PWS.L Regulatory News (PWS)

28 Mar 2006 07:03

Pinewood Shepperton plc28 March 2006 28 March 2006 Pinewood Shepperton plc Preliminary Results for the Twelve Months Ended 31 December 2005 Summary • Turnover of £33.4m (2004: £38.7m) reflecting the adverse impact of transition in UK film fiscal policy • Operating profit before exceptional administrative expenses, finance costs and taxation of £5.3m (2004: £12.9m) • Operating profit of £3.7m (2004: £11.4m) • Diluted earnings per share of 0.9p (2004: 13.3p) • Year end net debt of £42.1m (2004: £40.5m) Strategic Milestones • Outline planning consents secured for 1.8 million sq.ft., comprising additional facilities of 1.2 million sq.ft. and replacement facilities of 0.6 million sq.ft. at the Pinewood and Shepperton sites • Teddington Studios acquisition in April 2005, further diversifying revenues • Resolution of film tax uncertainty with the Chancellor's 2006 Budget announcement of UK film fiscal incentives, effective from 1 April 2006 Michael Grade, Chairman, Pinewood Shepperton plc, commented: "Trading conditions, particularly for the first half of 2005 were challenging,resulting principally from our film customers' uncertainty, now resolved, overthe outcome of the Government's review of UK film fiscal policy. However, asanticipated, film revenues during the latter part of the year improved and madean important contribution to the full year's results." Ivan Dunleavy, Chief Executive, Pinewood Shepperton plc, said: "Our performance for 2005 has been resilient, and in line with marketexpectations. We are encouraged by the outlook for the future. Pleasingly, filmfiscal policy has been finalised and we and the rest of the industry can nowlook forward with greater confidence and clarity. Our long-term strategy remains on course: to increase utilisation of our studiofacilities, to enhance the scale and quality of the studios and further to growour television and media park revenues." A presentation of the results of the Company will be available on PinewoodShepperton's website: www.pinewoodshepperton.com from 12pm today. Enquiries: Pinewood Shepperton plcIvan Dunleavy - Chief Executive 01753 656 183 Brunswick Group LLPTom Buchanan/James Olley 020 7404 5959 Chief Executive's Review Operating review ENHANCED REPORTING OF REVENUE Pinewood Shepperton continues to be the leading European provider of studio andrelated services to the film and television industries. In line with ourstrategy, our film stages are being successfully marketed to televisioncustomers, driving up overall utilisation. In order to provide greatertransparency on the sources of our revenue, we are adopting an analysis of filmand television revenue based on the type of customer, rather than categorisingit, as in previous years, by the type of production facility used. Media Parkincome will continue to be disclosed separately. For 2005, Note 1 to the financial statements provides an analysis on both bases. The Operating Review below follows this revised customer type analysis. MARKETS Film (including film sound services) Film production is a global business and international competition fromlocations offering tax incentives, including cash benefits, is strong. Howeverthe UK is recognised as a highly efficient provider of film services to theglobal market and Pinewood Shepperton competes by offering a breadth offacilities and unique assets. Overall, film production investment in the UK for 2005 was £559m (2004: £812m).This reduction was mostly due to the uncertainty over the UK film taxenvironment, which is now resolving itself satisfactorily. Digital technologies are transforming the production and distribution ofaudiovisual content. Consumers have access to more content than ever before.Digital cinema - the digital distribution and projection of films - is coming,only the time frame is unknown. This development will enable an even greaterrange of content to be shown theatrically with more flexible release patterns,and should only enhance demand for new films. The film sound post production market in London and the South East is fragmentedwith a large number of independent operators. Our marketing initiatives,supported by global connectivity links to other post production facilities, arekeeping Pinewood Shepperton at the forefront of the audio post productionindustry in the UK. Television In January 2006, an OFCOM survey revealed that UK network broadcasters spent£4.7bn on programming in 2004, of which £2.6bn was on UK originated programming.This has confirmed our view on our strategy of diversification into television.Demand for UK television content, both filmed and electronic, continues to grow,particularly for high end drama, sit-coms and major event programming. Therising number of distribution channels also fuels demand for new content - bothin quantity and quality. The predominant UK network broadcasters are valuedcustomers and they account for the majority of investment in high cost programmeorigination. It is anticipated that expenditure on originated programming willcontinue to increase. In response to this the Group has sought growthopportunities, as offered by the acquisition of Teddington Studios. Media Park Media Park facilities at Pinewood Studios and Shepperton Studios have continuedto perform competitively, reflecting the uniqueness and flexibility ofaccommodation on offer. The Thames Valley and M25 property markets have continued to show signs ofrecovery, with increased occupier demand reflected in increasing take-up levelsand reductions in vacant stock. Development activity remains limited, with lessthan 400,000 sq. ft. of new accommodation currently under construction in theentire region, well below the long-term average. The reduction in new space isparticularly acute and the availability of larger new buildings has decreasedsignificantly. Vacancy rates have gradually been declining over the course of2005. The technology, media and telecoms sector has maintained demand levels andaccounts for almost one third of all take up within the area. TRADING Film For the twelve months ended 31 December 2005, Film revenues were £18.0m (2004:£26.2m). In the first half of 2005, challenging trading conditions resulted inFilm revenues of £7.3m (2004: £14.7m). In the second half of the year, occupancylevels of our film studios were buoyed by productions including, The Da VinciCode, Children of Men and Stormbreaker, amongst others, and Film revenuesincreased to £10.7m (2004: £11.5m). In March 2005 we brought into use the newly constructed Underwater FilmingStage, a unique facility which has proved to be an attractive addition toPinewood. An encouraging level of contracts for this facility were securedthroughout 2005, including Basic Instinct II and The Da Vinci Code, as well as anumber of television productions and commercials. During the first half of the year, our Film revenues from sound post productionperformed well, mixing a number of major and medium-sized films including BatmanBegins, Doom, Nanny McPhee, Kingdom of Heaven, Goal, Valiant, Pride andPrejudice and Festival. Audiovisual post production activity lags the principalfilm production process by several months, and the lack of clarity of UK filmfiscal policy has therefore affected this revenue stream later in the cycle. During the year our facility dedicated to foreign language sound mixingcontinued to perform well, in line with previous years. Television Turnover from Television for the twelve months to 31 December 2005 was £8.9m(2004: £6.0m). Television revenues for the first half of 2005 of £2.6m (2004:£2.6m) increased during the second half of 2005 to £6.3m (2004: £3.4m),following the Teddington Studios acquisition and the completion of a number ofsignificant productions that had been held over at the mid year. In 2005 wehosted, The Weakest Link, My Family, The Trisha Goddard Series, Green GreenGrass, The IT Crowd and Home Again in addition to a number of medium-sizedtelevision filmed drama productions including Elizabeth, Miss Marple, Poirot andExtras, and a healthy level of commercials and corporate events. We areencouraged by the level of repeat business from a number of continuingproductions, and by the level of utilisation of our film facilities thattelevision dramas are generating, which are delivering greater consistency tothe enlarged business. Teddington Studios is now successfully integrated into the Group. Prior to ouracquisition, its level of business activity had been significantly eroded. Wehave restructured the business, reducing fixed costs, and progressed theharmonisation of our television operations. Teddington Studios has expanded therange of television and media services we are able to offer in the market place,and we are encouraged by the additional revenue streams from channel hosting andlive broadcast facilities. This is providing access to a wider range ofindependent television production companies, producing programmes such as QuizCall TV and Racing UK. Our transmission capabilities at Teddington Studiosenable us to offer more channel hosting facilities to the marketplace and we areactively pursuing growth opportunities in this area. During the year we renovated a dubbing theatre at Pinewood Studios to provide abespoke, dual purpose audio post production facility, for film and television,the latter being a new revenue stream. Productions which utilised this facilityincluded Rosemary and Thyme, Waking the Dead, 55 Degrees North and CaptainScarlet. Media Park Media Park income for the twelve months to 31 December 2005 was £6.5m (2004:£6.3m). This is a recurring revenue stream and occupancy levels remain strong.In order to retain long-term revenues we continued to renovate and refurbishareas of our portfolio without compromising our plans for the future. STUDIO ENHANCEMENTS During 2005 we brought into use new facilities including our unique underwaterfilming stage and a bespoke television audio post production facility atPinewood Studios. At Shepperton Studios we constructed an additional 8,000 sq.ft. of workshops and renovated A and B stages. We are delighted that we have achieved outline planning consents for theenhancement of our studios at both Pinewood and Shepperton. This was wellreceived by the local communities, and is a significant step in expanding andimproving the facilities at both studios. We are working with our advisers todetermine the most appropriate structure to take advantage of these consents forthe benefit of shareholders. The development of additional capacity will supportour long-term growth strategy. ORGANISATIONAL STRUCTURE The Group now operates across three sites, as a consequence of which, we took adecision to streamline our operational management structure, generating anannualised cost saving of £0.5m. UK FILM FISCAL POLICY On 29 July 2005 the UK Government published its long awaited consultationdocument for new tax incentives for British films, aimed at delivering asustainable film production industry. This is intended to replace the existingSections 42 and 48 reliefs of the ICTA. The formal consultation period ended on21 October 2005. The Government, on 05 December 2005, outlined its proposals fora new regime of tax credits for film. The Government proposals provide an improvement in the value of the tax creditfor smaller (£20m or less) films, and a significant improvement in the value ofthe tax credit for larger budget (more than £20m) films. The tax creditsproposed are at a rate of 20% and 16% respectively, on the value of UKexpenditure for film production. A tighter definition of 'film producer' willensure that the tax credit flows directly to the film maker, and Government hasconfirmed that the taxation relief will be retrospectively available from 1April 2006, following the passing of legislation. At the same time, a pointsbased cultural test for British films will be introduced. Further details of theproposed new UK tax credits were announced in the Budget on 22 March 2006,including a welcome reduction to the minimum spend threshold. We have welcomed the Government's announcement and their strong commitment to asustainable UK film industry. The proposals outlined by the Chancellor in the2006 Budget have brought greater clarity and certainty, which the film industryhad been seeking. OUTLOOK Prospects for the full year are encouraging. As we stated during 2005, the filmtax legislative timetable continues to impact income from film. As thelegislation moves closer to being finalised, we are seeing film customerconfidence returning. We expect, revenues in the first half of the year to beahead of the comparable period for 2005 and further, that revenues will returnto normal levels in the second half of the year, in line with marketexpectations. Major contracted film productions currently at the studios include The MagicFlute directed by Kenneth Branagh, Stardust, a Paramount Pictures production,and Casino Royale, which is also using facilities elsewhere. In Television, we are committed to increasing our share of this growing market.We have contracted productions including Bremner, Bird and Fortune and HarryHill's TV Burp, and The Weakest Link has contracted for a further season. Wecontinue to attract shows from each of the major broadcasters. Channel hostingnow provides an additional, and more consistent, revenue stream. We expect our Media Park revenue to remain stable for the full year. The Board views the Company's prospects with confidence. Financial Review First time adoption of International Financial Reporting Standards (IFRS) The consolidated financial results for Pinewood Shepperton plc for the 12 monthsto 31 December 2005 have been prepared for the first time under IFRS. Under IFRS, we retrospectively reviewed the business combinations following theacquisition of Pinewood Studios and Shepperton Studios in 2000 and 2001respectively. This review has given rise to a goodwill figure of £11.9m and anadditional deferred taxation liability of £11.3m, being the capital gains taxwhich would be payable if the properties were to be sold at the valueattributable to them at the time of their acquisition by the Group. Detailed explanation of the IFRS adjustments are included in the notes to thefinancial statements. Profit Performance Gross profit margin was 34.7% (2004: 48.9%), and operating profit margin beforeexceptional administrative expenses, finance costs and taxation was 16.0% (2004:33.3%). The reduction in both gross and operating margins arose fromsignificantly reduced turnover from film against the comparable period in 2004and reflects the operational gearing of the Group. The profit before tax afterexceptional costs was £0.6m (2004: £6.4m). Earnings Per Share Diluted Earnings Per Share for the twelve months to 31 December 2005 were 0.9p,compared to 13.3p for 2004. The diluted and weighted average number of shares inissue was 45.8m. Operating Cashflow and Net Debt Cashflow generated from operating activities, after borrowing costs and taxationpayments, for the twelve months to 31 December 2005, was £7.3m (2004: £5.1m),reflecting the Company's post IPO capital structure. Net debt at 31 December 2005 was £42.1m (2004: £40.5m), being the group'scurrent and non-current interest bearing loans and borrowings of £0.3m and£43.1m respectively (2004: £1.6m and £38.9m respectively), net of cash of £1.3m(2004: £nil). This includes £0.3m of outstanding finance lease liabilities, froma total of £1.2m taken over on the acquisition of Teddington Studios. During2005, the Board reviewed the Company's financing arrangements with its Bankers,agreeing revised terms, which provide a revolving credit facility of £50.0m andan overdraft facility of £3.0m. Interest Finance costs for the twelve months to 31 December 2005 were £3.1m which were£1.8m less than 2004, reflecting the benefit of the Company's new capitalstructure following the IPO in May 2004. The Company's policy is to hedge £20m of its drawn debt, and in accordance withIFRS accounting requirements, there has been a charge to reserves of £400,000,reflecting the fair value of this interest rate swap agreement, net of deferredtax. Taxation The tax charge for the year to 31 December 2005 is £180,000, an effective rateof 32%, allowing for the impact of certain disallowable expenditure, includingitems relating to the acquisition of Teddington Studios. Dividend The Board is not proposing a final dividend for 2005. As soon as appropriate,the Board intends to return to its progressive dividend policy. Exceptional costs Restructuring and reorganisation costs of £0.6m were incurred during 2005,arising from streamlining of the management structure at Pinewood andShepperton. In addition, costs of £1.0m relating to the acquisition andrestructuring of Teddington Studios, resulted in a total exceptional costscharge of £1.6m for 2005 (2004: £1.5m). Acquisition of Teddington Studios On 1 April 2005, Pinewood Shepperton acquired the business and certain of theassets relating to Teddington Studios Ltd (in administration) and the entireshare capital of the Studio Broadcasting Company Limited at a cost of £2.9m. Theacquisition price was made up of £1.0m for assets acquired and costs incurred inthe acquisition, £1.2m for assets the subject of finance leases and liabilitiesassumed of £0.7m. Subsequent to the acquisition, we further evaluated the fairvalue of the assets acquired and allocated £1.7m of the purchase price togoodwill, which is carried in the balance sheet at 31 December 2005. At the time of the acquisition, we said we would incur reorganisation costs of£1.3m that were to be provided for during 2005 as an exceptional item. We haverevised this expectation, and we do not now anticipate exceptional costsrelating to this acquisition to exceed the £1.0m already charged. Group income statement For the year ended 31 December 2006 Year Year ended ended 31 December 31 December 2005 2004 Notes £000 £000RevenueRendering of services 1 33,387 38,667Cost of sales (21,806) (19,762) ---------- ---------Gross profit 11,581 18,905 ---------- ---------Selling and distribution expenses (2,260) (1,830)Other administrative expenses (3,995) (4,207)Exceptional administrative expenses 3 (1,607) (1,517) ---------- ---------Administrative expenses (5,602) (5,724)--------------------------- ------ --------- ---------Operating profit before exceptionaladministrativeexpenses, finance costs and taxation 2 5,326 12,868--------------------------- ------ --------- --------- Operating profit 3,719 11,351Finance costs (3,148) (4,930)Finance income - 28 ---------- ---------Profit before tax 571 6,449Corporation tax expense (180) (1,819) ---------- ---------Profit for the year 391 4,630 ----------- -----------Attributable to:Equity holders of the parent 391 4,630 ----------- -----------Earnings per share - basic for result for the year 4 0.9p 13.3p- diluted for result for the year 4 0.9p 13.3p Consolidated balance sheet At 31 December 2005 Year Year ended ended 31 December 31 December 2005 2004 Notes £000 £000ASSETSNon-current assetsProperty, plant and equipment 5 100,862 99,113Intangible assets 6 13,629 11,910 ------- ------- 114,491 111,023 ------- -------Current assetsInventories 303 396Trade and other receivables 3,174 2,762Prepayments 1,314 1,806Cash 1,276 - ------- ------- 6,067 4,964 ------- -------TOTAL ASSETS 120,558 115,987 -------- -------- -------- -------- EQUITY AND LIABILITIES Equity attributable to equity holders of parent Share capital 8 4,581 4,581Share premium 43,469 43,269Capital redemption reserve 8 135 135Merger reserve 8 348 348Fair value of cash flow hedge reserve 8 (400) (381)Retained earnings 3,880 4,666 ------- -------Total equity 52,013 52,618 ------- -------Non-current liabilitiesInterest-bearing loans and borrowings 9 43,100 38,908Deferred tax liabilities 13,843 13,644 ------- ------- 56,943 52,552 ------- -------Current liabilitiesTrade and other payables 10,849 8,099Interest-bearing loans and borrowings 300 1,604Tax payable 453 1,114 ------- ------- 11,602 10,817 ------- -------TOTAL LIABILITIES 68,545 63,369 -------- -------- -------- -------- ------- -------TOTAL EQUITY AND LIABILITIES 120,558 115,987 -------- -------- ---------- ---------- The financial statements were approved by the Board of Directors on 27 March2006 and are signed on its behalf by: P.F. Garner Director Group cash flow statement For the year ended 31 Decvember 2005 Year Year ended ended 31 December 31 December 2005 2004 Notes £000 £000Cash flows from operating activitiesReceipts from customers 33,467 38,334Payments to suppliers and employees (22,926) (26,124)Borrowing costs (2,583) (5,785)Corporation tax paid (630) (1,321) -------- --------Net cash flows from operating activities 7,328 5,104 -------- --------Cash flows from investing activitiesInterest received - 28Purchase of property, plant and equipment (5,364) (3,947)Acquisition of subsidiary undertaking 7 (956) -Net cash disposed of with subsidiaryundertaking - (281) -------- --------Net cash flows used in investing activities (6,320) (4,200) -------- --------Cash flows from financing activitiesProceeds from issue of shares - 46,896Payment of finance lease liabilities (891) (106)Dividends (1,237) -Proceeds from borrowings 4,000 39,124Repayment of borrowings - (88,536) -------- --------Net cash flows from /(used in) financingactivities 1,872 (2,622) -------- --------Net increase/(decrease) in cash and cashequivalents 2,880 (1,718)Cash at start of year (1,604) 114 -------- --------Cash at end of year 1,276 (1,604) --------- --------- ----------- ----------- Consolidated statement of changes in equity From 1 January 2005 to 31 December 2005 Share capital Share premium Retained Merger reserve Fair value cash Capital Total equity earnings flow hedge redemption reserve reserve £000 £000 £000 £000 £000 £000 £000At 1 January2005 4,581 43,269 4,666 348 (381) 135 52,618Profit for theyear - - 391 - - - 391Transfers tothe incomestatementOn cash flowhedges - - - - 143 - 143Income andexpenserecogniseddirectly inequityLoss on cashflow hedgestaken toequity - - - - (170) - (170)Tax on itemstaken directlyto ortransferredfrom equity - - - - 8 - 8-------------- ------ ------- ------- ------- ------ ------- ------Totalrecognisedincome andexpense forthe year - - 391 - (19) - 372-------------- ------ ------- ------- ------- ------ ------- ------ Equitydividends(note 4) - - (1,237) - - - (1,237)Share issuecosts - 200 - - - - 200Share basedpayment - - 60 - - - 60 ------ ------- ------- ------- ------ ------- ------At 31 December2005 4,581 43,469 3,880 348 (400) 135 52,013 ====== ======= ======= ======= ====== ======= ====== Consolidated statement of changes in equity From 1 January 2004 to 31 December 2004 Share Share Retained Merger Foreign Fair value Capital Total Minority Total capital premium earnings reserve exchange cash flow redemption equity interests earnings hedge reserve £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 At 1January 238 807 16 348 - (388) - 1,021 (650) 3712004Profit forthe - - 4,630 - - - - 4,630 - 4,630yearTransfersto the incomestatementOn cash flow - - - - - 279 - 279 - 279hedgeForeign exchangeon the sale ofsubsidiary - - - - 15 - - 15 - 15Income and expenserecognised directly inequity:Loss on cashflow hedge taken equity - - - - - (269) - (269) - (269)Foreign exchangeon the sale ofsubsidiary - - - - (15) - - (15) - (15)Tax on itemstaken directlyto or transferred from equity - - - - - (3) - (3) - (3)---------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -----Totalrecognisedincome andexpense forthe year - - 4,630 - - 7 - 4,637 - 4,637---------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -----New sharesissued 2,778 47,222 - - - - - 50,000 - 50,000Optionsexcercisedrelated 46 (16) - - - - - 30 - 30bonusissueShare basedpayment - - 20 - - - - 20 - 20Warrantsexercisedandrelated 206 (192) - - - - - 14 - 14bonus issueBonus issue 1,448 (1,448) - - - - - - - -Sharerepurchases (135) - - - - - 135 - - -Share issuecosts - (3,104) - - - - - (1,304) - (1,304)Sale ofsubsidiary - - - - - - - - 650 650---------- ------ ------ ------ ------ ------ ------ ------ ------ ------ -----At 31December 4,581 43,269 4,666 348 - (381) 135 2,618 - 52,6182004 ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== 1. Revenue analysis The group operates in one principal area of activity, that of media services,arising in the United Kingdom. Revenues from these activities can be further analysed by type of customer asfollows: 2005 2004 £000 £000Film 17,960 26,181Television 8,946 6,042Media Park 6,481 6,312Silver Lining Productions Limited - 132 --------- --------- 33,387 38,667 --------- --------- Revenues analysed by facility used, as previously disclosed, are as follows: 2005 2004 £000 £000Film Stage Services 14,055 21,545Television and Sound Services 12,851 10,678Media Park income 6,481 6,312Silver Lining Productions Limited - 132 --------- --------- 33,387 38,667 --------- --------- 2. Operating profit before exceptional administrative expenses, financecosts and taxation This is stated after charging/(crediting): 2005 2004 £000 £000 Research and development expenditurewritten off - 40 ------------- ------------- Cost of inventories recognised as anexpense 1,284 1,567Including write-down of inventories to netrealisable value 44 21 ------------- ------------- Depreciation of property, plant andequipment 3,609 3,821 ------------- ------------- Reorganisation costs (334) 533Rates rebate - (686) ------------- -------------Total reorganisation costs and rates rebate (334) (153) ------------- ------------- Net foreign currency differences - 15 ------------- ------------- Operating - minimum lease payments 496 5lease payments ------------- ------------- Research and development costs, in 2004, were charged directly to cost of salesin the income statement. Depreciation of property, plant and equipment, in 2004, included £155,000following an impairment review of assets relating to reorganised activitiesduring the year. Reorganisation costs for 2004 include redundancy costs and other costsassociated with the restructuring of certain of the group's trading activities.During the year ended 31 December 2005 the group secured lower than anticipatedcosts relating to the 2004 reorganisation. Rates rebate for 2004 reflects the one-off receipt in relation to thereassessment of previous year rateable values at one of the group's principallocations. Operating lease payments for the year ended 31 December 2005 relate to theoperating lease of the Teddington Studios premises from 1 April 2005. 3. Exceptional administrative expenses 2005 2004 £000 £000Exceptional costs in relation tothe acquisition of Teddington Studios 1,027 -Group reorganisation 580 -Costs in relation to the Initial Public Offering - 1,517 --------- --------- 1,607 1,517 --------- --------- Acquisition of Teddington Studios During the year ended 31 December 2005, the group purchased the trade andcertain of the assets and liabilities of Teddington Studios Limited (inadministration), and acquired 100% of the share capital of The StudioBroadcasting Company Limited. Exceptional costs incurred in the year relate tothe reorganisation and integration of the acquired operations, comprising£778,000 of redundancy related costs, legal and professional fees of £127,000and £122,000 of operational continuity costs. The group does not anticipateincurring further exceptional costs in relation to the acquisition of TeddingtonStudios. Group reorganisation During the year ended 31 December 2005, £580,000 of redundancy and other costswere incurred as a result of the implementation of a group reorganisationprogramme to enhance organisational structure and efficiency. 4. Earnings per ordinary share and dividend Earnings per ordinary share Basic earnings per share are calculated by dividing net profit for the yearattributable to the holders of ordinary equity of the parent by the weightedaverage number of ordinary shares outstanding during the year. Diluted earnings per share are calculated by dividing net profit for the yearattributable to the holders of ordinary equity of the parent by the weightedaverage number of ordinary shares outstanding during the year (adjusted for theeffects of dilutive options). The following reflects the income and share data used in the basic and dilutedearnings per share computations: 2005 2004 £000 £000Profit attributable to equity holders of the parent 391 4,630 -------- -------- Thousands ThousandsBasic number of shares at start of the year 45,813 1,035Number of shares issued via bonus issue - 14,484Weighted number of shares issued in the year - 19,368 -------- -------- 45,813 34,887Dilutive potential ordinary shares - -Employee options relating to the Sharesave scheme - -Employee options relating to the CSOP scheme -------- -------- 45,813 34,887 -------- -------- ---------- ----------Dividend paid 2005 2004 £000 £000Final dividend for 2004 paid at 2.7p per ordinary share 1,237 - -------- -------- ---------- ---------- 5. Property, plant and equipment Freehold buildings Fixtures, Assets in the and Leasehold fittings and course of Freehold Land improvements improvements equipment construction Total £000 £000 £000 £000 £000 £000Cost:At 1 January2004 51,307 43,825 - 13,169 - 108,301Additions 44 1,455 - 1,839 1,747 5,085Disposals - - - (11) - (11)Transfers - (262) - 262 - - -------- -------- -------- -------- --------- --------At 31December 51,351 45,018 15,259 1,747 113,3752004Additions - 1,647 287 1,619 606 4,159Disposals - - - (84) - (84)Transfers - 1,265 - - (1,265) -Acquisition ofsubsidiary - - - 1,214 - 1,214(note 7) -------- -------- -------- -------- --------- --------At 31 December 51,351 47,930 287 18,008 1,088 118,6642005 -------- -------- -------- -------- --------- -------- Depreciation:At 1 January2004 - 4,133 - 6,319 - 10,452Provided during theyear - 1,368 - 2,453 - 3,821Depreciationon disposals - - - (11) - (11) -------- -------- -------- -------- --------- --------At 31December 5,501 - 8,761 - 14,2622004Providedduring theyear - 1,456 13 2,140 - 3,609Depreciationon thedisposals - - - (69) - (69) -------- -------- -------- -------- --------- --------At 31December - 6,957 13 10,832 - 17,8022005 -------- -------- -------- -------- --------- -------- Net bookvalue: -------- -------- -------- -------- --------- --------At 31December 51,351 40,973 274 7,176 1,088 100,8622005 ======== ======== ======== ======== ========= ======== --------- --------- --------- --------- --------- ---------At 31December 51,351 39,517 - 6,498 1,747 99,1132004 ========= ========= ========= ========= ========= ========= Included in the net book value of fixtures, fittings and equipment is £352,000(2004: £nil) of assets held under finance leases. 'Acquisition of subsidiary'includes £690,000 (2004: £nil) of fixtures, fittings and equipment held underfinance leases. Leased assets are pledged as security for the related financelease liability. Assets in the course of construction include costs incurred in securing planningconsents. Assets in the course of construction are not depreciated. The group's long-term loan is secured by floating charge over all of the group'sproperty, plant and equipment. 6. Intangible assets Goodwill £000Cost at 1 January 2005 and 2004 11,910Acquisition of a subsidiary (Note 7) 1,719 ------At 31 December 2005 13,629 ------- --------- At 31 December 2004 11,910 ------- --------- Goodwill is not amortised but is subject to annual impairment testing. 7. Business combination Acquisition of Teddington Studios On 1 April 2005 the group purchased the trade and certain of the assets andliabilities of Teddington Studios Limited, which was in administration, andacquired 100% of the share capital of The Studio Broadcasting Company Limited. The fair value of the identifiable assets and liabilities acquired fromTeddington Studios Limited and of The Studio Broadcasting Company Limited as atthe date of acquisition are shown as those in 'Recognised on acquisition'compared with carrying values in the records of the acquired entities. Recognised Carrying on acquisition Value £000 £000Property, plant and equipment 1,214 2,167Inventories 10 10 -------- -------- 1,224 2,177 -------- --------Finance lease obligations (1,210) (1,210)Trade and other payables (684) (323) -------- -------- (1,894) (1,533) -------- --------- -----------Fair value of net liabilities (670) 1,719Goodwill arising on acquisition -------- 1,049 --------- -----------Consideration: £000Costs associated with the acquisition 249Consideration - paid 611Consideration - deferred 189 --------Total consideration 1,049 --------- ----------- The cash outflow on acquisition is as follows: £000Cash paid for trade, assets and liabilities (611)Costs of acquisition (249)Deferred consideration (96) --------Net cash flow (956) --------- ----------- From the date of acquisition to 31 December 2005, Teddington Studios hascontributed an operating loss of £58,000 to the group before taking account ofexceptional administrative costs of £1,027,000. The group does not anticipateincurring further exceptional costs in relation to the acquisition of TeddingtonStudios. 7. Business combination (continued) The directors have made the assessment of goodwill based on the informationavailable at the date of this report. This estimate has been amended, since theinterim report, to reflect a revised recognised value on property, plant andequipment, additional acquired liabilities, and a reduction to the value ofintangible assets acquired. The directors have reviewed the acquisition of Teddington Studios to ascertainthe nature and value of intangible assets acquired and have identified acontract, and a customer with whom a formal contract was yet to be agreed, inexistence at the time of acquisition. Neither have been recognised due to thethird parties' ability to terminate these agreements at short notice. The valueof the brand name of Teddington Studios has also been considered, but as theformer Teddington Studios Limited was in administration the directors considerthe brand to be of negligible value. 8. Share capital and reservesAuthorised 2005 2004 £000 £000Ordinary shares of 10p each 7,000 7,000 -------- -------- 7,000 7,000 -------- -------- ---------- ---------- Allotted, called up and fully paid 2005 2004 No. £000 No. £000Ordinary shares of 10p 45,813,118 4,581 45,813,118 4,581each --------- --------- --------- --------- 45,813,118 4,581 45,813,118 4,581 --------- --------- --------- --------- ----------- ----------- ----------- ----------- A block listing of 230,000 10p ordinary shares, under the Pinewood Sheppertonplc Sharesave Scheme, has been admitted to the Official List between thereporting date and the date of completion of these financial statements. On 30January 2006, 2,783 ordinary 10p shares were issued. Share option schemes The group has two share based payment plans under which options to subscribe forthe group's shares have been granted to certain executives and senior employees. Other reserves 2005 2004 £000 £000Capital redemption reserve 135 135Merger reserve 348 348Fair value of cash flow hedge reserve (400) (381) --------- --------- 83 102 --------- --------- ----------- ----------- 8. Share capital and reserves (continued) Nature and purpose of reserve Capital redemption reserve The capital redemption reserve arose as a result of the repurchase of shares. Merger reserve On acquiring Shepperton Studios Limited the group issued ordinary shares as partof the consideration. Merger relief was taken in accordance with s131 of theCompanies Act 1985, and hence £348,000 was credited to the merger reserve. Fair value of cash flow hedge reserve The cash flow hedge reserve is used to record the fair value gains or losses,and related deferred tax, on the hedging instrument used by the group to manageinterest rate risk. The cash flow hedge is determined to be an effective hedge. 9. Interest-bearing loans and borrowings Effective 2005 2004 Interest rate % Maturity £ £CurrentBank overdraft LIBOR + 1.0% on demand - 1,604Obligations underfinance leases 16.1% 2006 300 - ------- ------- 300 1,604 ------- ------- ------- -------Non-currentSecured bank loan LIBOR + 12 May 2009 42,511 38,363 variable marginCash flow hedge 5.525% 31 March 2009 572 545Obligations underfinance leases 16.1% 2007 17 - ------- ------- 43,100 38,908 ------- ------- ------- ------- At 31 December 2005, the group had £10,000,000 (2004: £22,396,000) of availableundrawn committed borrowing facilities. Bank overdraft The group has an overdraft facility of £3,000,000 to support the futureoperating activities of the business. This overdraft is secured by a floatingcharge over the group's assets, and is repayable in full on demand. 9. Interest bearing loans and borrowings (continued) Secured bank loan at LIBOR + variable margin The group has entered into a revolving credit facility with a syndicate ofbanks, which provides facilities of £50,000,000 (2004: £60,000,000). The bankloan is secured by floating charge over the group's assets, and is repayable infull on a final repayment date,12 May 2009. Long-term loan facilities become repayable on demand following a change incontrol of the group. Interest on the loan is based on LIBOR plus a variable margin. At 31 December2005 the margin was 1.50% (2004: 1.15%). The group has entered into an interestrate hedging agreement to manage the impact of interest rate fluctuations. 10. Basis of preparation The group's financial statements have been prepared in accordance with IFRS asadopted by the European Union and as applied in accordance with the provisionsof the Companies Act 1985. This is the first year in which the group has prepared its financial statementsunder International Financial Reporting Standards (IFRS) and the comparativeshave been restated from UK Generally Accepted Accounting Practice (UK GAAP) tocomply with IFRS. The group issued its interim financial statements in August2005 incorporating its preliminary IFRS financial statements for 2004, thereconciliations to IFRS from the previously published UK GAAP financialstatements and the accounting policies of the group under IFRS. 11. Date of approval of the preliminary announcementThe preliminary announcement was approved by the Board of Directors on 27 March2006. 12. Publication of non-statutory accounts The financial information contained herein does not constitute the Company'sstatutory accounts for the year ended 31 December 2005, as defined in section240 of the Companies Act 1985, but have been extracted from the statutoryaccounts, upon which the auditors issued an unqualified opinion. Statutoryaccounts for 2004 have been delivered to the Registrar of Companies. Statutoryaccounts for the year ended 31 December 2005 will be delivered following theCompany's Annual General Meeting. This information is provided by RNS The company news service from the London Stock Exchange