PWS.L Regulatory News (PWS)

3 Apr 2008 07:01

Pinewood Shepperton plc03 April 2008 Pinewood Shepperton plc Preliminary Results for the Twelve Months Ended 31st December 2007 Pinewood Shepperton announces 2007 full year results in line with currentexpectations showing the benefit of diversification of revenues into televisionand media park activites to complement film. The Group continues to develop itsoffer to the global creative industries. Highlights • Turnover £37.4m (2006: £40.7m) • Operating profit before exceptional items £8.1m (2006: £9.1m) • Reported operating profit of £7.1 (2006: £10.1m) • EBITDA £11.1m (2006: £12.3m) before exceptional items • Diluted earnings per share of 10.3p (2006: 14.0p) • Adjusted earnings per share for exceptional items and the effect of indexation on deferred tax provision 9.9p (2006: 10.3p) • Recommended final dividend of 2.3p (2006: 2.1p) resulting in a total dividend for 2007, up 10% to 3.3p (2006: 3.0p) • Significant pre-let secured at Pinewood Studios • Major media businesses commit to longer-term leases at Pinewood Studios • Announced "Project Pinewood" proposal to create the world's first purpose-built film and television 'live-work' community for the wider creative industries Commenting on today's results, Ivan Dunleavy, Chief Executive of PinewoodShepperton plc, said: "During the past 12 months we have continued to make excellent progress inimplementing our strategic aim of diversifying our business and deliveringgreater consistency of revenue streams. Our studios are developing intodesirable hubs for the growing creative industries in the UK." "2008 will be another busy year of progress towards our strategic goals." Enquiries Pinewood Shepperton plcIvan Dunleavy - Chief Executive 01753 656 183 Brunswick Group LLPJames Olley / Oliver Hughes 020 7404 5959 A presentation of the results of the Company will be available on PinewoodShepperton's website: www.pinewoodgroup.com from 12pm today. Chairman's statement As anticipated, 2007 turned out to be a challenging year for PinewoodShepperton. Delays to production starts and the Writers Guild of America strike,now resolved, impacted film revenues significantly. This volatility in filmrevenues can only be countered by growing our non film revenues, in particularin television and property. I am therefore delighted with the progress made onboth fronts during the year. In television, the Group has entered into trading arrangements with majorterrestrial television producers/broadcasters and independent producers to buildcustomer loyalty and grow revenue streams. In property, we were delighted to announce in December an agreement for leasewith a major corporation at Pinewood. At Shepperton, we continued to develop thenew Gainsborough building with our joint venture partner Morley. Thesedevelopments represent significant progress of our masterplans for the twosites. We have secured long term lease arrangements with existing major tenantsat Pinewood Studios, improving the quality and sustainability of our revenues. Despite the challenges emerging in the global economy, the markets in which weoperate are historically resilient in times of a consumer downturn. Pinewood Shepperton's results for 2007 were achieved following majorcontributions by my fellow Directors and staff, and I thank them for theircontinued support. With executive and non-executive colleagues I remaincommitted to Pinewood Shepperton's business and growth aspirations. I am pleased to report that the Board is recommending a final dividend of 2.3p,taking the total dividend for 2007 to 3.3p. The Group continues to deliver a premium service for its increasingly diversecustomer base which bodes well for the future. Michael Grade Chairman 02 April 2008 Operating Review Trading and Market Overview Film Pinewood Shepperton's film revenues declined during 2007 to £19.5m (2006:£22.5m) following delays to the start of production of a number of major filmswhich had been expected to commence earlier in the year. As previouslyannounced, due to the Writers Guild of America strike, a major contracted filmproduction did not commence during the fourth quarter of 2007, adverselyimpacting ancillary revenues. Total film production investment in the UK fell by 15% to £723m (112 films) in2007, from £855m (135 films) in 2006. The decline was the result of thecontinued weakness of the US dollar against international currencies, changedtaxation legislation for co-productions and the impact of the Writers Guild ofAmerica strike. Since the year end the Writers Guild of America has resolved itsdispute with the major studios. Major productions using Pinewood Shepperton's facilities during the yearincluded: Sweeney Todd (Warner Bros), Inkheart (New Line), Bourne Ultimatum(Universal), His Dark Materials: The Golden Compass (New Line) and Mamma Mia(Universal). The latest Bond production, Quantum of Solace (Sony) and TheWolfman (Universal) commenced production during the latter part of 2007 andcontinue to use our facilities during 2008. Trading conditions for audio post production remained challenging during 2007.We are continuing with our strategy of improving the quality and breadth of ouraudio post production offering. We continued to upgrade our assets including the refurbishment of C&D stages atShepperton Studios and post production facilities across the Group. We openedthe new 007 Stage which has proven to be a popular and unique asset for theGroup. Television Television revenues, which include those generated by the dedicated televisionstudios at Pinewood and Teddington, channel hosting, television post production,filmed television productions, commercials and pop promos, for the 12 months to31 December 2007, were £12.1m (2006: £11.8m). Despite a challenging first sixmonths of 2007, the Group's television revenues exceeded forecasts in the secondhalf of the year. A number of television production starts were delayed untilearly 2008. The UK's independent television production market is estimated to have grown byjust over 9% in 2007(1) with total revenue reported at £2.14bn. The majorindependent production companies generated over 43% of sector revenue, mostly asthe result of commissions by UK broadcasters. Pinewood Shepperton continues todiversify into television by longer term trading arrangements with producers andbroadcasters thus broadening the customer base using facilities across theGroup. As a leading provider of television facilities we are well placed todevelop preferred supplier status with the major independent productioncompanies and key broadcasters. Our volume arrangement with the BBC is progressing positively. We have alsoentered into a volume arrangement with Celador Productions Limited. Newtelevision clients of Pinewood Shepperton in 2007 include RDF Media Group, ShedMedia Plc, Twofour Group and Olga TV. We are pleased with progress at Teddington Studios, which contributedsuccessfully to 2007's revenues and in particular, with the continued progressof our channel hosting activities at this location. Our digital television studios at Pinewood and Teddington Studios have hosted anumber of returning and new productions, including the 7th series of Harry Hill(Harry Hill enjoys ITV's highest audience ratings) Weakest Link, My Family, Takeit Or Leave It, The Great Pretender, Let Me Entertain You, and Bremner Bird andFortune amongst others. Teddington Studios strengthened its leading position inthe High Definition ("HD") sitcom market, recording The Green Green Grass, NotGoing Out and Teenage Kicks in this format. Other television productions at Pinewood Shepperton in 2007 included the Colourof Magic, Dragons' Den, Cranford Chronicles and the use of facilities bycommercials, including Skoda (the cake), Guinness and Sky, plus pop promos/rehearsals for Kylie Minogue, The Spice Girls and Led Zeppelin. During 2007, the Group invested further in HD television equipment in responseto television production requirements. We enhanced our channel hostingfacilities at Teddington Studios to accommodate Turf TV. We will continue toinvest in HD equipment as required, within our normal capital expenditure. BBC Resources At the time of the interim results in September 2007, Pinewood Sheppertonconfirmed its interest in participating in the sale process of the BBC Resourcesunit, which began in October 2007. We were attracted to the BBC's televisionstudios business and engaged external advisors to carry out the necessary duediligence for the potential acquisition. Because the Group's interest was limited to the television studios businesswithin the BBC Resources unit, the due diligence process was lengthy andcomplex. On 7 March 2008, the BBC announced that it intended to retain itstelevision studios business. Pinewood Shepperton incurred professional fees of£985,000 in the due diligence process which have been written off as anexceptional item in 2007. Pinewood Shepperton continues to grow its working relationship with the BBC forthe provision of studio services. Media Park Income Media park income was £5.8m for 2007 (2006: £6.3m) after accounting for our 50%interest in the Shepperton Studios joint venture for the full year of £0.8m(2006 from 12 September: £0.3m). Growth in our media park revenues at Pinewood and Shepperton studios is gearedto rental increases, the majority of which are related to RPI, as both estatesare currently at high occupancy levels. Nevertheless, significant progress hasbeen made in extending the lease profiles of a number of tenants from short termlease agreements to medium and long term agreements. We will continue toimplement this strategy. During the year we renewed the lease with Avid Technology (Europe) Limited("Avid") for a longer term on their existing 30,000 sq. ft of space at PinewoodStudios. Since the year end, Avid has committed to take up a further 12,000 sq.ft. Panalux Limited entered into a new long term lease for 16,500 sq. ft ofwarehouse and distribution space at Pinewood Studios. We commenced refurbishmentof the Panalux premises during the latter part of 2007, which will be availablefor occupation during mid 2008. The Thames Valley rental markets, where Pinewood and Shepperton Studios arelocated, remained resilient during 2007, due in part to the scarcity ofavailable new buildings. Media Park Development The Shepperton Studios joint venture established in September 2006 with Morleycontinues to progress well. Construction of the 60,000 sq ft GainsboroughBuilding commenced during the first half of 2007, and is due for completion byMay 2008. As part of a wider marketing campaign via our property advisors, DTZand Strutt Parker, we are seeking tenants to occupy the building whilstmaintaining flexibility as appropriate for utilisation of its available areasfor film and television production. In December 2007 we entered into an agreement for lease with TechnicolorLaboratories Limited ("Technicolor") for a purpose built building of 42,000 sqft, which has recently commenced construction, and is expected to be revenueproducing by late 2009. The building, on the western boundary of PinewoodStudios, will comprise three floors with a mix of commercial and office spacedesigned to facilitate the digital and film processing undertaken by Technicolorin the UK. The commencement of these developments and the construction of Pinewood's newentrance mark a significant milestone in the implementation of PinewoodShepperton's master planning consents, which we intend to develop primarily on apre-let basis. The joint appointment of DTZ and Strutt and Parker has increasedour marketing resource. Project Pinewood In November 2007, Pinewood Shepperton announced its intention to submit a planning application to the relevant authorities for the development of green belt land adjacent to Pinewood Studios. The proposed development includes a "collage" of locations, designed for the useof film and television productions including streetscapes and zones replicatinglocations across the UK, mainland Europe and the US. It is intended that suchsettings would significantly boost the efficiency and creative options availableto film and television productions, enhancing the position of PinewoodShepperton as one of the leading providers of production facilities worldwide. As a key part of the design, Project Pinewood will be a living-workingenvironment, with the proposed creative community being integrated with the filmlocations. The Group's consultants are making progress with the initial design phase andviability studies. We intend to submit a planning application late 2008. Inkeeping with its previous developments, Pinewood Shepperton will consider themost appropriate structure for the realisation of the project at the relevant time. Current Trading and Outlook As anticipated, trading to date is ahead of the equivalent period last year. Expected film revenues are showing some modest improvement. The level oftelevision bookings and enquiries indicate stronger demand year on year andmedia park revenues progress steadily. In the USA, the settlement of the Writers Guild strike is being seen as a signthat the potential Screen Actors Guild dispute may be averted, although, aspreviously stated, negotiations have yet to commence. The Board views the Company's prospects with confidence. Financial Review Revenue Turnover for the 12 months to 31 December 2007 was £37.4m (2006: £40.7m). Thereduced turnover resulted from production delays adversely impacting filmrevenues, which were £19.5m (2006: £22.5m). Television revenues of £12.1m (2006:£11.8m) showed modest growth as certain productions shifted into 2008,notwithstanding a successful second half of 2007. Media Park income at £5.8m(2006: £6.3m) reflected a full year of our joint venture arrangement with Morleyat Shepperton Studios, compared to three and a half months in 2006. Profit performance Gross margin was 39% in 2007 (2006: 41%). The reduction in film revenuesadversely impacted the gross margin for 2007, reflecting the operational gearingof the business. Operating margin before exceptional items remained at 22% due to selling,distribution and administrative cost savings achieved across the Group during2007. Operating profit before exceptional items is the underlying financial measureused to report the Group's trading results, and includes the Group's share ofthe results of the Shepperton Studios joint venture. Operating profit beforeexceptional items for the year was £8.1m (2006: £9.1m). The reduction in Groupturnover described above has resulted in reduced profitability compared to 2006. Reported operating profit was £7.1m (2006: £10.1m) after accounting forexceptional costs of £1m in 2007 and exceptional income of £1m in 2006. The Group monitors earnings before interest, tax, depreciation and amortisation(EBITDA), given its close alignment with the cash generative qualities of thebusiness. EBITDA before exceptional items for the year ended 31 December 2007was £11.1m (2006: £12.3m). This reduction is consistent with the change tooperating profit. Exceptional Costs We incurred professional fees approaching £1.0m during the latter part of 2007carrying out due diligence on the BBC Resources television studios business,which had been offered for sale. In March 2008 the BBC decided to retain itstelevision studios business and consequently these costs have been written offas an exceptional item in 2007. Earnings per share Earnings per share after adjusting for exceptional items and the effects ofindexation on deferred tax were 9.9p (2006: 10.3p). Diluted earnings per sharewere 10.3p (2006: 14.0p). The diluted and weighted average number of shares in issue was 46.4m. Dividend The Board is recommending a final dividend of 2.3p per share (2006: 2.1p). Takentogether with the interim dividend of 1p (2006: 0.9p) the total dividend is 3.3p(2006: 3.0p). The dividend for 2007 is covered 3 times by adjusted earnings.Subject to approval by shareholders at the Annual General Meeting to be held on23 June 2008, the final dividend will be paid on 27 June 2008 to shareholders onthe register on 6 June 2008 (ex-dividend date of 4 June 2008). It remains the Board's objective to continue its progressive dividend policy. Cash Flow and net debt Pinewood Shepperton is a cash generative business that operates on negativeworking capital. At 31 December 2007 the Group's net debt was £30.1m (2006: £17.8m). Included inthe £30.1m is the Group's 50% share of the Aviva loan to the Shepperton Studiosjoint venture of £10m (2006: £10m) which is non recourse to Pinewood Shepperton.The increase in net debt reflects the commencement of investment capitalexpenditure as part of Pinewood Shepperton's media park development strategy andProject Pinewood. During 2007 £17.6m was invested in capital expenditure (2006: £6.2m). The majoritems of capital expenditure incurred during the year were: • Completion of the 007 stage, £5.3m; • New entrance at Pinewood Studios including s278 highways related infrastructure, £2.8m; • Acquisition of land for Project Pinewood, £3.3m; • Development expenditure (Gainsborough Building), £2.1m; and • Life cycle expenditure, £4.1m. Financial gearing As a result of the investment capital expenditure during the year, net debt hasrisen, increasing financial gearing to 45.3% (2006: 28.4%). The Group'sfacilities are a £35m revolving credit facility (of which £14m was un-drawn asat 31 December 2007) and a £3m overdraft facility. Interest Interest cover for the year ended 31 December 2007 was 4.4 times (2006: 3.1times) reflecting a reduction in finance costs in the year to £1.8m (2006:£2.9m) as a result of funds released under the Shepperton Studios joint ventureagreement with Morley in September 2006. Hedging During 2007 we continued to use an interest rate derivative to manage ourinterest rate exposure. The Board is currently reviewing its hedging policy. Atthe year end £7.5m of the Group's revolving credit facility (of which £21m wasdrawn) was hedged. Taxation The tax charge for the year ended 31 December 2007 on profit before tax of £5.3mis £0.5m, an effective tax rate of 9%. The underlying rate of tax on profitbefore exceptional items is 33%; however this has been reduced by the effect oftaxation on exceptional items and the result of adjusting for the effects ofindexation on deferred tax. Group balance sheet At 31 December 2007 +-------------------------------+------+----------+-----------+| | |Year ended| Year|| | | | || | | 31| ended|| | | December| || | | |31 December|| | | 2007| 2006|| | | | || | | |as restated|+-------------------------------+------+----------+-----------+| | Notes| £000| £000|+-------------------------------+------+----------+-----------+|Revenue | | | |+-------------------------------+------+----------+-----------+|Rendering of services | 2| 37,397| 40,704|+-------------------------------+------+----------+-----------+| | | | |+-------------------------------+------+----------+-----------+|Cost of sales | | (22,637)| (24,064)|+-------------------------------+------+----------+-----------+| | | | || | | --------| ----------|+-------------------------------+------+----------+-----------+|Gross profit | | 14,760| 16,640|| | | --------| ----------|+-------------------------------+------+----------+-----------+| | | | |+-------------------------------+------+----------+-----------+|Selling and distribution | | (1,735)| (2,089)||expenses | | | |+-------------------------------+------+----------+-----------+|Administrative expenses | | (4,942)| (5,493)|+-------------------------------+------+----------+-----------+| | | | |+-------------------------------+------+----------+-----------+| | | | || ----------------------|------| --------| ----------|+-------------------------------+------+----------+-----------+|Operating profit before | | 8,083| 9,058||exceptional items |------| --------| ----------||---------------------- | | | |+-------------------------------+------+----------+-----------+| | | | |+-------------------------------+------+----------+-----------+|Exceptional costs | 3| (985)| -|+-------------------------------+------+----------+-----------+|Exceptional income | | -| 1,013|+-------------------------------+------+----------+-----------+| | | | || | | --------| ----------|+-------------------------------+------+----------+-----------+|Operating profit | | 7,098| 10,071|+-------------------------------+------+----------+-----------+| | | | |+-------------------------------+------+----------+-----------+|Finance costs | 4| (1,821)| (2,909)|+-------------------------------+------+----------+-----------+| | | | || | | --------| ----------|+-------------------------------+------+----------+-----------+|Profit before tax | | 5,277| 7,162|+-------------------------------+------+----------+-----------+| | | | |+-------------------------------+------+----------+-----------+|Corporation tax expense | 5| (493)| (683)|+-------------------------------+------+----------+-----------+| | | | || | | --------| ----------|+-------------------------------+------+----------+-----------+|Profit for the year | | 4,784| 6,479|| | | ========| ==========|+-------------------------------+------+----------+-----------+| | | | |+-------------------------------+------+----------+-----------+|Attributable to: | | 4,784| 6,479|| | | ========| ==========||Equity holders of the parent | | | |+-------------------------------+------+----------+-----------+| | | | |+-------------------------------+------+----------+-----------+|Earnings per share | | | |+-------------------------------+------+----------+-----------+|- basic for result for the year| 6| 10.4p| 14.1p|+-------------------------------+------+----------+-----------+|- diluted for result for the | 6| 10.3p| 14.0p||year | | | |+-------------------------------+------+----------+-----------+|- basic for result for the year| 6| 11.9p| 12.6p||adjusted for exceptional items | | | |+-------------------------------+------+----------+-----------+|- diluted for result for the | 6| 11.8p| 12.5p||year adjusted for exceptional | | | ||items | | | |+-------------------------------+------+----------+-----------+|- basic for result for the year| 6| 10.1p| 10.4p||adjusted for exceptional items | | | ||and effect of indexation on | | | ||deferred tax provision | | | |+-------------------------------+------+----------+-----------+|- diluted for result for the | 6| 9.9p| 10.3p||year adjusted for exceptional | | | ||items and effect of indexation | | | ||on deferred tax provision | | | |+-------------------------------+------+----------+-----------+ Group balance sheetat 31 December 2007 Notes As at As at 31 December 31 December 2007 2006 £000 as restated £000ASSETSNon-current assetsProperty, plant and 7 102,257 89,096equipmentIntangible assets 5,604 5,604 ---------- ---------- 107,861 94,700 ---------- ---------- Current assetsInventories 411 319Trade and other receivables 4,148 4,792Prepayments 2,121 2,171Cash 834 1,064 ---------- ---------- 7,514 8,346 ---------- ---------- ---------- ----------TOTAL ASSETS 115,375 103,046 ---------- ---------- ---------- ----------EQUITY AND LIABILITIESEquity attributable toequity holders of parentShare capital 8 4,591 4,582Share premium 43,615 43,478Capital redemption reserve 8 135 135Merger reserve 8 348 348Fair value of cash flow 8 - (3)hedge reserveRetained earnings 17,616 14,020 ---------- ----------Total equity 66,305 62,560 ---------- ---------- Non-current liabilitiesInterest-bearing loans and 9 30,894 18,806borrowingsDeferred tax liabilities 3,921 5,555 ---------- ---------- 34,815 24,361 ---------- ---------- Current liabilitiesTrade and other payables 12,913 15,114Provisions 371 812Interest-bearing loans and 9 - 18borrowingsTax payable 971 181 ---------- ---------- 14,255 16,125 ---------- ---------- ---------- ----------TOTAL LIABILITIES 49,070 40,486 ---------- ---------- ---------- ----------TOTAL EQUITY AND LIABILITIES 115,375 103,046 ========== ========== The financial statements were approved by the Board of Directors on 2 April 2008and are signed on its behalf by: P.F. Garner Director Group cash flow statementFor the year ended 31 December 2007 Year ended Year ended 31 December 31 December 2007 2006 £000 £000Cash flow from operating activitiesProfit before tax 5,277 7,162Adjustments to reconcile profit beforetax to net cash flowsExceptional income - (1,013)Exceptional costs 985 -Depreciation 3,033 3,220Finance costs 1,821 2,909 ---------- --------Cash flow from operating activities 11,116 12,278before changes in working capitalIncrease in trade and other receivables (823) (958)Increase in inventories (92) (16)Decrease in trade and other payables (2,434) (642) ---------- --------Cash generated from operations 7,767 10,662Finance costs paid (1,809) (2,845)Corporation tax paid (1,354) (1,430) ---------- --------Net cash flow from operating activities 4,604 6,387 ---------- -------- Cash flow (used in)/from investingactivitiesProceeds from Shepperton Studios joint - 20,500venture transactionCosts of the Shepperton Studios joint (357) (1,162)venture transactionProceeds from insurance for 007 stage 2,457 4,980Purchase of property, plant and equipment (17,641) (6,215) ---------- --------Net cash flow (used in)/from investing (15,541) 18,103activities ---------- -------- Cash flow from/(used in) financingactivitiesProceeds from issue of shares 146 10Payment of finance lease liabilities (18) (300)Dividends (1,421) (412)Proceeds from borrowings of joint venture - 10,000Proceeds from bank borrowings 12,000 -Repayment of bank borrowings - (34,000) ---------- --------Net cash flow from/(used in) financing 10,707 (24,702)activities ---------- -------- ---------- --------Net decrease in cash (230) (212) ========== ======== Group reconciliation of movement in net debtFor the year ended 31 December 2007 Year ended Year ended 31 December 31 December 2007 2006 £000 £000Reconciliation of net cash flow tomovement in net debtDecrease in cash (230) (212)Repayment of bank loans - 34,000Amortisation of loan issue costs (92) (291)Payments of capital elements of finance 18 300leasesProceeds from borrowings of joint - (10,000)ventureProceeds from bank borrowings (12,000) -Movement in fair value of cash flow 4 567hedge ---------- --------Movement in net debt (12,300) 24,364Net debt at 1 January (17,760) (42,124) ---------- --------Net debt at 31 December (30,060) (17,760) ========== ======== Attributable to:Cash 834 1,064Current liabilitiesInterest-bearing loans and borrowings - (18)Non-Current liabilitiesInterest-bearing loans and borrowings (30,894) (18,806) ---------- --------Net debt at 31 December (30,060) (17,760) ========== ======== Group statement of changes in equityFrom 1 January 2007 to 31 December 2007 Share Share Retained Merger Fair Capital Total capital premium earnings reserve value redemption equity of cash reserve flow hedge reserve £000 £000 £000 £000 £000 £000 £000At 1 January 4,582 43,478 14,020 348 (3) 135 62,5602007Profit for - - 4,784 - - - 4,784the yearTransfers tothe incomestatementOn cash flow - - - - 3 - 3hedgesIncome andexpenserecogniseddirectly inequityProfit on - - - - - - -cash flowhedges takento equityTax on items - - (17) - - - (17)taken ------ ------- ------- ------ ------ -------- ------directly toortransferredfrom equity----------Total - - 4,767 - 3 - 4,770recognised ------ ------- ------- ------ ------ -------- ------income andexpense forthe year---------- Equity - - (1,421) - - - (1,421)dividends(Note 6)New shares 9 137 - - - - 146issuedShare based - - 250 - - - 250payment ------ ------- ------- ------ ------ -------- ------At 31 4,591 43,615 17,616 348 - 135 66,305December ====== ======= ======= ====== ====== ======== ======2007 Group statement of changes in equityFrom 1 January 2006 to 31 December 2006 Share Share Retained Merger Fair Capital Total capital premium earnings reserve value redemption equity of cash reserve flow hedge reserve £000 £000 £000 £000 £000 £000 £000At 1 January 4,581 43,469 3,880 348 (400) 135 52,0132006 - asoriginallystatedPrior year - - 3,888 - - - 3,888adjustment ------ ------- ------- ------- ------ -------- -----------------At 1 January 4,581 43,469 7,768 348 (400) 135 55,9012006 - asrestatedProfit for - - 6,479 - - - 6,479the yearTransfers tothe incomestatementOn cash flow - - - - 232 - 232hedgesIncome andexpenserecogniseddirectly inequityProfit on - - - - 335 - 335cash flowhedges takento equityTax on items - - 43 - (170) - (127)taken directly toortransferredfrom equity ------ ------- ------- ------- ------ -------- ------Total - - 6,522 - 397 - 6,919recognised ------ ------- ------- ------- ------ -------- ------income andexpense forthe year Equity - - (412) - - - (412)dividendsNew shares 1 9 - - - - 10issuedShare based - - 142 - - - 142payment ------ ------- ------- ------- ------ -------- ------At 31 4,582 43,478 14,020 348 (3) 135 62,560December 2006 ====== ======= ======= ======= ====== ======== ====== Pinewood Shepperton plc Company UK GAAP Financial Statements 1. Interest in a joint venture The Group has a 50% interest in Shepperton Studios Property Partnership, anentity controlled jointly with a third party, which holds a 999 year lease onthe Shepperton Studios property. The Group's share of the joint venture's assets, liabilities and results are asfollows: 2007 2006 £000 £000 Share of joint ventures balance sheetProperty, plant and equipment 19,662 17,907Current assets 518 327 -------- -------- 20,180 18,234 -------- --------Interest bearing loans and borrowings (10,000) (10,000)Current liabilities (782) (260) -------- -------- (10,782) (10,260) -------- --------Share of joint ventures income andexpensesRevenue 842 253Cost of sales (428) (170)Administrative expenses 4 (19)Finance costs (751) (207) -------- --------Net loss (333) (143) --------- --------- ----------- ----------- 2. Revenue analysis The Group operates in one principal continuing area of activity, that of mediaservices, arising in the United Kingdom. Revenues from these activities can be further analysed by type of customer asfollows: 2007 2006 £000 £000 Film 19,548 22,549Television 12,085 11,837Media Park 5,764 6,318 ---------- -------- 37,397 40,704 ---------- -------- 3. Exceptional costs 2007 2006 £000 £000 Administrative expenses 985 - --------- --------- ----------- ----------- BBC Resources aborted transaction costs During the year ended 31 December 2007 the Group entered into a process relatingto the potential acquisition of the BBC television studios business. Transactionexpenses of £985,000 were incurred during the year. On 7 March 2008 the BBCannounced that it intended to retain its television studios business. 4. Finance costs 2007 2006 £000 £000 Bank loans and overdrafts 1,020 2,508Interest rate hedging (22) 112Share of joint venture loan 751 207Bank charges 15 15Finance charges payable under finance leases 2 44Other loans 55 23 -------- -------- 1,821 2,909 ======== ======== Finance costs directly attributable to the construction of certain capitalexpenditure of £180,000 (2006: £17,000) have been capitalised based on LIBORplus a variable margin consistent with the Group's secured bank loan. Thecapitalisation rate was 6.88% (2006: 6.11%). 5. Taxation The major components of corporation tax expense for the years ended 31 December2007 and 2006 are: 2006 2007 as restated £000 £000 Consolidated income statementCurrent corporation taxUK corporation tax 1,765 1,186Amounts under provided in previous years 400 - ---------- ----------Total current corporation tax 2,165 1,186 Deferred taxRelating to origination and reversal of temporary (1,672) (503)differences ---------- ----------Tax charge in the income statement 493 683 --------- --------- ----------- ----------- The tax charge in the income statement comprises: Tax on profit before exceptional items 789 1,511Tax provision adjustments relating to exceptional (296) (828)items ---------- ----------Tax charge in the income statement 493 683 --------- --------- ----------- -----------Tax relating to items charged or credited toequityCurrent corporation tax:Current corporation tax reported in equity on (20) -share based payments Deferred tax:Deferred tax reported in equity on cash flow 2 170hedgesDeferred tax reported in equity on share based 35 (43)payments ---------- ----------Tax charge in the statement of changes in equity 17 127 --------- --------- ----------- ----------- 6. Earnings per ordinary share and dividend Earnings per ordinary share Basic earnings per ordinary share are calculated by dividing net profit for theyear attributable to the holders of ordinary equity of the parent by theweighted average number of ordinary shares outstanding during the year. Diluted earnings per ordinary share are calculated by dividing net profit forthe year attributable to the holders of ordinary equity of the parent by theweighted average number of ordinary shares outstanding during the year adjustedfor the effects of dilutive potential ordinary shares resulting from employeeshare schemes. The Group presents as exceptional items on the face of the income statementthose items where the cost or income is of such size or incidence that theadditional disclosure is required for the reader to understand the financialstatements. Basic and diluted earnings per share are also presented on thisbasis. The following reflects the profit and number of shares generating the basic anddiluted earnings per ordinary share computations: 2007 2006 £000 £000 Profit attributable to equity holders of the 4,784 6,479parent for basic earnings per share Adjustments to profit for calculation ofadjusted earnings per shareExceptional items 985 (1,013)Taxation adjustments on exceptional items (296) 305 --------- ---------Adjusted profit for adjusted earnings per share 5,473 5,771Effect of indexation on deferred tax provision (853) (1,009) --------- --------- 4,620 4,762 ---------- ---------- ------------ ------------ Thousands Thousands Basic weighted average number of ordinary shares 45,861 45,817Dilutive potential ordinary shares resulting 587 350from employee share schemes --------- --------- 46,448 46,167 ---------- ---------- ------------ ------------ Dividend paid 2007 2006 £000 £000 Interim dividend for 2006 paid at 0.9p per - 412ordinary shareFinal dividend for 2006 paid at 2.1p per 962 -ordinary shareInterim dividend for 2007 paid at 1.0p per 459 -ordinary share --------- --------- 1,421 412 ---------- ---------- ------------ ------------ 7. Property, plant and equipment+-------------+--------+-------------+-------------+---------+------------+--------+| |Freehold| Freehold| Leasehold|Fixtures,| Assets in| Total|| | Land| buildings|imp-rovements| fittings| the course| || | | | £000| and| of| £000|| | £000| and| |equipment|construction| || | |imp-rovements| | | | || | | £000| | £000| £000| |+-------------+--------+-------------+-------------+---------+------------+--------+|Cost: | | | | | | || |--------| --------| --------| --------| --------| -------|+-------------+--------+-------------+-------------+---------+------------+--------+|At 1 January | 51,351| 51,903| 287| 18,008| 1,088| 122,637||2006 | | | | | | |+-------------+--------+-------------+-------------+---------+------------+--------+|Additions | -| 1,577| 218| 1,688| 6,132| 9,615|+-------------+--------+-------------+-------------+---------+------------+--------+|Disposals | (8,062)| (15,185)| -| (1,111)| (229)|(24,587)|| |--------| --------| --------| --------| --------| -------|+-------------+--------+-------------+-------------+---------+------------+--------+|At 31 | 43,289| 38,295| 505| 18,585| 6,991| 107,665||December 2006| | | | | | |+-------------+--------+-------------+-------------+---------+------------+--------+|Additions | 3,621| 6,836| 132| 3,098| 2,918| 16,605|+-------------+--------+-------------+-------------+---------+------------+--------+|Disposals | -| -| -| -| (411)| (411)|+-------------+--------+-------------+-------------+---------+------------+--------+|Transfers | -| 4,315| -| 989| (5,304)| -|| |--------| --------| --------| --------| --------| -------|+-------------+--------+-------------+-------------+---------+------------+--------+|At 31 | 46,910| 49,446| 637| 22,672| 4,194| 123,859||December 2007|--------| --------| --------| --------| --------| -------|+-------------+--------+-------------+-------------+---------+------------+--------+| | | | | | | |+-------------+--------+-------------+-------------+---------+------------+--------+|Depreciation:| | | | | | |+-------------+--------+-------------+-------------+---------+------------+--------+|At 1 January | -| 6,957| 13| 10,832| -| 17,802||2006 | | | | | | |+-------------+--------+-------------+-------------+---------+------------+--------+|Provided | -| 1,384| 68| 1,768| -| 3,220||during the | | | | | | ||year | | | | | | |+-------------+--------+-------------+-------------+---------+------------+--------+|Depreciation | -| (2,213)| -| (240)| -| (2,453)||on disposals |--------| --------| --------| --------| --------| -------|+-------------+--------+-------------+-------------+---------+------------+--------+|At 31 | -| 6,128| 81| 12,360| -| 18,569||December 2006| | | | | | |+-------------+--------+-------------+-------------+---------+------------+--------+|Provided | -| 1,222| 69| 1,742| -| 3,033||during the |--------| --------| --------| --------| --------| -------||year | | | | | | |+-------------+--------+-------------+-------------+---------+------------+--------+|At 31 | -| 7,350| 150| 14,102| -| 21,602||December 2007|--------| --------| --------| --------| --------| -------|+-------------+--------+-------------+-------------+---------+------------+--------+|Net book | | | | | | ||value: |--------| --------| --------| --------| --------| -------|+-------------+--------+-------------+-------------+---------+------------+--------+|At 31 | 46,910| 42,096| 487| 8,570| 4,194| 102,257||December 2007|========| ========| ========| ========| ========| =======|+-------------+--------+-------------+-------------+---------+------------+--------+| | | | | | | || |--------| --------| --------| --------| --------| -------|+-------------+--------+-------------+-------------+---------+------------+--------+|At 31 | 43,289| 32,167| 424| 6,225| 6,991| 89,096||December 2006|========| ========| ========| ========| ========| =======|+-------------+--------+-------------+-------------+---------+------------+--------+ Included in the net book value of fixtures, fittings and equipment is £nil(2006: £158,000) of assets held under finance leases. Leased assets are pledgedas security for the related finance lease liability. Assets in the course of construction at 31 December 2007 include theGainsborough Building construction costs. Assets in the course of constructionare not depreciated. The Group's long-term loan is secured by floating charge over the Group'sdirectly owned assets. Shepperton Studios Property Partnership's long leasehold interest in theShepperton Studios site was valued at £43,360,000 by an independent firm ofChartered Surveyors in December 2007 (2006: £42,900,000). The Group's 50% shareof the revaluation has not been incorporated into the financial statements. 8. Share capital and reserves Authorised 2007 2006 £000 £000Ordinary shares of 10p each 7,000 7,000 --------- --------- 7,000 7,000 ---------- ---------- ------------ ------------ Allotted, called up and fully paid 2007 2006 No. £000 No. £000 Ordinary shares of 10p 45,818,687 4,582 45,813,118 4,581each Shares issued under thePinewood Shepperton plcSharesave scheme:10p ordinary shares issued - - 2,783 -on 30 January 200610p ordinary shares issued - - 2,786 1on 24 April 200610p ordinary shares issued 597 - - -on 23 April 200710p ordinary shares issued 30,444 3 - -on 2 July 200710p ordinary shares issued 45,151 5 - -on 6 July 200710p ordinary shares issued 2,083 - - -on 13 July 200710p ordinary shares issued 2,315 - - -on 20 July 200710p ordinary shares issued 1,157 - - -on 8 August 200710p ordinary shares issued 1,216 - - -on 24 September 200710p ordinary shares issued 6,946 1 - -on 15 October 2007 --------- --------- --------- --------- 45,908,596 4,591 45,818,687 4,582 ---------- ---------- ---------- ---------- ------------ ------------ ------------ ------------ Share option schemes The Group has two share based payment plans under which options to subscribe forthe Group's shares have been granted. 8. Share capital and reserves (continued) Long-Term Incentive plan The Group has a long-term incentive plan under which awards for the Group'sshares have been granted to certain executives and senior employees. Nature and purpose of reserve Capital redemption reserve The capital redemption reserve arose as a result of the repurchase of shares in2001. 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 2007 2006 Interest Maturity £000 £000 rate %CurrentObligations under finance 16.1% 2007 - 18leases ------- ------- - 18 ------- ------- ------- -------Non-currentSecured bank loan LIBOR + 12 May 2009 21,000 9,000 variable marginSecured bank loan (106) (198)arrangement costs ------- ------- 20,894 8,802 Share of joint venture loan Base rate + 30 10,000 10,000 2% September 2026Cash flow hedge 5.525% 31 March - 4 2009 30,894 18,806 ------- ------- ------- ------- At 31 December 2007, the Group had £17m (2006: £29m) of available undrawncommitted 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 directly owned assets. Secured bank loan at LIBOR + variable margin. The Group has entered into a revolving credit facility with a syndicate ofbanks, which provides facilities of £35,000,000 (2006: £35,000,000). The bankloan is secured by floating charge over the Group's directly owned assets. 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 derived from theratio of net debt, which includes interest bearing loans and borrowings andcash, to EBITDA, which is operating profit before exceptional items plusdepreciation. At 31 December 2007 the margin was 0.95% (2006: 0.95%). The Grouphas entered into an interest rate hedging agreement to mitigate the impact ofinterest rate fluctuations. Share of joint venture loan This relates to the Group's 50% share of the joint venture's £20,000,000investor loan (2006: £20,000,000). The loan is secured by a fixed charge on theassets of Shepperton Studios Property Partnership, is non-recourse on the Groupand is repayable in full on 30 September 2026. Interest on the loan is base rate plus 2% margin with an interest rate floor of6.5%. The interest rate floor is an embedded derivative in the loan agreement;however the derivative has not been separated from the loan agreement as itsatisfies the criteria for non-separation in IAS 39. 10. Commitments and contingencies Capital commitments At 31 December 2007, the Group had capital commitments contracted for but notprovided in the accounts totalling £8,004,000 (2006: £1,855,000) in relation tothe completion of certain capital expenditure projects. 11. Basis of preparation The consolidated financial statements of Pinewood Shepperton plc and all itssubsidiaries and joint ventures have been prepared in accordance withInternational Financial Reporting Standards as adopted by the European Union asthey apply to the financial statements of the Group for the year ended 31December 2007 and applied in accordance with the Companies Act 1985. The accounting policies which follow set out those policies which apply inpreparing the financial statements for the year ended 31 December 2007. The Group financial statements are presented in UK sterling and all values arerounded to the nearest thousand pounds (£'000) except when otherwise indicated. 12. Date of approval of the preliminary announcement The preliminary announcement was approved by the Board of Directors on 2 April2008. 13. Publication of non statutory accounts The financial information contained herein does not constitute the Company'sstatutory accounts for the year ended 31 December 2007, 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 2006 have been delivered to the Registrar of Companies. Statutoryaccounts for the year ended 31 December 2007 will be delivered following theCompany's Annual General Meeting. -------------------------- (1) Source: Pact 2007Independent Production Census This information is provided by RNS The company news service from the London Stock Exchange