Zinc Media Regulatory News (ZIN)

14 Dec 2007 07:00

Ten Alps PLC14 December 2007 14 December 2007 Ten Alps Plc ('Ten Alps' or the 'Group') Interim Results Ten Alps Plc, the factual media company, announces its IFRS interim results forthe period ended September 30, 2007. Half-year results are on track, current trading is strong and the full year isset to meet expectations. The Group was founded by Alex Connock and Bob Geldof in 1999 and has sincedeveloped into one of the first integrated media businesses - offeringspecialist factual content across Online, TV, B2B Print and Events. Ten Alps now has 650 staff, 61,000 clients and annualized revenues above £75m. Ayear of internal development spending has concluded with successful delivery offast-growing ventures in online TV. Financial highlights • Turnover £37.6m, up 11.9% (2006: £33.6m) • EBITDA £2.33m, up 3.1% (2006: £2.26m) • EBITA at £1.97m, up 3.1% (2006: £1.91m) • Adjusted basic EPS up 30.1% at 2.55p (2006: 1.95p) and adjusted diluted EPS up 31% to 2.49p (2006: 1.90p) • Online and development expenditure of £700,000 • Pre-tax profit £1.5m (2006: £1.61m) following reassessment of intangibles • Cash £10.8m (2006: £13.2m) reflecting three acquisitions, and later payment of September public sector client invoices. • Trade receivables increased 52.3% from £10.7m in 2006 to £16.3m in 2007. Operational highlights 2007 2006 % Change 2007 Gross 2006 % Change Income Income Profit Gross Profit Communications £24.7m £18.7m 32.1% £7.7m £6.0m 28.3%Broadcast £12.9m £14.9m (13.4)% £2.9m £3.6m (19.4)% Communications Division • Consolidated position within UK Trade Print Media, increasing publications to 630 across all sectors, including new work for The British Chamber of Commerce, Mercedes Benz and the PGA. • Now producing 65 events annually, including new owned events in the legal, transport and public sector markets. • Good progress in commercial online TV, and contribution is now generated across 100 websites and 270 online publications. • Completed three acquisitions since announcement of last results: DBDA (corporate responsibility content - mostly web), Mongoose Media (specialist advertising sales) and MMA (online video advertising production.) Broadcast Division • Financial performance weighted towards second half, with robust UK and Irish slates in place • Market leader in public sector Online TV with successfully-launched Kent TV, a pioneering online TV channel funded by Kent County Council, and Ten Alps currently in discussion with a number of other local authorities • Continued audience growth and online expansion of Teachers TV • Ten Alps production Companies produced leading programmes including the " The Last Days of Tony Blair", "Gordon Brown - Fit for Office?" and a number of investigative "Dispatches" for Channel 4 Commenting on the Results, Alex Connock, Chief Executive of Ten Alps, said: "Our financial performance in the first half was on track, given that ourearnings are now second half weighted. Our investment added an online video advertising production capacity which isattractive to existing commercial clients, alongside further expansion in ourPrint and Event portfolios. Our current trading is strong and we are on track to meet market expectationsfor the full year." For further information, please contact:Ten Alps plcAlex Connock, CEO Tel: +44 (0) 20 7878 2311 Nitil Patel FD c/o Moira McManus www.tenalps.com Collins Stewart, Nominated AdviserChris Wells / Mark Connelly Tel: +44 (0) 20 7523 8350 www.collins-stewart.com Media enquiries:Pelham, Financial PRAlex Walters/ Hugh Barker Tel: +44 (0) 20 7743 6670 www.pelhampr.com Chief Executive's Statement After our successful first half, the growth strategy is to build our twodivisions - Communications and Broadcast - organically, through cross-sellingand by acquisition. The Communications division offers integrated, commercially-funded B2B content -Online, Print and Events - enabling us to cross-sell to our 61,000 existingclients and market a "one stop shop" to potential customers. Our specialist titles become trade events and then online video on our Public TVchannels, producing online advertising and production revenues. Meanwhile ouronline video advertising production unit, Ten Alps DFD, launched in November2007 and is already generating revenue from our current client base. The Broadcast division covers the production of publicly and broadcaster-fundedOnline TV and TV output. Kent TV and Teachers TV (in which the group has a management and independentprogramme making role) have proven the case for publicly-funded specialistonline and digital TV channels on a contract publishing model, formerly knownonly in print. And in terrestrial TV our companies continue to producecutting-edge factual TV, from Dispatches investigations on Channel 4, todocumentaries and factual entertainment for the BBC, BSkyB and Discovery. We have grown fast, and our model of production, sale and distribution infactual output remains scaleable. We are now one of the UK's largest contractpublishing businesses, and one of the UK's top factual TV producers, but ourcore offer is in the fast-growing space between the two. Second half of the 2007-8 financial year We are on target to achieve full-year market expectations Our publishing businesses are now more second half-weighted, due to the fourmost recent acquisitions publishing the bulk of their annual titles in periodOctober to March. (This was highlighted in February 2007 when we boughtAtalink.) Their sales remain on target. TV projects have occurred principally in the second half this year. Ourmulti-platform approach in building a factual media company paid the obviousdividend of insulating Ten Alps from an extremely unsettled commissioning periodin the TV production sector. Operational review The group was this period operationally reorganised into two divisions:Communications, headed by Adrian Dunleavy; and Broadcast headed by Nitil Patel(who is also Group Finance Director.) Both divisions are heavily engaged inonline production. Communications Division Revenues from this division for the first half were £24.7m (2006: £18.7m), up32.1% and accounting for 67% of group sales. Gross profit increased to £7.7m(2006: £6.0m). Print and events Acquisitions and new business drove growth in print publishing by 24% in theperiod. Output grew to an annualised 630 print titles, with new publishingclients including British Chamber of Commerce, The Association Of IndependentFinancial Advisers, the Society Of Chemical Industries, Axa and NatMags and newadvertising sales contracts with the Professional Golf Association and MercedesMagazine. Events revenues grew by 29% on the back of client wins including BP, BWEA, ITVand Dr Martens and the continued roll out of owned trade events includingInnovation In Public Services, Criminal Justice 2007, Integrated Transport 2007and Public Sector Project Management. Commercial online TV and websites The above growth from traditional markets provides a strong platform from whichto drive web business and entry into the commercial online TV market. Revenuesincreased by 259% in the period. Online activities are now trading profitably with web production for the likesof the Road Haulage Association, BP and the British Veterinary Association andcommercial web sales for client sites such as Private Eye, Visit London, theBritish Computer Society and the Royal Aeronautical Society. So far 270publications have been brought on line resulting in high margin sales revenues. The push into online TV revenue generation saw traditional advertising sales onTen Alps 14 Public TV channels bolstered by the launch of the Ten Alps DFD unitto take on the expanding market for online video production. Corporate social responsibility and communications content This is an exciting growth area - encompassing websites, print, video contentand even a year-long theatrical road-show to primary schools across London.Production increased 42.8% in the period, driven by the acquisition of DBDA -the specialist corporate social responsibility communications business, withclients such as BMW, Nationwide, Transport for London and the ScottishExecutive. Broadcast Division Whilst the first half was weak we are now expecting a significant upturn for thelatter part of the financial year. Revenues to September 30 from this divisionwere £12.9m (2006: £14.9m), down 13.4% with a corresponding drop in gross profitto £2.9m (2006: £3.6m). We have seen such fluctuations every year, and continue to invest indevelopment, focussing on high margin factual formats business and new producerappointments. TV and Radio Through its Broadcast Division, Ten Alps produces factual TV and Radio programmes for broadcast and digital markets in the UK, Europe and US. In the period, as well as substantial radio programming and Teachers' TVcontent, Ten Alps' production companies Blakeway and Brook Lapping producedGolden Girls, several investigative ' Dispatches for Channel 4', 'The Last Daysof Tony Blair, 'Gordon Brown: Fit For Office?' East Midlands Politics Show,Visionaries and Top Dog. Publicly-funded Online TV This period saw the successful launch of Kent TV (www.kenttv.com), a pioneeringinnovation fully funded by Kent County Council. Ten Alps is already indiscussion about possible rollout of similar services with some of its existing216 local authority clients. Funded development of on online TV projects suchas the Peace Channel, continues. Growth prospects in 2008-9 The current Teachers TV contract runs to August 2008. The follow-on contract isin a tender process. Ten Alps has, via its subsidiary Brook Lapping, submittedwhat we believe to be a high quality bid, in partnership with ITN, Espresso and4Learning. Based on the schedule attached to the tender, we believe the resultof the tender process should be known around the middle of February 2008. Ten Alps has structured its recent acquisitions to facilitate year-on-yeargrowth in 2008-9 regardless of market conditions. The full-year effects of themost recent deals will only be seen next year. Both the Communication and Broadcast Divisions are well placed to achieve strongorganic growth. The success of Kent TV offers a number of opportunities in thisarea and within the Communications Division we will focus on developing ouronline video and web services. We have launched our online video advertisingunit through the acquisition of MMA. This opens a large, untapped B2B market,and we aim to build our own national brand in the field. This is the singlebiggest growth opportunity available to Ten Alps at present. Our current acquisition focus is in the developing UK online video market andthe consolidation of specialist factual media businesses. Financial Review - Finance Director, Nitil Patel The six month period to 30 September 2007 was again a period of investment andprofitable stability. Group turnover grew by 11.9% to £37.6m (2006: £33.6m) and the gross profitincreased by 10.5% to £10.6m (2006: £9.6m) signifying that we were able tocontinue delivering profitable growth. Gross margin has remained constant at 28.2% compared to 28.4% in same periodlast year. Administrative expenses have also remained constant as a percentageand now represent 23.1% of turnover (2006: 23.1%). This year's addition of theacquisitions has meant that the Group's revenues and gross margin are now moreweighted towards the second half of the year. EBITDA or headline profit, a key measure used by the board, increased by 3.1% to£2.33m (2006: £2.26m) even after continued high level of investment, relating inparticular to the Ten Alps Digital, Public TV and Ten Alps Drama. Thesedevelopment costs were written off directly to the profit and loss account. EBITwas down to £1.8m (2006: £1.9m) reflecting the major change arising from theadoption of IFRS as described below. As we converted from UK GAAP to IFRS, the Group recognised various categories ofintangibles from goodwill to customer relationships to publishing titles, whichare subject to impairment reviews for goodwill and amortisation for otherintangibles. The Group has adopted the following amortisation rates: Customer Relations - 8 yearsPublishing Titles - 3 years The charge for the period under IFRS was £168,000 (2006: £Nil) whilst under UKGAAP the charge would have been £283,000 (2006: £283,000). Profit before tax was marginally down at £1.5m (2006: £1.6m), reflecting a netinterest charge of £(305,000) (2006: £300,000) on the £12.05m debt outstandingas at 30 September 2007. The retained distributable profit and loss account reserves are now at £4.2m(2006: £2.2m). The tax charge for the period is £202,000 (2006: £500,000) reflecting overaccrual in the previous year and the impact of deferred tax under IFRS. Weexpect to pay the statutory rate of 28% in future periods. The Group continues to maintain a healthy cash balance and held £10.8m as atSeptember 2007(2006: £13.2m). The balance is £3.6m lower than as at the lastfinancial year end, reflecting cash outflows on acquisitions and an increase intrade receivables from £11.2m in March 2007 to £16.3m in September 2007 arisingfrom a late payment of September public sector invoices. The Group has provided for deferred consideration of £2.4m (2006: £1.9m) on thebalance sheet which relates to earnout payments due to be made in relation toMongoose Media, DBDA and McMillan Scott within the next year. As at the period end the Group had outstanding bank loans of £12.05m (2006:£9.35m) of which £8.8m (2006: £7.35m) is due after more than one year. The Groupalso had outstanding media loans of £274,000 at the period end (2006: £346,000) Earnings per share Basic earnings per share in the six months were 2.20p (2006: 1.93p) and wascalculated on the profits after taxation of £1.15m (2006: £999,000) divided bythe weighted average number of shares in issue during the period being52,157,080 (2006: 51,830,413). The number of shares has increased due toemployees enacting share options during the period. Diluted basic earnings per share in the year was 2.16p (2006: 1.88p) and isbased on the basic earnings per share calculation above, except that theweighted average number of shares includes all dilutive share options granted asif those options had been exercised on the first day of the accounting year orthe date of the grant, if later. This gives a weighted average number of shares in issue of 53,247,229 (2006:53,201,551) reflecting the impact of the outstanding share options as at 30September 2007. International Financial Reporting Standards ('IFRS') As mentioned previously the Group is reporting for the first time under IFRS andfull reconciliations between UK GAAP and IFRS are provided for in the notes tothe condensed financial statements. The Group alone reports under IFRS and haselected for all its subsidiaries to report under UK GAAP. Ten Alps Plc Condensed Consolidated Interim Financial statements for the period ended 30September 2007 Condensed consolidated interim income statement 6 months to 6 months Year to 30 September 30 September 31 March 2007 2006 2007 (Unaudited) (Unaudited) (Unaudited) Notes £'000's £'000's £'000's Revenue 37,566 33,578 69,045Operating costs before amortisation of (65,875)intangible assets (35,599) (31,667)Earnings before interest, tax andamortisation (EBITA) 1,967 1,911 3,170Amortisation of intangible assets (168) - (17)Total operating costs (35,767) (31,667) (65,892)Operating profit 1,799 1,911 3,153Finance costs 5 (410) (300) (684)Finance income 5 105 - 281Profit before tax 1,494 1,611 2,750Taxation 6 (202) (500) (740)Profit for the period 1,292 1,111 2,010Attributable to:Equity holders of the parent 1,150 999 1,801Minority interest 142 112 209Retained profit for the year 1,292 1,111 2,010 Basic earnings per share 11 3.47 2.20 p 1.93 p pDiluted earnings per share 11 3.40 2.16 p 1.88 p p Ten Alps Plc Condensed Consolidated Interim Financial statements for the period ended 30September 2007 Condensed consolidated interim balance sheet 30 September 30 September 31 March 2007 2006 2007 (Unaudited) (Unaudited) (Unaudited) Note £ '000 £ '000 £ '000AssetsNon-currentGoodwill 8 18,766 15,455 16,210Other intangible assets 8 3,903 - 1,444Property, plant and equipment 1,744 1,583 1,650Deferred tax - 958 255 24,413 17,996 19,559Current assetsInventories 3,586 2,190 2,762Trade and other receivables 16,300 10,698 11,194Cash and cash equivalents 10,812 13,183 14,368 30,698 26,071 28,324LiabilitiesCurrent liabilitiesTrade and other payables (23,337) (17,690) (21,908)Current tax liabilities (622) (695) (414)Borrowings 9 (3,524) (2,076) (1,028)Financial liabilities (85) (16) (59)Provisions 10 (2,362) (1,870) (395) (29,930) (22,347) (23,804)Net current assets 768 3,724 4,520Non-current liabilitiesBorrowings 9 (8,800) (7,620) (9,420)Financial liabilities - (57) (52)Deferred tax (463) - -Other non-current liabilities (235) (319) (235) (9,498) (7,996) (9,707)Net assets 15,683 13,724 14,372Capital and reservesCalled up share capital 1,042 1,037 1,041Share premium account 7,198 7,154 7,190Merger reserve 2,930 2,930 2,930Retained earnings 4,161 2,190 3,001Total attributable to equity shareholdersof parent 15,331 13,311 14,162Minority interest 352 413 210Total equity 15,683 13,724 14,372 Ten Alps Plc Condensed Consolidated Interim Financial statements for the period ended 30September 2007 Condensed consolidated interim cash flow statement 6 months to 6 months to Year to 30 September 30 September 31 March 2007 2006 2007 (Unaudited) (Unaudited) (Unaudited) £ '000 £ '000 £ '000Operating activitiesReconciliation of profit to operating cash flowsProfit for the period 2,010 1,292 1,111Add back:Taxation 202 500 740Depreciation 360 354 685Amortisation 168 - 17Finance costs 410 300 684Finance income (105) - (281)FRS 20 share based payment charge 10 14 23(Loss)/profit on sale of fixed assets (4) (2) 2Foreign exchange loss on media loans 10 (11) 5 2,343 2,266 3,885(Increase)/decrease in work in progress (373) 472 590(Increase)/decrease in trade and other receivables (4,166) 1,623 2,632Decrease in trade and other creditors (428) (2,324) (2,168)Cash (used in)/generated from operations (2,624) 2,037 4,939Interest received 105 - 281Interest paid (410) (300) (684)Tax paid (137) (390) (712)Net cash flows (used in)/from operationsactivities (3,066) 1,347 3,824Investing activitiesAcquisition of subsidiary undertakings, net ofcash and overdrafts acquired (1,943) (38) (1,430)Payment of deferred consideration - (1,075) (1,075)Purchase of property, plant and equipment (460) (326) (746)Proceeds of sale of property, plant and equipment 64 - 21Net cash flows used in investing activities (2,339) (1,439) (3,230)Financing activitiesIssue of ordinary share capital 9 27 67Increase/(decrease) in borrowings 1,866 (1,200) (463)Capital element of finance lease payments (26) (67) (45)Dividends paid to minority interests - - (300)Net cash flows from financing activities 1,849 (1,240) (741)Net decrease in cash and cash equivalents (3,556) (1,332) (147)Cash and cash equivalents at 1 April 14,515 14,368 14,515Cash and cash equivalents at 10,812 13,183 14,368 Ten Alps Plc Condensed Consolidated Interim Financial statements for the period ended 30September 2007 Condensed consolidated interim statement of changes in equity Share Share Merger Retained Minority Total capital premium reserve earnings Total interest equity £000 £000 £000 £000 £000 £000 £000 Balance at 1 April 2006 1,035 7,129 2,930 1,177 12,271 301 12,572 Profit for the Period - - - 999 999 112 1,111 Total recognised income and expense - - - 999 999 112 1,111 Equity-settled share-based payments - - - 14 14 - 14 Dividends paid - - - - - - - Shares issued 2 25 - - 27 - 27 Balance at 30 September 2006 1,037 7,154 2,930 2,190 13,311 413 13,724 Balance at 1 April 2006 1,035 7,129 2,930 1,177 12,271 301 12,572 Profit for the Period - - - 1,801 1,801 209 2,010 Total recognised income and expense - - - 1,801 1,801 209 2,010 Equity-settled share-based payments - - - 23 23 - 23 Dividends paid - - - - - (300) (300) Shares issued 6 61 - - 67 - 67 Balance at 31 March 2007 1,041 7,190 2,930 3,001 14,162 210 14,372 Balance at 1 April 2007 1,041 7,190 2,930 3,001 14,162 210 14,372 Profit for the Period - - - 1,150 1,150 142 1,292 Total recognised income and expense - - - 1,150 1,150 142 1,292 Equity-settled share-based payments - - - 10 10 - 10 Dividends paid - - - - - - - Shares issued 1 8 - - 9 - 9 Balance at 30 September 2007 1,042 7,198 2,930 4,161 15,331 352 15,683 Notes to the condensed consolidated interim financial statements 1) General Information Ten Alps Plc and its subsidiaries (the Group) is a factual media company whichprovides and manages content on TV, radio, online TV and print. Ten Alps Plc is the Group's ultimate parent and is a public listed companyincorporated in Scotland. The address of its registered office is 100 UnionStreet, Aberdeen, AB10 1QR. Its shares are listed on the Alternative InvestmentMarket of the London Stock Exchange. These condensed consolidated interim financial statements have been approved forissue by the Board of Directors on 13 December 2007. The financial information set out in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. TheGroup's statutory financial statements for the year ended 31 March 2007,prepared under UK GAAP, have been filed with the Registrar of Companies. Theauditor's report on those financial statements was unqualified and did notcontain a statement under Section 237 (2) of the Companies Act 1985. 2) Basis of Preparation These condensed consolidated interim financial statements of Ten Alps Plc arefor the six months ended 30 September 2007. These condensed consolidatedinterim financial statements have been prepared in accordance with therequirements of IFRS 1 "First time adoption of International Financial ReportingStandards" with the accounting policies set out below. These are based on therecognition and measurement principles of IFRS in issue and are effective at 30September 2007 or expected to be adopted and effective at 31 March 2008 ourfirst annual reporting date at which it is required to use IFRS accountingstandards. Ten Alps plc's consolidated financial statements have been previously preparedin accordance with UK GAAP until 31 March 2007. The transition date to IFRS was1 April 2006. The comparative figures in respect of the periods to 30 September2006 and 31 March 2007 have been restated to reflect changes in accountingpolicies as a result of adoption of IFRS. The disclosures required by IFRSconcerning the transition from UK GAAP to IFRS are given in the reconciliationschedules, presented and explained in note 12. The accounting policies have been applied consistently throughout the Group forthe purposes of preparation of these statements. 3) Summary of Significant Accounting Policies Basis of Consolidation The Group financial statements consolidate those of the company and of itssubsidiary undertakings drawn up to 30 September 2007. Subsidiaries are entitiesover which the Group has the power to control the financial and operatingpolicies so as to obtain benefits from its activities. The Group obtains andexercises control through voting rights. Amounts reported in the financialstatements of subsidiaries have been adjusted where necessary to ensureconsistency with the accounting policies adopted by the Group. Acquisitions of subsidiaries are dealt with by the acquisition method. Theacquisition method involves the recognition at fair value of all identifiableassets and liabilities, including contingent liabilities of the subsidiary, atthe acquisition date, regardless of whether or not they were recorded in thefinancial statements of the subsidiary prior to acquisition. On initialrecognition, the assets and liabilities of the subsidiary are included in theconsolidated balance sheet at their fair values, which are also used as thebases for subsequent measurement in accordance with the Group's accountingpolicies. Goodwill is stated after separating out identifiable intangible assets. Goodwillrepresents the excess of acquisition cost over the fair value of the Group'sshare of the identifiable net assets of the acquired subsidiary at the date ofacquisition. Business Combinations completed prior to date of transition to IFRS The Group has elected not to apply IFRS 3 Business Combinations retrospectivelyto business combinations prior to 1 April 2006. Assets and liabilities are recognised at date of transition and are measuredusing their UK GAAP carrying amount immediately post-acquisition as deemed costunder IFRS. Deferred tax and minority interest are adjusted for the impact ofany consequential adjustments after taking advantage of the transitionalprovisions. Revenue Revenue is recognised when it is probable that the economic benefits will flowto the group and the revenue can be reliably measured. Revenue is measured atthe fair value of the consideration received or receivable for the sale of goodsand services, net of trade discounts, VAT, other sales related taxes, and aftereliminating sales within the Group. Revenue is recognised as follows: Broadcast Production revenue comprises broadcaster licence fees and other pre-salesreceivable for work carried out in producing television programmes. Productionrevenue is recognised over the period of the production. Gross profit onproduction activity is recognised over the period of the production and inaccordance with the underlying contract. Overspends on productions arerecognised as they arise and underspends are recognised on completion of theproductions. Included in production turnover is accrued income in relation to Key PerformanceIndicators (KPIs) being achieved with respect to the Teachers' TV operation withthe range being between 0% to 10%. As the full assessment will not be knownuntil January 2008, the Directors have recognised a best estimate accrual. Turnover also includes sums receivable from the exploitation of programmes inwhich the company owns rights and is recognised when all of the followingcriteria have been met: i) an agreement has been executed by both parties;ii) the programme is available for delivery; andiii) the arrangements are fixed and determinable. Gross profit from the exploitation of programme rights is recognised whenreceivable. Communications Revenue is recognised in the accounting period in which the services arerendered by reference to stage of completion of the specific transactionassessed on the basis of the actual service provided as a proportion of thetotal services to be provided. Publishing: advertising revenue is recognised on date publications aredispatched to customers. Exhibitions: revenue is recognised when the show has been completed. Depositsreceived in advance are recorded as deferred income on the balance sheet. Online: revenue is recognised at the point of delivery or fulfilment for single/discrete services. Production Costs When the Group is commissioned to make a programme by a broadcaster, thebroadcaster pays a licence fee for the programme in their own territory and theGroup retains the right to exploit the programme elsewhere. Where the licence fee exceeds the cost of production, then, due to the uncertainnature of other future revenues, the Group writes off 100% of the productioncost against the licence fee income. Where the estimated production costs are greater than the licence fee from thebroadcaster, production will only take place if estimates of future income fromall sources exceed the excess production costs. Under these circumstances, theexcess production cost is included in 'Intangible Assets'. The net book value ofthe production is reduced at the year end by the income received in the year andthe amount held on the balance sheet will be the lesser of the amount ofanticipated future ancillary revenues and the amortised cost of investment. Property, plant and equipment Property, plant and equipment are stated at cost net of depreciation and anyprovision for impairment. Depreciation is calculated to write down the cost less estimated residual valueof all property, plant and equipment by equal annual instalments over theirexpected useful lives. The rates generally applicable are: Leasehold premises over the term of the leaseMotor vehicles 20% on costOffice equipment 10% on costComputer Equipment 20% on costWebsites 20% on cost Goodwill and business combinations Goodwill arising from business combinations is capitalised and subject to anannual impairment review in accordance with IAS36. The fair value of intangible assets acquired as a result of businesscombinations are capitalised and amortised on a straight line basis through theprofit and loss account. The rates applicable, which represent directors' bestestimate of the useful economic life, are: Customer Relations 8 yearsMagazine Titles 3 years Leased assets In accordance with IAS 17, the economic ownership of a leased asset istransferred to the lessee if the lessee bears substantially all the risks andrewards related to the ownership of the leased asset. The related asset isrecognised at the time of inception of the lease at the fair value of the leasedasset or, if lower, the present value of the minimum lease payments plusincidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability. Theinterest element of leasing payments represents a constant proportion of thecapital balance outstanding and is charged to the income statement over theperiod of the lease. All other leases are regarded as operating leases and the payments made underthem are charged to the profit and loss account on a straight line basis overthe lease term. Inventories Broadcast Inventories comprise of costs on productions that are incomplete at the year-endless any amounts recognised as cost of sales. Communications Inventories comprise cumulative costs incurred in relation to unpublished titlesor events, less provision for future losses and are valued on the basis ofdirect costs plus attributable overheads based on normal level of activity. Noelement of profit is included in the valuation of inventories. Programmes in progress at period end Where productions are in progress at the period end and where the sales invoicedexceed the value of work done the excess is shown as deferred income; where thecosts incurred exceed sales invoiced the amounts are classified as accruedincome. Where it is anticipated that a production will make a loss, theanticipated loss is provided for in full. Impairment of assets For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are separately identifiable cash flows (cash-generatingunits). As a result, some assets are tested individually for impairment and someare tested at the cash-generating unit level. Goodwill is allocated to those cash generating units that are expected tobenefit from the synergies of the related business combination and represent thelowest level within the Group at which management monitors the related cashflows. Goodwill, other individual assets or cash-generating units that includegoodwill, other intangible assets with an indefinite useful life, and thoseintangible assets not yet available for use are tested for impairment at leastannually. All other individual assets or cash-generating units are tested forimpairment whenever events or changes in circumstances indicate that thecarrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's orcash-generating unit's carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of fair value, reflecting market conditionsless costs to sell, and value in use based on an internal discounted cash flowevaluation. Impairment losses recognised for cash-generating units, to whichgoodwill has been allocated, are credited initially to the carrying amount ofgoodwill. Any remaining impairment loss is charged pro rata to the other assetsin the cash generating unit. With the exception of goodwill, all assets aresubsequently reassessed for indications that an impairment loss previouslyrecognised may no longer exist. Cash and cash equivalents Cash and cash equivalents, which are measured at cost, comprise cash on hand anddemand deposits. Equity Equity comprises the following: • Share capital represents the nominal value of equity shares. • Share premium represents the excess over nominal value of the fair value ofconsideration received for equity shares, net of expenses of the share issue. • Merger Reserve represents the excess over nominal value of the fair value ofconsideration received for equity shares, where ordinary shares are issued asconsideration for the purchase of subsidiaries in which the group hold a 90%interest or above. • Retained earnings represents retained profits. Current and Deferred taxation Current tax is the tax currently payable based on taxable profit for the year. Deferred income taxes are calculated using the liability method on temporarydifferences. Deferred tax is generally provided on the difference between thecarrying amounts of assets and liabilities and their tax bases. However,deferred tax is not provided on the initial recognition of an asset or liabilityunless the related transaction is a business combination or affects tax oraccounting profit. In addition, tax losses available to be carried forward aswell as other income tax credits to the Group are assessed for recognition asdeferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred taxassets are recognised to the extent that it is probable that the underlyingdeductible temporary differences will be able to be offset against futuretaxable income. Current and deferred tax assets and liabilities are calculatedat tax rates that are expected to apply to their respective period ofrealisation, provided they are enacted or substantively enacted at the balancesheet date. Changes in deferred tax assets or liabilities are recognised as a component oftax expense in the income statement, except where they relate to items that arecharged or credited directly to equity in which case the related deferred tax isalso charged or credited directly to equity. Trade Receivables Trade receivables are recorded at their fair value and measured subsequently atamortised cost. Bank Borrowings Interest bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption anddirect issue costs, are accounted for on an effective interest method and areadded to the carrying amount of the instrument to the extent that they are notsettled in the period in which they arise. Trade Payables Trade Payables are stated at their fair value and measured subsequently atamortised cost. Share options Under IFRS 2, all share-based payment arrangements granted after 7 November 2002that had not vested prior to 1 April 2006 are recognised in the financialstatements. Where employees are rewarded using share-based payments, the fair values ofemployees' services are determined indirectly by reference to the fair value ofthe instrument granted to the employee. This fair value is appraised at thegrant date and excludes the impact of non-market vesting conditions. All equity-settled share-based payments are ultimately recognised as an expensein the profit and loss account with a corresponding credit to reserves. If vesting periods apply, the expense is allocated over the vesting period,based on the best available estimate of the number of share options expected tovest. Estimates are revised subsequently if there is any indication that thenumber of share options expected to vest differs from previous estimates. Anycumulative adjustment prior to vesting is recognised in the current period. Noadjustment is made to any expense recognised in prior periods if share optionsthat have vested are not exercised. Upon exercise of share options, the proceeds received net of attributabletransaction costs are credited to share capital, and where appropriate sharepremium. Retirement benefits The Group operates a stakeholder pension scheme. The Company made nocontributions to the scheme during the period. Significant judgements and estimates The preparation of consolidated financial statements under IFRS requires theGroup to make estimates and assumptions that affect the application of policiesand reported amounts. Estimates and judgements are continually evaluated and arebased on historical experience and other factors including expectations offuture events that are believed to be reasonable under the circumstances. Actualresults may differ from these estimates. The estimates and assumptions whichhave a significant risk of causing a material adjustment to the carrying amountof assets and liabilities are discussed below. Impairment of goodwill The Group is required to test, at least annually, whether goodwill has sufferedany impairment. The recoverable amount is determined based on value in usecalculations. The use of this method requires the estimation of future cashflows and the choice of a suitable discount rate in order to calculate thepresent value of these cash flows. Actual outcomes could vary. Intangible assets The Group recognises intangible assets acquired as part of business combinationsat fair value at the date of acquisition. The determination of these fair valuesis based upon management's judgement and includes assumptions on the timing andamount of future incremental cash flows generated by the assets and selection ofan appropriate cost of capital. Furthermore, management must estimate theexpected useful lives of intangible assets and charge amortisation on theseassets accordingly. Impairment of property, plant and equipment Property, plant and equipment are reviewed for impairment if events or changesin circumstances indicate that the carrying amount may not be recoverable. Whena review for impairment is conducted, the recoverable amount is determined basedon value in use calculations prepared on the basis of management's assumptionsand estimates. Depreciation of property, plant and equipment Depreciation is provided so as to write down the assets to their residual valuesover their estimated useful lives as set out above. The selection of theseestimated lives requires the exercise of management judgement. Seasonal Fluctuations The business of Ten Alps plc is subject to seasonal fluctuations with strongerdemand for services in the second half of the year. 4) Segmental Analysis The operations of the group are managed in two principle business divisions,broadcast and communications. These divisions are the basis upon which themanagement reports its primary segment information. Revenues by Business Division 6 months to 6 months to Year to 30 September 2007 30 September 2006 31 March 2007 £ '000 £ '000 £ '000 Communications 24,645 18,692 39,623 Broadcast 12,921 14,886 29,422Total 37,566 33,578 69,045 5) Finance Income and Costs 6 months to 6 months to Year to 30 September 2007 30 September 2006 31 March 2007 £'000 £'000 £'000 Bank interest receivable 105 - 281 Interest payable on:Finance leases and hire purchase (28) - (10)contractsBank loans (382) (300) (674) (410) (300) (684) 6) Tax on Profit on Ordinary Activities Tax charge for the period represents: 6 months to 6 months to Year to 30 September 2007 30 September 2006 31 March 2007 £'000 £'000 £'000 UK corporation tax 363 447 449Over provision in prior period (95) - (9)Deferred tax movement (66) 53 300 202 500 740 7) Business Combinations On 15 June 2007 the group acquired the trade and assets of DBDA forconsideration (including expenses) of £956,000. The acquisition was made byDBDA Ltd, a wholly owned subsidiary created for the purpose of the transaction. The assets and liabilities arising from the acquisition are as follows: Book Value Fair Value Adjustments Provisional Fair Value £'000 £'000 £'000 Property, plant and equipment 41 - 41Inventories 382 - 382Trade and other receivables 282 - 282 Cash and cash equivalents 232 - 232Trade and other payables (210) - (210)Provisions (625) - (625)Deferred tax - (387) (387)Net assets/(liabilities) acquired 102 (387) (285) Intangible fixed assets acquired 1,291Goodwill capitalised 717Consideration given 1,723 Satisfied by:Cash 900Acquisition expenses 56Deferred contingent consideration 767 1,723 The fair value adjustments made to book value relate to deferred tax relating tothe intangible assets identified on the acquisition. The DBDA purchase is subject to three additional payments of up to a maximum£766,667 each. These payments are dependant on DBDA Limited achievingannualised EBIT between £400,000 and £800,000 for the period from acquisition to31 March 2008 and achieving between £400,000 and £800,000 for the years ending31 March 2009 and 31 March 2010. At 30 September 2007, £766,666 had beenprovided for. On 22 June 2007 Ten Alps Plc purchased the whole of the issued share capital ofMongoose Media Limited (Mongoose) for consideration (including expenses) of£1,736,000. The assets and liabilities arising from the acquisition are asfollows: Book Value Fair Value Adjustments Provisional Fair Value £'000 £'000 £'000 Property, plant and equipment 22 - 22Inventories 69 - 69Trade and other receivables 657 - 657Cash and cash equivalents 517 - 517 Trade and other payables (229) - (229)Current tax liabilities (77) - (77)Provisions (793) - (793)Deferred tax - (399) (399) Net assets/(liabilities) acquired 166 (399) (233) Intangible fixed assets acquired 1,330Goodwill capitalised 1,839Consideration given 2,936 Satisfied by:Cash 1,650Acquisition expenses 86Deferred contingent consideration 1,200 2,936 The fair value adjustments made to book value relate to deferred tax relating tothe intangible assets identified on the acquisition. At 30 September 2007 the Mongoose purchase is subject to three additionalpayments. £50,000 was payable subject to the agreement of completion accountswith net assets greater than £150,000. This amount was paid on 10 October 2007.A further payment of up to a maximum £1,450,000 is payable subject to Mongooseachieving EBIT of up to £725,000 for the period from the date of acquisition to31 March 2008. A final payment of up to a maximum £300,000 is payable subjectto Mongoose achieving certain new client profit targets. At 30 September 2007,a total £1,200,000 of deferred consideration had been provided for. 8) Intangible Assets Customer Magazine Websites Goodwill Total relationships Titles £000's £000's £000's £000's £000's Carrying amount at 1 April 2007 1,183 157 104 16,210 17,654Additions 2,621 - 6 2,556 5,183Amortisation (157) (11) - - (168)Carrying amount at 30 September 2007 3,647 146 110 18,766 22,669 Customer Magazine Websites Goodwill Total relationships Titles £000's £000's £000's £000's £000's Carrying amount at 1 April 2006 - - - 15,718 15,718Revaluation of deferred consideration - - - (263) (263)Carrying amount at 30 September 2006 - - - 15,455 15,455 Customer Magazine Websites Goodwill Total relationships Titles £000's £000's £000's £000's £000's Carrying amount at 1 April 2006 - - - 15,718 15,718Additions 1,197 167 104 2,342 3,810Revaluation of deferred consideration - - - (1,850) (1,850)Amortisation (14) (10) - - (24)Carrying amount at 31 March 2007 1,183 157 104 16,210 17,654 9) Borrowings 30 September 2007 30 September 2006 31 March 2007 £'000 £'000 £'000 Bank Loans - current 3,250 2,000 1,000Bank Loans - non current 8,800 7,350 9,150Media Loans - current 274 76 28Media Loans - non current - 270 270 12,324 9,696 10,448 10) Provisions 30 September 2007 30 September 2006 31 March 2007 £'000 £'000 £'000 Deferred contingent consideration 2,362 1,870 395 2,362 1,870 395 11) Earnings Per Share 30 September 2007 30 September 2006 31 March 2007Weighted average number of shares used in basicearnings per share calculation 52,157,080 51,830,413 51,943,330Dilutive effect of share options 1,090,149 1,371,138 1,088,555Weighted average number of shares used in dilutedearnings per share calculation 53,247,229 53,201,551 53,031,885 Profit for period attributable to shareholders 1,150 999 1,801Amortisation of intangible assets and goodwill 168 - 17Share-based payments 10 14 23Adjusted profit for period attributable to 1,328 1,013 1,841shareholders Basic Earnings per Share 2.20 p 1.93 p 3.47 pDiluted Earnings per Share 2.16 p 1.88 p 3.40 pAdjusted Basic Earnings per Share 2.55 p 1.95 p 3.54 pAdjusted Diluted Earnings per Share 2.49 p 1.90 p 3.47 p 12) Transition to IFRS Reconciliation of equity at 31 March 2006 UK GAAP Effect of IFRS 31 March transition 31 March 2006 to IFRS 2006 Note £ '000 £ '000 £ '000AssetsNon-currentGoodwill a 15,718 - 15,718Other intangible assets - - -Property, plant and equipment 1,611 - 1,611Deferred tax e,f - 957 957 17,329 957 18,286Current assets Inventories 2,662 - 2,662Trade and other receivables d 12,978 (659) 12,319Cash and cash equivalents 14,515 - 14,515 30,155 (659) 29,496LiabilitiesCurrent liabilitiesTrade and other payables g (25,005) 5,079 (19,926)Current tax liabilities g - (583) (583)Borrowings g - (1,277) (1,277)Financial liabilities g - (101) (101)Provisions g,j - (3,245) (3,245) (25,005) (127) (25,132)Net current assets 5,150 (786) 4,364Non-current liabilitiesBorrowings h - (9,630) (9,630)Financial liabilities h - (39) (39)Deferred tax - - -Other non-current liabilities h - (409) (409)Provisions h (10,078) 10,078 - (10,078) - (10,078) Net assets 12,401 171 12,572 Capital and reservesCalled up share capital 1,035 - 1,035 Share premium account 7,129 - 7,129Merger reserve 2,930 - 2,930Retained earnings e,j 1,006 171 1,177Total shareholders' equity 12,100 171 12,271Minority interest 301 - 301Total equity 12,401 171 12,572 Reconciliation of equity at 30 September 2006 UK GAAP Effect of IFRS 30 September transition 30 September 2006 to IFRS 2006 Note £ '000 £ '000 £ '000AssetsNon-currentGoodwill a,b 15,172 283 15,455Other intangible assets - - -Property, plant and equipment 1,583 - 1,583Deferred tax e,f - 958 958 16,755 1,241 17,996Current assetsInventories 2,190 - 2,190Trade and other receivables d 11,411 (713) 10,698Cash and cash equivalents 13,183 - 13,183 26,784 (713) 26,071LiabilitiesCurrent liabilitiesTrade and other payables g (22,317) 4,627 (17,690)Current tax liabilities g - (695) (695)Borrowings (current) g - (2,076) (2,076)Financial liabilities (current) g - (16) (16)Provisions (current) g,j - (1,870) (1,870) (22,317) (30) (22,347) Net current assets 4,467 (743) 3,724Non-current liabilitiesBorrowings (non-current) h - (7,620) (7,620)Financial liabilities h(non-current) - (57) (57)Deferred tax - - -Other non-current liabilities h - (319) (319)Provisions (non-current) h (7,996) 7,996 - (7,996) - (7,996) Net assets 13,226 498 13,724Capital and reservesCalled up share capital 1,037 - 1,037Share premium account 7,154 - 7,154Merger reserve 2,930 - 2,930Retained earnings e,j 1,692 498 2,190 Total shareholders' equity 12,813 498 13,311Minority interest 413 - 413 Total equity 13,226 498 13,724 Reconciliation of equity at 31 March 2007 UK GAAP Effect of IFRS 31 March transition 31 March 2007 to IFRS 2007 Note £ '000 £ '000 £ '000AssetsNon-currentGoodwill a,b,c,e 16,577 (367) 16,210Other intangible assets c,d - 1,444 1,444Property, plant and equipment d 1,754 (104) 1,650Deferred tax e,f - 255 255 18,331 1,228 19,559Current assetsInventories 2,762 - 2,762Trade and other receivables d 11,666 (472) 11,194Cash and cash equivalents 14,368 - 14,368 28,796 (472) 28,324LiabilitiesCurrent liabilitiesTrade and other payables g (23,593) 1,685 (21,908)Current tax liabilities g - (414) (414)Borrowings g - (1,028) (1,028)Financial liabilities g - (59) (59)Provisions g,j - (395) (395) (23,593) (211) (23,804) Net current assets 5,203 (683) 4,520Non-current liabilitiesBorrowings h - (9,420) (9,420)Financial liabilities h - (52) (52)Deferred tax - - -Other non-current liabilities - (235) (235)Provisions h (9,707) 9,707 - (9,707) - (9,707) Net assets 13,827 545 14,372Capital and reservesCalled up share capital 1,041 - 1,041Share premium account 7,190 - 7,190Merger reserve 2,930 - 2,930Retained earnings e,j 2,456 545 3,001 Total shareholders' equity 13,617 545 14,162Minority interest 210 - 210 Total equity 13,827 545 14,372 Reconciliation of profit for the 6 months to 30 September 2006 Effect of UK GAAP transition IFRS Notes £'000's £'000's £'000's Revenue 33,578 - 33,578Operating costs before amortisation jof intangible assets (31,764) 97 (31,667)Earnings before interest, tax andamortisation (EBITA) 1,814 97 1,911Amortisation and impairment of cintangible assets (283) 283 - Total operating costs (32,047) 380 (31,667) Operating profit 1,531 380 1,911 Finance costs (300) - (300)Finance income - - - Profit before tax 1,231 380 1,611Taxation e (447) (53) (500) Profit for the period 784 327 1,111 Attributable to:Equity holders 672 327 999Minority interest 112 - 112 Retained profit for the year 784 327 1,111 Reconciliation of profit for the year ended 31 March 2007 Effect of UK GAAP transition IFRS Notes £'000's £'000's £'000's Revenue 69,045 - 69,045Operating costs before amortisation jof intangible assets (65,791) (84) (65,875)Earnings before interest, tax andamortisation (EBITA) 3,254 (84) 3,170Amortisation and impairment of cintangible assets (588) 571 (17) Total operating costs (66,379) 487 (65,892) Operating profit 2,666 487 3,153 Finance costs (684) - (684)Finance income 281 - 281 Profit before tax 2,263 487 2,750Taxation e (627) (113) (740) Profit for the period 1,636 374 2,010 Attributable to:Equity holders 1,427 374 1,801Minority interest 209 - 209 Retained profit for the year 1,636 374 2,010 Notes to the Reconciliations a) IFRS 1 permits companies adopting IFRS for the first time to applycertain exemptions from the full requirements of IFRS in the transition period.These interim financial statements have been prepared on the basis of taking theexemption whereby business combinations prior the Group's date of transition toIFRS have not been restated to comply with IFRS 3 Business Combinations.Goodwill of £15,718,000 on business combinations prior to this date has beenfrozen at their UK GAAP carrying value as at 1 April 2006. b) Under IFRS goodwill is not amortised, but tested annually forimpairment. The effect of the above is to add back the amortisation charge by£283,000 at 30 September 2006 and £588,000 at 31 March 2007. c) The Group acquired Cameron Publishing Ltd on 6 November 2006 andAtalink Limited on 30 March 2006. Application of IFRS 3 to these businesscombinations resulted in identification of intangible assets (customerrelationships and magazine titles). Under IFRS these have been recognisedseparately in the balance sheet at their fair value at the date of thecombination. Under UK GAAP these intangible assets were subsumed withingoodwill. The result of this adjustment is to decrease goodwill and increaseintangible assets at the dates of the combinations. At 31 March 2007 the valueof intangible assets was increased by £1,340k (this has also impacted on thedeferred tax liability recognised, see note e below). The value of goodwill at31 March 2007 was reduced by £1,365k. d) IAS38 requires that certain intangible assets are shown separately onthe Balance Sheet. Intangible assets, other than those acquired throughbusiness combinations, have been identified and consist of items such assoftware and certain websites generated in-house. They have been disclosed asIntangible Assets, and the carrying value of Tangible Assets has been reduced bythe same amount. e) Under FRS 19 deferred tax was recognised only on timing differences; incontrast IAS 12 "Income Taxes" requires the recognition of deferred tax on alltemporary differences. The recognition of intangible assets on the acquisitionsresulted in a number of temporary differences. Under UK GAAP deferred tax wasnot provided in such cases. The effect of this adjustment is to create acombined deferred tax liability of £409,000 at the date of the combinations.Goodwill is increased at those dates of combination by the same amounts. Inaddition, a deferred tax asset or liability arises on the share options inissue. This has resulted in an adjustment to opening reserves at 1 April 2006of £298,000, a deferred tax charge for the 6 months ended 30 September 2006 andthe year ended 31 March 2007 of £53,000 and £113,000 respectively. f) Deferred tax assets are disclosed separately, whilst they werepreviously included within Current Assets. g) Short term tax creditors, borrowings, financial liabilities andprovisions are disclosed separately, whilst they were previously included withingeneral creditors. h) Long term loans and finance liabilities are now shown separately fromprovisions. i) Deferred income has been reclassified from Trade and other payablesto Short term provisions. j) IAS 19 "Employee Benefits" requires that an accrual is made foroutstanding Holiday Balances due but not taken at the balance sheet date. ENDS This information is provided by RNS The company news service from the London Stock Exchange