DCD.L Regulatory News (DCD)

DCD Media Plc

("DCD Media" or the "Company")

Audited results for the year ended 31 December 2014

DCD Media and its subsidiaries, the independent TV production and distribution group (the "Group"), today report results for the year ended 31 December 2014.

Financial Summary

Continuing operations:

· Revenue £9.7m (2013: £12.3m)

· Gross profit £2.5m (2013: £4.3m)

· Operating loss £0.9m (2013: £2.7m)

Discontinued operations:

· Revenue £1.3m (2013: £1.9m)

· Gross profit £0.3m (2013: £0.2m)

· Operating loss £0.0m (2013: £0.3m)

· Gain on sale £0.3m (2013 : £nil)

Group results:

· Operating loss £0.6m (2013: £3.0m)

· Adjusted EBITDA £(0.2m) (2013: (£0.9m))

· Adjusted loss before tax £(0.5m) (2013: (£1.1m))

Please refer to the table within the Performance section below for an explanation of the profit adjustments.

Business highlights

· Focus on our rights business yields results and provides a platform for further growth

· DCD Rights wins the tender to represent the prestigious Open University catalogue for two years and starts dialogue to acquire a library of programmes from the administrators of Electric Sky

· September Films' production Celebrity Squares airs on ITV

· Negotiations with The CW network and co-producers 117 Productions lead to the commission of a US version of the magic competition show Penn & Teller: Fool Us which will be aired in 2015

· Loss making subsidiary Matchlight is sold to management

· Sequence Post expands its client base

· Coutts term loan is repaid in November 2014

· Largest shareholders agreed to lend further £0.8m in the form of new convertible loan notes

· Actions taken in previous years yield savings in both personnel and operational expenses in 2014

David Craven, Executive Chairman and Chief Executive Officer, commented: "This year saw further consolidation for the Group and notably, the Board was pleased to see a cleaner balance sheet as a consequence of the repayment of the long-term debt facility.

"The Executive and Board took the decision last year to drive growth through the Rights business whilst operating a more streamlined and manageable cost base through the Production businesses. We are delighted to be able to report that this strategy is succeeding and delivering reduced losses and a more predictable revenue stream going forward.

"The business reports a relatively modest adjusted EBITDA loss of £0.2m compared to £0.9m loss in 2013. This is a consequence of the consolidation work undertaken in the last 18 months. The Board believes that it has the platform now for a sustainable business with a solid contribution from the Rights business and strong output from the Production companies.

"The financial performance therefore reflects a more cohesive business at a revenue level, with EBITDA losses narrowing with the reasonable expectation that the Group will report adjusted EBITDA positivity next year.

"Following the consolidation of the Production businesses, the team has won some exciting commissions including a US network co-production of the Jonathan Ross hosted the magic competition show Penn & Teller: Fool Us for the CW network. Elsewhere, September Films secured a major new ITV commission for a seven-part 60 minute series of Celebrity Squares hosted by Hollywood star Warwick Davis. The primetime comedy game-show premiered in July 2014 and was subsequently re-commissioned for a second eight-part, 45 minute series for transmission in 2015.

"We are particularly pleased that the development of the successful and highly-respected international Rights business continued. Under the strong leadership of Nicky Davies Williams, DCD Rights won the tender to represent the prestigious Open University catalogue for two years and began a dialogue to acquire a library of programmes from the administrators of Electric Sky. The library was subsequently acquired by DCD Media after the year end.

"We are confident we can see further expansion from the Rights division in the new financial year. While there are challenges sourcing the best quality content, we look forward to the Rights business driving sustained growth in the coming years.

 "The Board is confident that with the term-debt paid down and rationalisation of the business divisions, that the future for DCD Media looks exciting and promising."

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Executive Chairman's review

The financial year to 31 December 2014 was progressive if not fruitful for both the Production and Rights divisions.

The stated ambition for the Group last year was to focus more intensely on the future growth for the Rights business and we are pleased to report the expansion plan has succeeded with a modest 5% growth in revenue from the previous year with further expansion planned in the next financial year.

DCD Rights consolidated its position as one of the world's top independent TV rights distributors in 2014 with considerable success in award-winning new dramas and factual programming as well as building its music library. The company continued to remain profitable and is poised for further growth in the next financial year.

Key to the growth story in Rights has been the acquisition of new content. Securing the licence to represent The Open University library was pivotal as was the acquisition of the Electric Sky library, the process for which began during the year. The team believe the Open University and Electric Sky deals are game-changers and significantly increase the footprint by creating greater depth in the sales catalogue. The Open University deal alone boosted the company's portfolio with more than 188 hours of BBC-produced, high-calibre and entertaining factual content as well as a further 40 hours of programming over a two-year period.

The Rights' team enjoy continued support from shareholder Timeweave which has provided a fund for the acquisition of third-party distribution rights. While the Rights team has built a reliance on the Timeweave fund to finance advances for third party content acquisition, the executives have engagement at an advanced stage with additional funders who can provide financial support for content acquisition, further extending the reach of the Rights division.

DCD Rights has continued to expand its sales team which has now been split into more focused geographies enabling further growth from new markets. The most significant challenge however remains the acquisition of high quality factual and drama content.

We believe we are now well placed for the Rights division to drive forward and deliver on the target of double digit sales growth in the forthcoming years.

We remained committed as a Board to the creative teams in Production and we are delighted to report that the London based Production businesses, September Films and Rize USA struck significant commissions during the year.

September Films prevailed with a major new ITV commission for a seven-part 60 minute series of Celebrity Squares hosted by Hollywood star Warwick Davis. The primetime comedy game-show premiered in July 2014 and was subsequently re-commissioned for a second eight-part, 45 minute series for transmission in 2015.

And for Rize USA, the acclaimed three-part behind-the-scenes series Liberty of London, which first aired in 2013, was re-commissioned by Channel 4 in a new four-part format and the second series premiered in October.

While the Production teams delivered on immediate opportunities, they have also been working on a number of broadcaster engagements and these are showing promise with some strong development prospects in the pipeline. We believe that a number of short-term production opportunities are within the grasp of the London based Production development teams.

Post-production house, Sequence Post ("Sequence") continues to assert itself in the post-production marketplace, securing a number of key contracts with the UK's foremost programme makers including programming for a variety of channels such as Celebrity Squares for ITV, Liberty of London for Channel 4, crime drama Suspects for Channel 5, Young Fathers: Return to Love for Channel 4's Random Acts and Australian travel adventure competition series RV Rampage for Travel Channel. Notably Sequence post-produced One Direction's Where We Are live concert album film premiered for an exclusive weekend in October and was Sequence's first ever cinema-release project, paving the way for potential lucrative future big-screen projects.

Corporate highlights of the year

The most notable Group achievement of the year was certainly the repayment of the remaining £0.48m of long-term debt to Coutts & Co, the Group's principal bankers. The Group had been hampered with the cash drain of over-borrowing and we are delighted that the current Executive and Board have delivered on the pledge to pay down this long-term loan.

In May 2014, the Group's largest shareholders agreed to lend a further £0.8m in the form of new convertible loan notes, having an interest rate of 10% and a conversion price of £1 following the resolutions approved by the shareholders at the AGM on 30 June 2014. These notes are due for repayment on 30 May 2016 if not previously converted.

D Craven

Executive Chairman and Chief Executive Officer

1 June 2015

Strategic report

Strategic outlook

We believe the Executive team focus on a highly regarded Rights business and streamlined Production entities is a stable platform for future profitable growth. We also believe the market will remain highly attractive in both these sectors in the coming years.

The current demand for compelling TV content and for returnable franchises is a first-class environment for both divisions to thrive. It is fair to say, the Group remains vulnerable to a lack of scale particularly in the Production area, but we are addressing this.

We are obviously delighted that the Group's bank debt burden is lifted; the Board can now focus more on taking advantage of the many opportunities being presented to the businesses.

As mentioned, DCD Rights is showing growth potential with a scalable model. The Board believes the team, continuously led by the highly-experienced Nicky Davies Williams, has demonstrated its capability supported by the Timeweave Rights acquisition fund. At the same time, the creative teams look to, and act in, highly competitive markets delivering acclaimed content broadcasters can rely on.

The Board recognises the benefits of running both Rights and Productions in an integrated manner and will continue to target investment in whichever direction the Board feels will maximise shareholder value.

Review of divisions for the year to 31 December 2014

Rights and Licensing

DCD Rights

DCD Rights continued to expand its catalogue of programming available for the world markets and during the year was able to launch award-winning new dramas and factual programming as well as building its music library. The business continued to remain profitable and delivered an increase in turnover of 5%.

In April 2014, DCD Rights won the tender to represent the prestigious Open University programming catalogue around the world. This significant deal boosted the company's extensive portfolio with more than 188 hours of BBC-produced, high calibre and entertaining factual content as well as a further 40 hours of programming over a two-year period.

Many Open University programmes are primetime ratings winners with well-known presenters, including two series of Coast, the award-winning BBC Two series which celebrates Britain's dramatic coastline, and Bang Goes The Theory, a magazine-style series which makes sense of the science behind headline discoveries.

In drama, the company launched new Australian series The Code, which was successfully sold to BBC Four, who premiered the thriller in October, as well as numerous other major broadcasters around the world including Arte for France and Germany, DirecTV for Audience Network in USA and Sundance Channel Latin America, Middle East and Iberia.

Following another successful MIPTV, DCD Rights sold its new, award winning 13-part cookery series Bitten: Sarah Graham Cooks Cape Town to over 35 international channels and is building a strong strand of food programming.

The very popular music library continued to be in demand from buyers and the library grew with new specials from George Michael, Santana, Jessie J, as well as a prestigious new Jimi Hendrix film from the Experience Hendrix estate.

From the US, the company benefitted from revenue from the format deal with NBC International for The Slap, which premiered on NBC starring Uma Thurman, Zachary Quinto and Emmy-winner Brian Cox whilst the Penn and Teller series that DCD Rights sold to the CW Network became the network's second most rated show over the summer and spawned a significant commission for an American version of the series.

DCD Publishing

DCD Publishing represents a wide range of properties and talent across all media including television, book publishing, DVD, licensed consumer products, product endorsement and monetised social media.

In 2014, the company's talent division represented a broad range of clients including Burberry's make-up artist Wendy Rowe, Kara Rosen of the Plenish Cleanse brand, journalist Kate Spicer, adventurer Simon Mann, Jack Monroe (A Girl called Jack), Deborah Lickfett (Metropolitan Mum), dancers Vincent and Flavia, William Banks-Blaney (William Vintage), The Shard, photographer Grace Vane Percy, chef Yuki Gomi, 'London's pop-up restaurant king' Jimmy Garcia and The Meek Family who are travelling for two years educating their children at home.

Following on from the successful release of dance fitness DVD Zalza with Russell Grant and Falvia Cacace in 2013, DCD Publishing secured the release of a second DVD instalment and a profitable QVC deal for a Zalza box-set in 2014.

In 2014, Penguin books sold the Italian rights to Yuki Gomi's Sushi at Home and Jack Monroe's number one best-selling frugal food cook book A Girl Called Jack to Newton Compton Editori. A second book from Jack Monroe A Year in 120 Recipes was subsequently secured by DCD Publishing and published by Michael Joseph in October along with Montezuma's Chocolate Cook Book, published by Kyle Books.

Additional book deals include 25 Dresses by William Vintage, published by Quadrille Publishing in 2015, Plenish: Juices to Boost, Heal and Cleanse, published by Mitchell Bleazely and a two-book deal for the Meek family: 100 Family Adventures and Learning Outdoors With The Meek Family, published by Frances Lincoln. DCD Publishing also secured a successful regular column for the Meeks with Green Parent magazine.

Productions

The DCD Media Productions division comprises the following UK and US-based brands:

Rize USA London, UK September Films UK London, UK

September Films USA Los Angeles, California Prospect Pictures London, UK

Prospect Cymru London, UK

The Group's results include those of Matchlight, its Glasgow based production company, until its point of disposal in September 2014.

These well-established, independent production companies have a strong track record in producing high-quality viewing covering a broad spectrum of programming including Entertainment, Factual, Current Affairs, Reality and Daytime (Lifestyle and Cookery).

The output of each organisation is overseen by DCD Media and complimented by the Group's Post-Production and Rights and Licensing divisions.

September Films UK

Following the Group's investment into development activity in 2013, September Films secured a major new ITV commission for a seven-part 60 minute series of Celebrity Squares hosted by Hollywood star Warwick Davis. The primetime comedy game-show premiered in July 2014 and was subsequently re-commissioned for a second eight part, 45 minute series for transmission in April 2015.

September Film's London-based development team continues to focus on winning new commissions, building important foundations and has since received significant broadcaster engagement regarding a proposed taster for an entertainment series for ITV.

September Films USA

In 2013 the Group invested resources into development activity which failed to deliver commissions across a range of funded projects.

It was also reported that the team was pursuing 'two significant projects', one of which we are pleased to report was secured by the DCD Media Rights team which delivered the US network co-production of the Jonathan Ross hosted magic competition show Penn & Teller: Fool Us. This is a major commission on a highly regarded US network, and while not related to the September Films USA team, it is nonetheless a major initiative in the North American market, which may lead to further developments in that market.

Rize USA

Rize USA, a joint-venture between Founder and Creative Director Sheldon Lazarus and DCD Media, launched in 2011 as a factual and reality producer with offices in London and Los Angeles. It has since provided a catalogue of hard-hitting shock-docs and behind-the-scenes observational documentaries for UK and US audiences including BBC Two, ITV, Channel 4, Science Channel, Discovery Fit & Health and TLC.

In 2014, the acclaimed three-part behind-the-scenes series Liberty of Londonwhich first aired in 2013 was re-commissioned by Channel 4 in a new four-part format and the second series premiered in October.

Rize USA proved its creativity and diversity, winning three separate commissions for fascinating one-off 60 minute documentaries to air in 2015. How to Remember Everything for ITV followed three British hopefuls to the World Memory Championships in China in December and Channel 4 commissioned a documentary exploring the phenomenal rise of dating apps for their Cutting Edge documentary: The Secret World of Tinder. Building on the success of Liberty of London which was sold worldwide by DCD Rights as a seven-part series, Rize USA went behind-the-scenes once more to Dubai's most opulent hotel, the Burj Al Arab Jumeirah, producing observational documentary The Billion Pound Hotel (titled the Billion Dollar Hotel for international distribution) which premiered in March 2015 and received a 10.5% audience share, trending 2nd in the UK and 6th in the world on social media.

Rize USA's productions have consistently generated valuable IP to be exploited worldwide by the Group's distributer, DCD Rights and in 2014, Rize USA continued to develop new and entertaining series proposals for a variety of audiences in the UK and US, one of which is expected to come to fruition in 2015 and will be a significant series commission for the Group.

Matchlight

Since inception in 2009, Matchlight produced documentary, history, arts, current affairs and popular factual programmes for all major UK channels including BBC One, Two, Three and Four, ITV, Channel 4, Channel 5, and BBC Scotland.

Prior to its sale, Matchlight had a number of new commissions.

In January, a one-off 60 minute documentary The Commonwealth of Burns transmitted on Burns Night on BBC Scotland and was closely followed by a three part 60 minute series presented by historian Amanda Vickery, The Story of Women and Power which aired on BBC Two in February.

In April, Jockey School, a one-off 60 minute documentary following three jockey hopefuls transmitted on Channel 4 and in May, a one hour documentary presented by Stephanie Flanders The Battle to Beat Polio, transmitted on BBC Two - it went on to secure a Royal Television Society (Scotland) nomination for Best Documentary/Factual Series. In the same month, The Story of Women and Art, also presented by Amanda Vickery was selected by BBC Director General Tony Hall to premier on iPlayer and transmitted on BBC Two. The three-part 60 minute series was nominated for Best Factual Series at the British Academy (BAFTA) Scotland Awards 2014.

In addition, in 2014 and while still part of the Group, Matchlight won three commissions which aired after its departure: a four-part 30 minute series Viva Variety commissioned by BBC Scotland, a one hour documentaryRussell Brand: End The Drugs War which aired in November and in December, Darcey Bussell's Looking for Audrey, a one-off special transmitted on BBC One.

The Commonwealth of Burns, The Story of Women and Art and Darcey Bussell's Looking for Audrey were sold internationally by DCD Rights which also represents subsequent Matchlight productions in secondary markets.

Despite this activity, Matchlight remained loss making and was sold to management, with DCD Rights retaining a long-term option over Matchlight's distribution rights.

Post-Production - Sequence Post

This London based post-production house was acquired by DCD Media in February 2012 in a strategic move to drive synergies from production-related activity provided by the Group. The acquisition improved Group profitability and profile (working for high profile third-party clients across all television, film and commercial genres), and in-house capabilities as an effective high-end service provider to DCD's production arms. Sequence Post ("Sequence") has equally benefitted from this synergy, experiencing a sharp increase in business through an expanded client base.

In 2014, Sequence secured work for companies such as Lemonade Money, Newman Street (part of Freemantle Media), Waddell media, JA Digital, Firecracker Films, Rize USA, September Films and Tuesday's Child.

Projects included programming for a variety of channels including Celebrity Squares for ITV, Liberty of London for Channel 4, crime drama Suspects for Channel 5, Young Fathers: Return to Love for Channel 4's Random Acts, online shorts for the Vodafone #Firsts series, and Australian travel adventure competition series RV Rampage for Travel Channel.

In addition, Sequence forged an important relationship with Grammy award winning director Paul Dugdale and producer Jim Parsons who commissioned Sequence to post-produce a series of ground-breaking live concert film music videos including Bafta-nominated Coldplay: Ghost Stories which premiered in May 2014 and was accompanied by a 60 minute behind-the-scenes documentary for Sky Arts (also post-produced by Sequence).

Michael Flatley's Lord of the Dance: Dangerous Games began post in 2014 for release the following year and One Direction's Where We Are live concert album film premiered for an exclusive weekend in October and was Sequence's first ever cinema-release project, paving the way for highly lucrative future big-screen projects.

Following investment from the Group, Sequence has continued to expand its facilities with the development of suites and an equipment upgrade. The division has seen its client base develop to encompass high-end documentary and music projects in addition to the Commercial and Corporate work that was once their staple.

Performance

At a turnover level, the Group delivered £11.0m in revenue compared with a comparative of £14.2m in 2013, of which £9.7m related to continuing operations (2013: £12.3m). The increase in turnover from productions in the UK was not sufficient to match the reduction in US productions that resulted from the loss of the Bridezillas franchise. However, restructuring within Productions in 2013 and early 2014 has reduced costs and generated an overall reduction in EBITDA loss in that division. In addition savings on central overheads have reduced losses at head office.

The Group made an operating loss for the year of £0.9m (2013: loss of £2.7m), which is stated after impairment and amortisation of intangible assets, including goodwill and trade names.

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

The headline Adjusted EBITDA in the year ended 31 December 2014 was a loss of £0.2m (2013: loss of £0.9m).

Adjusted loss before tax for the Group was £0.5m in 2014 against an adjusted loss of £1.1m for the year to 31 December 2013.

The following table represents the reconciliation between the operating loss per the consolidated income statement and adjusted Loss Before Tax (LBT) and adjusted Earnings Before Interest Tax Depreciation and Amortisation (EBITDA):

Intangible assets

The Group's consolidated income statement and consolidated statement of financial position has again this year been impacted by the amortisation and impairment of intangible assets, see note 5.

The Group has seen amortisation and impairment of goodwill and trade names for the year of £0.4m (2013: £1.7m) and a net amortisation and impairment of programme rights of £1.0m (2013: £4.4m).

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

Goodwill

September Films UK has now successfully produced two series of Celebrity Squares, co-produced a series of Penn & Teller Fool Us in the USA, and has several developments in the pipeline. Management now consider the forecast cash flows and profitability of the business support the carrying value of the goodwill and as a result, no impairment was booked in 2014.

Trade names

Trade names are amortised over ten years on a straight line basis and a non-cash expense of £0.4m was expensed in the year relating to trade names. The carrying value of trade names after the amortisation was £1.0m (2013: £1.5m).

Restructuring costs

Restructuring costs of £0.3m have been disclosed in the consolidated statement of comprehensive income and relate largely to redundancy payments.

Earnings per share

Basic loss per share in the year was 177p (year ended 31 December 2013: 656p loss per share) and was calculated on the loss after taxation of £0.7m (year ended 31 December 2013: loss £2.7m) divided by the weighted average number of shares in issue during the year being 414,281 (2013: 414,281).

Balance sheet

The Group's net cash balances have increased to £1.3m at 31 December 2014 from £0.5m at 31 December 2013. A substantial part of the Group cash balances represent working capital commitment in relation to its rights business and is not considered free cash. The increase in the year is largely due to temporary movements in receivables and payables in working capital.

During the year, repayments of £0.5m against bank debt were made. The bank term loan was fully repaid on 30 November 2014.

In the year, the Group's largest shareholders agreed to lend a further £0.8m in the form of new convertible loan notes, having an interest rate of 10% and a conversion price of £5. These notes are due for repayment on 30 May 2016 if not previously converted. At the AGM on the 30 June 2014, following the approval of the capital re-organisation, the conversion price became £1.

At the year end, the Group had an available gross overdraft facility of £0.75m and a net facility of £0.5m.

Shareholders' equity

Retained earnings as at 31 December 2014 were £(58.5m) (2013: £(57.7m)) and total shareholders' equity at that date was £2.6m (2013: £3.2m).

Amounts attributable to non-controlling interests

At the year end, the Group held an 80% stake in Rize Television Ltd. An amount of (£0.1m) (2013: (£0.1m)) as equity representing the non-controlling interest of the Group is reported as at the year end.

Current trading

2015 has got off to a good start for all of the Group's divisions. Within Productions, September Films produced a further series of Celebrity Squares for ITV and co-produced a series of Penn and Teller: Fool Us for The CW network in the US. Rize USA delivered three programmes. Both companies have several developments in the pipeline.

DCD Rights bolstered its catalogue with the acquisition of approximately 253 hours across 50 titles of Electric Sky owned productions, including the long running Fat Doctor series as well as recent productions Sky High Scrapers and How Cities Work, alongside a significant number of hours in a wide ranging factual catalogue of licensed titles from third party producers.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out above. The financial position of the Group, its cash position and borrowings are set out in the Performance section of the statement. In addition note 20 to the consolidated financial statements 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 with other activities funded from a combination of equity and short and medium term debt instruments. The overdraft facility is reducing by £0.25m throughout 2015 and is scheduled for review by the Group's principal bankers, Coutts & Co ("Coutts"), on 30 June 2015. The Directors have a reasonable expectation that the overdraft facility will continue to be available to the Group for a period in excess of 12 months from the date of approval of these financial statements.

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 trading environment. These projections reflect the 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. The forecasts show that the Group will continue to utilise its overdraft facility provided by its principal bankers for the foreseeable future.

The Directors' forecasts and projections, which make allowance for potential changes in its trading performance, show that, with the ongoing support of its shareholders, lenders and its bank, the Group can continue to generate cash to meet its obligations as they fall due.

The Directors have regular discussions with the Group's main shareholders and its principal bankers and 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.

Key Performance Indicators (KPIs)

Principal risks and uncertainties

General commercial risks

The Group's management aims to minimise the risk of over-reliance on individual business segments, members of staff, productions or customers by developing a broad, balanced stable of production and distribution activities 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.

Production and distribution revenue

Revenue is subject to fluctuations throughout the year. As the business grows, a broader range of customers and activities is expected to smooth out these fluctuations.

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 the short-term cash flows on productions can sometimes be negative initially. This is due to costs incurred before contracted payments 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 minimised; or, through a short term advance from a bank or other 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 £1.3m (31 December 2013: £0.5m) including certain production related cash held to maintain the Group policy. The Group debt consists primarily of an overdraft and conventional bank debt. Details of interest payable, funding and risk mitigation are disclosed in notes 9, 18 and 20 to the consolidated financial statements.

Exchange rate risk

The Group's exposure to exchange rate fluctuations has historically been small. Management initiate cash inflows and outflows in source currency and when required, take out forward options to protect against any short-term fluctuations.

D Craven

Executive Chairman and Chief Executive Officer

1 June 2015

Report of the Directors for the year ended 31 December 2014

The Directors present their report together with the audited financial statements for the year ended 31 December 2014.

Principal activities

The main activities of the Group continued to be content production, distribution and rights exploitation. The main activity of the Company continued to be that of a holding company, providing support services to its subsidiaries.

Business review

A detailed review of the Group's business including key performance indicators and likely future developments is contained in the Executive Chairman's Review and Strategic Report, which should be read in conjunction with this report.

Results

The Group's loss before taxation for the year ended 31 December 2014 was £0.9m (2013: £3.1m). The loss for the year post-taxation was £0.7m (2013: £2.8m) and has been carried forward in reserves.

The Directors do not propose to recommend the payment of a dividend (2013: £nil).

Directors and their interests

1. N Davies Williams was appointed on 30 June 2014.

2. See note 21 to the consolidated financial statements for information on the capital reorganisation that took place in 2014.

Mr Lindley and Mr McMyn are Non-Executive Directors.

Other than as disclosed in note 24 to the consolidated 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 year.

Substantial shareholdings

The Company has been notified, as at 29 May 2015, of the following material interests in the voting rights of the Company under the provisions of the Disclosure and Transparency Rules:

\* Timeweave Ltd and Colter Ltd are under the common ownership (see note 29 to the consolidated financial statements).

**Henderson and future references to Henderson mean together Henderson Global Investors Limited and certain funds managed by Henderson Alternative Investment Advisor Limited.

Share capital

Details of share capital are disclosed in note 21 to the consolidated 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 20 of the consolidated financial statements.

CORPORATE GOVERNANCE

Statement of compliance

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 UK Corporate Governance Code issued by the Financial Reporting Council ("the Combined Code").

DCD Media Plc's shares are quoted on AIM, a market operated by the London Stock Exchange Plc and as such there is no requirement to publish a detailed Corporate Governance Statement nor comply with all the requirements of the Combined Code. However, the Directors are committed to ensuring appropriate standards of Corporate Governance are maintained by the Group and this statement sets out how the Board has applied the principles of good Corporate Governance in its management of the business in the year ended 31 December 2014.

The Board recognises its collective responsibility for the long-term success of the Group. It assesses business opportunities and seeks to ensure that appropriate controls are in place to assess and manage risk.

During a normal year there are a number of scheduled Board meetings with other meetings being arranged at shorter notice as necessary. The Board agenda is set by the Chairman in consultation with the other Directors and Company Secretary.

The Board has a formal schedule of matters reserved to it for decision which is reviewed on an annual basis.

Under the provisions of the Company's Articles of Association all Directors are required to offer themselves for re-election at least once every three years. In addition, under the Articles, any Director appointed during the year will stand for election at the next annual general meeting, ensuring that each Board member faces re-election at regular intervals.

The Directors are entitled to take independent professional advice at the expense of the Company and all have access to the advice and services of the Company Secretary.

Board committees

The Board has established an Audit, Nomination and Remuneration Committee. All are formally constituted with written terms of reference. The terms of reference are available on request from the Company Secretary.

Relations with shareholders

The Company communicates with its shareholders through the Annual and Interim Reports and maintains an on-going dialogue with its principal institutional investors from time to time. The Board welcomes all shareholders at the annual general meeting where they are able to put questions to the Board. This assists in ensuring that the members of the Board, in particular the Non-Executive Directors, develop a balanced understanding of the views of major investors of the Company.

The Group uses the website www.dcdmedia.co.uk to communicate with its shareholders.

Internal control

The Board has overall responsibility for ensuring that the Group maintains a sound system of internal control to provide it with reasonable assurance that all information used within the business and for external publication is adequate, including financial, operational and compliance control and risk management.

It should be recognised that any system of control can provide only reasonable and not absolute assurance against material misstatement or loss, as it is designed to manage rather than eliminate those risks that may affect the Group achieving its business objectives.

Going concern

For the reasons set out in the Executive Chairman's Review, the Directors consider it is appropriate to continue to adopt the going concern basis in preparing the annual report and financial statements.

Statement of Directors' responsibilities

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, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 for that period.

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 IFRSs as adopted by the European Union and applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the Group and parent company financial statements respectively; 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 Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Supplier payment policy

The Company and Group's policy is to agree terms of payment with suppliers when agreeing the overall terms of each transaction, to ensure that suppliers are aware of the terms of payment and that Group companies abide by the terms of the payment.

Share Capital

Details of the Company's share capital and changes to the share capital are shown in note 21 to the Consolidated Financial Statements.

Resolutions at the Annual General Meeting

The Company's AGM will be held on Tuesday 30 June 2015. Accompanying this Report is the Notice of AGM which sets out the resolutions to be considered and approved at the meeting together with some explanatory notes. The resolutions cover such routine matters as the renewal of authority to allot shares, to disapply pre-emption rights and to purchase own shares. In addition, the Notice of AGM also describes the resolutions that are required to authorise the Board to issue shares related to the new convertible loan notes and the proposed capital reorganisation.

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 (www.dcdmedia.co.uk) 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 on-going integrity of the financial statements contained therein.

Charitable and political donations

Group donations to charities worldwide were £nil (2013: £nil). No donations were made to any political party in either year.

Auditors

A resolution was passed to appoint SRLV as the Company's auditors at the AGM to be held on 30 June 2015.

Disclosure of information to the Auditors

In the case of each of the persons who are Directors at the time when the annual report is approved, the following applies:

· so far as that Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and

· that Director has taken all the steps that they ought to have taken as a Director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

Directors' Report approved by the Board on 1 June 2015 and signed on its behalf by:

D Craven

Executive Chairman and Chief Executive Officer

1 June 2015

Board of Directors

David Craven (Executive Chairman & CEO)

David Craven was appointed CEO of DCD Media in October 2012 and Executive Chairman in January 2013. He is also CEO and a Director of Timeweave Ltd, which he joined in April 2011. David brings significant sector-specific and broad commercial experience to the Group, having held senior roles with News Corporation, UPC Media and Trinity Newspapers. He was also joint MD of the Tote for six years and was closely involved in its privatisation, and has held senior executive roles at UK Betting Plc and Wembley Plc. David was also a co-founder of broadband and interactive TV media group, UPC Chello, and is a co-founder of the Gaming Media Group.

Nicky Davies Williams (Executive Director)

Nicky Davies Williams was appointed CEO of DCD Rights, DCD Media's Distribution Division, in December 2005 when she sold NBD TV, a company she founded and ran successfully for over 22 years, to the Group. An English Literature graduate from Leeds University, she began her career in the music business, moving into film and television distribution at Island Pictures, where she rose to the post of Sales Director, prior to founding her own company in 1983. She has managed DCD Rights' growth into one of the world's leading independent distributors. Her experience includes

non-executive directorships on the Board of The Channel Television Group from 1991-1998, and as a founding

non-executive of the Women in Film and Television in the UK.

David Green (Executive Director)

David Green joined the group in 2007 when London and LA-based TV and film production company September Films, of which he was Chairman and Founder, was acquired by DCD Media. He took on the role of Group Chief Creative Officer before becoming CEO in 2009 and Executive Chairman in 2012. In October 2012, he relinquished his corporate role to return to production while remaining an Executive Director of the Group.

Oxford educated and a veteran of the UK and US film and TV industries, David's feature film directing credits include 'Buster' and 'Wings of the Apache', and he has produced over 2,000 hours of primetime TV programming including landmark series 'Hollywood Women' and 'Bridezillas', both of which he created.

Neil McMyn (Non-Executive Director)

Neil McMyn is a chartered accountant and Chief Financial Officer for the European Investment Portfolio of Tavistock Group, an international private investment organisation. Previously Neil spent nine years with Arthur Andersen Corporate Finance in Edinburgh and six years in advisory and funds management roles at Westpac Institutional Bank in Sydney, Australia. He became a Non-Executive Director of DCD Media in September 2012.

Andrew Lindley (Non-Executive Director)

Andrew Lindley joined the Board of DCD Media in September 2012. He is a practicing solicitor and holds another non-executive role with Turf TV as well as being an executive director of Lightbulb Investments and a consultant with Axiom. Andrew was Director of the Tote for the six years up to its sale in 2011 and before that spent five years at Northern Foods Plc before that, where he focused on M&A and complex contracts.

Consolidated income statement for the year ended 31 December 2014

Consolidated statement of comprehensive income for the year ended 31 December 2014

Consolidated statement of financial position as at 31 December 2014

Company number 03393610

The financial statements were approved and authorised for issue by the Board of Directors on 1 June 2015.

DCM Craven

Director

Consolidated statement of cash flows for the year ended 31 December 2014

Consolidated statement of changes in equity for the year ended 31 December 2014

Notes to the consolidated financial statements for the year ended 31 December 2014

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 Glen House, 22 Glenthorne Road, London, W6 0NG, 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 2014.

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.

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 Executive Chairman's Review and the Strategic Report. The financial position of the Group, its cash position and borrowings are set out in the financial review section of the Strategic Report. In addition, note 20 to the consolidated financial statements 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 £0.5m, with other activities funded from a combination of equity and short and medium term debt instruments.

The Group's overdraft facility has been extended by its principal bankers until 30 June 2015. The facility has reduced by £0.125m since the year end and is scheduled to reduce by a further £0.125m during the remainder of 2015. The term loan facility of £1.2m was finally repaid in November 2014. The Directors have a reasonable expectation that an overdraft facility will continue to be available to the Group for the foreseeable future.

During the year, the Group raised £0.8m through the issue of convertible loan notes to major shareholders. The loan note instrument was signed on 31 May 2014, has a maturity date of 30 May 2016 and accrues interest at 10% per annum.

On 30 May 2015, the loan notes issued in 2013 along with accrued interest totalling £1.2m were due for repayment. On 28 May 2015, DCD Media agreed with Timeweave Ltd and Henderson, together being the Special Majority Noteholders, that the conversion date of the 2013 loan notes would be extended from 30 May 2015 to such further date as agreed by the Majority Noteholders. 

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 market environment.

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 its 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 were unable to continue as a going concern.

Changes in accounting policies

A number of standards and interpretations have been issued by the IASB in relation to investment entities, consolidated financial statements and disclosures on the recoverable amount for non-financial assets. Those that were effective for the year end commencing 1 January 2014 have been reviewed and no adjustments deemed necessary. Those becoming effective from 1 January 2015 have not been adopted by the Group. Management have reviewed these standards and believe none of these standards, 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.

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 2014. 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.

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:

Short leasehold property improvements Over the life of the lease

Motor vehicles 25% on cost

Office and technical equipment 25%-33% on cost

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. Purchased programme rights are amortised over a period in-line 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.

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 loan represents the part of the loan classified as equity rather than liability;

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

· Own shares held represents shares in employee benefit trust;

· 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 contributes to the personal pension plans for the benefit of a number of its employees. Contributions are charged against profits as they accrue.

2 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 three main reportable segments:

· Production - This division is involved in the production of television content.

· 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.

· Post-Production - This division is involved in post-production and contains Sequence Post.

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 requires 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 EBITDA and profit.

In the year, the Group changed the way it evaluates the segments and now excludes management and rent recharges from EBITDA and profit figures. The comparatives for 2013 have been adjusted to exclude these recharges to the segments.

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 allocated to their respective segments. Segment liabilities include all trading liabilities incurred by the segments. Certain loans and borrowings incurred by the Group are not allocated to segments. Details of these balances are provided in the reconciliations below:

2014 Segmental Analysis - income statement

2014 Segmental Analysis - financial position

2013 Segmental Analysis - income statement

2013 Segmental Analysis - financial position

3 Discontinued operations

On 9 October 2014, the Group announced that it had sold its interest in Matchlight Limited.

The entity had net liabilities of £470,000 at the date of sale (2013 - £381 000). The entity did not have any significant non-current assets at the date of disposal. The profit on disposal amounted to £334,000.

In June 2011, the Board took the decision to part company with key management at one of its subsidiaries, Done and Dusted Group Ltd ("Done and Dusted"). Done and Dusted remained within the Group, however trade names were passed to key management in consideration of key management returning their shares in the Company. Operations within Done and Dusted ceased from 1 January 2012.

As mentioned in note 4 below, diluted earnings per share has not been considered for either the 2014 or 2013 figures as, due to the overall loss position of the group, this effect would be anti-dilutive.

4 Earnings per share

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.