PWS.L Regulatory News (PWS)

Pinewood Shepperton plc

Unaudited results for the fifteen month period ended 31 March 2012 

Pinewood Shepperton plc ("the Company"), a leading provider of services to the global film and television industry, today announces its unaudited results for the fifteen month period ended 31 March 2012 ("the fifteen month period").

Key developments in the fifteen month period ended 31 March 2012

·; Revenue £63.0m (year to 31 December 2010: £43.4m)

·; Operating profit before exceptional items £13.2m (year to 31 December 2010: £9.1m)

·; Loss before tax after exceptional items of £1.9m (year to 31 December 2010 profit: £5.8m)

·; Basic earnings per share after adjusting for exceptional items and deferred tax: 14.6p (year to 31 December 2010: 8.0p)

·; Opening of the 30,000 sq ft Richard Attenborough stage on time and within budget

·; Committed to a transformational digital television investment programme.

Commenting on today's results, Ivan Dunleavy, Chief Executive, said:

"Once again the Company has delivered a strong set of results with revenues substantially up. Our strategy, both at home and abroad, is delivering strong growth. Despite increasing global competition during the fifteen month period ended 31 March 2012, the Company won significant business from big budget films for our facilities which resulted in the Studios achieving high utilisation. In television, the trend for large audience television shows continues. The Media Park, home to around 300 media businesses, remains attractive to the makers and producers of film, television, video games and the wider digital screen industries.

"The Company is well placed to meet the increasing demand for content both at its UK studios and abroad and has embarked on a consultation for the future development of Pinewood Studios. The Board looks forward to the future with confidence.

"The Company has made a positive start to the new financial year."

Enquiries

Notes to editors

·; Pinewood Shepperton plc is Europe's largest provider of stage and studio space

·; The 30,000 sq ft Richard Attenborough Stage was officially opened on 23 April 2012

·; Pinewood, Shepperton and Teddington Studios together accommodate 34 stages, five dedicated digital television studios and five digital presentation studios

·; Pinewood Studios is home to Europe's leading studio-based underwater filming stage, as well as one of the largest exterior water tanks in Europe

·; Pinewood Studios has Europe's largest green screen

·; Pinewood and Shepperton Studios have been home to over 1,500 films in the last 75 years

·; Pinewood, Shepperton and Teddington Studios have hosted over 600 TV shows

·; The Studios offer digital network speeds of 10 Gb/s.

Forward looking statements

This announcement includes forward looking statements that are based on current expectations and assumptions. They involve risks and uncertainties and may differ, possibly materially, from actual results, performance and achievement. Neither the Company, nor any of its directors, undertakes any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

For more information

www.pinewoodgroup.com

Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website, nor any other website, is incorporated into, or forms part of this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not to acquire, continue to hold, or dispose of, securities in the Company.

Chairman's Statement

Pinewood Shepperton plc has once again delivered another strong performance with revenues of £63.0m for the fifteen month period ended 31 March 2012 (year to 31 December 2010: £43.4m). The Company has made a positive start to the new financial year. The Company has continued to invest in its facilities to ensure it remains the preferred destination for the screen based industries. A range of infrastructure projects have been completed or are under way to meet the ever increasing demands of its global customer base. These investments have included a £3.3m capital project for an electricity supply upgrade, a £0.5m new workshop facility and the new £5.6m 30,000 sq ft Richard Attenborough Stage officially named by Lord Puttnam on 23 April 2012. In addition, the Company announced on 29 February 2012 a transformational investment programme to expand its digital offering and HD television facilities.

The Company's international strategy has delivered positive growth. Our new markets in Canada, the Dominican Republic, Germany and Malaysia give the Company access to regions of the world where content production is expected to grow. The innovative water tank facility at Pinewood Indomina Studios in the Dominican Republic is expected to become operational during September 2012 and phase one of the Pinewood Iskandar Malaysia Studios is expected to open during May 2013.

In light of the level of exceptional costs incurred in the period, the Board has decided not to recommend a dividend in respect of the fifteen month period to 31 March 2012, resulting in nil interim dividends paid for the fifteen month period. The Board is committed to pay dividends in line with its dividend policy of not less than three times cover.

On 8 July 2011 the Recommended Cash Offer ("the Offer") by Peel Acquisitions (Pegasus) Limited ("Peel Acquisitions") for the Company closed. Peel Acquisitions is now the largest shareholder with 71.06% of the Company. Warren James Holdings Ltd is the second largest shareholder with 27.91% of the Company. Both major shareholders have independently stated their long-term support of the Company. Combined, these shareholdings represent nearly 99% of the share capital of the Company. Consequently, the Company wrote to the Financial Services Authority on 15 July 2011 to inform them that the Company no longer complies with the requirements of the UKLA's Listing Rules regarding the number of shares to be held in public hands. The Company announced on 27 April 2012 that it had received a Supervisory Notice from the FSA proposing to discontinue the listing of the Company's ordinary shares with effect from 31 May 2012, following a meeting by the Regulatory Decisions Committee (RDC) held on 26 April 2012. Subsequent to a submission made by the Company, the RDC has extended the proposed delisting date to 6 June 2012 to allow the Company to actively explore its options including a possible admission of its ordinary shares to trading on AIM. A further update will be made in due course.

During the period three Non-Executive Directors resigned from the Board: Adrian Burn, James Donald and Nigel Hall. Patrick Garner, Finance Director retired from the Company on 30 April 2012. I would like to record our thanks for their wise counsel over the years. We were delighted to welcome to the Board as Non-Executive Directors Peter Hosker, Neil Lees, Mark Senior and John Whittaker. Pinewood Shepperton's results for the period were achieved following major contributions by my fellow Directors and especially the staff. I thank them for their continued support.

Lord Grade of Yarmouth, CBE

Chairman

22 May 2012

Operating Review

Company Overview

Pinewood Shepperton plc has three complementary revenue streams - film, television and media park.

Film

Film revenues for the fifteen month period ended 31 March 2012 "the fifteen month period" were £44.9m (year to 31 December 2010: £29.1m).

The largest film production based at Pinewood Studios during the period was Dark Shadows (Warner Bros) and the largest production based at Shepperton Studios was Wrath of the Titans (Warner Bros). Productions which used the Company's facilities and services during the period included Prometheus (Fox), Anna Karenina (Working Title/Universal), Snow White and the Huntsman (Universal), The Hobbit: An Unexpected Journey (New Line Cinema and MGM) and Les Misérables (Working Title/Universal). The 23rd James Bond film Skyfall (Eon Productions/ MGM/Sony Pictures) commenced filming at Pinewood during the fifteen month period and is still in production.

The Company welcomed the announcement on 10 November 2011 that the Government has extended film tax relief until the end of 2015. This decision will deliver certainty for the UK's talented film makers and will provide a stable platform for growth, investment and jobs in a growing sector of the economy.

The European Commission published its Communication from the Commission on State Aid for Films and other Audiovisual Works on 14 March 2012. This second round of consultation invites comments on the new draft Communication. The deadline for comments is 14 June 2012. After reviewing the comments received, the Commission expects to adopt a revised Communication in the second half of 2012. The Company is coordinating its response to the Communication with the British Film Commission and the British Film Institute.

Digital Content Services (DCS) revenues for the fifteen month period were £8.0m (year to 31 December 2010: £5.8m).

DCS provides sound and picture post production, media storage, management and distribution for original English language and internationally re-versioned content. During the period a wide variety of creative and process-based services were delivered to film, television and video games clients. Notable sound post production work included completion of DNA's remake of Judge Dredd and for the first Pinewood-backed film, A Fantastic Fear of Everything, starring Simon Pegg. In addition, a complete service package - incorporating stages, sound and picture post production - was delivered to the BBC's light entertainment series The Magicians.International re-versioning of sound-tracks and the long-term agreement with Disney Character Voices International continues to perform well, as do growing relationships with many international major studios.The preservation and restoration of a number of significant archive features was completed during the period; such as Passport to Pimlico, The Titfield Thunderbolt, The Land That Time Forgot and 'The Who's' Tommy. 

DCS continues to enhance its offering to the growing number of feature films choosing to shoot with digital camera technology and television productions wishing to work in a digital file based environment at the Studios. This has been achieved by taking advantage of the investment in core networking infrastructure undertaken at the Studios over the last three years, which now allows network speeds of 10Gb/s. This, in conjunction with the Data Centre, Screening Services, Media Transfer Centre and additional high speed network services has led to increased demand from customers.

The Company welcomed the announcement on 21 March 2012 by the Chancellor of the Exchequer that the Government intends to introduce fiscal incentives for animation and video games. The Company is well placed to meet the additional demand and build on its growing presence in these two sectors of the creative industries.

Film Funding

Last year, the Company announced that it would, through Pinewood Films Limited ("Pinewood Films"), provide low risk, partial film funding to selected independent British films. The Company committed to jointly fund its first such project A Fantastic Fear of Everything (Keel Films/Pinewood Films) in July 2011 which will premier on 8 June 2012 and announced in September 2011 its second investment, Last Passenger (Pinewood Films/BFI/Pathe Pictures/Future Films).

Building on the success of Pinewood Films, the Company is currently in advanced discussions with an existing third party film fund. Should these discussions prove successful, this would result in the Company advising a multimillion pound film fund. A further update will be made in due course.

International

International revenues included in film, principally representing fees, for the fifteen month period were £1.2m (year to 31 December 2010: £0.6m).

Pinewood is an expanding global brand, delivering premium services around the world. Its international initiatives, currently in four regions, are progressing well. The Company continues to actively explore strategic opportunities in other regions of the world.

The Company has a sales and marketing agreement with "Pinewood Toronto Studios". During the fifteen month period, the Studios attracted a number of high profile film and television productions which included Mama (De Milo productions/Universal International), Pacific Rim (Legendary Pictures/Warner Bros) and Total Recall (Sony Pictures). The joint venture "Pinewood Studio Berlin Film Services" attracted its first film production Planet B Boy (Sony Screen Gems). Construction of "Pinewood Iskandar Malaysia Studios" has commenced and is expected to open in May 2013. Phase one will comprise five film and two television stages totalling 125,000 sq ft. It will be the largest purpose built facility in the territory. Construction of the water tank at "Pinewood Indomina Studios" in the Dominican Republic is expected to open in September 2012.

Television

Television revenues for the fifteen month period were £10.1m (year to 31 December 2010: £8.2m).

The Company has developed a leading television business which provides unique production facilities, often utilising its film stages and Digital Content Services to host and service large 'event' television productions.

Following a sustained period where the UK television market contracted, the market is now seeing growth in some genres. The Company is consolidating its television offering at Pinewood Studios and is investing significantly in its television business to increase its ability to provide a comprehensive range of production facilities to the TV community including HD studios, film stages and post production services to support every genre of television production. The Company believes this comprehensive range of facilities gives its business a competitive edge.

This investment complements the recently opened 30,000 sq ft Richard Attenborough television/film stage at Pinewood Studios.Pinewood and Teddington television studios played host to new and repeat business from Would I Lie To You (Zepperton), Keith Lemon's Lemonaid (talkbackTHAMES) and The Rob Brydon Show (talkbackTHAMES). During the fifteen month period, television productions such as Got To Dance (Princess Productions) and The Magicians (Shine) utilised large film stages at Shepperton Studios.

The Company welcomed the announcement on 21 March 2012 by the Chancellor of the Exchequer that the Government intends to introduce fiscal incentives for high-end filmed television drama. We await further details from HM Treasury.

Media Park

Media Park (including the Company's 50% interest in the Shepperton Studios Property Partnership) revenues for the fifteen month period were £8.0m (year to 31 December 2010: £6.2m).

The total number of Media Park companies accommodated during the fifteen month period remained stable at 276 while occupancy for the fifteen month period increased to 92% (year to 31 December 2010: 90%). The Company continued to rationalise and refurbish its stock of buildings available for both Media Park occupiers and productions.

Outlook

During the fifteen month period the Company saw rising demand for its facilities, especially in film. This level of demand has continued into the start of the current financial year and bodes well for the future.

On 16 May 2012, the Company announced that it is embarking on a consultation

on the future development of Pinewood Studios with local and national stakeholders and the producers and developers of creative content. Certainty as to its future development is critical to enable Pinewood Studios to plan for growth. Without major investment Pinewood Studios cannot remain globally competitive and respond to the changing needs and ever increasing demands of the screen and digital industries both at home and abroad.

The Company is responding well to the increasing demand for content both at its UK studios and abroad.

The Board looks forward to the future with confidence.

Ivan DunleavyChief Executive

22 May 2012

Financial Review

As a result of the change to its accounting reference date from 31 December to 31 March, the Company is delivering unaudited results for the fifteen months ended 31 March 2012 ("the fifteen month period").

The Board uses a number of key performance indicators ("KPIs") to monitor Company performance, as well as to measure progress against the Company's objectives. The Company's financial KPIs relate to revenue, profitability, return on capital employed, cash flow and net debt, all of which are discussed as part of the Financial Review.

Revenue

Total revenues for the fifteen month period were £63.0m (year to 31 December 2010: £43.4m).

Film revenues for the period were £44.9m (year to 31 December 2010: £29.1m), reflecting the Company's ongoing success in winning business in a buoyant but highly competitive international market. Included in film are international revenues for the fifteen month period of £1.2m (year to 31 December 2010: £0.6m). These revenues were earned from providing international sales, marketing and studio development services in Canada, the Dominican Republic and Malaysia.

Television revenues for the fifteen month period were £10.1m (year to 31 December 2010: £8.2m) reflecting the current television commissioning environment and competitive market conditions.

Included within film and television revenues are Digital Content Services which cover sound and picture post production, foreign language versioning, digitisation and archival services. Digital Content Services revenues for the fifteen month period were £8.0m (year to 31 December 2010: £5.8m).

Media Park revenues, inclusive of service, utility and facility charges for the fifteen month period were £8.0m (year to 31 December 2010: £6.2m). The fifteen month period included the Group's 50% interest in revenues from the Shepperton Studios Property Partnership of £0.8m (year to 31 December 2010: £0.9m).

Profit performance and earnings per share

Gross profit for the fifteen month period was £24.9m (year to 31 December 2010: £17.4m). Gross margin for the fifteen month period was 40% (year to 31 December 2010: 40%).

Operating profit before exceptional items for the fifteen month period was £13.2m (year to 31 December 2010: £9.1m). Operating profit before exceptional items for the fifteen month period was 21% (year to 31 December 2010: 21%) reflecting the production mix and increased operating costs.

EBITDA (earnings before exceptional items, interest, tax, depreciation and amortisation) for the fifteen month period was £17.9m (year to 31 December 2010: £12.8m).

Loss before tax, after exceptional items, for the fifteen month period was £1.9m (year to 31 December 2010: profit £5.8m).

Basic loss per share for the fifteen month period was 6.3p (year to 31 December 2010 earnings: 9.3p). Basic earnings per share after adjusting for exceptional items and the effects of the release of the provision for potential capital gains tax on properties for the fifteen month period was 14.6p (year to 31 December 2010: 8.0p).

Diluted loss per share for the fifteen month period was 6.3p (year to 31 December 2010 earnings: 8.9p). Diluted earnings per share after adjusting for exceptional items and the release of the provision for the potential capital gains tax on properties were 14.6p for the fifteen month period (year to 31 December 2010: 7.7p).

The weighted average number of shares in issue at 31 March 2012 was 46.9m (31 December 2010: 46.2m). At 31 March 2012 there are no shares potentially issuable as a result of employee share schemes and therefore the weighted average diluted number of shares was 46.9m (31 December 2010: 48.2m).

Return on capital employed

The Group measures return on capital employed by reference to operating profit before exceptional items, as a percentage of average capital employed, being total equity plus interest bearing loans and borrowings, which for the fifteen month period was 8.7% (year to 31 December 2010: 7.7%).

Adjusted consolidated income statement

The following table summarises the Group's consolidated income statement for the period identifying Underlying Operations and exceptional items being the write off of Project Pinewood costs, expenses incurred in relation to the Peel Offer, Group reorganisation costs and prior period VAT refunds. Profit before tax from Underlying Operations for the fifteen month period was £9.5m (year to 31 December 2010: £5.8m).

The Board considers that the presentation of an adjusted consolidated income statement provides a useful analysis of Underlying Operations for the fifteen month period. The adjustments for exceptional items are as follows:

Project Pinewood

The Company has provided as an exceptional charge £7.1m of Project Pinewood costs incurred over the five years to 31 December 2011 following the Secretary of State for Communities and Local Government's decision on 19 January 2012 to refuse planning permission for Project Pinewood.

Acquisition by Peel

The Company incurred exceptional costs of £2,400,000 in the period in relation to the acquisition of a majority shareholding in the Company by Peel Acquisitions and also incurred £1,268,000 of accelerated share based non-cash charges as a result of the Offer by Peel Acquisitions becoming unconditional on 21 June 2011.

Group reorganisation

The Company incurred exceptional reorganisation costs of £287,000 in relation to the restructuring of certain business areas during the fifteen month period.

VAT claim

The Group successfully agreed a VAT refund of £541,000 relating to prior periods. This benefit has been treated in the income statement as exceptional income.

Dividend

In light of the level of exceptional costs incurred in the period, the Board has decided not to recommend a dividend in respect of the fifteen month period to 31 March 2012, resulting in nil interim dividends paid for the fifteen month period (year to 31 December 2010: total dividends declared were 3.6p, fully paid). The Board is committed to pay dividends in line with its dividend policy of not less than three times cover.

Cash flow and net debt

The Company generated operating cash flow for the fifteen month period of £16.2m (year to 31 December 2010: £13.0m). After adjusting for movements in working capital, cash generated from operations for the fifteen month period was £16.1m (year to 31 December 2010: £17.6m), from which finance costs of £4.1m (year to 31 December 2010: £3.0m) and corporation tax of £3.0m (year to 31 December 2010: £1.9m) were paid.

Cash outflow on capital expenditure during the fifteen month period was £16.2m (year to 31 December 2010: £6.7m). The main items of expenditure during the period were: life cycle expenditure £3.7m, power upgrade costs of £1.8m, Project Pinewood costs of £2.2m, new stage construction costs of £5.6m and infrastructure works of £2.9m.

Following the cash outflow on capital expenditure during the fifteen month period net debt at 31 March 2012 increased to £50.4m (31 December 2010: £42.7m) which included £12.0m (31 December 2010: £12.0m) relating to the Company's 50% interest in the non-recourse Aviva loan to the Shepperton Studios Property Partnership ("SSPP").

One of the pre-conditions of the Offer by Peel Acquisitions for Pinewood Shepperton plc was that the current banking facilities remained in place to August 2013. The Board was required to agree a waiver of a change of control clause within the banking documentation. The variations to the banking documentation required the Company to pay a fee to the banks of £235,000 which has been included in exceptional costs. In addition, there has been an increase in the margin by 25 basis points which took effect from 12 July 2011. The Board also cancelled £18.0m of the undrawn pre-let development facility.

The Company's amended banking facilities of £52m, following the successful offer for the Company by Peel Acquisitions, comprise a £40.5m revolving credit facility, a £6.5m pre-let development facility and a £5m overdraft facility, all of which are secured by a floating charge over the Group's assets.

The revolving and pre-let development facilities contain no scheduled payments and mature in August 2013. The Company is currently well progressed with its negotiations to renew its banking facilities. The £5m overdraft facility is also available until August 2013 and is subject to annual reviews. As at 31 March 2012, £30.5m (31 December 2010: £22.5m) of the revolving credit facility and £6.5m (31 December 2010: £6.0m) of the pre-let development facility were drawn. The overdraft facility was undrawn at 31 March 2012 and undrawn at 31 December 2010. There are a range of covenants relating to the revolving credit facility, pre-let facility and overdraft facility. The Company was covenant compliant with adequate headroom on all covenants at 31 March 2012.

In addition to the £52m banking facilities, there are non-recourse facilities provided to SSPP by the Company's joint venture partner Aviva which total £40m, of which £24m was drawn at 31 March 2012. This loan, which is 50% consolidated at £12m (31 December 2010: £12m) is included in the Group's statement of financial position. These facilities, which are available until 2026, are covenant free with no scheduled repayments.

Investment property

Investment property is recognised in accordance with IAS 40 as a category within assets in the Company's statement of financial position. At 31 March 2012, investment property was recorded at the carrying cost of £6.2m (31 December 2010: £6.4m). This compares to the Director's assessment of the fair value of £7.3m (31 December 2010: £7.1m).

Capital commitments 

The Company had capital commitments of £2.5m at 31 March 2012 (31 December 2010: £2.3m).

Financial gearing

At 31 March 2012, net debt including the Group's share of the SSPP non-recourse drawn loan was £50.4m (31 December 2010: £42.7m). Financial gearing at 31 March 2012 excluding fair value and loan issue costs was 68.3% (31 December 2010: 55.8%).

Finance costs and hedging

Net finance costs for the fifteen month period were £4.6m (year to 31 December 2010: £3.3m). The Company has at its disposal undrawn facilities for which it pays non-utilisation fees as a percentage of the margin. Net finance costs were covered 2.9 times by operating profit before exceptional items for the fifteen month period (year to 31 December 2010: 2.8 times). The Company continued to use interest rate derivatives to manage interest rate exposure.

The Company has a £7.5m hedge with an effective rate of 2.89% plus a variable margin that was entered into in April 2009 and expires in July 2013. The Company also has a £15m hedge with an effective rate of 5.195% plus a variable margin that was entered into in October 2009 and expires in July 2013.

At 31 March 2012, £22.5m (31 December 2010: £22.5m) of the Company's facilities were under interest rate swaps and £1.3m (31 December 2010: £1.8m) under a fixed interest rate asset financing facility.

At 31 March 2012, 48% (31 December 2010: 57%) of the Company's borrowings were at a fixed rate of interest. The Group is currently negotiating to renew its banking facilities and reviewing appropriate hedging in line with the Group's policy. The Board regularly reviews the hedging arrangements to manage interest rate exposure.

Taxation

The current corporation tax expense for the fifteen month period, based on adjusted profit before tax of £9.5m, was £2.1m, a current adjusted tax rate of 22% (year to 31 December 2010: 35%).

The current corporation tax expense for the fifteen month period, based on loss before tax of £1.9m, was £1.4m, a current adjusted tax rate of (73%) (year to 31 December 2010: 35%).

Going concern

In assessing the going concern basis, the Directors considered the Company's business activities, the financial position of the Company and the Company's financial risk management objectives and policies as described above. The Directors considered that the Company has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing these financial statements.

Ivan Dunleavy

Chief Executive

22 May 2012

Key business risks

The Board views effective risk management as a primary part of the Group's wider strategy and is fully committed to the identification, evaluation and management of significant risks facing the Group. The table below outlines the key risks and uncertainties identified by the Board together with an outline of mitigation activities.

1. General risks

2. Financial risks

3. Operational risks

The Business review contains forward-looking statements that are made by the Directors in good faith. This information is based on the view of the Board of Directors at the date of approval of this Annual Report and based on knowledge and information at that time together with what are considered to be reasonable judgements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors outside of the Group's control which could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including factors outside of the Group's control. Any forward-looking statements speak only as of the date that they are made, and the Group gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes to events, conditions or circumstances on which any such statement is based.

Unaudited condensed Group income statement for the fifteen month period ended 31 March 2012 and year ended 31 December 2010

Unaudited condensed Group statement of other comprehensive income for the fifteen month period ended 31 March 2012 and year ended 31 December 2010

Unaudited condensed Group statement of financial position at 31 March 2012 and 31 December 2010

Unaudited condensed Group statement of cash flows for the fifteen month period ended 31 March 2012 and year ended 31 December 2010

Unaudited condensed Group reconciliation of movement in net debt for the fifteen month period ended 31 March 2012 and year ended 31 December 2010

Unaudited condensed Group statement of changes in equity

From 1 January 2011 to 31 March 2012

From 1 January 2010 to 31 December 2010

Publication of non-statutory accounts

The group's financial statements for the fifteen month period ended 31 March 2012 will be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the EU.

Whilst the financial information included in this preliminary announcement has been computed in accordance with IFRS this announcement does not itself contain sufficient information to comply with IFRS. The company expects to publish full financial statements that comply with IFRS by 31 May 2012.

The accounting policies adopted in the preparation of the condensed consolidated financial statements are consistent with those disclosed in the annual report & accounts for the year ended 31 December 2010.

Forward-looking statements

The business review contains forward-looking statements that are made by the Directors in good faith. This information is based on the view of the Board of Directors at the date of approval of this Annual Report and based on knowledge and information at that time together with what are considered to be reasonable judgements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors outside of the Group's control which could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including factors outside of the Group's control. Any forward-looking statements speak only as of the date that they are made, and the Group gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes to events, conditions or circumstances on which any such statement is based.

1. Basis of preparation and statement of compliance

The consolidated financial statements of Pinewood Shepperton plc and all of its subsidiaries and joint ventures will be prepared in accordance with IFRS as adopted by the European Union as they apply to the financial statements of the Group for the fifteen month period ended 31 March 2012 and applied in accordance with the Companies Act 2006.

The accounting policies which follow set out those policies which apply in preparing the financial statements for the fifteen month period ended 31 March 2012. The Group financial statements are presented in UK sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

Going concern

The Group's business activities, together with the key business risks that may impact its future development, performance and position are within the following sections: Operating review, Financial review and Key business risks. The review covers the financial position of the Group and its cash flows, liquidity position and borrowing facilities.

The Group has primary banking facilities and an overdraft facility in place until August 2013, the overdraft is subject to an annual review. In addition, the Shepperton Studios Property Partnership joint venture partnership with Aviva has a non-recourse facility in place until 2026. The Group also has a strong brand and reputation in the marketplace with a wide number of customers and suppliers in the film and television industry. As a consequence, the Directors believe that the Group is well placed to manage its business risks and operations successfully despite the current economic environment.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements, as there are no material uncertainties related to events or conditions that may cast significant doubt on the ability of the Group to continue as a going concern. The going concern assessment has been prepared in accordance with 'Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009', published by the Financial Reporting Council in 2009.

Basis of consolidation

The Group consolidated financial statements comprise the financial statements of Pinewood Shepperton plc and its subsidiaries and joint ventures as at 31 March 2012 and 31 December 2010. All intercompany balances and transactions have been eliminated in full.

Subsidiaries and joint ventures are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where there is a loss of control of a subsidiary or joint venture, the consolidated financial statements include the results for the part of the reporting year during which Pinewood Shepperton plc has control.

2. Changes in accounting policy and disclosures

The accounting policies adopted are consistent with those of the previous financial year.

3. Segment information and revenue analysis

The chief operating decision maker is the Board of Directors. The Group operates in one principal continuing area of activity, that of media services, primarily arising in the United Kingdom. It provides studio and related services to the film and television and wider creative industries.

Revenues from these activities can be further analysed by type of customer as follows:

Other information provided to the Board of Directors is in a format consistent with that in the financial statements.

Information about major customers

Revenue from two customers, operating through several separate subsidiaries, of £8.8m and £7.4m (year to 31 December 2010: two customers of £12.1m and £5.0m) was recognised in the fifteen month period.

4. Exceptional income

Exceptional income was £541,000 for the fifteen months (year to 31 December 2010: £632,000) and consists of:

VAT claim

The Group successfully agreed VAT refunds for the fifteen month period of £541,000 relating to prior periods (year to 31 December 2010: £nil). This benefit has been treated in the income statement as exceptional.

Rates rebate

During the year ended 31 December 2010 the Group successfully negotiated an exceptional business rates rebate of £506,000 relating to prior years. No rates rebates were received in the fifteen month period to 31 March 2012.

Share-based payment

During the year ended 31 December 2010 £126,000 of IFRS 2 charges, relating to prior years, were reversed to the Group income statement as an exceptional credit. No IFRS 2 charges were reversed in the fifteen month period to 31 March 2012.

5. Exceptional costs

Exceptional costs for the fifteen month period were £11,025,000 (year to 31 December 2010: £579,000) and consist of:

Project Pinewood

The Company has expensed as exceptional cost £7,070,000 (year to 31 December 2010: £nil)of Project Pinewood costs following the Secretary of State's decision on 20 January 2012 to refuse planning permission for Project Pinewood, previously capitalised within Property, Plant and Equipment in the Group Statement of Financial Position.

Acquisition by Peel

The Group incurred exceptional costs of £2,400,000 (year to 31 December 2010: £nil) relating to bid defence costs incurred in relation to the acquisition of a majority shareholding in the Company by Peel Acquisitions.

Accelerated share option costs due to the acquisition by Peel Acquisitions

The Group also incurred share option costs of £1,268,000 (year to 31 December 2010: £nil) of accelerated share based charges as a result of the acquisition of a majority shareholding in the Company by Peel Acquisitions becoming unconditional on 21 June 2011.

Group reorganisation

The Group incurred exceptional reorganisation costs in relation to the restructuring of certain business areas of £287,000 (year to 31 December 2010: £386,000).

International ventures

During the year ended 31 December 2010 the Group incurred exceptional start up costs of £193,000 in relation to the commencement of certain international ventures. No costs were incurred in the fifteen month period to 31 March 2012.

6. Taxation

(a) The major components of corporation tax expense are:

(b) Reconciliation of the total tax charge

A reconciliation between tax expense and the product of accounting profit multiplied by the standard rate of corporation tax in the UK for the fifteen month period ended 31 March 2012 and year ended 31 December 2010 is as follows:

6. Taxation continued

(c) Deferred tax

Deferred tax relates to the following:

Deferred tax in the income statement

 (d) Potential deferred tax assets unrecognised

A potential deferred tax asset of £138,435 (31 December 2010: £143,760) in respect of £4,307 (31 December 2010: £4,307) non-trading losses and £501,376 (31 December 2010: £501,376) capital losses in Pinewood-Shepperton Studios Limited and £26,760 (31 December 2010: £26,760) trading losses in Teddington Studios Limited has not been recognised as it is not anticipated that suitable gains will arise to enable the reversal of these temporary differences.

7. Earnings per ordinary share and dividend

Earnings per ordinary share

Basic earnings per ordinary share are calculated by dividing profit for the period attributable to the holders of ordinary equity of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per ordinary share are calculated by dividing profit for the period attributable to the holders of ordinary equity of the parent by the weighted average number of ordinary shares outstanding during the period adjusted for the effects of the dilution of potential ordinary shares resulting from employee share schemes.

The Group presents as exceptional items on the face of the income statement those items where the cost or income is of such size or incidence that the additional disclosure is required for the reader to understand the financial statements.

Basic and diluted earnings per share are also presented adjusting for the combined effect of the exceptional items and the effects of the release of deferred tax provision on property assets.

The following reflects the profit and number of shares used in the basic and diluted earnings per ordinary share computations:

7. Earnings per ordinary share and dividend continued

Dividend paid

The Board is recommending no final dividend for approval at the Annual General Meeting and, based on the shares in issue at the date the Board approved the Group financial statements, this would amount to a total dividend payment of nil.

8. Property, plant and equipment

Assets under construction at 31 March 2012 primarily relate to building refurbishment and infrastructure cost. These are not depreciated in this period.

8. Property, plant and equipment continued

The Group's long-term loan is secured by a floating charge over the Group's assets.

Shepperton Studios Property Partnership's ("SSPP") long leasehold interest in the Shepperton Studios site was valued at £37,065,000 by an independent firm of Chartered Surveyors in March 2012 (31 December 2010: £35,730,000). The Group carries its 50% interest in the property, plant and equipment of SSPP at £19,805,000 (31 December 2010: £20,168,000) being depreciated cost.

9. Share capital and reserves

Authorised

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the general meetings of the Company.

Share option schemes

The Company had one share-based payment plan under which options to subscribe for the Company's shares have been granted. As a result of the Offer by Peel Acquisitions becoming unconditional on 21 June 2011, 155,785 shares were issued on 8 July 2011 under this scheme and the scheme closed.

Long-term incentive plan

The Company had a long-term incentive plan under which awards for the Company's shares have been granted to certain executives and senior employees. As a result of the Offer by Peel Acquisitions becoming unconditional on 21 June 2011, 860,892 shares were issued on 21 June 2011 and 8 July 2011 under this scheme and the scheme closed.

Nature and purpose of reserve

Reserve for own shares

Included within the cash capital account are the costs of Pinewood Shepperton plc shares purchased in the market and held by the Pinewood Shepperton plc Employee Benefit Trust to satisfy future exercise of awards under the Company share option scheme. As at 31 March 2012 the Company held none (31 December 2010: 127,100) of its own shares at an average cost of nil per share (31 December 2010: 10p per share). As a result of the recommended cash offer by Peel Acquisitions

9. Share capital and reserves continued

becoming unconditional on 21 June 2011, 127,100 shares were used to satisfy the exercise of awards under the Company share option scheme. 

Share premium reserve

The share premium increased by £155,000 (31 December 2010: nil) in the fifteen month period ended 31 March 2012 as a result of the shares issued under the share option scheme noted in the table above.

Capital redemption reserve

The capital redemption reserve arose as a result of the repurchase of shares in 2001.

Merger reserve

On acquiring Shepperton Studios Limited the Company issued ordinary shares as part of the consideration. Merger relief was taken in accordance with Section 131 of the Companies Act 1985 (since succeeded by Section 612 of the Companies Act 2006), 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 instruments used by the Group to manage interest rate risk. The cash flow hedges are determined to be effective hedges.

10. Interest-bearing loans and borrowings

Banking facilities

One of the pre-conditions of the Offer by Peel Acquisitions for Pinewood Shepperton plc was that the current banking facilities remained in place to August 2013. The Board was required to agree a waiver of a change of control clause within the banking documentation. The variations to the banking documentation required the Company to pay a fee to the banks of £235,000 which has been included in exceptional costs. In addition, there has been an increase in the

10. Interest-bearing loans and borrowings continued

margin by 25 basis points which took effect from 12 July 2011. The Board also cancelled £18.0m of the undrawn pre-let development facility.

The Group has agreements with a syndicate of banks, which provides facilities as follows:

Overdraft

A £5,000,000 (31 December 2010: £5,000,000) overdraft facility to support the future operating activities of the business, secured by a floating charge over the Group's assets. This facility is in place until August 2013 and is subject to annual review with interest charged at 225 basis points over bank base rate.

Revolving credit facility

A revolving credit facility of up to £40,500,000 to support the operating activities of the business, secured by a floating charge over the Group's assets. Interest is charged at LIBOR plus a variable margin of between 200 and 335 basis points based on specific covenant levels. This facility is in place until August 2013.

Pre-let development facility

A pre-let development facility of up to £6,500,000 to support the pre-let Media Park development strategy. Interest is charged at LIBOR plus a variable margin of between 200 and 250 basis points based on the status of the pre-let development. This facility is in place until August 2013.

The banking facilities become repayable on demand following a change of control in the Group if the Group and the syndicate of banks' agent are unable to agree alternative terms within thirty days of the Group's notification of a change of control.

The overdraft, revolving credit facility and pre-let development facility are secured by a floating charge over the principal assets of the Group, other than those secured by a fixed charge by Shepperton Studios Property Partnership.

Covenants

The banking agreements contain a range of covenants appropriate for the revolving credit facility, pre-let development facility and overdraft facility. The Group was covenant compliant at 31 March 2012.

Cash flow hedge

At 31 March 2012, the Group held interest rate swaps designated as hedges against drawn debt obligations amounting to £22,500,000 (31 December 2010: £22,500,000).

Asset financing facility

The asset financing facility is a sterling chattel mortgage facility over a fixed term with fixed monthly payments and is secured over identifiable assets of an equal value. These assets are classified as 'Fixtures, fittings and equipment' within 'Property, plant and equipment' in the statement of financial position.

Share of joint venture loan

This relates to the Group's 50% interest, £12,002,000 (31 December 2010: £12,002,000) of the joint venture's £24,004,000 investor and development loan (31 December 2010: £24,004,000). These loans which have no financial covenants attached to them are secured by a fixed charge on the assets of Shepperton Studios Property Partnership, are non-recourse to the Group and are repayable in full on 30 September 2026. Interest on the loans is at base rate plus 2% with an interest rate floor of 6.5%. The interest rate floor is an embedded derivative in the loan agreement; however the derivative has not been separated from the loan agreement as it satisfies the criteria for non-separation in IAS 39.

10. Interest-bearing loans and borrowings continued

Borrowing facilities

The available but undrawn committed facilities are as follows:

31 March 2012

10. Interest-bearing loans and borrowings continued

Borrowing facilities

31 December 2010

11. Related party disclosures

The consolidated financial statements include the financial statements of Pinewood Shepperton plc, its subsidiaries and its 50% interest in the joint ventures listed in the following table.