TIDMPFO
RNS Number : 5068N
Prime Focus London PLC
28 September 2012
28 September 2012
Prime Focus London plc
("Prime Focus" or the "Company")
Preliminary results for the year ended 31 March 2012
CHAIRMAN'S STATEMENT
Prime Focus operates in a global industry where creativity and
technology converge. The creativity of our artists and operators is
underpinned by the technology that connects our studios - the
technology that enables our artists to create and collaborate
across facilities, continents and time zones.
Our creativity and technology is rounded-out and bound together
by our highly differentiated business model - WorldSourcing. This
model brings together our expertise across projects, locations,
disciplines and sectors, allowing us to operate in every major
market and at every stage of a project's development. It allows us
to operate a network that combines global cost advantages,
resources and talent pool with a deep understanding of the local
markets in which we operate.
It is this understanding of our markets, and specifically our
knowledge of the commercials and advertising sector in the UK, that
has precipitated some difficult decisions for our UK business this
year. We identified early developing negative industry trends that
are forcing declines in activity levels in the UK commercials post
production market, and we are moving quickly to attempt to insulate
your company from the worst effects of these conditions.
Sir Martin Sorrell's Group M estimated in July 2012 that TV and
press advertising revenues would fall by more than GBP350m in the
UK during 2012, and we have seen marked reductions in the activity
levels of our TV advertising client base. This reduction in
activity has been exacerbated by the effect of the London Olympics,
which was broadcast only on the advertising-free BBC channels this
summer, leading to further declines in TV media spend in 2012.
However, the diverse nature of our operations in the UK ensures
that not all areas of our business are affected by these trends to
the same extent. Alongside our commercials business, we also have a
strong presence in the TV broadcast post production and visual
effects market in the UK.
Our broadcast division has reinforced its reputation this year
for operational and technical excellence, on complex projects for
all the UK broadcasters, as well as US broadcasters such as History
Channel, Discovery Networks and National Geographic. We were also
selected by Red Bee Media to devise, install and run a 'post
production village' at their offices in White City, which is
already operational and busy delivering over 5,000 on-air
continuity items per year for clients such as the BBC and UKTV.
Furthermore, our broadcast visual effects (VFX) division, though
still a nascent business, has expanded rapidly due to client
demand, delivering over 160 minutes of high-end VFX across five
major broadcast projects in the last six months alone, with a busy
order book for the year ahead.
Your company is not alone in facing the challenging conditions
of the market, but has responded swiftly, with decisive operational
change designed to ensure we emerge from this downturn in a strong
position. We expect to see consolidation in our industry over the
coming months, due to the continuing downward pressure on margins
and an over-capacity of service providers. Our response is one of
retrenchment, to attain stability for the company against these
rapidly emerging market conditions whilst investing in and
supporting the more profitable areas of our business.
I would like to thank our clients, investors, vendors and most
of all our people for their trust, faith and belief in our company,
and I assure you all of our commitment to ensuring that Prime Focus
London plc is strongly positioned for the future.
Ramakrishnan Sankaranarayanan
Chairman
For further information, contact:
Prime Focus London plc
Bernard Kumeta Tel: 020 7565 1000
Northland Capital Partners Limited
Tim Metcalfe / Edward Hutton / Lauren Kettle Tel: 020 7796 8800
CHIEF EXECUTIVE OFFICER'S REVIEW
This is my first statement as Chief Executive Officer of Prime
Focus London plc. My appointment was made in April 2012, just after
the conclusion of the financial year covered in this report, and
one of my first priorities was to perform a review of the company -
both financial and operational. That review forms the basis of this
statement.
My appointment was one of several changes to the Board this
year. Alongside my appointment, Ramakrishnan Sankaranarayanan was
named Non-Executive Chairman, and Christopher Honeyborne and
Shivkumar Venkatachalam both joined the Board as Non-Executive
Directors. The company also appointed a new Nominated Advisor and
Broker - Northland Capital Partners.
This financial year was a challenging period for the company.
Whilst activity levels rose during the year, the continued downward
pressure on rates for services worsened. The increased activity did
not generate the incremental profit that would be expected, and the
company had to be selective with the projects it took on.
As predicted in the previous year's accounts, trading remained
challenging in this financial year, and the company fought hard to
maintain market share.
Revenue
Sales increased slightly from GBP30.6m to GBP31.2m
Category Mar-11 Mar-12 Variance
----------------------- ------- ------- ---------
GBP000 GBP000 GBP000
----------------------- ------- ------- ---------
Commercials 7,969 8,174 205
----------------------- ------- ------- ---------
Broadcast 4,412 4,464 53
----------------------- ------- ------- ---------
Content Services 1,224 1,717 493
----------------------- ------- ------- ---------
Independent Film 8,100 8,041 -59
----------------------- ------- ------- ---------
View d (Discontinued) 8,153 7,755 -399
----------------------- ------- ------- ---------
Broadcast VFX 606 955 349
----------------------- ------- ------- ---------
Meanwhile 143 124 -19
----------------------- ------- ------- ---------
Total 30,608 31,230 622
----------------------- ------- ------- ---------
Operating Loss
An Operating loss of GBP1.54m is reported compared to an
Operating Profit of GBP4.035m in the previous year.
Margin improved in the period thanks to the removal of License
fees for the final half of the financial year, charged for
View-D(TM) software associated with the disposed of View-D
business, of GBP2.62m; together with charges not repeated in this
financial year from Prime Focus North America in respect of work
that they carried out on behalf of London on the 'Chronicles of
Narnia: Voyage of the Dawn Treader' film project of GBP2.029m.
However, set against the margin improvement were various
adjustments as follows:
GBP000
--------------------------------------------------------- -------
Increased salary costs incurred in the View D business,
sold part way through the year. 3,575
--------------------------------------------------------- -------
Incremental Provision for restructuring 300
--------------------------------------------------------- -------
Increased Provision for Bad and Doubtful debts 955
--------------------------------------------------------- -------
Exceptional income in the prior year related to the
write back of liabilities on discontinued activities,
not repeated in the current year 2,593
--------------------------------------------------------- -------
Additional depreciation 1,021
--------------------------------------------------------- -------
Increase in rent and rates 269
--------------------------------------------------------- -------
Profit on sale of assets in prior year 795
--------------------------------------------------------- -------
Other increases in expenditure 401
--------------------------------------------------------- -------
Total 9,909
--------------------------------------------------------- -------
Other Income and Exceptional Charges are referred to in the
notes to the accounts.
Business review
The Commercials division of the company continues to be
particularly hard hit by the negative industry trends it is facing.
Reports predicting a sharp fall in TV advertising revenues in 2012
have been corroborated, and the intense interest in the London
Olympics has predictably given the BBC, which had exclusive rights
to broadcast the Olympics in the UK, the lion's share of the summer
viewing figures, perhaps leading brands to reconsider their TV
media spend this year and consider digital advertising in its
place.
The Broadcast division was also affected by the challenging
market conditions prevalent in the industry. The continuing effect
of the recession and the on-going downward pressure on production
company budgets both had a part to play in making this a difficult
year for this area of the business, though there were also a number
of positive initiatives for the Broadcast division, including the
installation of a 'facility within a facility' for Red Bee Media.
As a creative and technical partner to Red Bee, Prime Focus is
creating around 5,000 on-air promotional items each year, operating
a bespoke tapeless post production workflow which further increases
Red Bee's own operational efficiencies. The benefits to Prime Focus
are increased operational capacity and revenues without expensive
infrastructure installations and building rent.
The Red Bee Media 'post production village', and continued
high-profile work for all the major UK broadcasters, helped to
insulate Broadcast from the worst effects of the negative market
trends.
The Broadcast VFX department, though still a young business, is
also showing promise, with high-profile visual effects work for
major broadcast shows already completed, and the promise of further
business growth due to increases in client demand for its
services.
The Independent Film department delivers creative and technical
post production services to independent filmmakers, including
telecine, digital intermediate, offline and online editing and
audio. The division performed in line with management expectations
this year.
Finally, the Content Services department offers high quality,
cost efficient and SLA compliant content preparation services
including mastering, quality control, encoding, transcoding,
repurposing, packaging and up/down conversion of media. This
department has enjoyed a good year, partly driven by the
fulfillment of a Prime Focus Technologies contract win to digitize
the vast Associated Press Film and Video archive, creating
3,800,000 new assets from 32,000 hours of AP archive material over
an 18 month period.
Operational Review
I will report more fully at the half year, but my initial review
of the company made it immediately clear that the business had
begun to suffer in the face of market headwinds and a loss of
direction. The decision was taken to quickly make operational
changes to help insulate the business from the negative industry
trends that had been identified. These changes have been designed
to drive greater efficiency while also ensuring that service levels
are maintained.
An operational restructuring of the company was announced to
protect profitability and to position the business to take full
advantage of the perceived impending consolidation of excess
capacity in the market. The objectives of the restructure are as
follows:
a. Reduce costs. The company operates a fixed cost recovery
model. The intention is to bring down break even points and convert
as much fixed cost to variable cost as possible, to allow flex in
the face of variable patterns of demand.
b. Reduce cash usage, and the consequent dependence on the
parent company, Prime Focus Limited, for funding.
c. Increase focus on profitable activity and improved
efficiency, and reduce heavy senior management overhead,
simplifying the reporting structure.
d. Reposition the business, with a focus on core competencies
and the elimination of non-core peripheral activities. To involve
the consolidation of operations, the standardization of operational
protocols, and the sharing of knowledge, resources and access to
market across the key business channels of Broadcast and
Commercials post production and Broadcast VFX.
e. Fully exploit the opportunity to drive improved margin
through access to the Prime Focus WorldSourcing business model. The
low-cost yet highly-skilled operations of the parent company in
India allow the company to offer many unique benefits such as
shortened turnaround times, increased flexibility and cost
benefits, which also enables more time and budget to be allocated
to the crafting of the work produced - a compelling advantage for
many clients.
f. Create a platform from which to deliver recovery, and to
restore shareholder value, recognising the instability in the
external environment.
Current Trading
The operational restructuring of the company will be completed
by the end of September 2012, resulting in an annualized run rate
reduction in salary and associated costs of GBP3 million, and the
elimination of losses through the termination of non-core
activities of approximately GBP800,000.
The restructuring will be followed by a period of retrenchment
whilst the company stabilizes and new, more efficient operational
procedures are put in place. With the changes made, the company
will continue to invest in the best people and equipment, and to
respond swiftly and appropriately to the needs of its clients.
There are encouraging signs of increased activity across all of
the company's business streams, including Commercials, both from
existing and new clients.
In conclusion, this has been a difficult time for the business,
and the outlook remains challenging, but the company is taking
decisive action to counter the negative industry trends it is
facing, and to position Prime Focus London plc strongly for
recovery and future success. I am excited by the possibilities for
the company, and I am confident that we are now on a path that will
deliver stability and growth, and add value for all our
stakeholders.
FINANCIAL POSITION
Net debt
Net debt increased to GBP14.411m from GBP6.977m.
CASHFLOW
Our cash balance has decreased to GBP1.2m from GBP1.3m in the
prior year.
KEY PERFORMANCE INDICATORS
Key performance indicators (KPIs) used by the Board to monitor
progress are listed in the table
below.
KPI 2012 2011 Definition and method of calculation
------------------ ----------- ----------- -----------------------------------------
Revenue GBP31,230k GBP30,608k Revenue per the consolidated statement
of comprehensive income.
Profit / (loss) GBP984k GBP3,910k Profit / (loss) before tax per
the consolidated statement of
comprehensive income.
Earnings per 2.99p 11.65p Basic earnings per share per the
share consolidated statement of comprehensive
income.
Net Cash & GBP1,228k GBP1,300k Net cash position of the Group
Cash Equivalents as per the consolidated statement
of cash flows.
Net debt GBP14,411k GBP6,977k Cash and cash equivalents less
bank loans and overdrafts, hire
purchase obligations and net parent
and associate company loans. All
taken from the consolidated statement
of financial position.
------------------ ----------- ----------- -----------------------------------------
PRINCIPAL RISKS AND UNCERTAINTIES
The management of the business and the execution of the
Company's strategy are subject to a number of risks. Risks are
formally reviewed by the Board and appropriate processes put in
place to monitor and mitigate them.
The following section comprises a summary of the main risks the
Board believes could potentially impact the Company's operating and
financial performance.
Operational
The Company's performance depends largely on the retention of
key creative staff and the ability of the management team to
attract new talent to enhance this existing team. The Group
continues to successfully retain its key staff by ensuring that it
gives them the necessary tools and working atmosphere such that
they can maximize their creative energies and output.
Financial
The company operates in an industry that demands continual
investment in hardware and software to ensure competitive edge
through technical delivery and creative output. This places a large
emphasis on capital expenditure and the Company continues to invest
in front-end creative systems and infrastructure through finance
leasing. The current economic climate presents a greater challenge
to securing this type of financing but the management continues to
explore all opportunities to maintain this investment strategy.
Market and Environment
Business environment risks considered by the Group include a
downturn in film production activity in the UK, potential delay in
revenue generation from the Group's media asset management
business, the timing of television production and the cut in
advertising spend by blue chip clients.
Technology
The Group is reliant on a number of technology systems to
provide services to clients. Due to the rapid advancement of
technology, there is a risk that systems could become outdated with
the potential to affect efficiency and have an impact on revenue
and client service. This risk is mitigated by regular reviews of
the Group's technology strategy and ongoing development of in-house
technology and software.
Financial Instruments
The Company's policy in relation to the use of financial
instruments and its exposure to price risk, liquidity risk and cash
flow risk is given in Note 4 to the financial statements.
Bernard Kumeta
Chief Executive Officer
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2012
Notes 2012 2011
GBP000 GBP000
--------- ---------
Revenue 5 31,230 30,608
Cost of sales (7,266) (11,890)
--------- ---------
Gross profit 23,964 18,718
Net operating charges (25,751) (15,842)
Other Income 8 246 1,159
--------- ---------
Operating profit / (loss) before exceptional items 6 (1,541) 4,035
Exceptional income 10 573 5
Exceptional charge 10 (148) -
Operating profit / (loss) (1,116) 4,040
Finance income 9 310 464
Finance costs 9 (1,210) (594)
Income from fellow group undertakings 3,000 -
--------- ---------
Profit / (loss) before taxation 984 3,910
Taxation 11 - (108)
Profit / (loss) for the year 984 3,802
Total comprehensive income for the year 984 3,802
--------- ---------
Earnings per share (pence)
Basic 12 2.99 11.65
Diluted 12 2.97 11.53
--------- ---------
Consolidated Balance Sheet as at 31 March 2012
Notes 31 March 31 March
2012 2011
GBP000 GBP000
ASSETS
Non-current assets
Intangible assets 13 1,409 707
Property, plant and equipment 14 14,862 7,997
Deferred tax assets 19 - -
Investments 16 5 32
Total non-current assets 16,276 8,736
---------- ----------
Current assets
Inventories 17 41 38
Trade and other receivables 18 26,714 21,563
Cash and cash equivalents 1,228 1,300
Total current assets 27,983 22,901
---------- ----------
Total assets 44,259 31,637
---------- ----------
EQUITY
Capital and reserves attributable
to equity shareholders
Share capital 20 1,643 1,632
Share premium account 6,515 6,498
Capital redemption reserve 270 270
Fair value reserve (17) (10)
Retained earnings 174 (810)
---------- ----------
Total equity 8,585 7,580
---------- ----------
LIABILITIES
Non-current liabilities
Borrowings 25 515 2,030
Deferred tax liability 19 90 90
Total non-current liabilities 605 2,120
---------- ----------
Current liabilities
Borrowings 22 15,125 6,247
Trade and other payables 23 19,944 15,690
Current income tax liabilities 24 - -
Total current liabilities 35,069 21,937
---------- ----------
Total liabilities 35,674 24,057
---------- ----------
Total equity and liabilities 44,259 31,637
---------- ----------
Consolidated Statement of cash flows for the year ended 31 March
2012
2012 2011
GBP000 GBP000
Cash Flows from operating activities
Profit / (loss) before taxation 984 3,910
Finance income (310) (464)
Finance costs 1,210 594
Depreciation 2,128 1,111
W/off liabilities of companies under administration
(Prior year adjustments) - (3,462)
Operating cash flows before movements in
working capital 4,012 1,689
Increase in inventories (3) (8)
(Increase ) / Decrease in receivables (5,151) (10,299)
Increase / (Decrease) in payables 4,254 2,631
Cash generated from operations 3,112 (5,987)
Interest received 310 464
Interest paid (1,210) (594)
Net cash generated from operating activities 2,212 (6,117)
--------- ---------
Cash flows from investing activities
Purchases of property, plant and equipment (11,644) (2,361)
Purchases of intangible assets - (498)
Proceeds from sale of property, plant and
equipment 1,969 9,116
--------- ---------
Net cash (used in)/generated from investing
activities (9,675) 6,257
--------- ---------
Cash flows from financing activities
Issue of shares 28 -
Net receipt / (repayment) in respect of
Parent borrowings 4,388 (2,461)
Repayment of Hire Purchase Obligations (52) (276)
(Repayment) / receipt of Bank and other
loans 3,027 2,673
--------- ---------
Net cash generated from financing activities 7,391 (64)
--------- ---------
Increase / (Decrease) in cash & cash equivalents (72) 76
Cash and cash equivalents at the beginning
of the year 1,300 1,224
--------- ---------
Cash and cash equivalents at the end of
the year 1,228 1,300
--------- ---------
Consolidated statement of changes in equity
Share capital Capital Fair value Total Equity
Share premium redemption reserve Retained
(i) reserve (iii) earnings
(ii) (v)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- --------------- ---------------- --------------- --------------- --------------- --------------
At 1 April 2011 1,638 6,512 270 (10) (810) 7,600
Comprehensive
income:
Profit for the
year - - - - 984 984
Revaluation of
investments - - - (7) - (7)
Transactions
with owners:
Share-based
payments 5 3 - - - 8
At 31 March
2012 1,643 6,515 270 (17) 174 8,585
---------------- --------------- ---------------- --------------- --------------- --------------- --------------
(i) Share premium - amount subscribed for share capital in
excess of nominal value, net of directly attributable issue
costs.
(ii) Capital redemption reserve - created as a result of a previous share buy-back.
(iii) Fair value reserve - represents cumulative gains or losses
on the fair value of available for sale investments recognized in
other comprehensive income.
(iv) Retained earnings - cumulative net gains and losses
recognized in the consolidated statement of comprehensive income
net of associated share based payment credits.
Notes to the Accounts for the Year Ended 31 March 2012
1. General information
Prime Focus London plc and its subsidiaries are technology based
creative service providers to the media and entertainment
industry.
The Company is a public limited company which is listed on the
AIM Market of the London Stock Exchange and is incorporated and
domiciled in England (Registration number 1694613). The address of
its registered office and principal place of business is 64 Dean
Street, London W1D 4QQ.
These financial statements were authorised for issue on 28
September 2012.
2. Significant accounting policies
Statement of compliance
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) and
International Financial Reporting Interpretation Committee (IFRIC)
interpretations as endorsed by the European Union, and those parts
of the Companies Act 2006 as applicable to companies reporting
under IFRS.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 March 2012. Control is achieved
where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits
from its activities.
The results of subsidiaries acquired during the year are
included in the Consolidated Statement of Comprehensive Income from
the date at which power of control is transferred to the group.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Associates
Where the Group has the power to participate in (but not
control) the financial and operating policy decisions of another
entity, it is classified as an associate. Associates are initially
recognised in the consolidated statement of financial position at
cost. The Group's share of post-acquisition profits and losses is
recognised in the consolidated statement of comprehensive income,
except that losses in excess of the Group's investment in the
associate are not recognised unless there is an obligation to make
good those losses.
Business combinations and goodwill
The acquisition of subsidiaries is accounted for using the
purchase method.
On acquisition, the acquiree's identifiable assets (including
intangible assets), liabilities and contingent liabilities of an
acquired entity are measured at their fair value and recognised at
the acquisition date. The determination of these fair values is
based upon management's judgment and includes assumptions on the
timing and amount of future incremental cash flows generated by the
assets acquired and the selection of an appropriate cost of
capital.
Goodwill arising on consolidation represents the excess of the
cost of an acquisition over the fair value of the Group's share of
the net assets / net liabilities of the acquired entity at the date
of acquisition. At the date of acquisition, goodwill acquired is
recognised as an asset and allocated to each of the cash-generating
units expected to benefit from the business combination's synergies
and to the lowest level at which management monitors the
goodwill.
Goodwill is reviewed for impairment at least annually by
assessing the recoverable amount of each cash-generating unit to
which the goodwill relates. The recoverable amount is the higher of
fair value less costs to sell, and value in use. When the
recoverable amount of the cash-generating unit is less than the
carrying amount, an impairment loss is recognised. Any impairment
loss is recognised immediately in profit or loss and is not
subsequently reversed.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
Revenue recognition
Revenue comprises the fair value of the consideration received
for the sale of services and products in the ordinary course of the
Group's activities. Revenue is shown net of value added tax,
rebates and discounts and after eliminating sales within the
Group.
The Group recognises revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits
will flow to the Group and when specific criteria have been met for
each of the Group's activities as described below. The Group bases
its estimates on historic results, taking into consideration the
type of transaction, the type of customer and the specifics of each
arrangement.
(a) Content services, post production & animation
Software sales
Where software is sold to a third party, there may be separable
elements of the transaction, such as software products, upgrades or
maintenance contracts. The Group allocates revenue to each element
based upon fair value. Revenue for software products is recognised
on delivery whereas revenue for upgrades or maintenance contracts
is recognised on a straight line basis over the life of the
relevant contract.
Post production & animation services
The group sells a variety of post production services to clients
in the film, broadcast and commercials sectors. These services are
provided as fixed price contracts, with contract terms generally
ranging over a period of many months.
Where the outcome of a contract can be estimated reliably,
revenue under these fixed price contracts is recognised under the
percentage completion method based on the services performed to the
reporting date as a percentage of total services expected to be
performed to deliver the contract. The Group generally measures
services performed by reference to hours spent.
Unbilled revenue is included as accrued income within
receivables. Revenue in respect of subsequent sales of completed
productions is recognised at the date the sale is agreed and the
product is shipped.
Where the terms of a contract take the form of an agency
arrangement, for example when the group does not have exposure to
significant risk associated with the completion of the contract,
commission revenue are recognised according to contractual
element.
(b) VFX
The group sells VFX services to clients in the film, broadcast
and commercials sectors. These services are provided as fixed price
contracts, with contract terms generally ranging over a period of
many months.
Where the outcome of a contract can be estimated reliably,
revenue under these fixed price contracts is recognised under the
percentage completion method based on the services performed to the
reporting date as a percentage of total services expected to be
performed to deliver the contract. The Group generally measures
services performed by reference to hours spent.
Unbilled revenue is included as accrued income within
receivables. Revenue in respect of subsequent sales of completed
productions is recognised at the date the sale is agreed and the
product is shipped.
Operating profit
Operating profit is shown after the deduction of expenses
incurred in the ordinary course of business. Exceptional items
represent income or expenses which based on their materiality and
non-recurring nature have been separately disclosed to allow an
assessment of the group's underlying operating profit.
Share-based compensation
The Group operates an equity-settled, share-based compensation
plan. The fair value of share option awards are estimated at the
date of award, using a Black-Scholes model, taking into account the
terms and conditions of the award.
No expense is recognised for grants that do not vest and charges
previously made are reversed except where vesting is conditional
upon a market condition which are treated as vesting irrespective
of whether or not the market condition is satisfied, provided all
other performance conditions are satisfied.
At each reporting date before vesting, the cumulative expense is
calculated, representing the extent to which the vesting period has
expired and management's best estimate of the achievement or
otherwise of non-market conditions, the number of equity
instruments that will ultimately vest or, in the case of an
instrument subject to a market condition, be treated as vesting as
described above. The movement in cumulative expense since the
previous balance sheet date is recognised in profit or loss, with a
corresponding entry in equity.
Where the terms for an equity-settled award are modified, and
the modification increases the total fair value of the share-based
payment, or is otherwise beneficial to the employee at the date of
modification, the incremental fair value is amortised over the
vesting period.
Leasehold improvements, equipment, motor vehicles, fixtures and
fitting
Leasehold property, equipment, motor vehicles, fixtures and
fittings are stated at cost less accumulated depreciation and any
provision for impairment. Cost comprises all costs that are
directly attributable to bringing the asset into working condition
for its intended use. Depreciation is calculated to write down the
cost of fixed assets to their residual values on a reducing balance
basis over the following estimated useful economic lives:
Equipment (including Assets held for
hire) 13.91%
Fixtures and fittings 18.10%
Motor vehicles 25.89%
Leasehold improvements are depreciated on a straight line basis
over the unexpired period of the lease.
Hire purchase and leased assets
Assets held under finance leases and hire purchase contracts are
capitalised in the balance sheet and depreciated over their
expected useful lives at the rates set out above. The interest
element of leasing payments represents a constant proportion of the
capital balance outstanding and is charged to the profit and loss
account over the period of the lease.
All other leases are operating leases which have annual rentals
charged to the profit and loss on a straight line over the lease
term.
Acquired intangible assets
Film rights represent amounts paid by the Group in respect of
content distribution agreements for certain film distribution
rights where the Group intends to enhance and release such films.
Film rights are measured initially at cost and are amortised on a
straight-line basis over their estimated useful lives. The period
of amortisation only starts at the point at which the films to
which the Group has purchased rights have been enhanced and become
available to produce economic returns.
Customer contracts acquired in a business combination are
recognised at fair value at the acquisition date. The contractual
customer relations have a finite useful life and are amortised on a
straight-line basis over this life, which is usually less than one
year.
Impairment of tangible and intangible assets excluding
goodwill
At each reporting date, the Group reviews the carrying amounts
of its tangible and intangible assets to determine whether there is
any indication that those assets are impaired. If such indication
exists, the recoverable amount of the asset is established in order
to determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from other
assets, an estimate is made of the recoverable amount of the
cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to
sell, and value in use. If the recoverable amount of an asset (or
cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit)
is reduced to its recoverable amount. An impairment loss is
recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of the recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined if no impairment loss had been
recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised as a credit to
profit or loss immediately.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in profit
or loss over the period of the borrowings using the effective
interest method.
Borrowings are classified as current liabilities unless the
group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
Leased assets
Where substantially all of the risks and rewards incidental to
ownership of a leased asset have been transferred to the Group (a
"finance lease"), the asset is treated as if it had been purchased
outright. The amount initially recognised as an asset is the lower
of the fair value of the leased property and the present value of
the minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease
payments are analysed between capital and interest. The interest
element is charged to profit or loss over the period of the lease
and is calculated so that it represents a constant proportion of
the lease liability. The capital element reduces the balance owed
to the lessor.
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an "operating lease"),
the total rentals payable under the lease are charged to profit or
loss on a straight-line basis over the lease term. The aggregate
benefit of lease incentives is recognised as a reduction of the
rental expense over the lease term on a straight-line basis.
Foreign currency translation
Transactions in currencies other than the functional currency
(foreign currencies) are recorded at the rates of exchange
prevailing on the dates of the transactions. At each reporting
date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing on the
reporting date. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are included in
profit or loss for the year.
Taxation
Corporation tax expense represents the sum of corporation tax
currently payable and deferred tax. The tax currently payable is
based on the taxable profit for the year. Taxable profit differs
from profit as reported in the Statement of Comprehensive Income
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group's liability for current tax
is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the statement of
comprehensive income.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Retirement benefits
The Group operates a defined contribution pension scheme. The
assets of the scheme are held separately from those of the Group in
an independently administered fund. The amount charged against
profits represents the contributions payable to the scheme in
respect of the accounting period.
Financial instruments
Financial assets and financial liabilities are recognised in the
Statement of Financial Position when the Group becomes a party to
the contractual provisions of the instrument.
Trade receivables
Trade receivables are non-interest bearing and are recognised
initially at fair value and subsequently measured less provision
for impairment. A provision for impairment of trade receivables is
established where there is objective evidence that the Group will
not be able to collect all amounts due according to the original
terms of the receivables. Significant financial difficulties of the
debtor, probability that the debtor will enter bankruptcy or
financial reorganisation and default or delinquency in payments are
considered indicators that the trade receivable is impaired.
When a trade receivable is uncollectible, it is written off
against the provision for trade receivables. Subsequent recoveries
of amounts previously written off are credited to profit or
loss.
Investments
For available-for-sale investments, gains and losses arising
from changes in fair value are recognised directly in equity, until
the security is disposed of or is determined to be impaired, at
which time the cumulative gain or loss previously recognised in
equity is included in the net result for the period. Dividends on
an available-for-sale equity instrument are recognised in profit or
loss when the entity's right to receive payment is established.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term, highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the company after deducting all
of its liabilities.
Trade payables
Trade payables are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective
interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Going concern
The Group's activities, together with the factors likely to
affect its future development are set out in the Managing
Director's Review. The Group meets its day to day working capital
requirements and funds its investment on content through a variety
of banking arrangements, cash generated from operations or, where
necessary, by loan from the Ultimate Parent Company, Prime Focus
Limited. The Ultimate Parent Company has confirmed it will continue
to support the Group for the foreseeable future as necessary.
The banking arrangements are shown in note 25 to the accounts.
The bank arrangements are subject to covenants and the Group is in
full compliance with its existing bank facility covenant
arrangements.
The Group is exposed to uncertainties arising from the economic
climate and also in the markets which it operates. Market
conditions could lead to lower than anticipated demand for the
Group's products and services and exchange rate volatility could
also impact reported performance. The directors have considered the
impact of these and other uncertainties and factored them into
their financial forecasts and assessment of covenant headroom. The
Group's forecasts and projections, taking into account of the
reasonable possible changes in trading performance (and available
mitigating actions), show that the Group will be able to operate
within the expected limits of the banking arrangements and provide
headroom against the covenants for the foreseeable future.
In the directors' view, the Group have adequate resources to
continue in operational existence for the foreseeable future. For
this reason the directors continue to adopt the going concern basis
in preparing the financial statements.
Inventories
Inventories are included at the lower of cost and net realisable
value less any provision for impairment.
Changes in accounting policy
i) Standards and amendments to existing standards effective 1 April 2011
The following new standards, amendments and interpretations are
effective for the first time in these financial statements but none
have had a material effect on the Group:
Standard / Interpretation Content
-------------------------- ------------------------------------
IAS 24 (Revised 2009) Related Party Disclosures
Amendment to IAS 32 Classification of Rights Issue
IFRIC 19 Extinguishing Financial Liabilities
with Equity Instruments
ii) Standards, amendments and interpretations to existing
standards that are not yet effective and have not been early
adopted by the Group in the 31 March 2012 financial statements:
At the date of authorisation of these financial statements
certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective.
The Group has not early adopted any of these pronouncements. The
new Standards, amendments and Interpretations that are expected to
be relevant to the Group's financial statements are as follows:
Applicable for
financial years
beginning on /
Standard / Interpretation Content after
-------------------------- ------------------------------------ -----------------
IFRS 9* Financial Instruments
Classification and measurement 1 January 2015
IFRS 10 Consolidated Financial Statements 1 January 2013
IFRS 11* Joint Arrangements 1 January 2013
Disclosure of Interest in Other
IFRS 12 * Entities 1 January 2013
IFRS 13* Fair Value Measurements 1 January 2013
IAS 19 (Revised Employee Benefits
June 2011)* 1 January 2013
Investments in Associates and
IAS 28 (Revised)* Joint Ventures 1 January 2013
Disclosures - Transfer of Financial
Amendments to Assets and Offsetting Financial
IFRS 7* Assets 1 July 2011
Financial Liabilities
-
Amendments to Deferred Tax : Recovery of
IFRS 12* Underlying Assets 1 January 2012
Amendments to Presentation of items of other
IFRS 1 comprehensive Income 1 July 2012
Amendments to Offsetting Financials Assets
IFRS 32* and Financial Liabilities 1 January 2014
* Not expected to be relevant to the Group
IFRS 9, 'Financial instruments: Classification and
measurement'
IFRS 9 will ultimately replace IAS 39. The standard requires an
entity to classify its financial assets on the basis of the
entity's business model for managing the financial assets and the
contractual cash flow characteristics of the financial asset, and
subsequently measures the financial assets as either at amortised
cost or fair value. The new standard is mandatory for annual
periods beginning on or after 1 January 2013.
IFRS 10 consolidated Financial Statements
IFRS 10 replaces the portion of IUAS 27 'Consolidated and
Separate Financial Statements' that addresses the accounting for
consolidated financial statements. It also includes the issues
raised in SIC-12' Consolidation - Special purpose Entities'. IFRS10
establishes a single control model that applies to all entities
including special purpose entities. The Changes introduced by IFRS
10 will require management to exercise significant judgement to
determine which entities are controlled and therefore, are required
to be consolidated by a parent, compared with the requirements that
were in IAS 27. This standard becomes effective for annual periods
beginning on or after 1 January 2013.
Amendments to IAS 1 Presentation of Financial Statements (IAS 1
Amendments)
The IAS 1 Amendments require an entity to Group items presented
in other comprehensive income into those that, in accordance with
other IFRSs: (a) will not be reclassified subsequently to profit or
loss and (b) will be reclassified subsequently to profit or loss
when specific conditions are met. It is applicable for annual
period beginning on or after 1 July 2012. It will not affect the
measurement or recognition of such items.
3. Critical accounting estimates and judgments
The preparation of the financial statements requires management
to make judgments, estimates and assumptions that affect the
application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated
assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances,
the results of which form the basis of making judgments about
carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical estimates and assumptions are primarily made in respect
of revenue recognition. As set out in the accounting policy note,
turnover is recognised as contract activity progresses and the
right to consideration is earned, reflecting time and cost incurred
as a percentage of total anticipated costs.
4. Capital management and financial instruments
a) Categorisation of financial instruments
At 31 March 2012 Available-for-sale Loans and receivables Total
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------------- ---------------------- ---------
Non-current financial assets
Investments 5 - 5
Current financial assets
Trade and other receivables (Note 18) - 24,156 24,156
Cash and cash equivalents - 1,228 1,228
------------------- ---------------------- ---------
5 25,384 25,389
------------------- ---------------------- ---------
Non-current financial liabilities
Borrowings (Note 25) - 515 515
Current financial liabilities
Borrowings (Note 22) - 15,125 15,125
Trade and other payables (Note 23) - 15,171 15,171
------------------- ---------------------- ---------
- 30,811 30,811
------------------- ---------------------- ---------
At 31 March 2011 Available-for-sale Loans and receivables Total
GBP'000 GBP'000 GBP'000
----------------------------------- ------------------- ---------------------- ---------
Non-current financial assets
Investments 32 - 32
Current financial assets
Trade and other receivables - 18,694 18,694
Cash and cash equivalents - 1,300 1,300
------------------- ---------------------- ---------
32 19,994 20,026
------------------- ---------------------- ---------
Non-current financial liabilities
Borrowings - 2,030 2,030
Current financial liabilities
Borrowings - 6,247 6,247
Trade and other payables - 11,933 11,933
------------------- ---------------------- ---------
- 20,210 20,210
------------------- ---------------------- ---------
b) Capital risk management
Capital comprises all components of equity - share capital,
other reserves and retained earnings. The Group's objectives when
managing capital are to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital. At present the Group is
unable to pay dividends or return equity to shareholders.
The Group sets the amounts of capital it requires in proportion
to risk. The Group manages its capital structure and makes
adjustments to it in light of changes in economic conditions and
risk characteristics of the underlying assets. In order to maintain
or adjust the capital structure, the Group may issue new shares or
sell assets to reduce debt.
During the year ended 31 March 2012 the Group's strategy, which
was unchanged from the previous year, was to monitor and manage the
use of funds whilst developing business strategies and
marketing.
c) Financial risk management
i) Credit risk
Credit risk is the risk of financial loss to the Group if a
client or counterparty to a financial instrument fails to meet its
contractual obligations, and arises principally from the Group's
receivables from clients and cash. Management has a credit policy
in place and the exposure to credit risk is monitored on an ongoing
basis.
The Group has a low credit risk in respect of its trade
receivables, its principal customers being national broadcasters
and major organisations which the Group has worked with for a
number of years. The Group is also exposed to credit risk in
respect of its cash and seeks to minimize this risk by holding
funds on deposit with major United Kingdom financial
institutions.
The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the balance sheet. The
highest credit risk exposure to a single customer at 31 March 2012
was GBP2,874k (2011: GBP265k).
An analysis of ageing of debt and the movement in the allowance
for doubtful accounts is presented in note 18.
ii) Liquidity risk
Ultimate responsibility for liquidity risk management rests with
the Board, which has developed a liquidity management forecasting
process which aims to ensure that the Group has sufficient cash at
all times to meet liabilities as they fall due.
Working capital requirements are generally provided from cash
generated from operations, bank overdraft or, where necessary, by
loan from the Parent Company, Prime Focus Limited.
The following analysis sets out the maturities of financial
assets and liabilities.
At 31 March 2012 Less than 3 months Between 3 and 12 months More than 12 months Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------------- ------------------------ -------------------- ---------
Financial assets
Investments - - 5 5
Trade and other receivables 20,090 4,066 - 24,156
Cash and cash equivalents 1,228 - - 1,228
------------------- ------------------------ -------------------- ---------
21,318 4,066 5 25,389
------------------- ------------------------ -------------------- ---------
Financial liabilities
Borrowings 11,647 3,478 515 15,640
Trade and other payables 15,171 - - 15,171
------------------- ------------------------ -------------------- ---------
26,818 3,478 515 30,811
------------------- ------------------------ -------------------- ---------
At 31 March 2011 Less than 3 months Between 3 and 12 months More than 12 months Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------------- ------------------------ -------------------- ---------
Financial assets
Investments - - 32 32
Trade and other receivables 14,291 4,403 - 18,694
Cash and cash equivalents 1,300 - - 1,300
------------------- ------------------------ -------------------- ---------
15,591 4,403 32 20,026
------------------- ------------------------ -------------------- ---------
Financial liabilities
Borrowings 4,755 1,492 2,030 8,277
Trade and other payables 6,968 4,965 - 11,933
------------------- ------------------------ -------------------- ---------
11,723 6,457 2,030 20,210
------------------- ------------------------ -------------------- ---------
iii) Market risk
The Group does not trade in financial instruments. As described
in note 16, the Group does have an equity investment which is
exposed to price risk, but the directors do not consider this to be
material to the Group.
It is, and has been throughout the year under review, the
Group's policy that financial derivatives shall not be used. As a
result, the Group has not used interest rate hedges and currency
swaps during the year.
Accordingly, the primary market risks to which the Group is
exposed are foreign currency and interest rate risk.
Foreign currency risk
Some equipment is purchased in US Dollars. Management has
continued to monitor the foreign exchange risk so that appropriate
action can be taken if required.
The table below shows the extent to which the Group has
financial assets and liabilities in currencies other than Sterling.
Foreign exchange differences on re-translation of these assets and
liabilities are recognised profit or loss.
2012
US Dollars GB pounds Total
GBP000 GBP000 GBP000
----------------- ---------------- -------------
Assets - GBP 2,872 22,517 25,389
Liabilities - GBP 8,971 21,840 30,811
----------------- ---------------- -------------
2011
US Dollars GB pounds Total
GBP000 GBP000 GBP000
----------------- ---------------- -------------
Assets - GBP 3,634 16,392 20,026
Liabilities - GBP 7,074 13,136 20,210
----------------- ---------------- -------------
A 10 percent strengthening of Sterling against the US Dollar at
31 March would have increased / (decreased) equity and profit or
loss by GBP1,077K (2011: GBP974k). A 10 percent weakening of
sterling against the US Dollar at 31 March would have had the equal
but opposite effect. This analysis assumes that all other
variables, in particular interest rates, remain constant.
Interest rate risk
Bank loans are arranged at floating rates, thus exposing the
Group to cash flow interest rate risk. The Group does not consider
this risk as significant. The benchmark rates for determining
floating rate liabilities are based on LIBOR.
The interest rate profile of the Group's financial assets and
liabilities were:
At 31 March 2012 Fixed rate Floating rate Interest free Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ----------- -------------- -------------- ---------
Financial assets
Investments - - 5 5
Trade and other receivables - - 24,156 24,156
Cash and cash equivalents - 1,228 - 1,228
----------- -------------- -------------- ---------
- 1,228 24,161 25,389
----------- -------------- -------------- ---------
Financial liabilities
Borrowings 1,632 8,247 5,761 15,640
Trade and other payables - - 15,171 15,171
----------- -------------- -------------- ---------
1,632 8,248 20,931 30,811
----------- -------------- -------------- ---------
At 31 March 2011 Fixed rate Floating rate Interest free Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ----------- -------------- -------------- ---------
Financial assets
Investments - - 32 32
Trade and other receivables - - 18,694 18,694
Cash and cash equivalents - 1,300 - 1,300
----------- -------------- -------------- ---------
- 1,300 18,726 20,026
----------- -------------- -------------- ---------
Financial liabilities
Borrowings 1,684 5,220 1,373 8,277
Trade and other payables - - 11,933 11,933
----------- -------------- -------------- ---------
1,684 5,220 13,306 20,210
----------- -------------- -------------- ---------
A 1 percent increase in floating interest rates at 31 March
would have decreased equity and profit by GBP70k (2011: GBP39k). A
1 percent decrease in floating interest rates at 31 March would
have had the equal but opposite effect. This analysis assumes that
all other variables remain constant.
5. Segmental Reporting
The Group is organised into operating segments based on the
nature of services provided. The information reviewed by the
executive directors, who are perceived to fulfill the function of
chief operating decision maker for the Group, contains various
operating segments however, certain of these operating segments are
aggregated into one reportable segment on the basis of the
operating segments having similar economic characteristics and one
management team is responsible for these combined segments.
The reportable segments of the group are comprised of the
following:
-- Content services, post production & animation - providing
data, content management and full post production & animation
services and facilities to the broadcasting, advertising and film
production sectors;
-- VFX - offers a full range of services to film and broadcast
including pre-production, pre-visualisation and design, VFX
supervision, 3D animation, matte paintings, digital grading and
title design.
The accounting policies of the operating segments are the same
as those described in the summary of significant accounting
policies. The executive directors evaluate performance on the basis
of profit or loss before tax.
Year ended 31 March 2012 Content services, VFX Total
post production
& animation
GBP'000 GBP'000 GBP'000
------------------ -------- ---------
Revenue 30,484 746 31,230
Inter-segment transactions - - -
Depreciation and impairment
of property, plant & equipment (2,050) (78) (2,128)
Other income and expenses (27,086) (1,032) (28,118)
Profit / (loss) before tax 1,348 (364) 984
------------------ -------- ---------
Year ended 31 March 2011 Content services VFX Total
& post production
GBP'000 GBP'000 GBP'000
------------------- --------- ---------
Revenue 21,867 8,741 30,608
Inter-segment transactions - - -
Depreciation and impairment
of property, plant & equipment (914) (197) (1,111)
Other income and expenses (13,375) (12,212) (25,587)
Loss before tax 7,578 (3,668) 3,910
------------------- --------- ---------
Entity wide disclosures
Revenue by geographical markets
2012 2011
GBP'000 GBP'000
-------- --------
United Kingdom 25,745 24,820
Europe 50 29
Rest of the world 5,435 5,759
-------- --------
31,230 30,608
-------- --------
Non-current assets by geographical market
2012 2011
GBP'000 GBP'000
-------- --------
United Kingdom 16,276 8,736
-------- --------
6. Operating profit / (loss) before
exceptional items
2012 2011
Operating profit / (loss) is stated GBP000 GBP000
after charging/(crediting):
------- --------
Depreciation Charge for the period
Owned Assets 1,866 823
Leased Assets 262 288
------- --------
Total Depreciation 2,128 1,111
(Profit) / loss on disposal of property,
plant and equipment, film rights - (84)
Operating lease rentals:
Others 1,144 1,054
------- --------
Auditors' remuneration
2012 2011
GBP000 GBP000
------- -------
Amounts receivable by auditors and
their associates in respect of:
Audit of financial statements
of Company 35 30
Audit of financial statement of subsidiaries
pursuant to legislation 10 9
All other services relating
to taxation 8 3
All other services - 2
------- -------
Other fees paid to auditors relate to advice in connection with
taxation and compliance matters. The directors do not consider that
the level of fees paid to the auditors for non-audit services
threatens their independence. The auditors have confirmed they
agree with the conclusion.
7. Staff numbers and costs
The average number of persons employed by the Group (including
directors) during the year was:
2012 2011
No. No.
Production and sales 271 246
Management and administration 66 60
----- -----
337 306
----- -----
The total staff cost incurred by the Group was:
2012 2011
GBP000 GBP000
---------- ----------
Wages and salaries 14,217 10,053
Social security costs 527 1,120
14,744 11,173
---------- ----------
Directors' emoluments were GBP24,650 (2011: GBP30,000), of which
the highest paid director's received GBP8,750 (2011:
GBP15,000).
Contributions were paid on behalf of the directors to money
purchase pension schemes amounting to GBPnil (2011: GBPnil).
Number of directors to whom retirement benefits are accruing
under the defined contribution pension scheme is nil (2011:
nil)
Key management remuneration (including directors):
2012 2011
GBP000 GBP000
------- -------
Wages and salaries 2,339 2,202
Social security costs 253 264
2,592 2,466
------- -------
Key management is defined as being the directors of the Group
and other senior management with the authority and responsibility
for planning, directing and controlling the Group's activities.
8. Other income
2012 2011
GBP000 GBP000
---------- ---------------
Rental income - 24
Reverse Premium 186 47
Return on Investments 32 -
Service Charge 28 -
Insurance Claim - 149
Profit on Sale of investments - 848
Exchange gain - 91
---------- ---------------
246 1,159
---------- ---------------
9. Finance income and cost
2012 2011
GBP000 GBP000
-------- --------
Finance income
Interest on loans to fellow subsidiaries 310 464
-------- --------
Finance cost
Other interest payable 302 348
Interest on loans from Parent 520 184
Bank interest payable 388 62
1,210 594
-------- --------
10. Exceptional Items
Exceptional income relates to net profit from sale of View D and
VFX business GBP0.550m, GBP0.023m for supplier balances write
off.
Exceptional charge relate to cost for Legal fees on abortive
transaction GBP0.100m, exceptional cost of GBP0.049m for write off
of Goodwill
This gives a total exceptional item credit for the current year
ending March 31, 2012 of GBP0.425m.
11. Tax expense
2012 2011
GBP000 GBP000
------- -------
Current tax
UK Corporation tax - -
Adjustments in respect of prior years - -
Deferred tax
Origination and reversal of timing differences (126) (511)
Deferred tax assets relating to trading
losses 126 403
------- -------
Total tax on profit on ordinary activities - (108)
------- -------
Deferred tax asset amounting to GBP1.048M for capital losses has
not been recognised because in the opinion of the Directors, there
will be no suitable taxable gains available in the foreseeable
future.
The difference between the tax charge and the amount calculated
by applying the standard rate of UK corporation tax to the profit
before tax is shown below.
2012 2011
GBP000 GBP000
Group profit / (loss) on ordinary activities
before tax 984 3,910
Tax on Group profit / (loss) on ordinary
activities at the standard UK corporation
tax
------- -------
Rate of 26% (2011: 28%) 256 1,095
Effects of:
Expenses Not Deductible including timing
differences for capital allowances 89 (145)
Unrecognised tax losses - (61)
Utilisation of tax losses (345) -
Adjustment to tax charge in respect of
exceptional item adjustments - (889)
------- -------
Tax charge for the year - -
------- -------
12. Earnings per share
Basic earnings per share amounts are calculated by dividing the
profit or loss attributable to owners of the parent by the weighted
average number of shares in issue during the year.
Diluted earnings per share amounts are calculated by dividing
the profit attributable to owners of the parent by the weighted
average number of shares in issue during the year, adjusted for the
effects of potentially dilutive options.
The dilution effect is calculated on the full exercise of all
potentially dilutive ordinary share options granted by the
Group.
All operations are continuing for the years presented.
2012 2011
Basic Potentially Diluted Basic Potentially Diluted
dilutive dilutive
share options share
options
------- --------------- --------- ------- ------------ ---------
Profit / (Loss) (GBP000) 984 984 3,802 - 3,802
Weighted average
number of shares
(000s) 32,864 241 33,105 32,632 348 32,980
Earnings per share
(pence) 2.99 2.97 11.65 - 11.53
------- --------------- --------- ------- ------------ ---------
13. Intangible assets
Goodwill Film Rights Total
GBP000 GBP000 GBP000
Cost
At 1 April 2011 49 658 707
Additions - 1,184 1,184
Disposals (49) (433) (482)
At 31 March 2012 - 1,409 1,409
--------- ------------ --------
Net carrying value
At 31 March 2012 - 1,409 1,409
--------- ------------ --------
At 31 March 2011 49 658 707
--------- ------------ --------
Cost
At 1 April 2010 - 9,345 9,345
Additions 49 429 478
Disposals - (9,116) (9,116)
At 31 March 2011 49 - 8,638
--------- ------------ --------
Net carrying value
--------- ------------ --------
At 31 March 2011 49 658 707
--------- ------------ --------
14. Property, plant and equipment
Short Equipment,
leasehold Motor Assets held fixtures
and
GROUP premises Vehicles for hire fittings Total
GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 April 2011 4,409 52 - 14,749 19,210
Additions 107 - 7,115 3,188 10,410
Disposals - - - (6,571) (6,571)
At 31 March
2012 4,516 52 7,115 11,366 23,049
Accumulated
depreciation
At 1 April 2011 3,164 38 - 8,011 11,213
Charge for the
year 232 4 522 1,370 2,128
Disposals - - - (5,154) (5,154)
At 31 March
2012 3,396 42 522 4,227 8,187
Net Book Value
At 31 March
2012 1,120 10 6,593 7,139 14,862
At 31 March
2011 1,245 14 - 6,738 7,997
Cost
At 1 April 2010 4,409 52 - 12,681 17,142
Additions - - - 2,494 2,494
Disposals - - - (426) (426)
At 31 March
2011 4,409 52 - 14,749 19,210
Accumulated
depreciation
At 1 April 2010 2,937 34 - 7,425 10,396
Charge for the
year 227 4 - 937 1,168
Disposals - - - (351) (351)
At 31 March
2011 3,164 38 - 8,011 11,213
Net Book Value
At 31 March
2011 1.245 14 - 6,738 7,997
The net book value of equipment, fixtures & fittings
includes an amount of GBP1,674,630 (2011:GBP1,823,031) in respect
of assets held under hire purchase agreements. The charge for
depreciation for the year on these assets was GBP262,259 (2011:
GBP288,757). The net book value of assets held for hire includes an
amount of GBP3,577,935 in respect of assets being leased out to
other companies of the parent group.
15. Other receivables
2012 2011
GBP000 GBP000
---------- ----------
Amounts falling after more than one year:
Other receivables - -
---------- ----------
- -
---------- ----------
16. Investments
Listed equity Other investments Total
investments
GBP000 GBP000 GBP000
-------------- ------------------ ---------
At 1 April 2011 12 20 32
Change in fair value (7) (20) (27)
Addition - - -
At 31 March 2012 5 - 5
-------------- ------------------ ---------
Listed equity Total
investments
GBP000 GBP000
-------------- ---------
At 1 April 2011 12 12
Change in fair value (7) (7)
At 31 March 2012 5 5
-------------- ---------
The Group through its wholly owned subsidiary, VTR Media
Investments Limited, owns 1,750,000 ordinary shares of GBP1 each in
Conexion Media Group Plc (formerly known as Music Copyrights
Solutions plc), a company incorporated in England and Wales. This
company is listed on AIM. The market value of these shares at 31
March 2012 was GBP4,900 (2011: GBP12,250).
The principal undertakings in which the Group's interest at the
year end is more than 20% are as follows:
Subsidiary undertakings: Principal activity at 31 Country of incorporation Percentage of ordinary
March 2012 shares held
---------------------------- ----------------------------- --------------------------- ----------------------------
Amazing Spectacles Limited
** Post production services Great Britain 100%
Prime Focus Visual
Entertainment Services
Limited * Broadcast post production Great Britain 100%
VTR Media Investments
Limited * Media investments Great Britain 100%
Clipstream Limited * Digital content management Great Britain 100%
PF Film UK Limited *
(In Liquidation) Dormant Great Britain 100%
Meanwhile Content Limited Post production of
** television commercials Great Britain 51%
Busy Buses Limited Dormant Great Britain 100%
PF Television VFX Ltd Broadcast VFX Great Britain 100%
Prime Focus Productions 1
Ltd Dormant Great Britain 100%
PF Broadcast VFX Ltd Broadcast VFX Great Britain 100%
DMJM Limited Dormant Great Britain 100%
PF Broadcast & Commercial
Ltd * Post production services Great Britain 100%
* Held by Prime Focus London plc
** Held by VTR Media Investments Limited
The Company accounts for its investments in subsidiaries using
the cost model.
17. Inventories
2012 2011
GBP000 GBP000
------- -------
Tapes and cassettes 41 38
------- -------
18. Trade and other receivables
2012 2011
GBP000 GBP000
--------- ---------
Amounts falling due within one year:
Trade receivables 5,659 14,499
Less: Provision for impairment of trade receivables (1,027) (887)
--------- ---------
4,632 13,612
Other debtors 2,874 -
Agency debtors 8,077 -
Amounts owed from fellow subsidiaries 8,573 5,082
Prepayments and accrued income 2,558 2,869
--------- ---------
26,714 21,563
--------- ---------
The average credit period for trade receivables at the end of
the year is 54 days. (2011: 162 days). The carrying amounts of the
Group's trade and other receivables are denominated in
sterling.
Trade receivables that are less than 3 months past due are not
considered impaired. As of 31 March 2012, trade receivables of
GBP2,520k (2011: GBP4,403k) were past due but not impaired. These
relate to a number of independent customers for whom there is no
recent history of default. The ageing analysis of all trade
receivables is as follows:
2012 2011
GBP000 GBP000
------- -------
Up to 3 months 3,139 9,209
3 to 6 months 1,073 1,479
Over 6 months 1,447 2,924
------- -------
5,659 13,612
------- -------
An analysis of the movement in the provision for impairment of
trade receivables is provided below:
2012 2011
GBP000 GBP000
------- -------
Balance at beginning of year 887 369
Impairment losses recognised 900 518
Amounts written off (760) -
Balance at end of year 1,027 887
------- -------
19. Deferred tax
The movement for the year in the Group's net deferred tax asset
provided at the UK company rate of corporation tax of 26% (2011:
28%) was as follows:
2012 2011
GBP000 GBP000
------- -------
Opening balance (90) 18
Recognised in statement of comprehensive income - (108)
------- -------
Closing balance (90) (90)
------- -------
The non-current asset/(provision) comprises:
Accelerated capital allowances (619) (493)
Unutilised losses 529 403
------- -------
(90) (90)
------- -------
20. Called Up Equity Share Capital
The Company has issued the following shares during the year:
2012 2011
------- -------- -------- --------
Authorised Number GBP000 Number
GBP000 (000s) (000s)
Ordinary shares of 5p
each 2,500 50,000 2,500 50,000
------- -------- -------- --------
Allotted
Allotted, called up and
fully paid
Ordinary shares of 5p each
At 1 April 1,638 32,757 1,632 32,632
Issued during the
year
Issue of Shares 5 107 6 125
Ordinary shares of 5p each
at 31 March 1,643 32,864 1,638 32,757
------- -------- -------- --------
During the year a total of 107,353 ordinary shares of 5p each
were issued.
Full details of all shares issued during the year can be found
in the stock exchange announcements.
Omitted from the prior year financial statements was an issue of
125,000 shares of 5p each.
21. Share-based payments
The company implemented a share option scheme for all employees
of the Group who participated in a salary reduction scheme. The
charge for the year recognised in profit or loss in respect of
equity-settled, share-based payments is GBPnil (2011: GBPnil).
The following tables reconcile the number of share options
outstanding and the weighted average exercise price:
For the year ended 31 March 2012 Options Weighted average
exercise price
---------- -----------------
Number Pence
Outstanding at 1 April 2011 1,086,190 7.00
Granted - -
Forfeited - -
Exercised 107,353 -
---------- -----------------
Outstanding at 31 March 2012 978,837 7.00
---------- -----------------
Exercisable as at 31 March 2012 978,837 -
---------- -----------------
For the year ended 31 March 2011 Options Weighted average
exercise price
---------- -----------------
Number Pence
Outstanding at 1 April 2010 - -
Granted 1,086,190 7.00
Forfeited - -
Exercised - -
---------- -----------------
Outstanding at 31 March 2011 1,086,190 7.00
---------- -----------------
Exercisable as at 31 March 2011 - -
---------- -----------------
The average share price during the year ended 31 March 2012 was
22.55p (2011: 12.42p).
22. Borrowings
Due within one 2012 2011
year
GBP000 GBP000
-------------- --------------
Bank loan 8,247 3,816
Hire Purchase Obligation 1,632 1,058
Loan from Parent Company 5,761 1,373
-------------- --------------
15,640 6,247
-------------- --------------
23. Trade and other payables
2012 2011
GBP000 GBP000
------- -------
Trade payables 4,617 9,809
Agency Creditors 8,675 -
Other payables 1,879 2,124
Accruals and deferred income 2,901 2,825
Social security and other taxes 1,872 932
------- -------
19,944 15,690
------- -------
The average credit period taken for trade payable at the end of
the year is 131 days (2011: 161days).
24. Income tax liabilities
Amounts falling within one 2012 2011
year:
GBP000 GBP000
------- -------
Corporation tax payable - -
------- -------
25. Borrowings
Due after more than 2012 2011
one year GBP000 GBP000
Bank / other
loan - 1,404
Hire purchase
obligation 515 626
-----------
515 2,030
---------------- -----------
Analysis of debt 2012 2011
maturity:
GBP000 GBP000
---------------- -----------
Repayable within one year
Bank loan 8,247 3,816
Hire purchase obligations 1,117 1,058
Loan from Parent Company 5,761 1,373
---------------- -----------
15,125 6,247
---------------- -----------
Repayable between one and two years
Bank / other loan - 1,404
Hire purchase obligations 515 313
Repayable between two and five
years
Bank loan - -
Hire purchase obligations - 313
515 3,405
---------------- -----------
Bank loans are secured by a fixed and floating charge over the
assets of the Group.
The maximum facility available as per the Bibby Factors
Manchester Limited Invoice discounting loan is GBP1.5 million
(2011: GBP1.5 million from Bibby). Interest is charged at 2% (2011:
2%) above the Bank of England base rate (with a minimum base /
libor rate of 3%).
26. Operating Lease and Capital commitments
(a) Total commitments under non-cancellable operating leases,
together with the obligations by maturity, are as follows:
2012 2011
GBP000 GBP000
---------- ----------
Commitments under non-cancellable operating
leases:
Within one
year 1,144 1,054
Later than one year and less
then five years 4,389 4,020
After five
years 444 1,765
---------- ----------
5,977 6,839
---------- ----------
27. Pensions
The Group's principle pension plans comprise a defined
contribution pension scheme. The pension charge for the year
represents contributions payable by the Group which amounted to
GBPnil (2011: GBPnil).
There were no outstanding or prepaid contributions at either the
beginning or end of each financial year.
28. Related party transactions
The following transactions with companies within the Group
headed by Prime Focus World ("PFW group"), a fellow subsidiary
company, occurred during the year:
- Prime Focus North America Inc, as associate company in the
USA, being a subsidiary of the Parent Company paid a sum equivalent
to GBP58,144 (2011: GBP31,439) on behalf of PFLPLC to third parties
in respect of operational and capital expenditure.
- Prime Focus North America Inc charged the Parent company the
equivalent of GBP45,892 (2011: GBP40,949) for travel expenses and
GBP0 (2011: GBP2,619,796) for license fees.
- PFLPLC charged Prime Focus North America Inc GBP220,762 (2011:
GBP371,444) for loan interest incurred by the company. Costs of
GBP172,194 (2011 GBP155,650) were incurred by PFLPLC in relation to
fixed assets. Additionally, costs in relation to travel and other
business expenses totalling GBP202,053 (2011: GBP160,836) were
incurred by PFLPLC.
- PFLPLC carried out post production work on behalf of Prime
Focus North America Inc. The total fee paid by Prime Focus North
America Inc to PFLPLC was GBP978,736 (2011: GBPnil).
- At 31 March 2012 the balance due from Prime Focus North
America Inc. was a sum of GBP1,991,990 (2011: GBP3,626,387),
including an underlying loan of GBP1,985,348.
- PFLPLC paid a sum of GBP68,553 (2011: GBPnil) to third parties
in respect of capital expenditure by Frantic Film VFX Inc., an
associate company in Canada, being a subsidiary of the Parent
Company. Additionally, costs in relation to travel and other
business expenses totalling GBP171,237 (2011: GBP6,334) were
incurred by PFLPLC. Frantic Film VFX incurred costs of GBP58,617
(2011: GBPnil) on behalf of PFLPLC.
- At 31 March 2012 the balance due to Frantic Films VFX Inc was
a sum of GBP410,817 (2011: -GBP684,735), including an underlying
loan payable of GBP967,054.
- Prime Focus International Services UK Ltd, as associate
company in UK, being a subsidiary of the Parent Company paid a sum
equivalent of GBP50,000 (2011: GBPnil) on behalf of PFLPLC to third
parties in respect of operational and capital expenditure.
- PFLPLC charged Prime Focus International Services UK Ltd for
Costs of GBP5,658,013 (2011 GBPnil) that were incurred by PFLPLC in
relation to fixed assets. Additionally, costs in relation to travel
and other business expenses totalling GBP4,803,576 (2011 GBPnil)
were incurred by PFLPLC. During the year Prime Focus International
Services UK Ltd paid GBP11,083,922 to PFLPLC against the fixed
assets and business expense incurred by PFLPLC.
- Prime Focus International Services UK Ltd carried out post
production work on behalf of PFLPLC clients. The total fee paid by
PFLPLC to the Parent Company in respect of this work was
GBP1,200,206 (2011: GBPnil). During the year PFLPLC paid GBP278,822
to Prime Focus International Services UK Ltd in respect of the post
production work done for PFLPLC clients.
- PFLPLC carried out post production work on behalf of Prime
Focus International Services UK Ltd clients. The total fee paid by
PFLPLC to Parent Company was GBP1,551,200 (2011: GBPnil).
- At 31 March 2012 the balance due to Prime Focus International
Services UK Ltd was a sum of GBP42,517 (2011: GBPnil).
- The balance outstanding at the end of the year payable to
Prime Focus International Limited was GBP4,767,822 (2011:
Receivable GBP145,549).
- The balance outstanding at the end of the year receivable from
Prime Focus World NV was GBP3,462 (2011: GBPnil).
The following transactions with the Parent Company (Prime Focus
India Limited) occurred during the year:
- The Parent Company charged PFLPLC for operational related
expenditure relating to PFLPLC's activities the sum of GBP246,113
(2011 : GBP12,152);
- PFLPLC paid a sum of GBP48,357 (2011: GBPnil) to a third party
on behalf of the Parent Company;
- The Parent Company carried out post production work on behalf
of PFLPLC clients. The total fee paid by PFLPLC to the Parent
Company was GBP2,658,206 (2011: GBP3,157,026). During the year
PFLPLC paid GBP3,014,808 to the Parent Company in respect of
against the post production work done on behalf of PFLPLC
clients.
- PFLPLC carried out post production work on the Parent Company
clients. The total fee paid by PFLPLC to Parent Company was
GBP154,886 (2011: GBPnil).
- The balance outstanding at the end of the year payable to
Parent Company was GBP3,200,400 (2011: GBP3,514,132).
- During the year PFLPLC paid expenses totalling GBP440,294
(2011: GBP22,482) on behalf of Prime Focus International
Limited.
- The balance outstanding at the end of the year receivable from
Prime Focus Technologies Ltd, India was GBP69,409 (2011:
GBPnil).
- The balance outstanding at the end of the year receivable from
Prime Focus Technologies UK Ltd was GBP407,975 (2011: GBPnil).
- At 31 March 2012 the balance due from Prime Focus Motion
Pictures Limited was a sum of GBP9,055,000 in respect of sale of
film rights.
The Parent Company has indemnified PFL PLC against all potential
foreign exchange gains and losses.
As reported in previous year's accounts under related party
balances, certain equipment owned by the Company is retained in
India for the use by the Group in its trading activities. No charge
has been made to the Parent Company for rent, maintenance and
operation of the equipment.
29. Contingent assets & liabilities
The bank loans of the Group undertakings are secured by cross
guarantee between Group companies. At 31 March 2012, the liability
of the bank was borne by the Company at a value of GBPnil (2011:
Nil)
The Company is a member of a Group VAT registration and is
jointly and severally liable for any debts by member of the
registration as at the year ended 31 March 2012. The total Group
liability amounted to GBP177,287.
30. Ultimate controlling party
Prime Focus Limited, a company incorporated in India is the
ultimate controlling party.
31. Availability of Report and Accounts
A copy of the final report and accounts for the year ended 31
March 2012 will shortly be posted to shareholders and be available
from the Company's website, www.pflplc.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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