), offering enhancedsales and marketing opportunities. The Board recognises that it is challenging for Passion to operate as astand-alone unit in an area with well established commercial competition. InMarch 2006 Ofcom advertised a new FM licence for Oxford/south Oxfordshire. Ofcomcurrently awards all new FM licences by means of a 'beauty parade'. On thisbasis, it is the opinion of the Board that the group possesses the skills,experience and resources to launch a complementary station to Passion in Oxford,whilst achieving substantial cost and sales synergies. The Board recognises the further challenge and opportunity created by theplanned advertisement by Ofcom of a new terrestrial DAB digital radio multiplexfor Oxfordshire, potentially within the next 12 months. According to Ofcom'sindicative predictions, the adult population within the primary protected areaserved by this multiplex may be as high as 767,000. The Board intends to furtherexplore appropriate opportunities to be a partner in the new digital radiomultiplex for Oxfordshire. Television Revenue £0.2 million (2004: £0.2 million), operating loss £0.3 million (2004:loss £0.5 million). Losses are continuing to fall following the implementation of a programme ofrestructuring and cost efficiencies, a focus on "advertisement features", jointsales pitches with Passion and the launch of new "public access" programminginitiatives. In the third quarter, the Board expects SIX TV to continue towardsa position much closer to break-even. Local news is the only type of mainstream news delivery in which TV is notcurrently the predominant platform provider in the UK. Milestone has alwaysrecognised that digital technology could change this, and has gained valuableexperience developing local services under its "SIX TV" brand broadcasting inOxford and Southampton. In January 2006, Ofcom announced that it is extending all analogue terrestrialLocal TV licences (such as that operated by SIX TV) until around the timedigital "switchover" takes place leading up to 2012. In the meantime, Milestonewelcomes Ofcom's commitment to consider further, with Government andstakeholders, appropriate policies that will help ensure a future roll-out forpublic service orientated Local TV content. Milestone strongly advocatesimmediate experiments of Local TV using digital terrestrial transmissions. New Chairman On 31 January 2006, the Board welcomed John Sanderson as its new Non-ExecutiveChairman. John's experience of advising entrepreneurial media companies hasalready proven an asset and he is a welcome addition to the Board. I would liketo take this opportunity to thank the former Chairman, Julian Blackwell, for hisadvice and support since the flotation of the group in 2003, and to wish himwell in the future. Finance & Dividend Policy On 17 February 2005, the Company placed 5,500,000 new ordinary shares withdirectors and institutional investors for a total of £1.1 million. Post-year-end, on 1 February 2006, the group announced the disposals of itsnon-wholly-owned radio assets, set out above, and a funding arrangement withManchester Securities Corporation, a connected company of Elliott InternationalLimited and Elliott Associates L.P., substantial shareholders in the company.The Board appreciates the long-standing support of the Elliott Group for thecompany. The proceeds from the asset sales have been used in part to repay the group'sdebts to Manchester Securities, with the remainder being allocated to reduce thegroup's reliance on banking facilities and provide ongoing working capital tothe group. Whilst Milestone's major shareholders have consistently demonstrated theircommitment to meet the financial requirements of the group, the Board is focusedon reducing the level of cash burn. The Board's intention is for the company to re-invest any net earnings tofinance and support its business and accordingly the directors do not intendthat the company shall pay dividends in the foreseeable future. The Board willcontinue to review the appropriateness of its dividend policy as the business ofthe group develops. Staffing The Board is grateful for the loyalty, dedication and commitment of staff acrossthe group, who ensure Milestone provides a high quality service to its clients. Extraordinary General Meeting As a consequence of the Board's prudent impairment of both goodwill andintercompany debts, the aggregate value of the Company's net assets is underfifty per cent of the Company's nominal called up share capital. The Board iscalling an extraordinary general meeting, to be held immediately following theGroup's annual general meeting on 28 April 2006, in order to enable shareholdersto consider this, as required under Section 142 of the Companies Act 1985. Outlook In the first five months of the new financial year, the radio and televisiondivisions performed broadly in line with management expectations. The publishingdivision continued to under-perform, incurring losses greater than anticipatedin a commercial advertising market that continues to deteriorate. SinceFebruary 2006, the group's senior management team, which formerly operatedacross multiple sites, has concentrated on its 100% owned businesses inOxfordshire and Hampshire. The group has established local brands and theBoard and management is committed to improving their performance against theback drop of the challenging market place. Whilst focusing on these businesses,the Board will continue to maintain its duty to carefully appraise all strategicoptions to maximise shareholder value. Andy CraigChief Executive Consolidated profit and loss account for the year ended 30 September 2005 2005 2004 Note £ £ Turnover 2 4,469,261 5,852,803 Cost of sales 2,925,009 3,351,014 _________ _________ Gross Profit 1,544,252 2,501,789 Distribution costs 118,375 123,875Administrative expenses: 3,4 Impairment of goodwill 6 3,316,960 2,884,549Other administrative expenses 3,956,054 5,891,833 7,273,014 8,776,382 _________ _________ (5,847,137) (6,398,468)Other operating income 5 13,826 68,806 _________ _________ Group operating loss 6 (5,833,311) (6,329,662) Share of operating loss in associated undertakings 14 171,253 229,750Loss on disposal of group operations 7 365,360 305,927 _________ _________ Loss on ordinary activities before interest (6,369,924) (6,865,339) Interest receivable - group 8 26,093 36,766 - associated undertakings 14 354 604Interest payable - group 9 (102,998) (11,735) - associated undertakings 14 (23,042) (21,341) _________ _________ Loss on ordinary activities before taxation (6,469,517) (6,861,045)Taxation on loss from ordinary activities 10,14 - (29,211) _________ _________ Loss on ordinary activities after taxation (6,469,517) (6,831,834)Minority interest 49,902 25,671 _________ _________ Loss for the financial year 21 (6,419,615) (6,806,163) _________ _________ Basic and diluted loss per share 11 (25.6)p (31.11) p _________ _________ All amounts relate to continuing activitiesAll recognised gains and losses are included in the profit and loss account Consolidated balance sheet at 30 September 2005 Note 2005 2005 2004 2004 £ £ £ £ Fixed assets Intangible assets 12 4,777,799 8,686,209 Tangible assets 13 752,594 1,011,068 Fixed asset investments 14 22,529 1,089,470 _________ _________ 5,552,922 10,786,747Current assets Debtors 15 1,023,910 1,392,062 Cash at bank and in hand 680,815 299,786 _________ ________ 1,704,725 1,691,848Creditors: amounts falling due within one year 16 2,138,448 1,909,633 _________ ________ Net current liabilities (433,723) (217,785) _________ _________ Total assets less current liabilities 5,119,199 10,568,962 Creditors: amounts falling due after more than one year 17 133,970 142,095 Provisions for liabilities and charges 19 22,523 15,395 _________ _________ 4,962,706 10,411,472 _________ _________ Consolidated balance sheet at 30 September 2005 (Continued) Note 2005 2004 £ £ Capital and reserves Called up share capital 20 2,760,510 2,210,510 Share premium account 21 7,692,985 7,222,235 Merger reserve 21 11,119,585 11,119,585 Profit and loss account 21 (16,654,472) (10,234,857) _________ _________ Equity shareholders' funds 22 4,918,608 10,317,473 Minority interests (equity) 44,098 93,999 _________ _________ 4,962,706 10,411,472 _________ _________ Company balance sheet at 30 September 2005 Note 2005 2005 2004 2004 £ £ £ £ Fixed assets Tangible assets 13 221,518 295,204 Investments 14 18,379 18,379 _________ ________ 239,897 313,583Current assets Debtors - due within 1 year 15 1,107,564 332,951 Debtors - due after more than 1 year 15 - 6,695,745 1,107,564 7,028,696Cash at bank and in hand 500,780 - _________ _________ 1,608,344 7,028,696Creditors: amounts falling duewithin one year 16 285,313 481,549 _________ _________ Net current assets 1,323,031 6,547,147 _________ _________ Total assets less current liabilities 1,562,928 6,860,730 Creditors: amounts falling due after more than one year 17 3,585,342 2,832,557 _________ _________ (2,022,414) 4,028,173 _________ _________ Capital and reserves Called up share capital 20 2,760,510 2,210,510 Share premium account 21 7,692,985 7,222,235 Profit and loss account 21 (12,475,909) (5,404,572) _________ _________ Equity shareholders' (deficit)/funds 22 (2,022,414) 4,028,173 _________ _________ Consolidated cash flow statement for the year ended 30 September 2005 Note 2005 2005 2004 2004 £ £ £ £ Net cash outflow from operating activities 27 (1,599,691) (1,776,239)Returns on investments andservicing of finance Interest received 26,093 36,766 Interest paid (102,998) (11,735) ________ _________ Net cash (outflow)/inflow from returnson investments and servicing of finance (76,905) 25,031 Capital expenditure Payments to acquire tangible fixed assets (15,166) (86,170) Receipts from sale of tangible fixed assets - 20,354 _________ _________Net cash outflow from capital expenditure (15,166) (65,816) Acquisitions and disposals Sale of business operations 7 514,768 1,250,000 Bank overdraft disposed of with business operations 7 - 12,027 Costs of disposal of business operations 7 - (151,479) Investment in associated undertaking 14 - (73,087) ________ ________Net cash inflow fromacquisitions and disposals 514,768 1,037,461 __________ _________ Cash outflow before financing (1,176,994) (779,563) Financing Issue of share capital 1,100,000 - Cost of issuing share capital (79,250) - Loan repayments (2,501) (2,298) Capital element of finance leases repaid (15,815) (44,039) Advances under invoice discounting 283,321 -agreements ________ _________ Cash inflow/(outflow) from financing 1,285,755 (46,337) _________ _________ Increase/(decrease) in cash in the year 28,29 108,761 (825,900) _________ _________ Notes 1 Accounting policies The financial statements have been prepared under the historical costconvention, and are in accordance with applicable accounting standards. 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 loss for the year ended 30 September2005 is £7,071,337 (2004 - £3,642,763). The following principal accounting policies have been applied: Going concern The directors have produced forecasts that suggest that the group has sufficientfunding to enable it to continue its operations in the foreseeable future. Thedirectors have prepared these financial statements on a going concern basiswhich assumes in particular the maintenance of the forecast levels of revenue.In the longer term the trading subsidiaries will either need to significantlyimprove their trading performance or the directors will seek funding from othersources or make strategic asset sales to provide the financial support that thegroup requires. The financial statements do not include any adjustments that would arise if thegoing concern basis of preparation became no longer appropriate. Basis of consolidation The consolidated financial statements incorporate the results of Milestone GroupPLC and all of its subsidiary undertakings as at 30 September 2005 using theacquisition method of accounting. Under the acquisition method, the results ofsubsidiary undertakings are included from the date of acquisition. Valuation of 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. Notes (Continued) 1 Accounting policies (continued) 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 profitand loss 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 and computer and office equipment - 12.5%-33% per annum, or over the period of the licencePlant and machinery - 10-50% per annumProduction 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. Financial instruments In relation to the disclosures made in note 18: • short term debtors and creditors are not treated as financial assets or financial liabilities;• the group does not hold or issue derivative financial instruments for trading purposes. Notes (Continued) 1 Accounting policies (continued) Deferred taxation 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. 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. 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. 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. Notes (Continued) 2 Turnover, loss and net assets The turnover, pre tax loss 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. Turnover Pre-tax loss Turnover Pre-tax loss 2005 2005 2004 2004 £ £ £ £ Analysis by class of business: Publishing Division - group 2,855,785 (3,705,636) 3,721,833 (517,283)Radio Division: Group 1,437,732 (1,447,331) 1,890,203 (3,951,751) Associated undertakings - (193,940) - (236,799)Television Division - group 175,744 (239,708) 240,767 (1,113,164) ________ _________ ________ _________ 4,469,261 (5,586,615) 5,852,803 (5,818,997) Head office costs - (882,902) - (1,042,048) ________ _________ ________ _________ 4,469,261 (6,469,517) 5,852,803 (6,861,045) _________ _________ ________ _________ Net assets Net assets 2005 2004 £ £Net operating assets: Publishing Division - group 2,274,490 6,137,337Radio Division: Group 2,211,575 3,430,653 Associated undertakings (22,523) 1,051,546Television Division - group (82,782) (84,879) _________ _________ 4,380,760 10,534,657 Head office cost assets/(liabilities) 581,946 (123,185) _________ _________ 4,962,706 10,411,472 _________ _________ Notes (Continued) 3 Employees The average number of employees of the group during the year, includingexecutive directors, was as follows: 2005 2004 Number Number Sales, operations and administration 100 132Management 9 12 _________ ________ 109 144 _________ ________ Staff costs for all employees, including executive directors, consist of: 2005 2004 £ £ Wages and salaries 2,585,389 2,769,061Social security costs 245,343 281,872Pension costs 23,335 25,528 _________ ________ 2,854,067 3,076,461 _________ ________ 4 Directors' remuneration 2005 2004 £ £ Directors' emoluments and fees 314,235 249,774Company contributions to money purchase pension schemes 21,000 21,000 _________ _______ There were two directors in the company's defined contribution pension schemeduring the year (2004 - 2). Further disclosures on the remuneration of each individual director is includedin the Remuneration Report. 5 Other operating income 2005 2004 £ £ Other operating income 13,056 15,708Rental income 770 53,098 ________ _______ 13,826 68,806 ________ _______ 6 Operating loss 2005 2004 £ £This is arrived at after charging: Depreciation 283,933 242,376Loss on disposal of fixed assets 791 14,719Amortisation of goodwill arising on consolidation 591,450 1,580,121Hire of plant and machinery - operating leases 128 17,138Hire of other assets - operating leases 31,034 85,233Hire of land and buildings - operating leases 138,000 139,500Auditors' remuneration - audit services (2005: company £74,000) (2004: company £47,000) 142,000 127,000 - non-audit services 49,600 65,095Impairment of goodwill 3,316,960 2,884,549 _________ ________ The directors have considered the carrying value of goodwill in accordance withFRS 11 "Impairment of Fixed Assets and Goodwill". Based on their review theyhave concluded that the goodwill is impaired and have therefore written it downto the recoverable amount based on net realisable value. 7 Disposal of group operations On 24 August 2005, the group disposed of Reading Broadcasting Limited. The loss on disposal has been calculated as follows: Total £ Cash proceeds 514,768 Net assets disposed of (880,128) ________ Loss on disposal (365,360) ________ 8 Interest receivable 2005 2004 £ £ Bank interest 5,121 8,267Interest from associated undertaking 20,972 21,354Other interest - 7,145 ________ _______ 26,093 36,766 ________ _______ 9 Interest payable and similar charges 2005 2004 £ £ Bank loans and overdrafts 45,313 11,694Finance lease and hire purchase interest - 41Other loans 57,685 - ________ _______ 102,998 11,735 ________ _______ 10 Taxation on loss from ordinary activities 2005 2004 £ £UK corporation taxCurrent tax on losses of the year - - Deferred taxOrigination and reversal of timing differences - (15,523) Other taxShare of associated undertaking's tax credit - (13,688) ________ _______ Taxation on loss from ordinary activities - (29,211) ________ _______ The tax assessed for the year is different than the standard rate of corporationtax in the UK. The differences are explained below: 2005 2004 £ £ Loss on ordinary activities before tax (6,469,517) (6,861,045) _________ ________ Loss on ordinary activities at the standard rateof corporation tax in the UK of 19% (2004 - 19%) (1,229,208) (1,303,599) Effects of:Expenses not deductible for tax purposes 789,597 543,154Capital allowances for year in excess of depreciation 41,925 11,839Unutilised tax losses 487,790 846,110Income not taxable for tax purposes (80,669) (75,105)Utilisation of tax losses (6,461) (19,517)Other items (2,974) (2,882) ________ _________ Current tax charge for the year - - ________ _________ 10 Taxation on loss from ordinary activities (continued) Factors that may affect future tax charges Deferred tax assets of approximately £1.8 million (group) and £500,000 (company)(2004 - £1.5 million (group) and £155,000 (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 £9.1 million (2004 - £8million) available for relief against future profits, subject to agreement by HM Revenue & Customs. 11 Loss per share Basic loss per share has been calculated in accordance with FRS 14. Basic lossper share has been calculated by dividing the loss on ordinary activities beforetaxation by the weighted average number of ordinary shares in issue during theyear. The weighted average number of equity shares in issue was 25,118,794(2004 - 21,877,541) and the loss was £6,419,615 (2004 - £6,806,163). 12 Intangible assets Group Goodwill on consolidation £Cost At 1 October 2004 and at 30 September 2005 14,347,031 _________ Amortisation and impairment At 1 October 2004 5,660,822 Provided for the year 3,908,410 _________ At 30 September 2005 9,569,232 _________ Net book value At 30 September 2005 4,777,799 _________ At 30 September 2004 8,686,209 _________ Included within the amortisation charge for the year is an amount of £3,316,960(2004 - £2,884,549) in respect of the impairment in value of goodwill, asdetailed in note 6. 13 Tangible assets Fixtures, fittings, Production Leasehold equipment and studio Motor Group improvements and plant equipment vehicles Total £ £ £ £ £ Cost At 1 October 2004 395,521 1,108,237 568,395 91,175 2,163,328 Additions - 26,250 - - 26,250 Reclassification (1,318) 1,318 - - - Disposals - (2,374) - (13,084) (15,458) _______ ________ _______ _______ ________ At 30 September 2005 394,203 1,133,431 568,395 78,091 2,174,120 _______ ________ _______ _______ ________ Depreciation At 1 October 2004 183,365 602,120 286,359 80,416 1,152,260 Provided for the year 60,520 147,664 66,773 8,976 283,933 Reclassification (879) 879 - - - Disposals - (1,583) - (13,084) (14,667) _______ _______ _______ _______ ________ At 30 September 2005 243,006 749,080 353,132 76,308 1,421,526 _______ _______ _______ _______ ________ Net book value At 30 September 2005 151,197 384,351 215,263 1,783 752,594 _______ _______ _______ _______ ________ At 30 September 2004 212,156 506,117 282,036 10,759 1,011,068 _______ _______ _______ _______ ________ The net book value of tangible fixed assets for the group includes an amount of£27,798 (2004 - £24,345) 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 £7,122 (2004 - £1,678)for the year. 13 Tangible assets (continued) Production Computer Leasehold and studio Fixtures and officeCompany improvements equipment and fittings equipment Total £ £ £ £ £ CostAt 1 October 2004 1,318 275,000 12,759 128,264 417,341Additions - - - 4,151 4,151Transfer to subsidiary (1,318) - - - (1,318) _______ ________ _______ _______ ________ At 30 September 2005 - 275,000 12,759 132,415 420,174 _______ ________ _______ _______ ________ DepreciationAt 1 October 2004 615 - 7,663 113,859 122,137Charge for the year 264 64,162 4,174 8,798 77,398Transfer to subsidiary (879) - - - (879) _______ ________ _______ _______ ________ At 30 September 2005 - 64,162 11,837 122,657 198,656 _______ ________ _______ _______ ________Net book valueAt 30 September 2005 - 210,838 922 9,758 221,518 _______ _______ _______ _______ ________ At 30 September 2004 703 275,000 5,096 14,405 295,204 _______ _______ _______ _______ _______ 14 Fixed asset investments Other AssociatedGroup investment undertakings Total £ £ £CostAt 1 October 2004 22,529 1,358,487 1,381,016Disposal - (1,358,487) (1,358,487) _______ ________ ________ At 30 September 2005 22,529 - 22,529 _______ ________ ________Share of retained lossesAt 1 October 2004 - 291,546 291,546Share of losses for the year - 186,813 186,813Disposal - (478,359) (478,359) _______ ________ ________ At 30 September 2005 - - - _______ ________ ________Net book valueAt 30 September 2005 22,529 - 22,529 _______ ________ ________ At 30 September 2004 22,529 1,066,941 1,089,470 _______ ________ ________ 14 Fixed asset investments (continued) The other investment represents a 13% shareholding of Milestone Radio HoldingsLimited in CKFM Kernow Limited. The book value of this investment is notmaterially different to the market value. A 37% shareholding of The Milestone Radio Company Limited in ReadingBroadcasting Company Limited was disposed of in August 2005. Included within the carrying value of associated undertakings is goodwill of£Nil (2004 - £1,408,038) and the share of operating losses for the year includesa goodwill amortisation charge of £103,773 (2004 - £110,162). The group had the following interests in Reading Broadcasting Company Limited,an associated undertaking as at the date of disposal: 2005 2005 2004 2004 £ £ £ £ Share of turnover 242,678 263,923 ________ ________Share of assetsShare of fixed assets 54,675 68,858Share of current assets 18,067 76,189 ________ ________ 72,742 145,047Share of liabilitiesDue within one year (32,521) (44,818)Due after more than one year (464,356) (441,325) ________ ________ (496,877) (486,143) ________ ________ Share of net liabilities (424,135) (341,096) ________ ________ 14 Fixed asset investments (continued) Shares in subsidiaryCompany undertakings £CostAt 1 October 2004 and at 30 September 2005 2,645,385 _________Provision for diminution in valueAt 1 October 2004 and at 30 September 2005 2,627,006 _________Net book valueAt 30 September 2005 18,379 _________ At 30 September 2004 18,379 _________ Subsidiary and associated undertakings At 30 September 2005, the principal investments of the group, all of which havebeen included in the consolidated financial statements were as stated below: Principal subsidiary undertakings Proportion of voting rights and ordinaryName Nature of business share 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 (3) Holding Company 100Aroma Broadcasting Limited (4) Holding Company 100Oxford Broadcasting Limited (1) Television Broadcasting 100Soundview Investments Limited (1) Holding Company 100Listenear Limited (5) Media Consultancy 100Milestone Radio Holdings Limited (5) Holding Company 100Milestone Radio Group Limited (6) Holding Company 100Links Investments Limited (6) Holding Company 100Passion Radio (Oxford) Limited (6) Radio Broadcasting 100Jazztech Limited (6) Holding Company 100Milestone Radio Stations Limited (7) Holding Company 100Milestone Radio Sales Limited (7) Radio Advertising and Management Services 100Milestone FM Limited (8) Holding Company 100The Milestone Radio Company Limited (9) Holding Company 100Milestone Pictures Limited (9) Holding Company 100Newbury Community Radio (Investments) Limited (10) Holding Company 100Rugby Broadcasting Company Limited (10) Radio Broadcasting 52Kestrel FM Limited (11) Radio Broadcasting 54West Berkshire Radio Limited (12) Radio Broadcasting 55 14 Fixed asset investments (continued) Principal associated undertaking and participating interest Proportion of voting rights and ordinary Name Nature of business share capital held The Burn FM Limited (13) Radio Broadcasting 44 All undertakings listed above were incorporated or registered in the United Kingdom. All undertakings operate from the United Kingdom. 1. Subsidiary undertakings held by Milestone Group PLC.2. Subsidiary undertakings held by Tri Media Publishing Limited.3. Subsidiary undertaking held by Milestone Television Limited.4. Subsidiary undertaking held by Six TV Limited.5. Subsidiary undertakings held by Soundview Investments Limited.6. Subsidiary undertakings held by Milestone Radio Holdings Limited.7. Subsidiary undertakings held by Milestone Radio Group Limited.8. Subsidiary undertaking held by Links Investments Limited.9. Subsidiary undertakings held by Jazztech Limited.10. Subsidiary undertakings held by The Milestone Radio Company Limited.11. Subsidiary undertaking held by The Milestone Radio Company Limited and Milestone Pictures Limited.12. Subsidiary undertaking held by Newbury Community Radio Investments Limited and The Milestone Radio Company Limited.13. Associated undertaking held by Milestone Radio Holdings Limited. 15 Debtors Group Company Group Company 2005 2005 2004 2004 £ £ £ £ Trade debtors 680,881 1,560 978,361 3,212Amounts due from subsidiary undertakings - 962,603 - 6,966,848Amounts due from associated undertakings - - 29,565 28,390Other debtors 120,354 114,953 66,384 9,458Corporation tax recoverable - - 1,835 -Prepayments and accrued income 222,675 28,448 315,917 20,788 ______ ________ ________ ________ 1,023,910 1,107,564 1,392,062 7,028,696 ________ ________ ________ ________ With the exception of £Nil included in amounts due from subsidiary undertakings(2004 - £6,695,745 (company)), all amounts fall due for payment within one year. 16 Creditors: amounts falling due within one year Group Company Group Company 2005 2005 2004 2004 £ £ £ £ Bank loans and overdrafts (secured) 754,397 - 482,129 40,569 Trade creditors 469,793 126,588 683,834 239,168 Amounts due to subsidiary undertakings - - - 1,312 Other creditors 96,779 4,888 79,659 6,499 Taxation and social security 163,341 40,965 326,562 109,932 Directors' loan account 13,950 - 13,950 - Obligations under finance leases and hire purchase contracts 11,882 - 10,989 - Advances under invoice 283,321 - - - discounting arrangements Accruals and deferred income 344,985 112,872 312,510 84,069 ________ ________ ________ _______ 2,138,448 285,313 1,909,633 481,549 ________ ________ ________ _______ The bank loans and overdrafts and advances under invoice discountingarrangements are secured by a fixed and floating charge over all the current andfuture assets of the group and the company. There is also a composite guarantee dated 14 June 2001 between the followingcompanies: Milestone Group PLC, Milestone Radio Holdings Limited, MilestoneRadio Group Limited, Links Investments Limited, Passion Radio (Oxford) Limitedand Milestone Radio Sales Limited (see note 26). The amount of factored debtors outstanding at 30 September 2005 was £377,761(2004 - £Nil). The obligations under finance leases and hire purchase contracts carry interestat an effective rate of 10.2% over the life of the contract. The advances underinvoice discounting arrangements carry a discounting charge of 2% above baserate. 17 Creditors: amounts falling due after more than one year Group Company Group Company 2005 2005 2004 2004 £ £ £ £ Bank loan 5,400 - 7,901 -Amounts owed to subsidiary undertakings - 3,585,342 - 2,832,557Obligations under finance leasesand hire purchase contracts - - 5,624 -Other loans 128,570 - 128,570 - _________ ________ ________ ________ 133,970 3,585,342 142,095 2,832,557 _________ ________ ________ ________ 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 represent interest-free shareholder loans with no fixedrepayment dates. 17 Creditors: amounts falling due after more than one year (continued) Group Finance Finance leases leases Bank and hire Bank and hire loans and purchase loans and purchase overdrafts contracts overdrafts contracts 2005 2005 2004 2004 £ £ £ £ Maturity of debt: In one year or less, or on demand 754,397 11,882 482,129 10,989 ________ ________ _______ _______ In more than one year but not more than two years 3,118 - 3,118 5,218 In more than two years But not more than five years 2,282 - 4,783 406 ________ ________ _______ _______ 5,400 - 7,901 5,624 ________ ________ _______ _______ 18 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 13 "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 2005 2004 £ £ Cash at bank and in hand 680,815 299,786 _________ _______ As at 30 September 2005, £680,815 (2004 - £299,786) 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. 18 Financial instruments (continued) Financial liabilities The group's financial liabilities were: Floating rate Interest freeAs at 30 September 2005 financial liabilities financial liabilities £ £ Bank loans and overdrafts - due in less than 1 year 754,397 -Amounts due under invoice discountingarrangements - 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 _______ _______ Floating rate Interest freeAs at 30 September 2004 financial liabilities financial liabilities £ £ Bank loans and overdrafts - due in less than 1 year 482,129 -Bank loans - due in more than 1 year 7,901 -Other loans - due in more than 1 year - 128,570 _______ _______ Financial liabilities The group's financial liabilities falling due within one year of £1,037,718 at30 September 2005 (2004 - £482,129) comprised three bank overdrafts and aninvoice discounting arrangement. The overdrafts were provided by NationalWestminster Bank Plc, Barclays Bank Plc and HSBC. At the year end the amountsoutstanding in respect of each of these overdrafts was £670,582 (2004 -£384,396), £27,390 (2004 - £94,614) and £53,307 (2004 - £nil) respectively. Allof the overdrafts were repayable on demand. At 30 September 2005 the remainingbalance of £3,118 (2004 - £3,119) related to a flexible business bank loan, asreferred to below. The group also had amounts due under an invoice discountingarrangement at the year end totalling £283,321 (2004 - £nil), comprising of abalance for Courier Newspapers (Oxford) Limited of £242,021 and £41,300 forBasingstoke Observer Limited. 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 2005 the bank rate was 4.5% (2004 - 4.75%). 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. During the year the group entered into an invoice discounting arrangement withThe Royal Bank of Scotland Commercial Services. This arrangement provides amaximum invoice discounting facility of £550,000 for Courier Newspapers (Oxford)Limited and £200,000 for Basingstoke Observer Limited. The maximum facilityavailable is based on a draw down of 75% of the value of gross invoices raisedby the respective companies, capped at £733,333 for Courier Newspapers (Oxford)Limited and £266,667 for Basingstoke Observer Limited. This arrangement issecured by a fixed and floating charge over the assets of each company. 18 Financial instruments (continued) Financial liabilities The overdraft facility of £50,000 provided by Barclays Bank Plc, carriedinterest at 3% per annum over the bank's base rate. At 30 September 2005 thebank base rate was 4.5% (2004 - 4.75%). 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 due for review in November2005 and although still available to the group has been reduced to £25,000. As at 30 September 2005 the group also had available to it a further facility of£50,000 (2004 - £50,000) from HSBC. This facility was due for review in January2006 and although still available to the group has been reduced to £20,000. The group's financial liabilities falling due after more than one year at 30September 2005 of £5,400 (2004 - £7,901) 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 other loans do not have a fixed repayment date but are expected to be repaidwithin five years. The fair value at the balance sheet date is not considered tobe materially different from the book value. 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 thatthe overdraft facilities provided bore interest at approximately 3% above thebank base rate. This interest rate was subject to change. The directors considered the fair value of the group's financial assets andliabilities to be the same as their book values. Other facilities available subsequent to the year end Subsequent to the year end, on 29 November 2005, Elliott International L.P. madeavailable to the company up to £550,000 15% guaranteed senior secured notes, toprovide necessary working capital for the group's operations. This arrangementwas scheduled to mature at the earlier of 31 March 2006 or the occurrence of anyequity placing (or series of equity placing) by the company, or asset disposalwhich in aggregate exceeds £550,000 on a net basis. The company was required to use 100% of the proceeds of asset disposals, capitalevents and insurance claims to redeem the notes at 105% of par value pluscapitalised interest and any accrued but uncapitalised interest. In addition,the company was required to redeem the notes in full upon the occurrence of achange of control at 110% of par value, plus capitalised interest and anyaccrued but uncapitalised interest. 18 Financial instruments (continued) 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. Theloan notes bore interest at 15 per cent. per annum and were repayable (subjectto a repayment fee of 5 per cent. of the value of the notes) out of the proceedsof any 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. These arrangements was secured by a fixed and floating charge over the assets ofthe company and those of The Milestone Radio Company Limited. On disposal of certain subsidiaries in February 2006 (see note 31) all amountswere settled in respect to these arrangements. 19 Provision for liabilities and charges AssociatedGroup undertakings £CostAt 1 October 2004 and at 30 September 2005 7,788 ________Share of retained lossesAt 1 October 2004 (23,183)Share of losses for the year (7,128) ________ At 30 September 2005 (30,311) ________Net book valueAt 30 September 2005 (22,523) ________ At 30 September 2004 (15,395) ________ The associated undertakings represent a 44% shareholding of Milestone RadioHoldings Limited in The Burn FM Limited. 20 Share capital Group and company Group and company 2005 2005 2004 2004 £ Number £ NumberAuthorised Ordinary shares of 10p each 5,000,000 50,000,000 5,000,000 50,000,000 _________ _________ _________ _________ Group and company Group and company 2005 2005 2004 2004 £ Number £ NumberAllotted, called up and fully paid Ordinary shares of 10p each 2,760,510 27,605,095 2,210,510 22,105,095 _________ _________ ________ _________ On 14 March 2005, 5,500,000 ordinary shares of 10p each were issued and creditedas fully paid for a consideration of £1,100,000. The difference between thenominal value of the shares issued and the consideration paid of 20p per sharehas been credited to the share premium account (see note 21). Share options At 30 September 2005 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 2005, 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 24/06/2013 Brian Chester 25/06/2003 432,000 100 26/06/2006 to 24/06/2013 Dan 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 is exercisable at any time during a three year period followingthe group's admission to the Alternative Investment Market at an exercise priceof £1. At 30 September 2005, no share options had been issued under the Milestone GroupPLC 2003 Approved Share Option Scheme. 21 Reserves Share Profit premium Merger and loss account reserve account Group £ £ £ At 1 October 2004 7,222,235 11,119,585 (10,234,857) Loss for the year - - (6,419,615) Premium on shares issued in the year (see note 20) 550,000 - - Share issue costs (79,250) - - _________ _________ _________ At 30 September 2005 7,692,985 11,119,585 (16,654,472) _________ _________ _________ Share Profit premium and loss Company account account £ £ At 1 October 2004 7,222,235 (5,404,572) Loss for the year - (7,071,337) Premium on shares issued in the year (see note 20) 550,000 - Share issue costs (79,250) - _________ ________ At 30 September 2005 7,692,985 (12,475,909) _________ ________ 22 Reconciliation of movements in shareholders' funds Group Company Group Company 2005 2005 2004 2004 £ £ £ £ Loss for the year (6,419,615) (7,071,337) (6,806,163) (3,642,763) Shares issued in the year 550,000 550,000 50,512 50,512 Merger reserve - - 229,607 - Premium on shares issued in the year 550,000 550,000 225,000 225,000 Share issue costs (79,250) (79,250) - - _________ ________ _________ ________ Net reduction in shareholders' funds (5,398,865) (6,050,587) (6,301,044) (3,367,251) Opening shareholders' funds 10,317,473 4,028,173 16,618,517 7,395,424 _________ ________ ________ ________ Closing shareholders' funds 4,918,608 (2,022,414) 10,317,473 4,028,173 _________ _________ _________ _________ 23 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. 24 Commitments under operating leases As at 30 September 2005, the group had annual commitments under non-cancellableoperating leases as set out below: Land and Land and buildings Other buildings Other 2005 2005 2004 2004 £ £ £ £ Operating leases which expire: Within one year 5,847 25,688 - 12,684 In two to five years 182,250 93,569 161,102 28,564 After five years - - 34,380 - ________ ________ _______ _______ 188,097 119,257 195,482 41,248 ________ ________ _______ _______ 25 Related party transactions During the year subsidiary undertakings of Milestone Group PLC made purchasesamounting to £14,000 (2004 - £21,448) from MGH Investments Limited. Amounts owedby these companies to MGH Investments Limited at 30 September 2005 amounted to£3,440 (2004 - £5,123). Mr A T Craig is an executive director of the company andMGH Investments Limited is a company in which he has a controlling interest. As at 30 September 2005 an amount of £8,500 (2004 - £8,500) was owed to JBlackwell, a non-executive director of the company. This was the maximum amountoutstanding at any time during the year. No interest is charged in respect ofthis balance. As at 30 September 2005 a directors' loan account of £5,450 (2004 - £5,450)existed. This was the maximum amount outstanding at any time during the year. Nointerest is charged in respect of this balance. 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 2005,6,280,413 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 17 and 18 to these financial statements. 26 Contingent liabilities Milestone Radio Holdings Limited has a gross group overdraft facility withcertain subsidiary undertakings up to a limit of £350,000 (2004 - £300,000). At30 September 2005 the liabilities covered by this facility totalled £670,582(2004 - £378,432). 27 Reconciliation of operating loss to net cash outflow from operating activities 2005 2004 £ £ Operating loss (5,833,311) (6,329,662) Amortisation and impairment of intangible fixed assets 3,908,410 4,464,670 Loss on disposal of fixed assets 791 14,719 Depreciation of tangible fixed assets 283,933 242,376 Decrease/(increase) in debtors 368,150 (132,131) Decrease in creditors (327,664) (36,211) ________ ________ Net cash outflow from operating activities (1,599,691) (1,776,239) _________ ________ 28 Reconciliation of net cash outflow to movement in net debt 2005 2004 £ £ Increase/(decrease) in cash 108,761 (825,900) Cash (inflow)/outflow from changes in debt, lease financing and advances under invoice discounting agreements (265,005) 46,337 ________ _______ Movement in net debt resulting from cashflows (156,244) (779,563) Inception of finance leases (11,084) (39,665) ________ _______ Movement in net debt (167,328) (819,228) Opening net debt (206,857) 612,371 ________ _______ Closing net debt (374,185) (206,857) ________ _______ 29 Analysis of net debt At Other At 30 September Cash non-cash 30 September 2004 flow items 2005 £ £ £ £ Cash at bank and in hand 299,786 381,029 - 680,815 Bank overdrafts (482,129) (272,268) - (754,397) _______ ________ ________ _______ (182,343) 108,761 - (73,582) Debt due after one year (7,901) 2,501 - (5,400) Finance leases (16,613) 15,815 (11,084) (11,882) Advances under invoice discounting arrangements - (283,321) - (283,321) _______ ________ ________ _______ Total (206,857) (156,244) (11,084) (374,185) _______ ________ ________ _______ 30 Major non-cash transactions During the year the group entered into finance lease arrangements for assetswith a total capital value at the inception of the leases of £11,084 (2004 -£39,665). 31 Post balance sheet events On 17 February 2006, the company completed the sale of its beneficial 54 percent. shareholding (held through subsidiaries of the company) in Kestrel FMLimited to Provincial Broadcasting Companies Limited ("Provincial") for aconsideration of approximately £594,000. In addition, the company and relatedgroup companies have assigned to Provincial the outstanding loans due to themfrom Kestrel FM Limited for a consideration of approximately £110,000. Theconsideration is subject to an adjustment (upwards or downwards) based on thenet asset value of Kestrel FM Limited at the time of the completion. On 17 February 2006, the company completed the sale of its beneficial 55 percent. shareholding (held through subsidiaries of the company) in West BerkshireRadio Limited trading as Kick FM, to Provincial for a consideration ofapproximately £490,000. In addition, the company and related group companieshave assigned to Provincial the outstanding loans due to them from WestBerkshire Radio Limited for a consideration of approximately £168,000. Theconsideration is subject to an adjustment (upwards or downwards) based on thenet asset value of West Berkshire Radio Limited at the time of the completion. On 17 February 2006, the company and its subsidiaries received £1,302,000representing the first instalment of the aggregate consideration due fromProvincial for the transfer of the shares and loans in Kestrel FM Limited andWest Berkshire Radio Limited. The company and its subsidiaries have agreed todefer in aggregate £60,000 of the consideration due in relation to the salesfrom Provincial until 30 September 2006. On 28 February 2006, the company completed the sale of its beneficial 52 percent. shareholding (held at that time through the Milestone Radio CompanyLimited) in Rugby Broadcasting Company Limited trading as Rugby FM, to CN GroupLimited. The total consideration of approximately £644,000 was received on 28February 2006. As at 30 September 2005 the net asset value and the attributable goodwill inrespect to these disposals was: Net asset Attributable value goodwill £ £Kestrel FM Limited 26,659 567,341West Berkshire Radio Limited (99,401) 589,401Rugby Broadcasting Company Limited 159,504 485,457 No tax arose in respect to these transactions. As the disposal of these companies took place more than three months after theyear end their results have been included in the consolidated profit and lossaccount and have been classified as continuing operations. This information is provided by RNS The company news service from the London Stock Exchange