PWS.L Regulatory News (PWS)

31 Aug 2005 07:01

Pinewood Shepperton plc31 August 2005 31st August 2005 Pinewood Shepperton plc Unaudited Results for the Six Months Ended 30 June 2005 Highlights •Turnover of £13.3m (2004:£20.4m) from continuing operations. •Operating profit from continuing operations before exceptional administrative expenses, finance costs and taxation £1.9m (2004: £6.6m). •Acquisition of Teddington Studios, a key strategic step in the expansion of the Television and Sound Services business. •Successful conclusion of 172,410 sq. m (1.85m sq. ft) enhancement planning applications for Pinewood Studios and Shepperton Studios. •Completion of two enhancement projects: U-Stage, a unique underwater filming facility and Eastern Workshops, both experiencing high levels of occupancy. Michael Grade, Chairman, commented: "As previously indicated, trading conditionsfor Film Stage Services during the first half of 2005 were challenging as adirect result of outside factors. On 29 July 2005 the Government finally issuedits consultation document on the future of UK film fiscal policy. We welcome theGovernment's commitment to continuing fiscal incentives for the UK film sector,and the fact that the issue is now on its way to a positive resolution.Inevitably, some uncertainty will remain while the details are finalised,expected by the Spring of 2006. The Board believes the disappointing results for the first half do not indicateany fundamental shift in the film production business as a whole. Our strategytherefore remains unchanged and the Board remains confident in the long termprospects for the group." Ivan Dunleavy, Chief Executive, added: "The results for the six months to the 30June 2005 reflect the unusual trading conditions experienced for Film StageServices, principally due to the protracted uncertainty over future UK filmfiscal policy and to a lesser extent the adverse dollar/sterling exchange rate.During the six months to 30 June 2005, it has proved difficult to achieve theconversion of provisional film bookings into contracts. Our long-term strategy, set out at IPO, remains on course. We have achieved thesuccessful acquisition of Teddington Studios, providing scope to grow ourrevenues from Television, and continue the diversification of media servicesprovided by the Company. We have also successfully concluded the enhancementplanning applications at Pinewood Studios and Shepperton Studios - a significantstep in ensuring the Company remains a market-leading media services provider." EnquiriesPinewood Shepperton plcIvan Dunleavy, Chief Executive 01753 656732Patrick Garner, Finance Director 01753 656183 Brunswick Group LLPTom Buchanan 020 7404 5959James Olley 020 7404 5959 The presentation of the results of the Company will be available on the investorrelations section of the Pinewood Shepperton website atwww.pinewoodshepperton.com from 12:00pm today. Chief Executive's Review Operating Review Overview Uncertainty over UK Film fiscal policy and, to a lesser extent, US dollarweakness, contributed significantly to a reduction in Film Stage Servicesrevenue during the first half. Consequently, the level of conversion ofprovisional film bookings to contracts have continued to fall below previouslyachieved levels. This is reflected in the reduced turnover of £13.3m for thefirst half of 2005 compared to the comparable period for 2004 of £20.4m. The results reflect a broader picture of reduced film production investment inthe UK during the first half of 2005. This halved to £335m in the first half of2005 compared to £668m in the same period in 2004. Of the 36 films whichcommenced shooting in the UK during the first half of 2005 there were only twosignificant Hollywood productions both of which continue to be serviced atPinewood Shepperton: The Da Vinci Code and Basic Instinct II. Television and Sound Services revenues were down on 2004, principally as aresult of the lower level of Sound Services activity in the first half of 2005,in contrast to a particularly buoyant first half of 2004. Additionally, Theatre2 at Pinewood Studios was closed for an extensive upgrade to provide purposebuilt facilities for television audio post production. The rescheduling oftelevision productions into the second half of 2005 also impacted this revenuestream. Media Park Income has continued to perform in line with expectationsduring the first half. UK Film Tax Incentives Consultation On 29 July 2005 the UK Government published a consultation document which setsout proposals for review of new tax incentives for British films, which aim todeliver a sustainable tax structure for the long term, of tax credits to replacethe existing Sections 42 and 48 reliefs. A period of formal consultation isunderway which ends on 21 October 2005. HM Treasury envisages that theseproposals should apply from 1 April 2006. We welcome this progress. Theconsultation document and further information can be found at HM Treasury'swebsite at www.hm-treasury.gov.uk. The Department for Culture, Media and Sport (DCMS) has launched a parallelconsultation on a revised test to qualify as British films to merit theTreasury's proposed new tax incentive for British films. The consultation paperis available at the DCMS website at www.culture.gov.uk Teddington Studios Acquisition On 1 April 2005 Pinewood Shepperton acquired the business and certain of theassets relating to Teddington Studios Limited (in administration) and the entireshare capital of The Studio Broadcasting Company Limited. Teddington Studios ismost well known as the former studios of Thames Television and had recentlyhosted shows such as The Office, My Hero and Harry Hill's TV Burp. The acquisition represents a natural extension to Pinewood Shepperton'sTelevision and Sound Services businesses, which is in line with our strategy todiversify revenue streams. Teddington Studios now has two large studios and fivechannel hosting studio facilities. This will enhance our presence in the marketplace as we combine it with our existing offering. Studio Enhancement Plans As indicated at the time of the IPO, we have been pursuing a long-term strategyof enhancing the facilities available at Pinewood Studios and SheppertonStudios. On 11 May 2005, South Bucks District Council approved plans to develop94,700 sq. m of new facilities at Pinewood Studios, and on 15 August 2005Spelthorne Borough Council approved plans to develop 77,710 sq. m of newfacilities at Shepperton Studios, totalling 172,410 sq. m (1.85m sq. ft). Theseplanning approvals include 114,130 sq. m of new additional facilities, and58,280 sq. m of new replacement facilities for poorer quality areas. Trading Film Stage Services During the six months ended 30 June 2005 Film Stage Services turnover was £5.0m(2004: £11.3m). Due to the uncertainty preceding and surrounding the Government's film fiscalpolicy review announcement in late 2004, there were few opportunities to securefilm contracts during the first half of 2005. Nevertheless, during the period wesecured a number of medium size television filmed drama productions including:Elizabeth, Miss Marple, Poirot and Extras. During the period under review, Pinewood Shepperton entered into two significantfilm contracts. At Pinewood Studios Basic Instinct II commenced set buildingduring the first half and has continued to utilise facilities into the secondhalf. At Shepperton Studios we contracted The Da Vinci Code which is currentlyin production and is also utilising the 007 Stage at Pinewood Studios.Throughout the six months we have also attracted a number of commercials andcorporate events into our film stages, demonstrating flexibility in the use ofour assets. In March 2005 we completed the construction of U Stage, at a cost of £1.1m. Thisunique underwater filming facility, the only one of its kind in Europe, hasadded to the overall attractiveness of the Pinewood Shepperton offering. Sincecompletion U Stage has enjoyed high levels of occupancy. At Shepperton Studioswe completed phase I of the Eastern workshops, at a cost of £0.6m which wasbrought into use late March for a number of productions. Television and Sound Services Turnover for the six months was £5.0m (2004:£6.0m). During the period our Disney foreign version facility performed well. We alsomixed a number of major and medium sized films including Batman Begins, Doom,Nanny McPhee, Kingdom of Heaven, Goal! and Valiant. We brought into commission arefurbished Theatre 2 at Pinewood Studios to provide for television audio postproduction which has proved highly successful, attracting productions such asRosemary and Thyme and Waking the Dead. Pinewood Television revenues during the period were lower than the comparableperiod for 2004 due to productions being rescheduled into the second half.Following the recent acquisition of Teddington Studios we continue to integrateour sales and marketing personnel and pursue initiatives to attract televisionproductions onto both television studios and film stages. The second half of2005 will reflect our efforts to integrate the Pinewood and Teddingtontelevision businesses. The Teddington television operation has introduced a new revenue stream forPinewood Shepperton. We are now able to offer twenty four hour channel hostingand transmission playout facilities. Currently we host several channelsincluding Choices TV, Racing UK and iBuy. Media Park Income Media Park Income for the period was £3.4m (2004:£3.1m). We have been encouragedby the prompt re-letting of areas falling vacant, reflecting ongoing demand forthe facilities at Pinewood and Shepperton from media businesses. Current Trading and Outlook Overall, we believe that revenue expectations for the full year are achievable. Our film customers await the outcome of the Government's formal consultation ofUK film tax incentives. This protracted process will continue to impact tradingfor the rest of 2005 and into 2006. In Television and Sound Services we are confident that the second half willcontinue to show the benefits from integrating the Teddington and PinewoodTelevision businesses, with a number of major productions contracted for thesecond half at Pinewood and Teddington. We continue to develop a strong presencein the television market, further diversifying our revenue streams. Media Park Income continues to enjoy sustained demand from media businesses forthe facilities at Pinewood Studios and Shepperton Studios. We have deferred major enhancement and non-essential capital expenditureprojects until there is a return to normal trading levels. The Board continuesto address the Company's fixed cost base and has commenced a restructuringinitiative which will lead to improved operating efficiencies. The enhancement planning approvals provide exciting opportunities to enhance ourbusiness by offering state of the art studios and accommodation, supporting thelong-term prospects for the Company. We continue to strengthen our sales and marketing resource across all businessesand we welcome Nick Smith, Sales and Marketing Director to the main Board,effective from 4 July 2005. Pinewood Shepperton will not be declaring an interim dividend for 2005 and yourBoard will review the appropriateness of a final dividend for the full year indue course. Financial Review First time adoption of International Financial Reporting Standards ("IFRS"). The financial results for Pinewood Shepperton plc for the six months to 30 June2005 have been prepared for the first time under IFRS, as required by theEuropean Union ("EU") regulations which took effect from 1 January 2005. Following the adoption of IFRS, there has been a modest impact on operatingprofit from continued operations before exceptional administrative expenses,finance costs and taxation, with adjustments arising from an accrual for holidaypay of some £108,000, which will largely reverse in the second half of 2005, anda small charge for share options. Under IFRS we have retrospectively reviewed the business combinations followingthe acquisitions 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 creditor of £11.3m. Detailed explanations of the IFRS adjustments are included in Section 2. Profit Performance Gross profit margin from continuing operations was 32.3% (2004:47.9%) withoperating profit margin from continuing operations before exceptionaladministrative expenses, finance costs and taxation at 14.1% (2004:32.5%). Thereductions in gross and operating margins arise from significantly reducedturnover against the comparable period in 2004. Loss before tax was £0.1m (2004:profit £1.6m). Earnings Per Share Diluted reported earnings per share for the result from continuing operationswere (0.2p) compared to 6.1p for the comparable period in 2004. The fullydiluted weighted average number of shares in issue throughout the period was46.1m. Operating Cash Flow Cash flow generated from operating activities, (calculated under IFRS adjustedfor borrowing costs and taxation payments), for the six months to 30 June 2005was £3.3m (2004:£1.5m). This movement reflects the debt refinancing at IPOduring the first half of 2004, offset by the impact of reduced trading in 2005against the comparable period in 2004. Capital Expenditure During the six months ended 30 June 2005 we completed two principal enhancementprojects, commenced during 2004, being the Underwater Stage at Pinewood andphase I of the Eastern Workshops at Shepperton. Cash resources expended onenhancement projects and Life Cycle capital expenditure totalled £4.0m for thesix months to 30 June 2005 (2004:£1.3m). Interest Finance costs for the six month period to 30 June 2005 decreased from £3.5m to£1.5m for the comparable period in 2004, resulting from the refinancing at thetime of the IPO in May 2004. For the six month period to 30 June 2005 theCompany incurred interest on £20m of drawn debt under the terms of a five yearinterest rate swap and interest on the remainder of the Company's drawn debt atfloating rate libor. In accordance with IFRS, there has been a charge to equity of £795,000representing the fair value of cash flow hedges. Taxation There is a small tax charge for the six months to 30 June 2005 as a result of anincreased deferred taxation liability. The effective tax rate for the interimresults for the six months ended 30 June 2004 was 26%. For the full year theCompany anticipates an effective tax rate of circa 32% allowing for the impactof certain disallowable expenditure, including items relating to the acquisitionof Teddington Studios. Dividend As previously announced by the Board, the Company will not be declaring aninterim dividend in respect of the current financial year. In accordance with IFRS dividends will be charged in the period in which theyare declared, rather than as previously, the period to which they relate. Net Debt Net borrowings at 30 June 2005 were £44.6m (2004 - £41.0m). The Board has reviewed the Company's ongoing financing requirements with itsbankers and has agreed in principle revised terms, which include continuingRevolving Credit and Overdraft facilities totalling £53.0m (31 December 2004 :£63.0m), with some potential margin increase. Acquisition of Teddington Studios On 1 April 2005, Pinewood Shepperton acquired the business and certain of theassets relating to Teddington Studios Limited (in administration) and the entireshare capital of The Studio Broadcasting Company Limited for £2.7m. Theacquisition price was made up of £1.1m for assets acquired and costs incurred inthe acquisition, £1.2m for assets the subject of finance leases and liabilitiesassumed of £0.4m. Subsequent to the acquisition we have fair valued the assetsacquired and allocated £1.3m of the purchase price to provisional goodwill andintangible assets which we are carrying in the balance sheet as at 30 June 2005. At the time of the acquisition we stated that we would incur reorganisationcosts of approximately £1.3m that were to be expensed during 2005 as anexceptional item. As at 30 June 2005 we have written off £491,000 of exceptionalcosts. We anticipate this figure increasing to approximately £1.3m by 31December 2005. Consolidated income statementfor the six months ended 30 June 2005 Six months Year Six months ended ended ended 30 June 31 December 30 June 2005 2004 2004 Restated Restated Unaudited Uaudited Unaudited Notes £000 £000 £000Continuing operationsRevenueRendering of services 2 13,328 38,535 20,364Cost of sales (9,029) (19,623) (10,605) ------ ------ ------Gross profit 4,299 18,912 9,759 ------ ------ ------ Selling and distribution expenses (751) (1,783) (1,090)Administrative expenses (1,674) (4,229) (2,045)Exceptional administrative expenses 4 (491) (1,517) (1,517) --------------------------------------------------------------------------------Operating profit from continuing operations before exceptional administrative expenses, finance costs and taxation 1,874 12,900 6,624-------------------------------------------------------------------------------- Operating profit from continuing operations 1,383 11,383 5,107Finance costs (1,491) (4,930) (3,493)Finance income - 28 17 ------ ------ ------(Loss)/profit before tax (108) 6,481 1,631Income tax expense (6) (1,822) (424) ------ ------ ------(Loss)/profit for the period from continuing operations (114) 4,659 1,207Discontinued operationLoss for the period from discontinued operation - (32) (32) ------ ------ ------(Loss)/profit for the period (114) 4,627 1,175 ====== ====== ======Attributable to:Equity holders of the parent (114) 4,536 1,084Minority interests - 91 91 ------ ------ ------ (114) 4,627 1,175 ====== ====== ====== As As restated restatedEarnings per share- basic for result for the period 5 (0.2p) 13.3p 6.0p- basic for result from continuing operations 5 (0.2p) 13.4p 6.1p- diluted for result for the period 5 (0.2p) 13.2p 6.0p- diluted for result from continuing operations 5 (0.2p) 13.3p 6.1p Consolidated balance sheetat 30 June 2005 As at As at As at 30 June 31 December 30 June 2005 2004 2004 Unaudited Unaudited Unaudited Restated Restated £000 £000 £000ASSETSNon-current assetsProperty, plant and equipment 101,388 99,113 96,645Intangible assets 13,262 11,910 11,910 ------ ------ ------ 114,650 111,023 108,555 ------ ------ ------ Current assetsInventories 377 396 346Trade and other receivables 3,591 2,762 5,144Prepayments 423 1,806 327 ------ ------ ------ 4,391 4,964 5,817 ------ ------ ------TOTAL ASSETS 119,041 115,987 114,372 ====== ====== ======EQUITY AND LIABILITIESEquity attributable to equity holders of parentIssued capital 4,581 4,581 4,581Share premium 43,269 43,269 43,269Capital redemption reserve 135 135 135Merger reserve 348 348 348Fair value of cash flow hedge reserve (795) (545) (22)Share options reserve 52 20 2Retained earnings 3,292 4,643 1,191 ------ ------ ------Total equity 50,882 52,451 49,504 ------ ------ ------Non-current liabilitiesInterest-bearing loans and borrowings 43,971 38,908 39,319Deferred tax liabilities 13,817 13,811 13,791 ------ ------ ------ 57,788 52,719 53,110 ------ ------ ------Current liabilitiesTrade and other payables 9,113 8,099 9,405Interest-bearing loans and borrowings 606 1,604 1,655Tax payable 652 1,114 698 ------ ------ ------ 10,371 10,817 11,758 ------ ------ ------ ------ ------ ------TOTAL LIABILITIES 68,159 63,536 64,868 ====== ====== ====== TOTAL EQUITY AND LIABILITIES 119,041 115,987 114,372 ====== ====== ====== Consolidated cash flow statementFor the six months ended 30 June 2005 Six months Year Six months ended ended ended 30 June 31 December 30 June 2005 2004 2004 Restated Restated Unaudited Uaudited Unaudited £000 £000 £000 Cash flows from operating activitiesReceipts from customers 13,882 38,334 19,260Payments to suppliers and employees (9,377) (26,124) (13,004)Borrowing costs (745) (5,785) (4,360)Income tax paid (462) (1,321) (359) ------ ------ ------Net cash flows from operating activities 3,298 5,104 1,537 ------ ------ ------Cash flows from investing activitiesInterest received - 28 17Purchase of property, plant and equipment (4,008) (3,947) (1,296)Acquisition of subsidiary undertaking (611) - -Net cash disposed of with subsidiary undertaking - (281) (281) ------ ------ ------Net cash flows used in investing activities (4,619) (4,200) (1,560) ------ ------ ------ Cash flows from financing activitiesProceeds from issue of shares - 46,896 46,896Payment of finance lease liabilities (168) (106) (106)Dividends (1,237) - -Proceeds from borrowings 4,000 39,124 40,000Repayment of borrowings - (88,536) (88,536) ------ ------ ------Net cash flows from /(used in) financing activities 2,595 (2,622) (1,746) ------ ------ ------Net increase/(decrease) in cash and cash equivalents 1,274 (1,718) (1,769)Cash and cash equivalents at start of period (1,604) 114 114 ------ ------ ------Cash and cash equivalents at end of period (330) (1,604) (1,655) ====== ====== ====== Consolidated statement of changes in equityfrom 1 January 2004 to 30 June 2004 Foreign Fair exchange in Foreign value of Disposal of New At 1 the exchange cash flow subsidiary shares January Profit for statement on the hedge issued 2004 the period of total sale of (as recognised subsidiary restated) gains and losses £000 £000 £000 £000 £000 £000 £000 Issued capital 238 - - - - - 2,778 Share premium 807 - - - - - 47,222 Retained earnings 16 1,175 - - - - - Merger reserve 348 - - - - - - Foreign exchange reserve - - (15) 15 - - - Fair value share options reserve - - - - - - - Fair value cash flow hedge reserve (555) - - - 533 - - Capital redemption reserve - - - - - - ------------------------------------------------------------------------------------------------------------------------Total 854 1,175 (15) 15 533 - 50,000Minority interest (650) - - - - 650 ------------------------------------------------------------------------------------------------------------------------Total equity 204 1,175 (15) 15 533 650 50,000======================================================================================================================= Fair value Options of share Warrants Share Share issue At 30 June exercised options exercised Bonus issue repurchases costs 2004 £000 £000 £000 £000 £000 £'000 £'000 Issued capital 46 - 206 1,448 (135) - 4,581 Share premium (16) - (192) (1,448) - (3,104) 43,269 Retained earnings - - - - - - 1,191 Merger reserve - - - - - - 348 Foreign exchange reserve - - - - - - - Fair value share options reserve - 2 - - - - 2 Fair value cash flow hedge reserve - - - - - - (22) Capital redemption reserve - - - - 135 - 135-----------------------------------------------------------------------------------------------------------------------Total 30 2 14 - - (3,104) 49,504Minority interest - - - - - - ------------------------------------------------------------------------------------------------------------------------Total equity 30 2 14 - - (3,104) 49,504======================================================================================================================= Consolidated statement of changes in equityfrom 30 June 2004 to 30 June 2005 At 30 Fair Profit Fair At 31 Loss Equity Fair Fair At 30 June value for value December for dividends value value June 2004 of the of 2004 the of of 2005 share period cash period cash share options flow flow options hedge hedge £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Issued capital 4,581 - - - 4,581 - - - 4,581 Share premium 43,269 - - - 43,269 - - 43,269 Retainedearnings 1,191 3,452 - 4,643 (114) (1,237) - 3,292 Merger reserve 348 - - - 348 - - - 348 Fair valuecash flowhedge reserve (22) - - (523) (545) - - (250) (795) Fair valueshareoptions reserve 2 18 - - 20 - - - 32 52 Capitalredemptionreserve 135 - - - 135 - - - 135-----------------------------------------------------------------------------------------------------------------------Total 49,504 18 3,452 (523) 52,451 (114) (1,237) (250) 32 50,882======================================================================================================================= Independent Review Report INDEPENDENT REVIEW REPORT TOPINEWOOD SHEPPERTON PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2005 which comprises the Consolidated IncomeStatement, Consolidated Balance Sheet, Consolidated Cash Flow Statement,Consolidated Statement of Changes in Equity, and the related notes 1 to 7. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the Company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 7, the next annual financial statements of the group willbe prepared in accordance with those IFRS adopted for use by the European Union.This interim report has been prepared in accordance with InternationalAccounting Standard 34, "Interim Financial Reporting" and the requirements ofIFRS1, "First Time Adoption of International Financial Reporting Standards"relevant to interim reports. The accounting policies are consistent with those that the directors intend touse in the next financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies have been applied. A review excludes audit proceduressuch as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express an audit opinionon the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. Ernst & Young LLPRegistered AuditorDate Notes to the consolidated financial statementsat 30th June 2005 1. Basis of preparation The interim consolidated financial statements have been prepared on a historicalcost basis except for derivative financial instruments which have been measuredat fair value. The consolidated financial statements are presented in poundssterling and all values are rounded to the nearest thousand (£000) except whenotherwise indicated. The financial information has been prepared on the basis of all applicable IFRS,including all International Accounting Standards (IAS), Standing InterpretationsCommittee (SIC) and International Financial Reporting Interpretations Committee(IFRIC) interpretations issued by the International Accounting Standards Board(IASB) and published by 31 December 2004. These include IFRS endorsed by the EUand those awaiting formal endorsement. At this stage of development of IFRS, matters such as the interpretation andapplication surrounding it are continuing to evolve. In addition, IFRS currentlyin issue and adopted by the EU are subject to interpretation issued from time totime by the IFRIC and further standards may be issued by the IASB that will beadopted by the EU in 2005. Given these uncertainties, the financial informationis subject to possible change when applied in Pinewood Shepperton plc's firstfinancial reporting under IFRS. The rules for first time adoption of IFRS are set out in IFRS1, "First-timeadoption of International Financial Reporting Standards". IFRS1 requires the useof the same accounting policies in the IFRS transition balance sheet and for allperiods presented thereafter. The accounting policies must comply with all IFRSeffective at the reporting date for the first financial reporting under IFRS.IFRS1 permits companies adopting for the first time to take exemptions from thefull requirements of IFRS in the transition period. The financial informationhas been prepared on the basis of taking the following exemption: • Cumulative translation differences on foreign operations are deemed to be zero at 1 January 2004. Any gains or losses recognised in the consolidated income statement on subsequent disposals of foreign operations will therefore exclude translation differences arising prior to the transition date. 2. Revenue analysis Continuing Discontinued Total £000 £000 £000Six monthsended 30 June2005Film Stage Services 5,009 -- 5,009Television and SoundServices 4,961 -- 4,961Media Park income 3,358 -- 3,358 --------------- --------------- --------------- 13,328 -- 13,328 --------------- --------------- ---------------Year ended 31December 2004Film Stage Services 21,545 -- 21,545Television and SoundServices 10,678 - 10,678Media Park income 6,312 - 6,312Silver Lining Productions - 132 132 --------------- --------------- --------------- 38,535 132 38,667 --------------- --------------- ---------------Six monthsended 30 June2004Film Stage Services 11,259 -- 11,259Television and SoundServices 6,010 - 6,010Media Park income 3,095 - 3,095Silver Lining Productions - 132 132 --------------- --------------- --------------- 20,364 132 20,496 --------------- --------------- --------------- 3. Business combination Acquisition of Teddington Studios On 16 February 2005 Pinewood Shepperton plc set up De Facto 1224 Limited. On 17March 2005 De Facto 1224 Limited changed its name to Waterways Studios Limited.On 1 April 2005 Waterways Studios Limited purchased the trade and certain of theassets and liabilities of Teddington Studios Limited, which was inadministration, and acquired 100% of the share capital of The StudioBroadcasting Company Limited. On 8 April 2005 Waterways Studios Limited changedits name to Teddington Studios Limited, a company specialising in the provisionof facilities to the television industry. The fair value of the identifiable assets and liabilities of Teddington StudiosLimited and The Studio Broadcasting Company Limited as at the date ofacquisition are shown as those in 'Recognised on acquisition' compared withcarrying values in the records of the acquired entities. Recognised Carrying on acquisition value £000 £000 Property, plant and equipment 1,319 2,167Inventories 10 10Intangibles (i.e. contracts) 121 121 --------- --------- 1,450 2,298 --------- --------- Finance lease obligations (1,210) (1,210)Trade and other payables (422) (323) --------- --------- (1,632) (1,533) --------- =========Fair value of net liabilities (182)Provisional goodwill arising on acquisition 1,231 --------- 1,049 ========= Consideration: £000Costs associated with the acquisition 249Consideration - paid 611Consideration - deferred 189 ---------Total consideration 1,049 ========= The cash outflow on £000acquisition is asfollows:Cash paid for business (611)Costs of acquisition (249) ---------Net cash flow (860) ========= From the date of acquisition, Teddington Studios has contributed an operatingloss of £231,000 to the Group. The directors have made the assessment of provisional goodwill based on theinformation available at the date of this report. However given the proximity ofthe acquisition date to the date of this report, the directors consider itappropriate to recognise the goodwill as provisional which may be adjusted. 4. Exceptional costs Six months Year Six months ended ended ended 30 June 31 December 30 June 2005 2004 2004 Restated Restated Unaudited Unaudited Unaudited £000 £000 £000 Exceptional costs inrelation tothe acquisitionof TeddingtonStudios 491 - -Costs in relation tothe InitialPublicOffering -- 1,517 1,517 --------------- --------------- --------------- 491 1,517 1,517 --------------- --------------- --------------- 5. Earnings per ordinary share and dividend Earnings per ordinary share Basic earnings per share are calculated by dividing net (loss)/profit for theyear attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net (loss)/profit attributable to ordinary shareholders by the weighted average number ofordinary shares outstanding during the year (adjusted for the effects ofdilutive options). The following reflects the income and share data used in the total operationsbasic and diluted earnings per share computations: Six months Year Six months ended ended ended 30 June 31 December 30 June 2005 2004 2004 Unaudited Unaudited Unaudited £000 £000 £000(Loss)/profitattributable toequity holdersfrom continuingoperations (114) 4,659 1,207Loss attributable toequity holdersfromdiscontinuedoperations -- (32) (32) --------- --------- ---------Net (loss)/ profitattributable toequity holdersof the parent (114) 4,627 1,175 --------- --------- --------- Six months Year Six months ended ended ended 30 June 31 December 30 June 2005 2004 2004 Unaudited Unaudited Unaudited Thousands Thousands Thousands Basic number of shares at startof the year 45,813 1,035 1,035Number of shares issued via bonusissue - 14,484 14,484Weighted number of shares issuedin the year - 19,368 4,138 --------- --------- --------- 45,813 34,887 19,657Dilutivepotentialordinary sharesEmployee options relating to theSharesave scheme 240 151 79 --------- --------- --------- 46,053 35,038 19,736 --------- --------- ---------Dividend Six months Year Six months ended ended ended 30 June 31 December 30 June 2005 2004 2004 Unaudited Unaudited Unaudited £000 £000 £000 Final dividend for 2004 paidat 2.7p perordinary share 1,237 -- -- --------------- -------------- -------------- 1,237 -- -- --------------- -------------- -------------- 6. Publication of non-statutory accounts The financial information contained in this statement does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Thefinancial statements for the year ended 31 December 2004, upon which theauditors issued an unqualified opinion, have been delivered to the Registrar ofCompanies. 7. Statement of compliance In July 2002 the European Union (EU) approved a regulation requiring all EUlisted companies to prepare consolidated financial statements in accordance withIFRS. The regulation applies to accounting periods beginning on or after 1January 2005. Pinewood Shepperton plc has published this interim report inaccordance with International Accounting Standard 34, "Interim FinancialReporting" and the requirements of IFRS1, "First Time Adoption of InternationalFinancial Reporting Standards" relevant to interim reports. The financial statements for the year ended 31 December 2005 will be prepared inaccordance with those IFRS adopted for use by the EU. Section 2 First time adoption of International Financial Reporting Standards "IFRS" - an overview Introduction In July 2002 the European Union (EU) approved a regulation requiring all EUlisted companies to prepare consolidated financial statements in accordance withIFRS. The regulation applies to accounting periods beginning on or after 1January 2005. Pinewood Shepperton plc has published its 2005 Interim Report inaccordance with IFRS. Section 4 of this report has been prepared in order to provide financialinformation on the impact of Pinewood Shepperton plc's transition from a UKGenerally Accepted Accounting Principles (UK GAAP) basis to an IFRS basisconcurrently with the publication of its first financial reporting under IFRS inSection 1. Following the adoption of IFRS the main areas of impact are: • Increase in the deferred tax liability of £11.3m at 30 June 2004 and£11.2 at 31 December 2004 due to the recognition of the deferred tax liabilityon the uplift in fair value of land and buildings at Pinewood and Sheppertonfollowing the acquisitions of Pinewood Studios Limited and Shepperton StudiosLimited in 2000 and 2001 respectively. • Intangible assets of £11.9m at 30 June 2004 and 31 December 2004 due tothe recognition of goodwill following the acquisitions of Pinewood StudiosLimited and Shepperton Studios Limited in 2000 and 2001 respectively. • Increase in 31 December 2004 profit of £1.2m due to the reversal of theprovision for proposed dividends payable approved by the Board on 18 March 2005. • Decrease in reported profit of £2,000 for the six months to 30 June2004 and £20,000 for the full year to 31 December 2004 due to share optioncharges. The accounting policies adopted are consistent with those of the previousinterim consolidated financial statements except that the Group has adoptedthose standards designed to form the "stable platform" intended to be mandatoryfor the financial years beginning on or after 1 January 2005. The principaleffects of this decision are discussed below. A restatement of equity followingthe adoption of IFRS is detailed in Section 4. IFRS2 "Share-based payment"Under IFRS2 the cost of equity settled transactions with employees is measuredby reference to the fair value at the date at which they are granted. The fairvalue is determined by an external valuer using the binomial method. In valuingequity-settled transactions, no account is taken of any performance conditions,other than the conditions linked to the price of the shares of PinewoodShepperton plc ('market conditions'). The cost of equity-settled transactions is recognised, together with acorresponding increase in equity, over the period in which the performanceconditions are fulfilled, ending on the date on which the relevant employeesbecome fully entitled to the award ('vesting date'). The cumulative expenserecognised for equity-settled transactions at each reporting date until thevesting date reflects the extent to which the vesting period has expired and thenumber of awards that, in the opinion of the directors of the Group at thatdate, based on the best available estimate of the number of equity instrumentsthat will ultimately vest. No expense is recognised for awards that do not ultimately vest, except forawards where vesting is conditional upon a market condition, which are treatedas vesting irrespective of whether or not the market condition is satisfied,provided that all other performance conditions are satisfied. Where the terms of an equity-settled award are modified, as a minimum an expenseis recognised as if the terms had not been modified. In addition, an expense isrecognised for any increase in the value of the transaction as a result of themodification. Where an equity-settled award is cancelled, it is treated as if it had vested onthe date of cancellation, and any expense not yet recognised for the award isrecognised immediately. However, if a new award is substituted for the cancelledaward, and designated as a replacement award on the date that it is granted, thecancelled and new awards are treated as if they were a modification of theoriginal award, as described in the previous paragraph. The charge under IFRS2 in the six month period to 30 June 2005 is £32,000.The charge under IFRS2 in the full year to 31 December 2004 is £20,000.The charge under IFRS2 in the six month period to 30 June 2004 is £2,000 IAS12 "Income taxes"Deferred taxation is to be provided for almost all differences between thebalance sheet amounts of assets and liabilities and their corresponding taxbase. Previously, under UK GAAP, deferred tax was provided for timingdifferences only. IFRS3 "Business combinations"IFRS3 applies to accounting for business combinations. Pinewood Shepperton plchas reviewed the business combinations under the provisions of IFRS3 and IAS12following the acquisitions of Pinewood Studios Limited and Shepperton StudiosLimited in 2000 and 2001 respectively. This has resulted in adjustments to theaccounting for the acquisitions as follows: Pinewood Shepperton Total Adjustments Fair Studios Studios book value Limited Limited book value book value value £000 £000 £000 £000 £000Tangible fixed assets 20,963 22,852 43,815 53,040 96,855Stocks 268 154 422 (55) 367Debtors 2,327 6,789 9,116 (400) 8,716Cash 59 (1,521) (1,462) - (1,462)Creditors due within one year (2,834) (3,151) (5,985) (376) (6,361)Creditors due in more thanone year - (5,416) (5,416) - (5,416)Deferred tax liability - (1,331) (1,331) (12,843) (14,174)Amounts due to former parentundertaking (18,597) - (18,597) - (18,597) -------------------------------------------------------Net assets 2,186 18,376 20,562 39,366 59,928 -------------------------------------------------------Discharged by:Cash 60,543Loan notes 10,025Shares 361Transaction costs 909 ------- 71,838 -------Goodwill arising onacquisition 11,910 ======= Under UK GAAP a deferred taxation liability of £11.3m was not required to berecognised in the balance sheet of the acquired entities. However,implementation of IAS12 "Income taxes" requires this liability to be recognisedwhich has resulted in the fair value of the net assets of the acquired entitiesbeing adjusted accordingly. The board has also reviewed the acquisitions for theexistence of intangible assets, as required under IFRS3, and has identified noother intangible assets in existence at the time of acquisition to which a valueshould be attributed. IFRS3 "Business combinations" (continued)Goodwill of £11.9m has been recognised in the balance sheet of PinewoodShepperton plc as an intangible asset, which the Board will review in line withthe stated accounting policies of Pinewood Shepperton plc. IAS10 "Events after the balance sheet date"Under UK GAAP, dividends were provided for in the year when profits on whichthey were declared and approved by the directors arose. Under IAS10 - Eventsafter the balance sheet date, dividends are only provided for when declared.Current liabilities have been reduced by £1,237,000 as at 31 December 2004 inrespect of proposed dividends not formally declared as at the balance sheetdate. IAS39 "Financial instruments: recognition and measurement"Pinewood Shepperton plc uses interest rate derivatives to hedge interest rateexposures. The Pinewood Shepperton plc derivative qualifies for hedge accountingtreatment and as such the portion of the gain or loss on the hedging instrumentthat is determined to be an effective hedge is recognised directly in equity andthe ineffective portion is recognised in net profit or loss. Under UK GAAP thefair value of the financial derivatives was noted but not recognised in thefinancial statements. IAS19 "Employee benefits"Benefits which fall due within 12 months, such as compensated absences likeholiday pay, will require recognition under the rules of IAS19. As a consequencePinewood Shepperton plc is now required to provide for unused holidayentitlements. The charge under IAS19 in the six month period to 30 June 2005 was £108,000.The charge under IAS19 in the full year to 31 December 2004 was £6,000.The charge under IAS19 in the six month period to 30 June 2004 was £108,000. Section 3 Pinewood Shepperton plc's accounting policiesfollowing transition to IFRS Corporate information The consolidated financial statements of Pinewood Shepperton plc for the six