DCD.L Regulatory News (DCD)

1 Dec 2008 07:00

Embargoed: 0700hrs, 1 December 2008

DCD MEDIA PLC

("DCD" or the "Group")

Final Results for the Year Ended 30 June 2008

DCD Media plc produces and distributes high quality factual, entertainment, drama, music and arts programming for television, DVD, and new media. The Group also stages and manages related media events.

The acquisition earlier this year of three highly established production companies progressed a year of growth further broadening the Group's reach geographically and diversifying the risk profile across new genre areas.

Financial Highlights

Revenue increased by 27% to £34.0m (2007: £26.8m)

Gross profit (Note 1)  increased 24% to £7.2m (2007: £5.8m)

Adjusted Profit Before Tax (Note 2) up 136% to £2.6m (2007: £1.1m) 

Loss Before Tax (Note 3) £25.4m (2007: £0.8m profit) 

Adjusted EBITDA (Note 4) up 124% to £3.8m (2007: £1.7m) 

Refer to table within the Financial Review section below for a reconciliation of the adjustments:

Note 1  Before impairment of programme rights charges (£2.3m)

Note 2: Profit Before Tax result adjusted for restructuring cost, amortisation and impairment charge 

Note 3: Statutory loss before tax as reflected on the face of the Income Statement 

Note 4: Adjusted EBITDA  equals EBITDA excluding restructuring costs

Operational Highlights

The most recent trio of acquired companies cemented their position within the Group:  

September Films had its best year with notable development in the US

Prospect Pictures began to add major documentaries to its lifestyle television business; and

West Park Pictures performed well with significant documentary series showcasing major talent

DCD's drama division produced  prime-time output for BBC One and ITV1 while its Arts division achieved acclaim 

The Group added three interactive series to its event-staging and concert-filming business Done and Dusted

The Group has brought forward tax losses with minimal corporation taxes expected to be paid for the foreseeable future 

Post Balance Sheet Events

Towards the year end and during November 2008 the Group re-organised its Board and Management structure to accommodate the changing requirements of the enlarged Group

A new deal signed which will assist the growth of the distribution division, now branded as DCD Rights

DCD's performing arts library completed a seven figure deal to supply content for new media distribution

DCD Publishing set up as a standalone operation with a pipeline of deals already in place 

The Company agreed with the holders of the Group's Convertible Loan Notes to extend the redemption dates for the outstanding Notes amounting to approximately £9.9 million (including £2.6 million purchased by a major shareholder) until December 2009 

David Elstein, Chairman of DCD Media, commented,

"DCD has continued its expansion and shown that our acquisition and consolidation strategy is appropriate in these difficult times. We are probably one of the most broadly based of the UK quoted independent TV companies and, with the recent deal within DCD Rights, we will further broaden the catalogue of titles which can generate future income streams.

The Group has an exciting creative core and a broad-based recently re-structured management team, who together make DCD Media a key player in the UK TV production and distribution sector. Recent initiatives have begun to develop a more efficient back office support function, and strengthen both production and distribution activities. The cost savings arising from these new initiatives are anticipated to flow during the current year.

Furthermore, the Group has resolved its recent issues surrounding the Convertible Loan Note terms.  The support shown by our major shareholder in buying the loan notes has allowed DCD to renegotiate the terms to a more favourable and stable position for DCD shareholders. The Group now has a more robust financial footing and the employees and management are excited about the future prospects of the business.

The current trading year should show further progress, with the first full twelve months of contributions from the most recent trio of acquisitions and the added momentum of the recent post balance sheet events which strengthen the Group."

For further information please contact:

John McIntosh, Finance Director

DCD Media plc 

Tel. 020 7297 8000

Ben Simons

M: Communications

Tel. 020 7153 1540

Tom Price/Jeremy Ellis

Evolution Securities

Tel. 020 7071 4300 

Chairman's Statement

On behalf of the board, I am pleased to present the annual results for the Group for the year ended June 30th 2008.

During this financial year, DCD Media has set itself the target of growth by two primary means: internal development of new programme strands and business divisions, plus enlargement of the Group's breadth and capacity.

Revenue in FY2008 was 27% up on the previous year. What was just three years previously a Group with revenue of £3.1m, is now a significant production and distribution business with revenue of £34.0m.

Each of the streams within the Group has made significant contributions, though there was slippage from FY2008 into FY2009 for two major concerts and two big drama projects. Despite this, Done and Dusted saw a growth in its coverage of major annual awards, initiated three ground-breaking interactive series for mobiles and the web, and continued to film major concerts; while Box TV completed its first substantial drama series The Last Enemy and its big event drama Affinity. 

The factual divisions performed strongly over a wide range of areas, including major documentary series fronted by Stephen Fry for West Park Pictures and Alan Whicker for September Films, while Prospect Pictures produced its first feature film documentary to contrast with its variety of cookery series.

Our distribution division, now rebranded DCD Rights, continued to grow and performed to expectations, while the classical library had its best year.  A new initiative also marks a step change in DCD Rights distribution operations, increasing its capacity and enabling it to represent more major programming, from international dramas and factual and reality series to individual documentaries. This has been enabled without any material increase of overhead costs. 

We have also created a new division, DCD Publishing, to exploit retail rights such as book, DVD and merchandising spin-offs.

Board Changes

As announced on the 24th November 2008 Chris Hunt left his role within the Group and is expected to return to creative programme-making and pursue other business interests. David Green, founder of September Films Limited and a Director of the Company since June 2008, has agreed to become Acting CEO, whilst continuing his responsibilities as Chief Creative Officer. During the period John McIntosh, the Chief Financial Officer, joined the Board as Finance Director, while Nicky Davies Williams, Justin Thomson Glover and more recently Michael Barton stepped down from the Board. Jim Hytner, previously at Barclays Bank, ITV, Five and BSkyB joined the Board as a non-executive director. Two new non-executive directors will be appointed in due course.

Financial Review

With revenue increasing from £26.8m in FY2007 to £34.0m in FY2008, the performance of the enlarged business has driven gross trading profit to £7.2m up 24% from £5.8m in the prior year.  Gross margin remained steady at 21% (2007: 21%). 

The profit for the year has been impacted by an impairment review and the re-organisation which occurred prior to the year end. The Group's statutory loss before tax after performing this impairment review was £(25.4m) (2007: £0.8m profit) driven by the significant write-down in carrying value of prior year goodwill and certain programme rights. 

The impairment review performed by the Group's management covered goodwill and programme valuations in the Group balance sheet. The basis for the review which is detailed in note 4 was to ensure that the Group reflected a prudent valuation of its investment in the overall production division in the current economic climate. The resulting non-cash impairment charges are not part of the trading performance of the Group's operations, and have to be adjusted to arrive at the normal operating performance of the business.

The measure used by the Group to indicate operating performance aims to reflect normalised trading before exceptional, restructuring items, non cash impairment charges, but after net finance costs. In normalising Profit Before Tax ("PBT") and Earnings Before Interest, Tax, Depreciation and Amortisation ("EBITDA"), the Group does not add back all its amortisation charges. There are various ways to reflect the non-cash amortisation charges, but the Group believes that where there is a direct cash cost related to earnings this type of related amortisation charge should not be added back. This primarily refers to amortisation of long-term television drama production. A reconciliation of the Group's Adjusted PBT and EBITDA is shown below:

The Group's management believes the most appropriate measure of performance after taking account of the non-cash and non-trading charges shown above is the Adjusted PBT of £2.6m (2007:£1.1m). 

Balance sheet highlights

Net assets reduced to £15.7m (2007: £22.4m) driven by the net impairments described above. Cash on hand at the period end stood at £3.1m (2007: £1.0m).

At the year end total debt stood at £11.5m (2007: £7.3m) reflecting the increased Convertible Loan Note ("CLN") raised to finance the July 2007 trio of acquisitions. Post year end the company made a net repayment of £1.7m to its CLN holders. This preceded the renegotiation of the CLN terms which was announced on 24th November 2008. The outcome of this renegotiation was that the Group has agreed with the holders of the loans to extend the redemption dates for the outstanding CLN, amounting to approximately £9.9 million, to December 2009 (including £2.6 million purchased by a major DCD shareholder). In addition, the price at which the CLN is convertible into ordinary shares in the Company has been fixed at 28 pence, subject to standard anti-dilution adjustments. The interest rate payable on all outstanding Notes will remain at LIBOR plus 3.25 per cent.  Interest cost rose in the full year to £1.0m (2007: £0.5m) due in part to the significant rise in the LIBOR rate during the period (the cost of long term debt) and the additional debt taken on during the acquisition round at the beginning of the period.

Shareholder Equity at £15.7m (2007: £22.4m) reflects the statutory result for the period net of the additional recently acquired trio of companies goodwill.

There is no UK tax charge as a result of losses available for offset. No deferred tax asset has been recognised in relation to these losses.

No dividend is proposed for the period. Earnings per share are disclosed in the notes below.

Outlook

As the core of production entities within the Group enlarges, the benefits of shared overheads and creative synergy become more evident. The Group is yet to see the full benefit of the economies of scale in administration cost savings. The gains to the Group from the three acquisitions made during the 2008 financial year will become more visible in 2009 and beyond. Having substantially grown in size we are now set on a course to drive an increase in distribution capacity as well. The Group is more diversified than in the prior period, making hundreds of hours of programming per year and selling to around two hundred clients; it is trading across a number of key markets with further growth potential, as clients look to the more stable as well as the most creative suppliers of content for the future. The strategy of steadily broadening our base, whilst diminishing risk and carefully controlling costs, continues to look healthy. We therefore expect to make further progress on our key metrics during the coming financial year.

I would like to finish by thanking my Board colleagues and all of the team at DCD Media for their hard work during the year. We owe particular thanks to Chris Hunt, who as a distinguished TV industry executive, and four-time Emmy award-winning programme-maker, has been Chief Executive of DCD Media since its inception in 1999. He has had the vision, dedication and passion to transform the Company from modest start-up to 'Super-Indie' status, with nine high-profile production and distribution companies in its current line-up. We offer him thanks for everything he has achieved for DCD, and wish him well for the future. Our thanks also goes to Richard Price, who served on the board from 2000 to 2008, including four years as Chairman, and who has accepted the board's invitation to become the Company's President, and to Michael Barton who served as the Group's Finance Director from 2001 until 2008.

Review of Divisions

DCD continues to grow, in production, distribution and now in retail areas, such as publishing. While our 2008 performance was somewhat reduced by some large projects arising after the reporting period, the underlying story is one of improved sales and strengthened trading profitability. Our acquisitions and recent divisional initiatives mean we have diversified to mitigate reliance on any one area, and our vertically-integrated structure improves margins, to the benefit of shareholders. In a marketplace where media share prices have been reduced by external factors, DCD continues to strengthen its position.

The FY2008 was encouraging despite the challenging conditions in the market. It showed a like-for-like 9.0% growth in divisional profit contribution. Though we had initially anticipated a better performance, slippage in two significant projects in two production divisions occurred. Both of the projects have been completed since the year end, but this yet again emphasises how the shifting of commissioning and production timetables outside of the Group's direct control can have a significant impact on a single year's results. Again, as in prior years, the bulk of the Group trading profit is earned in the second half of the year.

Done and Dusted

Done and Dusted continued with its combination of major awards ceremonies, rock and fashion shows, but added a new string to its bow with a series-based, youth-facing television programme which helped diversify its output. As well as the annual 'Laureus World Sports Awards', the team filmed two further awards shows plus the much-reported Amy Winehouse performance at the Grammys. The recurring 'T4 On The Beach' and 'Victoria's Secret Fashion Show' were supplemented with concerts by Boyzone, Mika, Dierks Bentley, Stevie Wonder and Neil Diamond, while their Christina Aguilera and Rolling Stones concerts were both nominated for major international awards.

Box TV (Box)

Box TV had a frustrating year. It produced its biggest ever commission, the 5-part series 'The Last Enemy', which was broadcast in primetime on BBC One in February and March, and is currently transmitting in the USA. It also produced the major one-off drama 'Affinity' which is scheduled for screening on ITV1 in December, and has already won an award at the Monte Carlo TV Festival. It has, however, suffered slippage on projects which are yet to be greenlit . Other drama projects are being developed within DCD, within the umbrella DCD Drama brand under executive producer Adrian Bate.

Iambic Productions (Iambic)

Iambic continued with its mix of high art and popular entertainment - the latter with the completion and transmission of its two part ITV series 'The Truth About Boy Bands', the former with its co-production with RPTA of the Royal Shakespeare Company/Ian McKellen 'King Lear' and a highly acclaimed BBC One film about German director Werner Herzog. After the year-end executive producer Fiona Morris joined DCD from Endemol, bringing two new arts projects to supplement the arts pipeline for FY09.

Prospect Pictures (Prospect)

Since joining DCD in August 2007, Prospect has overhauled its slate of cookery programmes, and supplied three series to ITV1: 'Saturday Cooks!', 'Christmas Cooks!', and the regular weekday 'Daily Cooks Challenge'. Shortly after it became part of DCD, the former Head of BBC's One Life series Todd Austin joined as Creative Director. He masterminded Prospect's expansion into major primetime programming such as the feature documentary 'The Road to Glory' (BBC Films), and 'RAF at 90' for BBC Two, as well as 'My Holiday Hostage Hell' for Virgin 1, the lighter-hearted 'I'm Kylie's Body Double' for BBC Three and '50 Greatest Families' for Sky 1. With further runs of its cookery series, the outlook remains positive for Prospect.

September Films (September)

In the months since it joined DCD, September Films has probably had its best ever period for new commissions, and led the group's charge into the American markets. As well as Series 5 and 6 of its US reality hit 'Bridezillas', September added new US format 'The Exterminators', and British factual entertainment show 'When Women Rule The World'. DCD's first children's series 'Richard Hammond's Blast Lab' (starring the Top Gear presenter) and 'Alan Whicker's Journey of a Lifetime' made it an excellent year for factual series. The arrival of new joint Creative Head, Sheldon Lazarus, in August 07 also saw September become the top producer of highly popular 'shock docs', with programmes such as 'Pregnant Man', 'I Am The Elephant Man', 'Stephen Wiltshire: The Human Camera', 'Boys Joined At The Head' and others.

West Park Pictures (West Park)

Acclaimed factual producer André Singer led West Park to a clutch of awards and new commissions. 'Stephen Fry: HIV & Me' won prizes in the US and UK, and expanded a fruitful relationship with Fry which was followed by the major BBC One series 'Stephen Fry In America', which has performed well in international TV sales, and book and DVD spin-offs. West Park also began its third series with Fry entitled  'Last Chance To See'. Among its other documentaries, 'Stairway To Heaven', the first in a series entitled 'Masterpieces' produced with the Prince's Charities won two international awards before it was even transmitted. Its ongoing series point to a positive 09 outlook.

Distribution

DCD Rights (formerly NBD Television)

DCD's in-house distributor has had a strong year, hitting tough sales targets while re-structuring its operations. It achieved record sales at the key autumn market Mipcom at the same time as consolidating September International, the sales arm of September Films, into its division. This good start to the financial year was followed up by excellent sales at the rest of the year's big markets.

Two events point to an improved outlook:

Firstly, the licence agreement during the year of new media rights in some titles in the classical catalogue (which DCD largely owns as well as exploits) for an advance of £1.8m.

Secondly, an innovative arrangement that can strengthen the distribution division - DCD Rights has access to an investment fund for the purpose of investing in programme rights, at no risk to itself, produced both internally and by third parties. The scheme is anticipated to generate a new revenue stream in DCD Rights over about four years, from which it will earn its usual commission. This, plus a slate that was already growing and diversifying, indicates a platform for future growth in DCD Rights.

DCD Publishing

The formation of this division is a post-balance sheet event but the announcement of its creation in September 2008 was accompanied by its signing of deals worth £2m, led by new book and DVD contracts for DCD's own programmes such as 'Stephen Fry In America' and 'Alan Whicker: Journey of a Lifetime'. This is a promising start for an operation set up to take advantage of often under-exploited ancillary rights connected to television programmes, and bodes well for the future. 

DVD label Digital Classics, now within DCD Publishing, has continued to broaden its appeal by acquiring titles from a major studio, in addition to releasing arts and cultural programmes from within the Group. In March 2008 it also launched an international video download website.

Outlook

The current outlook for DCD is positive. There is undoubtedly pressure on certain of our broadcast customers dependent on the depressed advertising market. DCD is operating across a number of genres, and in a number of territories, which will help mitigate any softening of the market. In UK television in 2007, the BBC and ITV poured £140m more into the independent production sector, whose turnover now exceeds £2bn (source: PACT Census Feb 2008). The PACT Census also clearly shows that the consolidating producers - among whom DCD is numbered - are faring better than smaller individual producers, demonstrating the effectiveness of the aggregation model in this sector. Meanwhile the US television market has never been more welcoming to British producers, and DCD is not alone in reaping the benefits of being able to operate there. In 2009 we expect UK budgets to be flat, but our growth in other countries and increasing success in winning commissions in the UK leads us to expect to be able to continue to outperform the market.

In distribution the position is more favourable still. In a downturn broadcasters buy more 'acquired' programming from distributors, an effect the recently renamed DCD Rights division has already started to notice. This good news in the general marketplace is underscored by a development that benefits DCD specifically. The recently announced venture with a private equity fund that creates a £10m co-production fund for DCD's use is based on a model of our actual recent performance and could deliver significant extra commission to the Group. While little of this will fall into FY2009, it is worth noting that DCD will retain a significant commission on all gross sales, on top of recouping its costs of selling. This initiative alone points to an uplift in DCD Rights distribution profit in due course. Furthermore, the merits of owning and operating a large library are becoming evident in new ways - not merely are these intellectual property rights rightly regarded as significant assets, but they are beginning to be monetized in new media applications. DCD's recent ten year library licence for some of its titles for a £1.8m advance and an equity participation in the venture demonstrates this point.

DCD has managed to maintain its momentum: the trio of companies bought in July 2007 have now been consolidated within the Group, and the benefits of economies of scale are now able to follow. We have been cautious about using cash to acquire additional production assets, and instead used available cash for significant repayment of debt (a £1.7m reduction in our debt level post year end).  This allied with the announcement of the renegotiation of the Group's debt post year end put the company on a more robust financial footing. 

As a result, DCD looks forward to the future with enthusiasm. We believe that our diversified, vertically integrated business model mitigates risk in an uncertain world, and positions us well to take advantage of the new opportunities we encounter.

David Elstein

Chairman

  Consolidated Income Statement For the year ended 30 June 2008

  Consolidated Balance Sheet  As at 30 June 2008

The financial statements were approved and authorised for issue by the Board of Directors on 30 November 2008.

J McIntosh

Finance Director

Consolidated Cash Flow Statement

For the year ended 30 June 2008

Consolidated Statement of Changes in Equity

For the year ended 30 June 2008

Notes to the preliminary announcement

The financial information in the announcement does not constitute the company's statutory accounts for the years ended 30 June 2008, prepared in accordance with IFRSs as adopted by the EU, or the period ended 30 June 2007, which were prepared under UK GAAP, but is derived from those accounts. The statutory accounts for the year ended 30 June 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the Company's annual general meeting. The auditors reported on those accounts; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under the Companies Act 1985, s 237(2) or (3).Basis of preparation The principal accounting policies adopted in the preparation of this preliminary announcement are unchanged from those disclosed in the interim announcement published on 31 March 2008.  While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Group expects to publish full financial statements that comply with IFRSs by 15th December 2008. This is the first time the Group has prepared its preliminary announcement in accordance with Adopted IFRSs, having previously prepared its preliminary announcement in accordance with UK accounting standards. The date of transition to IFRS is 1 July 2006. 

1 (Loss)/profit per share

The calculation of the basic (loss)/profit per share is based on the (loss)/profit attributable to ordinary shareholders divided by the average number of shares in issue during the year. The calculation of diluted (loss)/profit per share is based on the basic (loss)/profit per share, adjusted to allow for the issue of shares and the post tax effect of dividends and interest, on the assumed conversion of all other dilutive options and other potential ordinary shares.

Loss attributable to ordinary shareholders

Share options outstanding at the year-end totalled 800,634 ordinary shares, and if the convertible loan was converted into ordinary shares at 28p per share (the last conversion rate), the number of shares issued from the exercise of the loan conversion would be 40,161,821. However, the above figures for 2008 have not been adjusted for such conversion as the effects would be anti-dilutive.

2 Post balance sheet events

In October 2008 the Group repaid £1.7m of its Convertible Loan Notes. In November 2008 the Group agreed with holders of the Convertible Loan Notes (totalling £9.9m post repayment of £1.7m) that the redemption dates should be 14 December 2009 for the loan notes taken out in December 2005, and 31 December 2009 for the loan notes taken out in August 2007. In addition, the price at which the loan notes are convertible into ordinary shares of the company has been fixed at 28p, subject to certain anti-dilution adjustments. The interest rate payable remains at 3.25% above six month sterling LIBOR. The company has also agreed to certain financial covenants in respect of the financial results for the year ended 30 June 2009.

3 Reporting under International Financial Reporting Standards (IFRS)

This annual report is the first to be prepared under IFRS. The comparative figures have been prepared on the same basis and have therefore been restated from those previously prepared under UK GAAP. The commentary below details the key changes that have arisen due to the transition to reporting under IFRS. The Group's date of transition is 30 June 2006, which is the beginning of the comparative period for the 2006/2007 financial year. Therefore the opening balance sheet for IFRS purposes is that reported at 30 June 2006 as amended for changes due to IFRS.

To explain the impact of the transition, reconciliations are included below that show the changes made to the statements previously reported under UK GAAP. The following reconciliations are included:

1. Reconciliation of Group balance sheet at 30 June 2006 from UK GAAP to IFRS;

2. Reconciliation of Group balance sheet at 30 June 2007 from UK GAAP to IFRS;

3. Reconciliation of Group income statement for the year ended 30 June 2007 from UK GAAP to IFRS.

The transition from UK GAAP to IFRS does not affect the cash flows generated by the Group. The IFRS cash flow statement is presented in a different format than that required under UK GAAP. The reconciling items between the UK GAAP format and the IFRS format have no net impact on the cash flows generated and accordingly reconciliations have not been presented.

4 Goodwill and Intangible Assets

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected profitability of the CGUs over the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks inherent in the CGUs.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management and extrapolates them. The cash flows are forecast to the period ending 31 December 2009. The growth rates applied from the end of the period covered by approved budgets into future cash flows for each CGU vary between 0% and 5% based on management's estimate of likely growth. Expected profitability is based on past results and expectations of future changes in the market.

The rate used to discount the forecast cash flows is 12% for all CGUs except Done & Dusted Group Ltd. A significantly higher rate of 27.5% has been used for this CGU to reflect the higher risk profile over the long term cash flows expected from this operation. The ongoing activities of both Iambic Productions Ltd and Box TV Ltd are not expected to generate free cash flow for the Group in the foreseeable future and accordingly the goodwill associated with both of these businesses has been fully impaired. 

If the discount rates used were reduced by 2% to10% and 25.5%, it is estimated that the recoverable amount of goodwill would have increased by approximately £0.8 million. If the discount rates were increased to 15% and 30.5% it is estimated that the recoverable amount of goodwill would be impaired by approximately £0.7 million.

Details of goodwill allocated to cash generating units for which the amount of goodwill so allocated is as follows:

Impairment of goodwill has been recognised in the valuations of Iambic Production Limited, Box TV Limited and Done and Dusted Group Limited, because management consider the trading conditions which resulted in the previous goodwill valuations have changed. The impairment losses recognised are £2,897,144 for Iambic Productions Limited, £6,339,393 for Box TV Limited and £8,891,527 for Done and Dusted Group Limited. All of these CGUs are attributable to the production class of business, and the goodwill valuations are based on the assumptions described above. The forecasts are based on historic earnings of each CGU, which are then considered against current factors including market conditions and key management personnel in those CGUs. The carrying value of goodwill in the other production CGUs is exceeded by a recoverable amount of £250,000. The carrying value of goodwill in the distribution CGU is exceeded by a recoverable amount of £450,000.

Impairment of programme rights has been recognised where management believe the market conditions for particular programmes has deteriorated. The impairment losses in the production class of business were £1,142,000 and in the distribution class of business £2,478,000. The valuations are based on the recoverable amounts from their value in use using a discount factor of 12%. The forecasts are based on historic sales of the programmes, and future sales are forecast over a seven year period on a reducing basis. Seven years is used for the forecasts because the programme rights are held for periods longer than five years, and usually for periods longer than seven years. The carrying value of unimpaired programme rights is exceeded by a recoverable amount of £900,000.