PWS.L Regulatory News (PWS)

4 Sep 2007 07:02

Pinewood Shepperton plc04 September 2007 Pinewood Shepperton plc Interim Results for the Six Months ended 30 June 2007 Pinewood Shepperton plc today reports half year results in line withexpectations. Financial Summary • Turnover of £18.3m (2006: £18.7m) • Operating profit of £3.6m (2006: £3.6m) • Profit before tax up 39% to £2.9m (2006: £2.1m) • Diluted earnings per share up to 5.9p (2006: 4.3p) • Earnings per share, after adjusting for the effects of indexation on deferred tax, up to 4.9p (2006: 3.1p) • Interim dividend up 11% to 1.0p (2006: 0.9p) Operational Summary • Demand for film production in the UK is showing the benefit of the effective operation of the new film tax regime • Investment in television facilities continues • Development commences at Shepperton Studios • Pre-let marketing for space at both Pinewood Studios and Shepperton Studios has commenced • Disney International Character Voices contract extended • Further timing delay shifting film revenues into the first half of 2008 Commenting on today's results, Ivan Dunleavy, Chief Executive of PinewoodShepperton plc, said: "Pinewood Shepperton has delivered steady results in the first half of 2007. TheCompany continues to make good progress on its media park development plans forthe business for the long term. "As we develop our business we focus on our strategy of diversifying our revenuestreams to create a broad media park platform, less reliant on volatile filmrevenues, but servicing the wider creative industries. We offer one of thepremier film making facilities in the world. Our aim is to increase our share ofthe TV market. "We continue to invest in our growth television services business to achievethis aim. "Pinewood Shepperton is making steady progress on our strategic developments forthe future of the business as we move towards more diversified and higherquality revenue streams." A presentation of the results of the Company will be available atwww.pinewoodgroup.com from 12pm today. Enquiries: Pinewood Shepperton plc 01753 656732Ivan Dunleavy, Chief ExecutivePatrick Garner, Finance Director Brunswick Group LLP 020 7404 5959James OlleyDominic McMullan Operating Review Film The benefits of increased confidence from our film customers following theintroduction of the new film tax credit, effective from 1 January 2007, are nowapparent. Increasing interest in film production activity in the UK in theperiod is providing strong evidence that the new film tax regime is operatingeffectively as an incentive. For the six months ended 30 June 2007, Film revenues were £10.8m, an increase of9% on 2006 (£9.9m) A number of productions commenced in 2006 and continued theirutilisation of facilities into 2007, for example Bourne Ultimatum (Universal),Sweeney Todd (Warner Bros), His Dark Materials: The Golden Compass (New Line),Inkheart (New Line) and Fred Claus (Warner Bros). Additionally, Mamma Mia(Universal) has contributed significantly to Film revenues during the firsthalf. We have also provided facilities for a number of productions on location duringthe period. Pinewood Shepperton is mindful of international competition from other Europeanstudios, and from US competitors who benefit from tax breaks in a number of USstates and the US Dollar weakness. We will continue to invest in the stages,equipment, facilities and ancillary services that will allow Pinewood Sheppertonto maintain its premium offering. We have commenced a major internalrefurbishment of C & D stages, last upgraded in the 1980s and C & D offices atShepperton Studios, and the upgrade of two workshops at Pinewood Studios. Ongoing investment in post production has maintained Pinewood Shepperton'smarket position in the first six months of 2007. Post Production has generatedrevenues from a number of films during the period including 28 Weeks Later,Killshot, His Dark Materials: The Golden Compass, Harry Potter and the Order ofthe Phoenix and 10,000 BC. The Group has also developed an increasing presence in foreign languageversioning. The long term success of our contract with Disney Character VoicesInternational resulted in their decision to grant a further extension of theircontract. Other productions serviced included Transformers (Paramount) andSurf's Up (Sony). In domestic post production, competitive trading conditions have continued into2007. Management's strategy continues to centre on providing a morecomprehensive offering of post production services, which we expect will improverevenues in the medium term. As reported at the time of our preliminary results announcement, the 007 Stagewas completed in March 2007 at a cost of approximately £8m. On completion, thefacility was utilised immediately for the shooting of Mamma Mia. Our decision toenhance the operational functionality of the stage, including increasedcapacity, a drive in ramp, improved gantry, lighting and drainage infrastructurehas been endorsed by the very positive feedback received to date. Television Television revenues for the first half of 2007 were £4.7m compared to £5.5m forthe equivalent period in 2006, reflecting timing differences for a number ofproductions. Our ability to attract a greater number of television production companies isfundamental to the strategy of diversifying our revenues across the group andexploiting the strong demand in the television market. As previously announced, the business will shortly begin to enjoy the benefitsof its volume arrangement with the BBC. We are actively seeking to extend thisconcept to other customers. We have undertaken necessary investment in High Definition camera equipment tosupport the development of our TV customer base, who are increasingly choosingto produce programmes in this format. The benefit of these enhancements hasenabled us to improve our gross margins at Teddington Studios. This investmentis in line with our usual programme of capital expenditure. During the first half of 2007 we welcomed back a number of productions to ourtelevision studios, including The Weakest Link, My Family, IT Crowd, HarryHill's TV Burp, and Bremner Bird and Fortune, in addition to a number of newclients including Shed Productions, Twofour Broadcast and Phil MacintyreProductions. Our customers are providing very positive feedback on thedevelopment of our television facilities. In addition to the TV work during the first half, we also provided facilities to43 commercials. At Teddington Studios we have increased the range of services offered toexisting customers. We have improved the facilities on offer to the ChineseChannel and have continued to support a number of other channel customers. Weare currently investing in Multi-Protocol Label Switching (MPLS) technologywhich will enable the strategic extension of our channel hosting capabilities toPinewood Studios. This will allow a broader range of services to be offered fromPinewood Studios. Filmed television productions which utilised facilities during the first half of2007 included Let Me Entertain You, Cranford Chronicles, Thomas the Tank Engineand Vivienne Vyle. We provided sound mixing services to a number of televisionproductions including Waking the Dead, Saddam's Tribe, Night Garden and MyFamily. Pinewood Shepperton remains committed to its strategy of growing televisionrevenues. To support diversification away from more volatile film productionrevenues, Pinewood Shepperton will seek to extend our trading relationships withmajor broadcasters and independent producers over the short to medium term.Pinewood Shepperton is well placed to respond to producers' requirements for abroad range of production facilities. Media Park Income Media Park income for the six months to 30 June 2007 was £2.8m (2006: £3.3m),after eliminating £0.4m of income attributable to our joint venture partner inShepperton Studios Property Partnership. Underlying performance for the firsthalf of 2007 remains broadly in line with 2006. The 280 businesses located across the Group generated occupancy levels in excessof 90% for the period under review. We continue to see evidence of strong demandfor our flexible accommodation across the studios, although we remain capacityconstrained in this area of our business until our development strategy adds theadditional capacity we require. Media Park Development Strategy To begin the implementation of our master planning initiatives we have launcheda marketing campaign to attract pre-lets at both Pinewood Studios and SheppertonStudios. Initial responses to this programme have been encouraging. We are nowactively pursuing prospective media tenants who recognise the significantbenefit in relocating to the Pinewood and Shepperton media clusters. We have 1,019,000 sq ft of new planning consents at Pinewood Studios, and inpreparation for its development we have commenced the necessary upgrade anddevelopment of a new entrance, roundabout and public highway access, which willimprove traffic flows through the studios. The new entrance will be completedtowards the end of 2007. Pinewood Shepperton is investing in the infrastructure of both its Pinewood andShepperton sites including, in the first instance, the commissioning of a newpower supply to the Pinewood site. We are continuing the improvement of amenities at all sites, and will beextending our existing green transport initiative. As we commence developments at the Studios, some disruption to studio activitywill be unavoidable. We will continue to manage carefully the impact of thisdisruption on trading activity as the pace of our development strategyincreases. Shepperton Studios Property Partnership The joint venture partnership entered into with Morley Fund Management inSeptember 2006 is progressing well. During the first quarter of 2007 theGainsborough Building (formerly referred to as I Building) at Shepperton wascommenced, including 40,000 sq. ft of offices and 20,000 sq. ft of workshopspace. Preparation of the site was completed during the period and contractorscommenced construction in May 2007. It is anticipated that this development willbe completed by April 2008. We work closely with Morley Fund Management on all aspects of the propertypartnership. The property management expertise they have brought to partnershipwill stand us in good stead as development accelerates. This will ensure greaterefficiency in our management of the Shepperton Studios media park. Current Trading and Outlook In our trading statement of the 13 June 2007 we reported that contracts for anumber of major film projects would commit to production later than expected inthe year. As a consequence, Film revenues were likely to be flat year on year.Also as stated, this timing delay would result in a greater certainty for Filmrevenues for the first half of 2008. More recently, further timing delays bymajor productions are now expected to impact revenues realised in the currentfinancial year, again to the benefit of the first half of 2008. Every effort isbeing made to replace these deferred productions, however if these fail tomaterialise the outturn for 2007 Film revenues will not match the levelsachieved in 2006. The benefit of these timing delays is that contracted film productions are at anunusually high level for the first half of 2008. The US film industry negotiations with the Writers' and Screen Actors' Guildswill commence in the coming months. It is currently too early to predict theoutcome of these negotiations. Experience of past negotiations suggests thiswill now create uncertainty over the timing and level of film activity in thesecond half of 2008. Television revenues are expected to show growth in the second half of 2007 andfor the year as a whole. The market for television production has shownconsistent demand and recent statements from broadcasters have highlighted theneed for the TV industry to continue to invest in high quality UK production.Much of this is ideally suited to the studio based production model. Media Park income is expected to remain in line with expectations and the Groupis making progress on several fronts with its development strategy. The Board continues to view the Company's prospects with confidence. BBC Resources On 15 August 2007 the BBC announced its intention to sell its Resources unit,which provides facilities for the production of television programmes. PinewoodShepperton confirms that it has expressed an interest in participating in thissale process, which is clearly at a very early stage. The Board does not intendto comment further on this matter at this time. Financial Review Adjusted Operating Profit The consolidated results of Pinewood Shepperton plc for the six months ended 30June 2007, incorporate the Company's 50% interest in Shepperton Studios PropertyPartnership, the joint venture with Morley Fund Management at SheppertonStudios. The impact on operating profit of the joint venture is presented in thefollowing table, which provides a comparison of adjusted results for the firsthalf of 2007 compared to the equivalent period for 2006. Reported Adjusted Reported Six months Six months Six months ended ended ended 30 June 2007 30 June 2007 30 June 2006 Unaudited Adjustments Unaudited Unaudited £000 £000 £000 £000 Revenue 18,329 416 (i) 18,745 18,729 Cost of sales (11,234) (47) (ii) (11,281) (11,611) -------------------------------------------------Gross profit 7,095 369 7,464 7,118 -------------------------------------------------Selling, distribution andadministrative expenses (3,453) 47 (iii) (3,406) (3,500)-------------------------------------------------------------------------------Operating profit 3,642 416 4,058 3,618-------------------------------------------------------------------------------- (i) Shepperton Studios Media Park income attributable to the joint venture partner's interest in Shepperton Studios Property Partnership (ii) The net impact of top up rentals, cost recovery and depreciation (iii)Costs incurred in the administration of the joint venture Revenue Turnover for the six months ended 30 June 2007 was £18.3m (2006: £18.7m).Adjusted turnover of £18.7m remains in line with 2006. Film revenues were up 9% at £10.8m (2006: £9.9m), with Television revenues at£4.7m, representing a 14% reduction compared to the equivalent period in 2006(£5.5m). Media Park income was £2.8m (2006: £3.3m). Profit performance Gross margin for the period was 38.7% (2006: 38.0%) with operating margin of19.9% marginally ahead of 2006 (19.3%) after accounting for the joint venture.Adjusted operating profit was £4.1m (2006: £3.6m). Reported EBITDA was £5.1m (2006: £5.3m). This measure continues to provide avaluable indicator of the Group's performance, reflecting the cash generativenature of the business. Profit before tax was £2.9m (2006: £2.1m), arising from improved performance inFilm revenues, together with the positive impact of significantly reducedinterest costs to 30 June 2007 of £0.8m (2006: £1.5m) as a result of the jointventure. Earnings per share Reported earnings per share were 5.9p (2006: 4.3p). Earnings per share for theperiod, after adjusting for exceptional items and the effects of indexation onthe deferred tax charge, were 4.9p (2006: 3.1p) reflecting improved underlyingoperating profit and lower interest costs for the period. The diluted and weighted average number of shares in issue was 45,886,000 forthe period. Dividend The Board has announced an interim dividend for 2007 of 1p per share (2006:0.9p) an increase of 11%, reflecting the Board's confidence in the business. Thedividend is to be paid on 9 November 2007 to shareholders on the register on 12October 2007 (ex dividend date 10 October 2007). The Board's objective is tomaintain a progressive dividend policy. Cash flow and net debt Cash flow generated from operations was £2.5m (2006: £2.2m). The Group's net debt at 30 June 2007 was £21.5m (2006: £41.4m), including its50% share of the non-recourse loan within Shepperton Studios PropertyPartnership, of £10m. At 30 June 2007 the financial gearing of the business was33% (2006: 71%). At 30 June 2007 the Company had drawn £11m of its available £35m RevolvingCredit Facility, and had utilised £0.6m of its available £3m overdraft facility. Capital Expenditure Capital expenditure during the period was £7.0m (2006: £1.8m), notablyinvestment in the replacement of the 007 stage of £5.2m, and other facilityenhancements including the commencement of investment in television HighDefinition equipment. Interest Finance costs for the six months to 30 June 2007 were £0.8m (2006: £1.5m)reflecting the reduced debt levels. The interest cover ratio based on operating profit was 4.8 times compared to 2.3times for the same period in 2006, reflecting improved gearing in the period. Pinewood Shepperton uses an interest rate derivative to manage its interestexposure. At 30 June 2007, £7.5m of the Company's revolving credit facility wasthe subject of an interest rate hedge. The non-recourse facility within the joint venture remains at floating rate. Taxation The current corporation tax expense, based on profit before tax of £2.9m, was£0.9m (2006: £0.7m), an effective tax rate of 32% (2006: 33%). Deferred tax restatement of prior year comparatives Following external advice on IFRS, it is now considered that the appropriateaccounting treatment is to calculate the tax charge that would be payable on thesale of land and buildings as a whole rather than separately. The result is togive full effect to the indexation allowances applicable to the tax base cost ofbuildings. As a result the total deferred tax liability at 31st December 2006 isdecreased by £8.3m. The impact of this change reflected as at 1 January 2006 is to decrease goodwillby £4.1m, decrease the deferred taxation liability by £7.9m and increaseretained earnings by £3.9m. The 2007 total tax charge incorporates the impact of deferred tax creditsarising from the recalculation of the Company's deferred tax liability. Therecalculated deferred tax now takes account of indexation allowances from thecombined treatment of land and buildings and results in a deferred tax credit of£0.5m (2006: £0.6m). Group income statement for the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006-as unaudited restated restated Unaudited Unaudited Notes £000 £000 £000RevenueRendering of services 3 18,329 18,729 40,704 Cost of sales (11,234) (11,611) (24,064) --------------------------------------Gross profit 7,095 7,118 16,640 -------------------------------------- Selling and distribution expenses (1,093) (879) (2,089)Administrative expenses (2,360) (2,621) (5,493)Exceptional income - - 1,013--------------------------------------------------------------------------------Operating profit before exceptionalitems 3,642 3,618 9,058-------------------------------------------------------------------------------- Operating profit 3,642 3,618 10,071 Finance costs (761) (1,541) (2,909)--------------------------------------------------------------------------------Profit before tax 2,881 2,077 7,162-------------------------------------------------------------------------------- Current tax expense (924) (678) (1,186)Deferred tax credit/(debit) 294 24 (506)Effect of indexation on deferredtax provision 474 554 1,009 -------------------------------------Total corporation tax expense (156) (100) (683) ------------------------------------ Profit for the period 2,725 1,977 6,479 ====================================-Attributable to: Equity holders of the parent 2,725 1,977 6,479 ====================================-Earnings per share- basic and diluted for result for the period 4 5.9p 4.3p 14.1p- basic and diluted for result for the period adjusted for exceptional items 4 5.9p 4.3p 12.6p- basic and diluted for result for the period adjusted for exceptional items and effect of indexation on deferred tax provision 4 4.9p 3.1p 10.4p Group balance sheetat 30 June 2007 As at As at 31 December As at 30 June 2006- 2006 - as 30 June 2007 as restated restated Unaudited £000 Unaudited £000 Unaudited £000ASSETSNon-current assetsProperty, plant andequipment 91,518 105,028 89,096Intangible assets 5,604 5,604 5,604 -------------------------------------------- 97,122 110,632 94,700 -------------------------------------------- Current assetsInventories 309 343 319Trade and otherreceivables 3,675 3,652 4,792Prepayments 579 1,336 2,171Cash - 587 1,064 -------------------------------------------- 4,563 5,918 8,346 ============================================TOTAL ASSETS 101,685 116,550 103,046 --------------------------------------------EQUITY AND LIABILITIESEquity attributable to equityholders of parentShare capital 4,582 4,582 4,582Share premium 43,478 43,478 43,478Capital redemptionreserve 135 135 135Merger reserve 348 348 348Fair value of cash flowhedge reserve - (147) (3)Retained earnings 15,888 9,765 14,020 --------------------------------------------Total equity 64,431 58,161 62,560 -------------------------------------------- Non-current liabilitiesInterest-bearing loans andborrowings 20,848 41,795 18,806Deferred tax liabilities 4,787 5,459 5,555 --------------------------------------------- 25,635 47,254 24,361 --------------------------------------------- Current liabilitiesTrade and other payables 9,552 10,415 15,114Provisions 769 - 812Interest-bearing loans andborrowings 637 174 18Tax payable 661 546 181 ---------------------------------------------- 11,619 11,135 16,125 ---------------------------------------------- TOTAL LIABILITIES 37,254 58,389 40,486 ----------------------------------------------TOTAL EQUITY ANDLIABILITIES 101,685 116,550 103,046 ---------------------------------------------- Group cash flow statementFor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Unaudited £000 £000 £000 Cash flow from operating activitiesProfit before tax 2,881 2,077 7,162Adjustments to reconcile profitbefore tax to net cash flowsExceptional income - - (1,013)Depreciation 1,433 1,648 3,220Finance costs 761 1,541 2,909 -------------------------------------------Cash flow from operatingactivities before changesin working capital 5,075 5,266 12,278Decrease/(increase) in tradeand other receivables 1,192 (500) (958)Decrease/(increase) in inventories 10 (40) (16)(Decrease)/increase in tradeand other payables (2,565) (55) (642) -------------------------------------------Cash generatedfrom operations 3,712 4,671 10,662Finance costs paid (775) (1,905) (2,845)Corporation tax paid (440) (560) (1,430) --------------------------------------------Net cash flow from operatingactivities 2,497 2,206 6,387 ---------------------------------------------Cash flow (used in)/(from) investing activitiesProceeds from SheppertonStudios Joint Venture transaction - - 20,500Costs of the Shepperton Studios JointVenture transaction (282) - (1,162)Proceeds from insurance for 007 Stage 2,017 - 4,980Purchase of property, plantand equipment (6,953) (1,762) (6,215) -------------------------------------------Net cash flow (used in)/(frominvesting activities (5,218) (1,762) 18,103 -------------------------------------------Cash flow from/(used in) financingactivitiesProceeds from the issue of shares - 10 10Payment of finance leaseliabilities (18) (143) (300)Dividends paid (962) - (412)Proceeds from borrowings ofJoint Venture - - 10,000Proceeds from bank borrowings 2,000 - -Repayment of bank borrowings - (1,000) (34,000) -------------------------------------------Net cash flow (used in)/fromfinancing activities 1,020 (1,133) (24,702) --------------------------------------------Net decrease in cash (1,701) (689) (212)Cash at the start of the period 1,064 1,276 1,276 --------------------------------------------(Overdraft)/cash at the end ofthe period (637) 587 1,064 ===========================================- Group reconciliation of movement in net debtFor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 2007 30 June 2006 31 December Unaudited Unaudited 2006 Unaudited £000 £000 £000 Reconciliation of net cash flow tomovement in net debt(Decrease)/incr ease in cash (1,701) (689) (212)Repayment of bank loans - 1,000 34,000Amortisation of loan issue costs (46) (74) (291)Repayments of finance leaseobligations 18 143 299Proceeds from borrowings ofJoint Venture - - (10,000)Proceeds from bank borrowings (2,000) - -Movement in fair value ofcash flow hedge 4 362 568 --------------------------------------------Movement in net debt (3,725) 742 24,364Net debt at the start of the period (17,760) (42,124) (42,124) -------------------------------------------Net debt at the end of the period (21,485) (41,382) (17,760) -------------------------------------------- Group statement of changes in equity Fair value of Capital Retained Merger cash flow hedge redemption Total Share Capital Share premium earnings reserve reserve reserve equity £000 £000 £000 £000 £000 £000 £000 At 1 January2007 4,582 43,478 14,020 348 (3) 135 62,560Profit for the period - - 2,725 - - - 2,725Transfers to the income statementOn cash flow hedges - - - - 3 - 3Income and expense recognised directly inequity -----------------------------------------------------------------------------------------------------------------Total recognisedincome and expense for the period - - 2,725 - 3 - 2,728---------------------------------------------------------------------------------------------------------------- Equity dividends - - (962) - - - (962)New shares - - - - - - -issued Share basedpayment - - 105 - - - 105 -------------------------------------------------------------------------------------------At 30 June 2007 4,582 43,478 15,888 348 - 135 64,431 ============================================================================================ Group statement of changes in equity Fair value of Capital Retained Merger cash flow hedge redemption Total Share Capital Share premium earnings reserve reserve reserve equity £000 £000 £000 £000 £000 £000 £000 At 1 January2006 - aspreviouslyreported 4,581 43,469 3,880 348 (400) 135 52,013Adjustmentin respect of deferred tax - - 3,888 - - - 3,888 --------------------------------------------------------------------------------------------------At 1 January2006 - asrestated 4,581 43,469 7,768 348 (400) 135 55,901Profit forthe period - - 1,977 - - - 1,977Transfers tothe incomestatementOn cash flowhedges - - - - 90 - 90Income andexpenserecogniseddirectly inequityProfit oncashflow hedgestaken to equity - - - - 272 - 272Tax on itemstakendirectlyto ortransferred from equity - - - - (109) - (109) --------------------------------------------------------------------------------------------------Totalrecognisedincome andexpense forthe period - - 1,977 - 253 - 2,230 -------------------------------------------------------------------------------------------------- New sharesissued 1 9 - - - - 10Share basedpayment - - 20 - - - 20 --------------------------------------------------------------------------------------------------At 30 June 2006 4,582 43,478 9,765 348 (147) 135 58,161Profit forthe period - - 4,502 - - - 4,502Transfers to the incomestatementOn cash flowhedges - - - - 142 - 142Income andexpenserecogniseddirectly inequityProfit oncashflow hedgestaken to equity - - - - 63 - 63Tax on itemstakendirectlyto ortransferred from equity - - 43 - (61) - (18) --------------------------------------------------------------------------------------------------Totalrecognisedincome andexpense forthe period - - 4,545 - 144 - 4,689 -------------------------------------------------------------------------------------------------- Equitydividends - - (412) - - - (412)Share issue costs - - - - - - -Share basedpayment - - 122 - - - 122 --------------------------------------------------------------------------------------------------At 31 December 2006 4,582 43,478 14,020 348 (3) 135 62,560 ================================================================================================== Independent Review Report INDEPENDENT REVIEW REPORT TO PINEWOOD SHEPPERTON plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2007 which comprises Group Income Statement, GroupBalance Sheet, Group Cash Flow Statement, Group reconciliation of movement innet debt, Group Statement of Changes in Equity and the related notes 1 to 5. 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 which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. 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 makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on 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 2007. Ernst & Young LLPLondon3 September 2007 1. Corporate information Pinewood Shepperton plc is a company incorporated and domiciled in the UnitedKingdom whose shares are publicly traded. The interim Group financial statementsof the Group for the six months ended 30 June 2007 were authorised for issue inaccordance with a resolution of the Directors on 3 September 2007. 2. Basis of preparation and accounting policies The interim report has been prepared in accordance with the historical costconvention and also with the recognition and measurement criteria of theInternational Financial Reporting Standards, including International AccountingStandards and Interpretations as adopted for use in the EU. The interimconsolidated financial statements do not include all the information anddisclosures required in the annual financial statements as defined in section240 of the Companies Act 1985, and should be read in conjunction with theGroup's annual financial statements as at 31 December 2006. The financialstatements for the year ended 31 December 2006, upon which the auditors issuedan unqualified opinion, have been delivered to the Registrar of Companies. Significant accounting policies The accounting policies adopted in the preparation of the interim consolidatedfinancial statements are consistent with those followed in the preparation ofthe Group's annual financial statements for the year ended 31 December 2006,except for the adoption of amendments mandatory for annual periods beginning onor after 1 January 2007. The adoption of these amendments did not affect theGroup results of operations or financial position. Restatement of prior year comparatives At the year ended 31 December 2006, a provision was made for the potentialcapital gains tax liability that would occur should the land and buildings besold. In arriving at this provision, following external advice on thereinterpretation of the IFRS, the group calculated the potential tax charge onthe sale of land and the sale of buildings separately. After furtherconsideration and developments in the interpretation of IFRS, it is nowconsidered that the appropriate accounting treatment is to calculate the taxcharge that would be payable on the sale of the properties as a whole. Theeffect of this for the group is to give full effect to the indexation allowancesapplicable to the tax base cost of buildings. As a result the total deferred taxliability at 31st December 2006 is decreased by £8,327,000. The impact of this change at 1 January 2006 is to decrease goodwill and thedeferred taxation liability by £4,052,000 and £7,940,000 respectively, andincrease retained earnings by £3,888,000. The restatement also increases the deferred taxation credit through the Groupincome statement during the year ended 31 December 2006 from £116,000 to£503,000, and the deferred taxation credit during the period ended 30 June 2006from £24,000 to £578,000. The credit for deferred taxation of £503,000 is made up as follows: • credit of £1,009,000 relating to the effect of indexation allowances in the year• credit of £415,000 for the effect of depreciation on buildings• debit of £282,000 as a result of the 007 Stage fire• debit of £266,000 as a result of the sale of the Shepperton site• debit of £397,000 for capital allowances in advance of depreciation on fixtures, fittings and equipment• credit for other timing differences totalling £24,000. This has no effect on the amount of tax payable in cash on the profits for theyear. As a result of the above, earnings in the period ending 30 June 2006 and 31December 2006 have increased by £554,000 and £387,000 respectively. This hasincreased both basic and diluted earnings per share in the period ending 30 June2006 and 31 December 2006 by 1.2 pence and 0.8 pence per share respectively. Notes to the consolidated financial statements at 30th June 2007 3. Revenue analysis Total £000Six months ended 30 June 2007Film 10,835Television 4,697Media Park income 2,797 ------------ 18,329 ------------ Total £000Six months ended 30 June 2006Film 9,947Television 5,453Media Park income 3,329 ------------ 18,729 ------------ Total £000Year ended 31 December 2006Film 22,549Television 11,837Media Park income 6,318 ------------ 40,704 ------------ Notes to the consolidated financial statements at 30th June 2007 4. Earnings per ordinary share and dividend Earnings per ordinary share Basic earnings per share are calculated by dividing profit for the periodattributable to ordinary equity holders of the company by the weighted averagenumber of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the profitattributable to ordinary shareholders by the weighted average number of ordinaryshares outstanding during the period, adjusted for the effects of dilutiveoptions. 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 excludingexceptional items and the effect of indexation on the deferred tax provision(see note 2). The following reflects the income and share data used in the basic and dilutedearnings per share computations: Six months Six months Year ended ended ended 31 30 June 2007 30 June 2006 December 2006 Restated Restated Unaudited Unaudited Unaudited £000 £000 £000 Profit attributable toequity holders of thecompany 2,725 1,977 6,479Adjustments to profit forcalculation of adjusted earningsper shareExceptional income - - (1,013)Taxation adjustments onexceptional items - - 305 ------------------------------------------- 2,725 1,977 5,771Effect of indexation ondeferred tax provision (474) (554) (1,009) ------------------------------------------- 2,251 1,423 4,762 ------------------------------------------- Thousands Thousands Thousands Basic weighted averagenumber of shares 45,817 45,813 45,817Dilutive potential ordinaryshares resulting fromemployee share schemes 69 - 57 ------------------------------------------Diluted weighted averagenumber of shares 45,886 45,813 45,874 ------------------------------------------- Notes to the consolidated financial statements at 30th June 2007 4. Earnings per ordinary share and dividend (continued) Six months Six months Year ended ended ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Unaudited £000 £000 £000 Dividend (finaland interim for2006) 962 - 412 ----------------------------------------------------- 5. Related party disclosures The consolidated financial statements include the financial statements ofPinewood Shepperton plc and the subsidiaries listed in the following table. % equity interest Country of Six months Six months Year incorporation ended ended ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited Unaudited PinewoodStudiosLimited United Kingdom 100 100 100SheppertonStudiosLimited United Kingdom 100 100 100Pinewood-Shepperton StudiosLimited United Kingdom 100 100 100StudiolinkLimited United Kingdom 100 100 100TeddingtonStudiosLimited United Kingdom 100 100 100The StudioBroadcastingCompanyLimited United Kingdom 100 100 100Baltray No.1Limited United Kingdom 100 - 100Baltray No.2Limited United Kingdom 100 - 100SheppertonManagementLimited United Kingdom 100 - 100 Pinewood Shepperton plc is the ultimate parent entity. Notes to the consolidated financial statements at 30th June 2007 5. Related party disclosures (continued) Joint ventures % equity interest Country of Six months Six months Year incorporation ended ended ended 30 June 2007 30 June 2006 31 December 2006 Unaudited Unaudited UnauditedSheppertonStudios(GeneralPartner)Limited United Kingdom 50 - 50SheppertonStudiosPropertyPartnership United Kingdom 50 - 50 During the period the Group entered into transactions with the following relatedparties, involving the utilisation of media facilities at normal market ratesand settlement terms. Sales to Amounts related owed by party related £000 party £000 Entity with which Michael Grade is associated: Six months ended/at 30 June 2007 ITV 31 5 ================== Six months ended/at 30 June 2006 BBC 1,080 92 ===================Year ended/at 31 December 2006 BBC 2,463 99 =================== The Group has entered into a commercial property lease on the Shepperton Studiosproperty. The net cost to the Group of principal lease rentals during the periodended 30 June 2007 was £325,000 (30 June 2006: £nil, 31 December 2006:£196,000). In addition the Group pays a top up rent to the joint venturepartnership based on certain of its trading activities at the Shepperton Studiossite. During the period the net cost to the Group of the top up rent was £18,000(30 June 2006: £nil, 31 December 2006: £47,000). The Group's amounts owed, tothe 50% joint venture partnership at 30 June 2007 was £150,000 (30 June 2006:£nil, 31 December 2006: £109,000). The Group has agreed to manage the assets of the joint venture partnership andcharge an asset manager fee based on independent valuations of the SheppertonStudios site. Asset manager fees charged during the period ended 30 June 2007were £65,000 (30 June 2006: £nil, 31 December 2006: £39,000). The Group'samounts owed by the 50% joint venture partnership at 30 June 2007 was £17,000(30 June 2006: £nil, 31 December 2006: £8,000). 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