DCD.L Regulatory News (DCD)

RNS Embargoed 29 May, 2012

DCD Media Plc

("DCD Media" or the "Group")

Audited results for the year ended 31 December 2011

DCD Media, the independent TV production and distribution group, today reports results for the year ended 31 December 2011.

Financial Summary (comparatives are eighteen months to 31 December 2010)

Continuing operations:

·; Revenue £21.8m (2010: £32.4m)

·; Gross profit £7.0m (2010: £7.2m)

·; Operating loss £6.0m (2010: £10.1m)

Discontinued operations:

·; Revenue £8.1m (2010: £15.9m)

·; Gross profit £1.1m (2010: £3.0m)

·; Operating loss £1.8m (2010: £1.1m)

Group results:

·; Unadjusted Loss Before Tax £8.2m (2010: £8.4m)

·; Adjusted Profit Before Tax £0.1m (2010: £1.8m)

·; Adjusted EBITDA £0.6m (2010: £2.3m)

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

Business highlights

·; £1.75m fundraising completed through £0.75m placing and £1.0m issue of convertible debt;

·; New factual production company 'Rize USA' launched successfully with several commissions won during the year and over £2 million worth of new orders to date;

·; September Films Limited grew US creative team off of the back of new seasons of US reality shows Bridezillas and Billy The Exterminator, and in the UK delivered Saturday night ITV1 primetime series Penn & Teller: Fool Us presented by Jonathan Ross;

·; Factual division centralized its management team and launched topical programming unit;

·; Cardiff based company Prospect Cymru/Wales Limited delivered award winning Shirley on BBC2 as the centre piece of BBC2's Mixed Race season; and

·; DCD Media appointed new members to the Board of Directors, adding Sammy Nourmand and John Cusins as Executive Director and Non-Executive Director of the Company, respectively.

Post year end events:

·; DCD Media appointed Sammy Nourmand as Chief Executive Officer and David Green asExecutive Chairman; and

·; DCD Media added post production activity to the range of its television production businesses with the launch of DCD Post-Production Limited, trading under the brand name 'Sequence'.

·; Timeweave plc acquired £3.1 million of convertible loan notes due on 28 November 2012 and converted £595,750 into 59,575,000 shares representing 29.9% of the Company's issued share capital.

·; The DCD Media Board of Directors have been, and continue to be, in discussions with the Directors of Timeweave to understand their intentions and are working with Timeweave on a proposal to reduce, or negate, the impact of the repayment of the convertible debt in November.

David Green, Executive Chairman, commented:

"Despite the continuing tough and challenging environment, the Group has delivered a steady set of results underpinned by an optimised operating structure and stronger financial footing that put us in a position to effectively take advantage of new opportunities on both sides of the Atlantic, grow the business and deliver long-term sustainable results for our shareholders."

For further information please contact:

Sammy Nourmand, Chief Executive

DCD Media Plc

Tel. +44 (0) 20 8 563 6976

Nahid Burke

DCD Media Plc

Tel: +44 (0)20 8563 6976

Stuart Andrews/Charlotte Stranner/Rose Herbert

finnCap

Tel: +44 (0) 20 7220 0500

Executive Chairman's review

Review of activity within the Group during the year.

Production

- Factual Television Production - This division is involved in the production of factual based content from the Prospect Pictures, Prospect Cymru/Wales, Rize USA and West Park Pictures brands. The review of joint venture Matchlight is also contained in this division

- Entertainment Television Production - This division is involved in the production of entertainment based television content. This includes productions by September Films

- Event Management - This division organises and manages events, primarily music concerts through Done and Dusted

Distribution

- Rights and Licensing - This division is involved with the sale of distribution rights, DVDs, music and publishing deals through DCD Rights and DCD Publishing (which comprises Digital Classics DVD and DCD Music)

Factual Division

The Group restructured its factual division bringing West Park Pictures, Prospect Pictures and Prospect Cymru/Wales under the Factual umbrella supported by a centralized management team with factual programming expertise including business affairs, finance and production management.

Highlights for 2011 included several successful programmes notably: Shirley, the biopic starring Ruth Negga in the role of Shirley Bassey, which achieved top ratings as the centre piece of BBC2's Mixed Race season and has won the Best Television Actress award at the Irish Film And Television Awards and was nominated for Best Actress at the Royal Television Society Awards; 6-part series Misbehaving Mums To Be for BBC3 which enjoyed high ratings and international sales; 2-part BBC documentary Passion of Port Talbot starring Michael Sheen which aired on BBC Wales to critical acclaim and BBC4 documentary Elgar: The Man Behind the Mask which won numerous awards including a BAFTA Craft Award 2011.

Finally the division launched a topical programming unit which quickly won its first commission with the documentary Gipsy Eviction: The Fight for Dale Farm for Channel 4, one of the highest rated Dispatches films of 2011.

Matchlight

Glasgow based independent factual producer Matchlight, the joint venture with DCD Media launched in 2009, further cemented its reputation as one of Scotland's leading production companies.

Matchlight's roster of clients now includes all the major UK broadcasters and the company has also strengthened its links with on-screen talent, working with a range of high profile personalities such as Prof. Amanda Vickery, John Humphrys, Rory Stewart, Dr. Helen Castor and Alexis Conran.

During the year Matchlight delivered over 10 series or individual films including for BBC1 - The Griersons Awards nominated Imagine: The Trouble with Tolstoy; for BBC2 - the RTS Programme Award nominated At Home with the Georgians; The Many Lovers of Jane Austen and The Future State of Welfare; for BBC3 - Josie: My Cancer Curse; and for Channel 5 - the 6 part series Dangerous Drivers' School. Just after the year end it also won its first commission for ITV1 with a new film Lenny Henry: Finding Shakespeare, presented by comedian and actor Lenny Henry.

The outlook for Matchlight remains positive with a slate of projects in production and development across observational documentary, history, arts, current affairs and popular factual television.

Rize USA

Rize USA was launched in October 2011 as a co-venture between DCD Media and former September Films Creative Director, Sheldon Lazarus. Based in London and Los Angeles, the company operates under the DCD umbrella and focuses on factual, factual entertainment and reality programming for the UK and the US.

Rize has enjoyed a strong start and proven a valuable brand addition to the DCD stable of production companies, winning over £2 million worth of new business since inception. During the period under review Rize won its first documentary specials, Accused: The 74-Stone Babysitter and My Social Network Stalker: True Stories, which both aired post year end and achieved strong audience ratings on Channel 4.

The company is currently in production on a number of new series and one-off productions for UK and US broadcasters to be announced in 2012.

Rize USA (continued)

Rize USA's output is in line with DCD Media's portfolio of non-scripted offerings and further strengthening the Group's position in the non-scripted market. The current strong pipeline of projects bodes well on both sides of the Atlantic and will also continue to generate valuable IP to be exploited worldwide.

Entertainment Division

September Films

September Films is a producer of reality television, entertainment and formats based in Los Angeles and London. The division's performance was driven by returning hit series and talent fronted primetime entertainment shows. Highlights from the year included new seasons of the high volume series Bridezillas and Billy The Exterminator for A&E as well as ITV1 Saturday night series Penn & Teller: Fool Us, presented by Jonathan Ross. Bridezillas and Penn & Teller: Fool Us have performed strongly in the international market place where they are distributed by DCD Rights, the Group's wholly owned distribution arm. The BAFTA winning children's series Richard Hammond's Blast Lab transmitted its fourth series on BBC1 and BBC2 and continued to perform well in sales and licensing.

The division renewed its Creative team with two new senior appointments and a promotion for the new roles of Head of Entertainment, Head of Factual Entertainment and Head of Development in the UK, together with a number of senior US executive appointments for newly created positions at its LA office in Tribeca West including Senior Vice President, Creative and VP Development to help sustain growth in the US market.

The outlook for September Films is positive particularly in the US market where the division has a strong reputation and solid pipeline of returning reality series.

Event Management Division

Done and Dusted

The music and live events division delivered recurring large scale productions including The Laureus World Sports Awards 2011 live from Abu Dhabi, Channel 4's summer music event T4 On the Beach which broadcast live in the summer and The Mobo Awards which aired live on BBC1 in the autumn. US based work included the returning franchise The Victoria's Secret Fashion Show which transmitted on CBS at the end of November. T4 Stars was held in December 2011 and transmitted live on Channel 4.

In September 2011, the Group confirmed the intended departure of its Done and Dusted management team at the end of December 2011. The departing management group have bought the trademark Done and Dusted from DCD Media. The Event Management division has been shown as a discontinued operation within the financial statements (note 10).

Rights and Licensing Division

DCD Rights

The Group's distribution arm was hampered by a difficult trading environment, coupled with a major buyer going into administration. Despite this backdrop, DCD Rights held its own and continued to expand in the international market. Many of the new shows acquired have been well received by network buyers around the world and also garnered numerous awards.

The support of DCD Rights' distribution fund and close relationships with top producers has been vital in securing third party programming from around the world.

Bridezillas, produced by September Films, continued to sell worldwide and entertainment series Penn & Teller: Fool Us performed well both as a finished programme and format. DCD Rights' factual catalogue has continued to grow and a notable ratings winner this year has been Dangerous Drivers School, produced by Matchlight, on Channel 5.

DCD Publishing (including DVD label Digital Classics)

The licensing arm of DCD Media exploiting wholly-owed and third party brands for IP in publishing, merchandising, DVD and music had a year of consolidation in 2011. It continued to take advantage of its access to the world's largest music publishing catalogues and launched a number of innovative products.

DCD Publishing have broadened their representation to include talent and to that end have signed representation deals with Emma Forbes, Russell Grant, Vincent and Flavia of BBC's Strictly Come Dancing, Windsor Concourse of Elegance, Mahiki, and TV company Splash Media.

DCD Publishing (including DVD label Digital Classics) (continued)

Richard Hammond's Blast Labmerchandise continues to sell well and the 'Bluw' toys range of music-based products got off to a flying start.

Digital Classics DVD, the Group's wholly owned DVD label, continued to increase the number of titles in the catalogue through third-party acquisitions as well as DCD-owned programmes. Continuing to work on titles by Stephen Fry, the label released a number of boxed sets all of which sold well. In 2011 the label suffered stock loss when Sony's Enfield warehouse burnt down in the riots but financial impact was limited by an effective insurance cover. Digital Classics DVD also took the opportunity of changing distribution arrangements, signing a new deal with distribution partner Demand in August, and sales volumes have increased significantly as a result. Highlighted titles in the period were Tony Robinson's Crime and Punishment, At Home with the Georgians and Peter Ackroyd's Thames.

David Green

Executive Chairman

28 May 2012

Chief Executive Officer's review

The Group continued to face challenges over the last 12 months but has produced a stabilising set of results which will allow it to move forward with a renewed focus and growth in the coming months and years.

In the first half of the year, the Group saw further rationalisation of resources, including further restructuring of the business units and moving to new, more cost effective office accommodation.

In the second half of the year, the Group saw a number of key events which are discussed below, including £1.75m fund raising, the departure of the Event Management business Done and Dusted Group Limited and changes to members of the Board of Directors.

The results are for the 12 months to 31 December 2011 and the comparatives are for the eighteen months to 31 December 2010.

Fund raising

During the latter half of the year the Company raised £1.75m through the issuance of new convertible debt of £975,000 and 77,500,000 ordinary shares at 1p each. This followed the announcement in the prior year financial statements of the need for funding and was the culmination of extensive discussions with investors. This investment provided a cash injection to stabilise the Group and to allow investment in the development and growth of the business.

Board changes

The year saw a number of changes to the Board. On 28 July 2011 John McIntosh, Chief Financial Officer, departed from the Board and, in November 2011, the existing Board Directors David Green (CEO) and Tarik Wildman (Non- Executive) were joined by John Cusins (Non Executive Chairman) and myself. Post year end I became CEO and David Green became Executive Chairman, with Non Executives John Cusins and Tarik Wildman forming the Audit Committee and Remuneration Committee.

Performance

The Group made an unadjusted loss after tax for the year of £7.1m (2010: £7.9m). This figure is affected by the impairment and amortisation of intangible assets, including goodwill and trade names.

Adjusted EBITDA and Adjusted PBT are the key performance measures that are used by the Board, as they more fairly reflect the underlying business performance by excluding the significant impacts of goodwill, trade name and programme rights amortisation and impairments.

The headline Adjusted EBITDA in the year ended 31 December 2011 was £0.6m, an annualised decrease of 61% on the eighteen months to 31 December 2010 (2010: £2.3m). Adjusted PBT was £0.1m, an annualised decrease of 92% on the eighteen month period to 31 December 2010 (2010: £1.8m).

Performance during the year was as expected but impacted by a number elements including

·; the extensive refinancing discussions with investors, requiring Directors and key management to focus on refinancing rather than the core element of producing content and the development of new business;

·; reduced momentum following on from the prior year, and as a result of continued difficult market conditions within the industry;

·; delayed development of programming through funding constraints, until the final quarter of the year after funding raising was completed; and

·; continued re-organisation and restructuring costs within the Group as part of the strategy to refocus on the core element of the business of television programming.

Revenue for the year ended 31 December 2011 for continuing operations was £21.8m, a 1% annualised increase on the eighteen month revenue to 31 December 2010 for continuing operations (2010: £32.4m).

Revenue for discontinued operations (note 10) for the year ended 31 December 2011 was £8.1m, an annualised 24% reduction on the eighteen months to 31 December 2010 (2010: 15.9m).

The following table represents the reconciliation between the operating loss per the consolidated statement of comprehensive income to adjusted Profit before Tax (PBT) and adjusted Earnings Before Tax Depreciation and Amortisation (EBITDA):

Intangible Assets

The Group's consolidated statement of comprehensive income and consolidated statement of financial position has again this year been impacted by the amortisation and impairment of intangible assets, see note 12.

The Group has seen amortisation and impairment of goodwill and trade names for the year of £6.1m (2010 eighteen months: £10.9m) and a net amortisation and impairment of programme rights of £1.0m (2010 eighteen months £2.0m). This expenditure within the Group's consolidated statement of comprehensive income negatively impact the overall result, creating a loss for the year.

The accounting implications, in terms of the effect of reporting impaired intangible assets under International Financial Standards, are explained below.

September Films

September Films Limited, an operating unit within the Entertainment cash generating unit (CGU) had its performance impaired by market conditions and delayed investment in programme development, as described more generally above. The business has started to rebuild its development and commissioning pipeline, but in the short term the future cash flows and profitability of the business were deemed by management not to be able to support the current carrying value of the goodwill. An impairment of £1.5m was therefore applied to the goodwill, leaving a carrying value of £3.9m (2010: £5.4m).

Done and Dusted

The key management of the Event Management CGU left the Group at the year end, and no replacement staff or trade were identified which resulted in the CGU being classified as a discontinued operation. No future cashflows are expected from the CGU moving forward. The remaining goodwill of £1.5m after management review was impaired down to reflect the fair value of the consideration likely to be received for the goodwill post year end. It was then re-categorised as an asset held for sale (note 16). The impairment amounted to £1.4m and the carrying value of the asset held for sale was £0.1m (note 10).

Trade Names

Trade names are amortised over ten years on a straight line basis and a non cash expense of £0.9m was expensed in the year relating to trade names. A review of the trade name net book value at the year end identified that the carrying value of the assets were not appropriate and an impairment of £2.3m against the West Park Pictures and Prospect trade names was applied. The carrying value of trade names after the amortisation and impairment was £2.5m.

Restructuring costs

Restructuring costs of £0.1m have been disclosed in the consolidated statement of comprehensive income. Restructuring costs relate to redundancy payments and an office move. In April 2011 the office in central London was closed and the head office operations were moved to the Hammersmith office, resulting in one off restructuring costs of £0.02m. This relocation to the Hammersmith office will provide the business with annual savings of £0.4m.

Discontinued US operations costs

The Event Management US operations incurred operational costs for maintaining a presence in the US which was not offset by normal revenue streams for the same period. The reduction in revenue was due to a reduced focus on the US operations as a result of the impending cessation of the Event Management activities, as part of the discontinued operations. The impact of this was £0.4m and is considered to be a one off exceptional item which will not recur in future years.

Staff cost normalisation

Staff normalisation costs relate to other costs incurred in the year which will not be incurred in future years through the rationalisation of resourcing across the business with a reduction in headcount. The reduced costs in the future amount to £0.6m and is considered to be a one off exceptional item which will not recur in future years.

Earnings per share

Basic loss per share in the period was 9.36p (eighteen month period ended 31 December 2010: 13.38p loss per share) and was calculated on the losses after taxation of £7.1m (eighteen month period ended 31 December 2010: loss £7.9m) divided by the weighted average number of shares in issue during the year being 75,354,034 (2010: 59,019,293). The number of shares has increased due to a conversion of debt to equity and a subscription of shares in the year, detailed in note 23.

Balance Sheet

Since the prior period end the Group debt profile has increased marginally by £0.3m with current debt at £6.1m (31 December 2010: £5.8m). During the year £1.0m of bank debt was repaid. Convertible debt increased by the issue of £1.0m of new convertible loan notes and through £0.4m of rolled up interest. The debt at the year end is made up of outstanding bank loans £1.2m (2010: £2m) and overdraft of £0.6m (£0.7m) and convertible debt of £4.3m (2010: £3.1m).

Following the restructuring explained in the Chief Executive Officer section above, the Group undertook its regular impairment review after the period end. As a consequence of that review under the principles of International Financial Reporting Standards the Group has taken a non-cash charge of £6.1m (2010: £9.4m) against goodwill and trade names and £1.0m (2010: £1.4m) against the intangible programme rights catalogue. This impairment has been recorded in the statement of comprehensive income (see note 12).

The Group's net cash balances as at 31 December 2011 were £5.8m (31 December 2010: £4.1m). A substantial part of the Company cash balances represent the Company's working capital commitment in relation to its programme making and is not considered to be free cash.

As at the 31 December 2011 the Group had a term loan of £1.0m which is due for repayment on 28 November 2012. The Group has repaid £0.25m of this term loan in the post year end period and the current outstanding balance is £0.75m. The term loan is currently under review and being renegotiated with the Group's principal bankers, with a view to changing the repayment period to one greater than 18 months. The Group's bankers have indicated that it is their intention to agree new terms. The Group's overdraft facility has also recently been extended by its principal bankers until 30 November 2012. Accordingly, the Directors have a reasonable expectation that both the term loan and the overdraft facility will continue to be available to the Group for the foreseeable future.

On 28 November 2012, convertible debt, totalling £4.3m of principal loan and cumulative interest as at 31 December 2011, is due to become payable. Timeweave Plc acquired £3.1m of this convertible debt on 8 February 2012. Timeweave PLC converted £0.6m of the convertible debt on 18 April 2012 to acquire a 29.99% holding in the Company. The Directors have been, and continue to be, in discussions with the Directors of Timeweave to understand their intentions and are working with Timeweave on a proposal for Timeweave to reduce, or negate, the impact of the repayment of the convertible debt in November 2012.. There remains, however, a material uncertainty that the Company may not be able to repay in cash the convertible debt on 28 November 2012 as it arises, if discussions with Timeweave result in a withdrawal of their support.

Shareholders' Equity

Retained earnings as at 31 December 2011 were £(59.8m) (2010: £(52.7m)) and total shareholders' equity at that date was £3.3m (2010: £9.8m).

Amounts attributable to non-controlling interests

In the prior period, the Group bought a stake in Matchlight Ltd, a collaboration with a group of leading Scottish programme makers. The Group has recognised a loss of £0.04m (2010: £0.15m) attributable to non controlling interests in the statement of comprehensive reserves and an amount of £0.62m (2010: £0.39m) as equity representing the non controlling interest of the company as at the financial year end.

Current Trading

The Group has had a slow start to 2012, however several big returning shows have been recommissioned and their income will be realised in the second half of the year. There is also a strong development pipeline and the directors expect this to further contribute to an improved second half of the year. The Group has also been focused on a rationalisation and restructure of the number of divisions and subsidiaries. Cash reserves remain tight, but the Group continues to generate cash from its activities and are confident that they will be able cover the operational costs.

Going Concern

On 28 November 2012, convertible debt, totalling £4.3m of principal loan and cumulative interest as at 31 December 2011, is due to become payable. Timeweave Plc acquired £3.1m of this convertible debt on 8 February 2012. Timeweave PLC converted £0.6m of the convertible debt on 18 April 2012 to acquire a 29.99% holding in the Company. The Directors have been, and continue to be, in discussions with the Directors of Timeweave to understand their intentions and are working with Timeweave on a proposal for Timeweave to reduce, or negate, the impact of the repayment of the convertible debt in November. There remains, however, a material uncertainty that the Company may not be able to repay in cash the convertible debt on 28 November 2012 as it arises, if discussions with Timeweave result in a withdrawal of their support.

S Nourmand

Chief Executive Officer

28 May 2012

Report of the Directors for the year ended 31 December 2011

The Directors present their report together with the audited financial statements for the year ended 31 December 2011.

Principal activities

The main activities of the Group continued to be content production, event management and distribution and rights exploitation.

A detailed review of the Group's business is contained in the Executive Chairman's review and the Chief Executive Officer's review set out below.

Results

The Group's loss before taxation for the year ended 31 December 2011 was £8.2m (eighteen month period ended 31 December 2010: £8.4m). The loss for the year post-taxation was £7.1m (eighteen month period ended 31 December 2010: £7.9m) and has been carried forward in reserves.

The Directors do not propose to recommend the payment of a dividend.

Business review

Risks and uncertainties

The Group's management aims to minimise risk by developing a broad, balanced stable of production/ distribution activity and intellectual property. Clear risk assessment and strong financial and operational management is essential to control and manage the Group's existing business, retain key staff and balance current development with future growth plans. As the Group operates in overseas markets it is also subject to exposures on transactions undertaken in foreign currencies.

Acquisition activity

As described in the Chief Executive Officer's review, during the year of reporting the Group has focused on stabilizing its existing business while seeking suitable partner opportunities. It is an aim of the Group to continue to look for suitable opportunities which will create synergy and enhance earnings. The known risks of such a strategy can be summarized as: finding appropriate targets or joint ventures opportunities, integration risk of acquiring targets, finding and retaining key staff and failure to achieve financial/operational synergies from those targets.

To minimize risk, the Group uses its financial and operational diligence process, backed by legal diligence. The Group has already integrated its previous acquisitions, which are regularly monitored through the Group's internal control function.

Production and distribution revenue

Revenue is subject to fluctuations throughout the year and will peak after sales markets during the year.

Funding and Liquidity

Costs incurred during production are not always funded by the commissioning broadcaster. The Group policy is to maintain its production cash balances to ensure there is no financial shortfall in the ability to produce a programme. It is inherent in the production process that in the short-term cash flows on productions can sometimes be negative initially. This is due to costs incurred before contracted sales have been received, in order to meet delivery and transmission dates. The Group funds these initial outflows, when they occur, in two ways: internally, ensuring that overall exposure is minimized; or, through a short term advance from a bank or finance house, which will be underwritten by the contracted sale. The Group regularly reviews the cost/benefit of such decisions in order to obtain the optimum use from its working capital. The Group's cash and cash equivalents net of overdraft at the end of the period was £5.8m (31 December 2010: £3.4m) including certain production related cash held to maintain the Group policy. The Group debt consists of convertible loan notes and conventional bank debt. Details of the interest payable and convertible loans notes are disclosed in note 8, 18 and 20 to the financial statements, respectively.

Liquidity risks

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. A full description of the Group's position regarding its convertible loan notes is disclosed in the Directors' consideration of the going concern basis of preparation of the financial statements (note 1). The Group's exposure to interest rate fluctuations on its conventional bank debt is appropriately hedged. The Group's exposure to exchange rate fluctuations has historically been small based on its revenue and cost base. Dependent on the extent the Group's international revenue grows the appropriate hedging strategy will be introduced.

It is Group policy to continue to seek the most optimum structure for its borrowings and this policy will be pursued over the coming year.

Directors and their interests

The Directors of the Company, and their beneficial interests in the share capital of the Company, during the year were as follows:

Other than as disclosed in note 26 to the financial statements, none of the Directors had a material interest in any other contract of any significance with the Company and its subsidiaries during or at the end of the financial period.

Substantial shareholdings

As at 21 May 2012, the following notifications had been made by holders of beneficial interests in 3% or more of the Company's issued ordinary share capital as follows:

Share capital

Details of share capital are disclosed in note 23 to the financial statements.

Employment Involvement

The Group's policy is to encourage employee involvement at all levels as it believes this is essential for the success of the business. There is significant competition for experienced and skilled creative staff and administrators. The Directors are aware of this and have looked to encourage and develop internal resources and to put in place succession plans. In addition, the Group has adopted an open management style to encourage communication and give employees the opportunity to contribute on business issues.

The Group does not discriminate against anyone on any grounds. Criteria for selection and promotion are based on suitability of an applicant for the job. Applications for employment by disabled persons are always fully considered, bearing in mind the respective aptitudes of the applicants concerned. In the event of members of staff becoming disabled, every effort will be made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be at least comparable with that of other employees.

Financial instruments

Details of the use of financial instruments by the company are contained in note 22 of the financial statements.

The Board

As at the date of approval of these financial statements, the Board of Directors consisted of four members, two of whom are Non-Executive Directors. The Group has adopted a framework for corporate governance which it believes is suitable for a company of its size with reference to the key points within the Principles of Good Governance and Code of Best Practice ("the Combined Code").

Corporate governance

The Board meets regularly, normally monthly, and covers strategic, operational, financial performance and remuneration committee matters as they arise from time to time. A Management Executive Group made up of key executives from the divisions normally meets monthly to cover cross-Group matters and develop new business opportunities. Matters of significance are raised with the Board. The Board reviews financial and operational information derived from the Management Executive Group, and the effectiveness of external audit and internal financial controls. The terms of reference of the Audit Committee are to assist themselves as Directors in discharging their individual and collective legal responsibilities for ensuring that:

·; the Group's financial and accounting systems provide accurate and up-to-date information on its current financial position;

·; the Group's published financial statements represent a true and fair reflection of this position; and

·; the external audit, which the law requires in order to provide independent confirmation that these legal responsibilities are being met, is conducted in a thorough, efficient and effective manner.

The external auditors attend the audit committee meeting and as such it provides them with a direct line of communication to the Directors.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive Officer's review. The financial position of the Group, its cash position and borrowings are set out in the financial review section of the statement (note 18). In addition note 22 sets out the Group's objectives, policies and processes for managing its financial instruments and risk.

As highlighted in note 1 to the financial statements, the Group's day-to-day operations are funded from cash generated from trading. 

As at the 31 December 2011 the Group had a term loan of £1.0m which is due for repayment on 28 November 2012. The Group has repaid £0.25m of this term loan in the post year end period and the current outstanding balance is £0.75m. The term loan is currently under review and being renegotiated with the Group's principal bankers, with a view to changing the repayment period to one greater than 18 months. The Group's bankers have indicated that it is their intention to agree new terms. The Group's overdraft facility has also recently been extended by its principal bankers until 30 November 2012. Accordingly, the Directors have a reasonable expectation that both the term loan and the overdraft facility will continue to be available to the Group for the foreseeable future.

On 28 November 2012, convertible debt, totalling £4.3m of principal loan and cumulative interest as at 31 December 2011, is due to become payable. Timeweave Plc acquired £3.1m of this convertible debt on 8 February 2012. Timeweave PLC converted £0.6m of the convertible debt on 18 April 2012 to acquire a 29.99% holding in the Company. The Directors have been, and continue to be, in discussions with the Directors of Timeweave to understand their intentions and are working with Timeweave on a proposal for Timeweave to reduce, or negate, the impact of the repayment of the convertible debt in November 2012. There remains, however, a material uncertainty that the Company may not be able to repay in cash the convertible debt on 28 November 2012 as it arises, if discussions with Timeweave result in a withdrawal of their support.

The Board remain positive about the resilience of the Group despite the pressures from the current economic conditions and those outlined above. The Directors forecasts and projections, which make allowance for reasonably possible changes in its trading performance, show that, with the ongoing support of its lenders and its bank, the Group can continue to generate cash to meet their obligations as they fall due.

Through the recent negotiations with its shareholders, its loan note holders and its principal bankers, the Directors, after making enquiries, have a reasonable expectation that the Company and the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

Directors' responsibilities for the financial statements

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The Directors have elected to prepare the parent company financial statements in accordance with UK GAAP. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

Directors' responsibilities for the financial statements (continued)

In preparing these financial statements, the Directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and accounting estimates that are reasonable and prudent;

·; state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and

·; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Auditors

All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company's auditors for the purposes of their audit and to establish that the auditors are aware of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware.

By Order of the Board

S Nourmand

Chief Executive Officer

28 May 2012

Board of Directors

David Green (Executive Chairman)

David Green was appointed as Executive Chairman of DCD Media in February 2012, after 3 years as CEO. He joined the Group in 2007 when London and LA-based television and film production company September Films, of which he was Chairman and Founder, was acquired by DCD Media. He originally took on the role of DCD Chief Creative Officer with the task of driving creative synergies across all Group production and distribution companies. He now merges his Chairman role with special responsibility for spearheading DCD Media's surge into the booming American production market.

A veteran of the British and American film and television industries where he has successfully built his career since graduating from Oxford in 1972, David has produced and/or directed over a thousand hours of primetime television including the landmark 'Hollywood Women' series and September's flagship show 'Bridezillas' - both of which he created. His four feature film directing credits notably include the Oscar-nominated 'Buster' (4 awards) one of the biggest grossing British films of all time, and the $22m Disney action adventure 'Wings of the Apache', starring Nicolas Cage and Tommy Lee Jones. He was also the Executive Producer of two September movies: Oscar-nominated 'Solomon and Gaenor' (7 awards) and 'House of America' (6 awards).

Sammy Nourmand (Chief Executive Officer)

Sammy Nourmand brings with him 18 years experience in the independent television sector, as a Production Accountant and then Financial Controller before joining September Films as Head of Finance in 1998. He went on to become Director of Finance and Deputy CEO in November 2003 taking over as CEO in April 2005. Sammy oversaw September Films operations in the UK and the US as well as its distribution arm, September International. He was instrumental in the sale of September Films to DCD Media in August 2007 and under his stewardship September Films enjoyed its longest period of growth and stability. Sammy took the role of acting COO of DCD Media between 2009 and 2010, became a Director of DCD Media in November 2011 and was appointed CEO in February in 2012.

Tarik Wildman (Non-Executive Director)

Tarik Wildman has been involved in the financial industry for over 20 years. He was a Director at Credit Suisse First Boston and Dillon Read and remains an adviser at UBS. He is also a partner in the Madrid-based firm Forest Asset Management, and runs his own enterprise Wildman & Company Limited, which finds financial solutions for a wide variety of corporate clients. Tarik is currently Managing Director of PJ Investments and sits on the Board of Red Letter Days and other companies associated with Peter Jones.

John Cusins (Non-Executive Director)

John Cusins has had a distinguished career in finance. He has held a variety of senior posts in the Investment Banking, Insurance and Asset Management sectors. He qualified as a Chartered Accountant with KPMG before moving to UBS, then took the role of Managing Director at Dresdner Bank, London. He was part of the private equity group that acquired Pearl Group Limited in December 2004 and held a number of senior Directorial posts in that business. Whilst at Pearl Group John founded Axial Investment Management Limited and held the positions of CEO, CIO and CFO within Axial. John is an Executive Director of Strathdon Investments PLC and a Non-Executive Director of AMG Systems Ltd.

Independent auditor's report to the members of DCD Media Plc

We have audited the financial statements of DCD Media Plc for the year ended 31 December 2011 which comprise the consolidated statement of comprehensive income, the consolidated statement of financial position and Company balance sheet, the consolidated statement of cash flows, the consolidated statement of changes in equity and the related notes. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company's members, as a body, in accordance with sections Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditors

As explained more fully in the statement of Directors' responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.

Opinion on financial statements

In our opinion:

·; the financial statements give a true and fair view of the state of the Group's and the parent Company's affairs as at 31 December 2011 and of the Group's loss for the period then ended;

·; the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

·; the parent Company's financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

·; the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Emphasis of matter - Going Concern

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 1 to the Financial Statements concerning the Group and Company's ability to continue as a going concern.

The Company's convertible loan notes become payable in November 2012. The Directors have entered into negotiations with these note holders and are confident that the note holders will not demand cash repayment within the next 12 months. Negotiations are currently ongoing and no guarantee exists that cash repayment will not be demanded.

These conditions indicate the existence of material uncertainties which may cast significant doubt upon the Group and Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

·; adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

·; the parent Company financial statements are not in agreement with the accounting records and returns; or

·; certain disclosures of Directors' remuneration specified by law are not made; or

·; we have not received all the information and explanations we require for our audit.

Simon Brooker (senior statutory auditor)

For and on behalf of BDO LLP, statutory auditor

Bridgewater House

Finzels Reach

Counterslip

Bristol

BS1 6BX

28 May 2012

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC203127).

Consolidated income statement for the year ended 31 December 2011

The notes set out below are an integral part of these consolidated financial statements.

Consolidated statement of financial position as at 31 December 2011

Company number 03393610

The notes set out below are an integral part of these consolidated financial statements.

The financial statements were approved and authorised for issue by the Board of Directors on 28 May 2012.

S Nourmand

Director

Consolidated statement of cash flows for the period ended 31 December 2011

Consolidated statement of changes in equity for the year ended 31 December 2011

Notes to the financial statements for the year ended 31 December 2011

The principal activity of DCD Media plc and subsidiaries (the Group) is the production of television programmes in the United Kingdom and United States, and the worldwide distribution of those programmes for television and other media; the Group also distributes programmes on behalf of other independent producers.

DCD Media plc is the Group's ultimate parent company, and it is incorporated and domiciled in Great Britain. The address of DCD Media plc's registered office is One America Square, Crosswall, London EC3N 2SG, and its principal place of business is London. DCD Media plc's shares are listed on the Alternative Investment Market of the London Stock Exchange.

DCD Media plc's consolidated financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company. The accounts have been drawn up to the date of 31 December 2011.

1 Principal accounting policies

The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. The Group financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by European Union ("Adopted IFRSs"), and with those parts of the Companies Act 2006 applicable to companies preparing their financial statements under Adopted IFRSs.

Change of accounting reference date

During the period to 31 December 2010, the accounting reference date (ARD) was changed from 30 June to 30 December. Under the Companies Act 2006, accounts can be made up to a date within 7 days of the ARD. The Directors have therefore selected 31December as the year end date. The financial statements shown for 2011 are for the year 1 January 2011 to 31 December 2011. Comparative figures are for the period 1 July 2009 to 31 December 2010, a period of 18 months.

Basis of preparation - going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the CEO's statement. The financial position of the Group, its cash position and borrowings are set out in the financial review section of the statement. In addition note 22 sets out the Group's objectives, policies and processes for managing its financial instruments and risk.

The Group's day-to-day operations are funded from cash generated from trading and the use of an overdraft facility of £0.75m, with other activities funded from a combination of equity and short and medium term debt instruments. In considering the going concern basis of preparation of the Group's financial statements, the Board have prepared profit and cash flow projections which incorporate reasonably foreseeable impacts of the ongoing challenging economic environment. These projections reflect the ongoing management of the day to day cash flows of the Group which includes assumptions on the profile of payment of certain existing liabilities of the Group. They show that the day to day operations will continue to be cash generative which will underpin the Group's stability and enable management to continue to focus the Group's activities into profitable production development. The forecasts show that the Group will continue to utilise its term loan and overdraft facility provided by its principal bankers for the foreseeable future.

As at the 31 December 2011 the Group had a term loan of £1.0m which is due for repayment on 28 November 2012. The Group has repaid £0.25m of this term loan in the post year end period and the current outstanding balance is £0.75m. The term loan is currently under review and being renegotiated with the Group's principal bankers, with a view to changing the repayment period to one greater than 18 months. The Group's bankers have indicated that it is their intention to agree new terms. The Group's overdraft facility has also recently been extended by its principal bankers until 30 November 2012. Accordingly, the Directors have a reasonable expectation that both the term loan and the overdraft facility will continue to be available to the Group for the foreseeable future.

On 28 November 2012, convertible debt, totalling £4.3m of principal loan and cumulative interest as at 31 December 2011, is due to become payable. Timeweave Plc acquired £3.1m of this convertible debt on 8 February 2012. Timeweave PLC converted £0.6m of the convertible debt on 18 April 2012 to acquire a 29.99% holding in the Company. The Directors have been, and continue to be, in discussions with the Directors of Timeweave to understand their intentions and are working with Timeweave on a proposal for Timeweave to reduce, or negate, the impact of the repayment of the convertible debt in November 2012. There remains, however, a material uncertainty that the Company may not be able to repay in cash the convertible debt on 28 November 2012 as it arises, if discussions with Timeweave result in a withdrawal of their support.

The Board remain positive about the resilience of the Group despite the pressures from the current economic conditions and those outlined above. The Directors forecasts and projections, which make allowance for reasonably possible changes in its trading performance, show that, with the ongoing support of its lenders and its bank, the Group can continue to generate cash to meet their obligations as they fall due.

Through the recent negotiations with its shareholders, its loan note holders and its principal bankers, the Directors, after making enquiries, have a reasonable expectation that the Company and the Group will have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and financial statements.

The financial statements do not include the adjustments that would result if the Group or Company was unable to continue as a going concern.

Changes in accounting policies

The following new standards, interpretations and amendments, applied for the first time from 1 January 2011, have had an affect on the financial statements:

Revised IAS 24 Related Party Disclosures

The revision to IAS 24 is in response to concerns that the previous disclosure requirements and the definition of a related party were too complex and difficult to apply in practice, especially in environments where government control is pervasive. The revised standard addresses these concerns by providing a revised definition of a related party. The structure of definition of a related party has been simplified and inconsistencies eliminated. The revised definition will mean that some entities within the Group will have more related parties for which disclosures will be required.

Improvements to IFRSs (2010)

The improvements in this Amendment clarify the requirements of IFRSs and eliminate inconsistencies within and between Standards. The changes include amendments to:

·; IFRS 3 (Revised 2008) 'Business combinations' including: (i) Clarification that the treatment of contingent consideration arising in business combinations occurring before the effective date of IFRS 3(R) continues to be treated under the old requirements. (ii) Limiting the choice to measure non-controlling interests at a proportionate share in recognised amounts of the acquiree's identified net assets to present ownership interests with other components of the non-controlling interest being measured at fair value. (iii) The inclusion or otherwise in the cost of investment of replacement share-based payment awards provided to employees of the acquiree

·; IFRS 7 'Financial instruments: Disclosures' including clarification that an entity should provide qualitative disclosures in the context of quantitative disclosures to enable users to link related disclosures and hence form an overall picture of the nature and extent of risks arising from financial instruments

·; IAS 1 (Revised 2007) 'Presentation of financial statements' clarifying that the analysis of components of other comprehensive income in the statement of changes in equity may be presented in a note

·; IAS 34 'Interim financial reporting' clarifying the disclosures required in respect of significant events and transactions during the period.

Improvements to IFRSs (2010) also made minor amendments to the wording of IFRIC 13 'Customer loyalty programmes' regarding the valuation of award credits and the transitional arrangements for amendments to IAS 21 'The effects of changes in foreign exchange rates' and IAS 28 'Investments in associates' in respect of the loss of control or significant influence which were introduced by IAS 27 (as amended 2008) 'Consolidated and separate financial statements'.

A number of standards and interpretations have been issued by the IASB. They become effective after the current year and have not been adopted by the Group. Management have reviewed these standards and believe none of these standards, which are effective for periods beginning after 1 January 2011 are expected to have a material effect on the Group's future financial statements.

Revenue and attributable profit

Production revenue represents amounts receivable from producing programme/production content, and is recognised over the period of the production in accordance with the milestones within the underlying signed contract. Profit attributable to the period is calculated by capitalising all appropriate costs up to the stage of production completion, and amortising production costs in the proportion that the revenue recognised in the year bears to estimated total revenue from the programme. The carrying value of programme costs in the statement of financial position is subject to an annual impairment review.

Event management revenue arises where the Group produced and filmed events in the period. Event management revenue is recognised in accordance with the milestones agreed within the underlying signed contract. Associated costs are recognised in-line with the agreed budgets aligned to the contractual milestones.

Where productions are in progress at the year end and where billing is in advance of the completed work per the contract, the excess is classified as deferred income and is shown within trade and other payables.

Distribution revenue arises from the licensing of programme rights which have been obtained under distribution agreements with either external parties or Group companies. Distribution revenue is recognised in the statement of comprehensive income on signature of the licence agreement, and represents amounts receivable from such contracts.

Revenue from sales of DVDs and other sales is the amounts receivable from invoiced sales during the year.

All revenue excludes value added tax.

Basis of consolidation

The Group financial statements consolidate those of the Company and of its subsidiary undertakings drawn up to 31 December 2011. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

The Group also holds an investment of 19.9% in Classical TV Limited. This interest is not accounted for as a subsidiary or associate as the Group does not have sufficient control or influence to do so. The investment had a carrying value of nil in both the current year and previous financial period.

Non-controlling interests

For business combinations completed prior to 1 July 2009, the Group initially recognised any non-controlling interest in the acquiree at the non-controlling interest's proportionate share of the acquiree's net assets. For business combinations completed on or after 1 July 2009 the Group has the choice, on a transaction by transaction basis, to initially recognise any non-controlling interest in the acquiree which is a present ownership interest and entitles its holders to a proportionate share of the entity's net assets in the event of liquidation at either acquisition date fair value or, at the present ownership instruments' proportionate share in the recognised amounts of the acquiree's identifiable net assets. Other components of non-controlling interest such as outstanding share options are generally measured at fair value. The Group has not elected to take the option to use fair value in acquisitions completed to date.

From 1 July 2009, the total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests. Before this date, unfunded losses in such subsidiaries were attributed entirely to the Group. In accordance with the transitional requirements of IAS 27 (2008), the carrying value of non-controlling interests at the effective date of the amendment has not been restated.

Goodwill

Goodwill represents the excess of the cost of a business combination over, in the case of business combinations completed prior to 1 January 2010, the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired and, in the case of business combinations completed on or after 1 July 2009, the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired. For business combinations completed prior to 1 July 2009, cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition. Changes in the estimated value of contingent consideration arising on business combinations completed by this date are treated as an adjustment to cost and, in consequence, result in a change in the carrying value of goodwill.

For business combinations completed on or after 1 July 2009, cost comprised the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, re-measured subsequently through profit or loss. For business combinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

Property, plant and equipment

Property, plant and equipment are stated at cost net of depreciation and any provision for impairment. Depreciation is calculated to write down the cost less estimated residual value by equal annual instalments over their expected useful lives. The rates generally applicable are:

The assets' residual values and useful lives are reviewed at each statement of financial position date and adjusted if appropriate.

Other intangible assets

Trade names

Trade names acquired through business combinations are stated at their fair value at the date of acquisition. They are amortised through the statement of comprehensive income, following a periodic impairment review, on a straight line basis over their useful economic lives, such periods not to exceed 10 years.

Programme rights

Internally developed programme rights are stated at the lower of cost, less accumulated amortisation, or recoverable amount. Cost comprises the cost of all productions and all other directly attributable costs incurred up to completion of the programme and all programme development costs. Where programme development is not expected to proceed, the related costs are written off to the statement of comprehensive income. Amortisation of programme costs is charged in the ratio that actual revenue recognised in the current year bears to estimated ultimate revenue. At each statement of financial position date, the Directors review the carrying value of programme rights and consider whether a provision is required to reduce the carrying value of the investment in programmes to the recoverable amount. The expected life of these assets is not expected to exceed 7 years.

Purchased programme rights are stated at the lower of cost, less accumulated amortisation, or recoverable amount. Purchase programme rights are amortised over a period inline with expected useful life, not exceeding 7 years.

Amortisation and any charge in respect of writing down to recoverable amount during the year are included in the statement of comprehensive income within cost of sales.

Leased assets

Property, plant and equipment acquired under finance leases or hire purchase contracts are capitalised and depreciated in the same manner as other property, plant and equipment, and the interest element of the lease is charged to the statement of comprehensive income over the period of the finance lease. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability by using an effective interest rate. The related obligations, net of future finance charges, are included in liabilities.

Rentals payable under operating leases are charged to the statement of comprehensive income on a straight line basis over the period of the lease.

Inventories

Inventories comprise pre-production costs incurred in respect of programmes deemed probable to be commissioned, and finished stock of DVDs available for resale. Where it is virtually certain production will occur, pre-production costs are capitalised in inventories and transferred to intangibles on commencement of production. Finished stock of DVDs available for re-sale is also included within inventories. Inventories are valued at the lower of cost or recoverable amount.

Programme distribution advances

Advances paid in order to secure distribution rights on third party catalogues or programmes are included within current assets. Distribution rights entitle the Company to license the programmes to broadcasters and DVD labels for a sales commission, whilst the underlying rights continue to be held by the programme owner. The advances are stated at the lower of the amounts advanced to the rights' owners less actual amounts due to rights owners based on sales to date.

Impairment of non-current assets

For the purposes of assessing impairment, assets are grouped into separately identifiable cash-generating units. Goodwill is allocated to those cash-generating units that have arisen from business combinations.

At each statement of financial position date, the Group reviews the carrying amounts of its non-current assets, to determine whether there is any indication those assets have suffered an impairment loss. If any such indication exists the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Goodwill is tested for impairment annually. Goodwill impairment charges are not reversed.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value and value in use based on an internal discounted cash flow evaluation.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents. Bank overdrafts are shown in current liabilities on the statement of financial position. Overdrafts are included in cash and cash equivalents for the purpose of the cash flow statement.

Assets held for sale

Non-current assets and disposal groups are classified as held for sale when:

·; they are available for immediate sale;

·; management is committed to a plan to sell;

·; it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;

·; an active programme to locate a buyer has been initiated;

·; the asset or disposal group is being marketed at a reasonable price in relation to its fair value; and

·; a sale is expected to complete within 12 months from the date of classification.

Non-current assets and disposal groups classified as held for sale are measured at the lower of:

·; their carrying amount immediately prior to being classified as held for sale in accordance with the Group's accounting policy; and

·; fair value less costs to sell.

Following their classification as held for sale, non-current assets (including those in a disposal group) are not depreciated.

Discontinued operations

The results of operations disposed during the year are included in the consolidated statement of comprehensive income up to the date of disposal.

A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of, has been abandoned or that meets the criteria to be classified as held for sale.

Discontinued operations are presented in the consolidated statement of comprehensive income as a single line which comprises the post-tax profit or loss of the discontinued operation along with the post-tax gain or loss recognised on the re-measurement to fair value less costs to sell or on disposal of the assets or disposal groups constituting discontinued operations.

Restatement of prior period cash flow statement

The restatement is due to the correction of the movements in trade and other receivables, the movements in trade and other payables and the net cash flows from financing activities. £0.966m has been reanalysed as a cash outflow from the movement in trade and other payables to net cash flows from financing activities. £0.38m has been reanalysed as a cash outflow from movements in trade and other receivables to movements in trade and other payables. The net effect on cash flows is nil.

Equity

Equity comprises the following:

·; Share capital represents the nominal value of issued Ordinary shares and Deferred shares;

·; Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue;

·; Equity element of convertible loanrepresents the part of the loan classified as equity rather than liability (see note 18);

·; Merger reserve represents the excess over nominal value of the fair value of consideration received for equity shares issued on acquisition of subsidiaries, net of expenses of the share issue (in accordance with s.612 of the Companies Act 2006);

·; Translation reserve represents the exchange rate differences on the translation of subsidiaries from a functional currency to Sterling at the year end;

·; Retained earnings represents retained profits and losses; and

·; Non controlling interest represents net assets owed to non-controlling interests.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base, except for differences arising on:

·; the initial recognition of goodwill;

·; the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

·; investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

·; the same taxable Group company; or

·; different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Foreign currency

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the statement of financial position date. Exchange differences arising on the settlement and retranslation of monetary items are taken to the statement of comprehensive income.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated at the exchange rate ruling at the statement of financial position date. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising are classified as equity and transferred to the Group's retained earnings reserve.

Financial instruments

Financial assets and financial liabilities are initially recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument at their fair value and thereafter at amortised cost.

Trade Receivables

Trade receivables are recorded at their amortised cost less any provision for doubtful debts. Trade receivables due in more than one year are discounted to their present value.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are reported in a separate allowance account with the loss being recognised within administrative expenses in the statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Convertible Loans

Convertible loan notes are regarded as compound instruments, consisting of a liability component and an equity component. At the date of issue the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible debt. The difference between the proceeds of issue of the convertible loan note and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group, is included in equity.

Issue costs are apportioned between the liability and equity components of the convertible loan notes based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity.

The interest expense of the liability component is calculated by applying the effective interest rate to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible loan note.

Bank Borrowings

Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the year to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. Finance charges are accounted for on an effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the year in which they arise.

Trade Payables

Trade payables are stated at their amortised cost.

Equity Instruments

Equity instruments issued by the Group are recorded as the proceeds received, net of direct costs.

Retirement benefits

The Group operates pension schemes for the benefit of a number of its Directors. The schemes are defined contribution schemes and the contributions are charged against profits as they accrue.

2 Critical accounting judgements and key sources of estimation uncertainty

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. If in the future such estimates and assumptions which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change. Where necessary, the comparatives have been reclassified or extended from the previously reported results to take into account presentational changes.

Critical judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, which are described in note 1, management has made the following judgements that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).

Sale and leaseback

As explained in note 24, the Group enters into sale and leaseback arrangements to finance programme production. The obligations to the lessee are matched by deposits held with financial institutions. The Group is not able to control the deposit accounts, nor is it able to withhold payments to the investor from the accounts. Accordingly, the Group has determined that, under IAS39 'Financial instruments: Recognition and Measurement', each sale and leaseback transaction entered into by the Group has, from inception, failed to meet the definition of an asset and liability and has therefore not been recognised in these financial statements. The Group has applied guidance from SIC27 'Evaluating the substance of transactions involving the legal form of a Lease'.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Recoverability of programmes in the course of production

During the year, management reviewed the recoverability of its programmes in the course of production which are included in its statement of financial position. The projects continue to progress satisfactorily and management continue to believe that the anticipated revenues will enable the carrying amount to be recovered in full.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which the goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the statement of financial position date was £4.6m. Details relating to the allocation of goodwill to cash-generating units and potential impairment calculations are given in note 12.

Impairment of programme rights

Determining whether programme rights are impaired requires an estimation of the value in use of the cash-generating unit to which the rights have been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of programme rights at the statement of financial position date was £0.5m. Details of the impairment review calculations are given in note 12.

3 Segment information

Under IFRS 8 the accounting policy for identifying segments is based on the internal management reporting information that is regularly reviewed by the senior management team.

The Group has four main reportable segments:

·; Factual Television Production - This division is involved in the production of factual based television content from the aggregate of the following reporting lines: Prospect Pictures, West Park Pictures and DCD Factual brands;

·; Entertainment Television Production - This division is involved in the production of entertainment based television content. This includes productions by September Films and Matchlight Ltd;

·; Event Management - This division organises and manages events, primarily music concerts through Done and Dusted, and has been classified as a discontinued operation at the year end; and

·; Rights and Licensing - This division is involved with the sale of distribution rights, DVDs, music and publishing deals through the aggregate of the following reporting lines: DCD Rights, DC DVD, DCD Music and DCD Publishing.

The Group's reportable segments are strategic business divisions that offer different products to different markets, while its Other division is its head office function which manages other business which cannot be reported within the other reportable segments. They are managed separately because each business required different management and marketing strategies.

Uniform accounting policies are applied across the entire Group. These are described in note 1 of the financial statements.

The Group evaluates performance of the basis of profit or loss from operations but excluding exceptional items such as goodwill impairments. The Board considers the most important KPIs within its business segments to be revenue and segmental profit.

Inter-segmental trading occurs between the Rights and Licensing division and the production divisions where sales are made of distribution rights. Royalties and commissions paid are governed by an umbrella agreement covering the Group that applies an appropriate rate that is acceptable to the local tax authorities.

Segment assets include all trading assets held and used by the segments for their day to day operations. Goodwill and trade-names are not included within segmental assets as management views these assets as owned by the Group. Segment liabilities include all trading liabilities incurred by the segments. Loans and borrowings and deferred tax liabilities incurred by the Group are not allocated to segments. Details of these balances are provided in the reconciliations below:

2011 Segmental Analysis - income statement

2011 Segmental Analysis - financial position

2010 Segmental Analysis - income statement

2010 Segmental Analysis - financial position