DCD MEDIA PLC
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2011
Company number 03393610
Contents
Audited results for the year ended 31 December 2011
Executive Chairman’s review
Chief Executive Officer’s review
Report of the Directors for the year ended 31 December 2011
Board of Directors
Independent auditor’s report to the members of DCD Media Plc
Consolidated income statement for the year ended 31 December 2011
Consolidated statement of comprehensive income for the year ended 31 December 2011
Consolidated statement of financial position as at 31 December 2011
Consolidated statement of cash flows for the year ended 31 December 2011
Consolidated statement of changes in equity for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
Company balance sheet as at 31 December 2011
Notes to company accounts for the year ended 31 December 2011
Company information
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DCD Media Plc
Financial statements for the year ended 31 December 2011
DCD Media Plc
(“DCD Media” or the “Group”)
Audited results for the year ended 31 December 2011
DCD Media, the independent TV production and distribution group, reports results for the year ended 31 December
2011.
Financial Summary (comparatives are eighteen months to 31 December 2010)
Continuing operations:
• Revenue
£21.8m (2010: £32.4m)
• Gross profit
£7.0m (2010: £7.2m)
• Operating loss
£6.0m (2010: £10.1m)
Discontinued operations:
• Revenue
£8.1m (2010: £15.9m)
• Gross profit
£1.1m (2010: £3.0m)
• Operating loss
£1.8m (2010: £1.1m)
Group results:
• Unadjusted Loss Before Tax
£8.2m (2010: £8.4m)
• Adjusted Profit Before Tax
£0.1m (2010: £1.8m)
• Adjusted EBITDA
£0.6m (2010: £2.3m)
Refer to table within the Financial Review section below for a reconciliation of the adjustments.
Business highlights
•
£1.75m fundraising completed through £0.75m placing and £1.0m issue of convertible debt;
• New factual production company ‘Rize USA’ launched successfully with several commissions won during the year
and over £2 million worth of new orders to date;
• September Films Limited grew US creative team off of the back of new seasons of US reality shows Bridezillas and
Billy The Exterminator, and in the UK delivered Saturday night ITV1 primetime series Penn & Teller: Fool Us
presented by Jonathan Ross;
•
Factual division centralised its management team and launched topical programming unit;
• Cardiff based company Prospect Cymru/Wales Limited delivered award winning Shirley on BBC2 as the centre
piece of BBC2’s Mixed Race season; and
• DCD Media appointed new members to the Board of Directors, adding Sammy Nourmand and John Cusins as
Executive Director and Non-Executive Director of the Company, respectively.
Post year end events:
• DCD Media appointed Sammy Nourmand as Chief Executive Officer and David Green as Executive Chairman;
and
• DCD Media added post production activity to the range of its television production businesses with the launch of
DCD Post-Production Limited, trading under the brand name ‘Sequence’.
DCD Media Plc
1
Financial statements for the year ended 31 December 2011
•
•
Timeweave plc acquired £3.1 million of convertible loan notes due on 28 November 2012 and converted £595,750
into 59,575,000 shares representing 29.9% of the Company’s issued share capital.
The DCD Media Board of Directors have been, and continue to be, in discussions with the Directors of Timeweave
to understand their intentions and are working with Timeweave on a proposal to reduce, or negate, the impact of the
repayment of the convertible debt in November.
David Green, Executive Chairman, commented:
“Despite the continuing tough and challenging environment, the Group has delivered a steady set of results underpinned
by an optimised operating structure and stronger financial footing that put us in a position to effectively take advantage of
new opportunities on both sides of the Atlantic, grow the business and deliver long-term sustainable results for our
shareholders.”
For further information please contact:
Nahid Burke
Investor Relations/ Media Relations
DCD Media plc
Tel: +44 (0)20 8563 6976
ir@dcdmedia.co.uk
Stuart Andrews, Charlotte Stranner or Rose Herbert
finnCap
Tel: +44 (0) 20 7220 0500
DCD Media Plc
2
Financial statements for the year ended 31 December 2011
Executive Chairman’s review
Review of activity within the Group during the year.
Production
-
-
-
Factual Television Production - This division is involved in the production of factual based content from the Prospect
Pictures, Prospect Cymru/Wales, Rize USA and West Park Pictures brands. The review of joint venture Matchlight is
also contained in this division
Entertainment Television Production – This division is involved in the production of entertainment based television
content. This includes productions by September Films
Event Management – This division organises and manages events, primarily music concerts through Done and
Dusted
Distribution
- Rights and Licensing – This division is involved with the sale of distribution rights, DVDs, music and publishing deals
through DCD Rights and DCD Publishing (which comprises Digital Classics DVD and DCD Music)
Factual Division
The Group restructured its factual division bringing West Park Pictures, Prospect Pictures and Prospect Cymru/Wales
under the Factual umbrella supported by a centralised management team with factual programming expertise including
business affairs, finance and production management.
Highlights for 2011 included several successful programmes notably: Shirley, the biopic starring Ruth Negga in the role
of Shirley Bassey, which achieved top ratings as the centre piece of BBC2’s Mixed Race season and has won the Best
Television Actress award at the Irish Film And Television Awards and was nominated for Best Actress at the Royal
Television Society Awards; 6-part series Misbehaving Mums To Be for BBC3 which enjoyed high ratings and
international sales; 2-part BBC documentary Passion of Port Talbot starring Michael Sheen which aired on BBC Wales
to critical acclaim and BBC4 documentary Elgar: The Man Behind the Mask which won numerous awards including a
BAFTA Craft Award 2011.
Finally the division launched a topical programming unit which quickly won its first commission with the documentary
Gipsy Eviction: The Fight for Dale Farm for Channel 4, one of the highest rated Dispatches films of 2011.
Matchlight
Glasgow based independent factual producer Matchlight, the joint venture with DCD Media launched in 2009, further
cemented its reputation as one of Scotland's leading production companies.
Matchlight’s roster of clients now includes all the major UK broadcasters and the company has also strengthened its links
with on-screen talent, working with a range of high profile personalities such as Prof. Amanda Vickery, John Humphrys,
Rory Stewart, Dr. Helen Castor and Alexis Conran.
During the year Matchlight delivered over 10 series or individual films including for BBC1 - The Griersons Awards
nominated Imagine: The Trouble with Tolstoy; for BBC2 - the RTS Programme Award nominated At Home with the
Georgians; The Many Lovers of Jane Austen and The Future State of Welfare; for BBC3 - Josie: My Cancer Curse;
and for Channel 5 – the 6 part series Dangerous Drivers’ School. Just after the year end it also won its first
commission for ITV1 with a new film Lenny Henry: Finding Shakespeare, presented by comedian and actor Lenny
Henry.
The outlook for Matchlight remains positive with a slate of projects in production and development across observational
documentary, history, arts, current affairs and popular factual television.
Rize USA
Rize USA was launched in October 2011 as a co-venture between DCD Media and former September Films Creative
Director, Sheldon Lazarus. Based in London and Los Angeles, the company operates under the DCD umbrella and
focuses on factual, factual entertainment and reality programming for the UK and the US.
Rize has enjoyed a strong start and proven a valuable brand addition to the DCD stable of production companies,
winning over £2 million worth of new business since inception. During the period under review Rize won its first
documentary specials, Accused: The 74-Stone Babysitter and My Social Network Stalker: True Stories, which both
aired post year end and achieved strong audience ratings on Channel 4.
The company is currently in production on a number of new series and one-off productions for UK and US broadcasters
to be announced in 2012.
DCD Media Plc
3
Financial statements for the year ended 31 December 2011
Executive Chairman’s review
Rize USA (continued)
Rize USA's output is in line with DCD Media's portfolio of non-scripted offerings and further strengthening the Group’s
position in the non-scripted market. The current strong pipeline of projects bodes well on both sides of the Atlantic and
will also continue to generate valuable IP to be exploited worldwide.
Entertainment Division
September Films
September Films is a producer of reality television, entertainment and formats based in Los Angeles and London. The
division’s performance was driven by returning hit series and talent fronted primetime entertainment shows. Highlights
from the year included new seasons of the high volume series Bridezillas and Billy The Exterminator for A&E as well
as ITV1 Saturday night series Penn & Teller: Fool Us, presented by Jonathan Ross. Bridezillas and Penn & Teller:
Fool Us have performed strongly in the international market place where they are distributed by DCD Rights, the
Group’s wholly owned distribution arm. The BAFTA winning children’s series Richard Hammond’s Blast Lab
transmitted its fourth series on BBC1 and BBC2 and continued to perform well in sales and licensing.
The division renewed its Creative team with two new senior appointments and a promotion for the new roles of Head of
Entertainment, Head of Factual Entertainment and Head of Development in the UK, together with a number of senior US
executive appointments for newly created positions at its LA office in Tribeca West including Senior Vice President,
Creative and VP Development to help sustain growth in the US market.
The outlook for September Films is positive particularly in the US market where the division has a strong reputation and
solid pipeline of returning reality series.
Event Management Division
Done and Dusted
The music and live events division delivered recurring large scale productions including The Laureus World Sports
Awards 2011 live from Abu Dhabi, Channel 4’s summer music event T4 On the Beach which broadcast live in the
summer and The Mobo Awards which aired live on BBC1 in the autumn. US based work included the returning
franchise The Victoria’s Secret Fashion Show which transmitted on CBS at the end of November. T4 Stars was held
in December 2011 and transmitted live on Channel 4.
In September 2011, the Group confirmed the intended departure of its Done and Dusted management team at the end of
December 2011. The departing management group have bought the trademark Done and Dusted from DCD Media. The
Event Management division has been shown as a discontinued operation within the financial statements (note 10).
Rights and Licensing Division
DCD Rights
The Group’s distribution arm was hampered by a difficult trading environment, coupled with a major buyer going into
administration. Despite this backdrop, DCD Rights held its own and continued to expand in the international market.
Many of the new shows acquired have been well received by network buyers around the world and also garnered
numerous awards.
The support of DCD Rights’ distribution fund and close relationships with top producers has been vital in securing third
party programming from around the world.
Bridezillas, produced by September Films, continued to sell worldwide and entertainment series Penn & Teller: Fool
Us performed well both as a finished programme and format. DCD Rights’ factual catalogue has continued to grow and a
notable ratings winner this year has been Dangerous Drivers School, produced by Matchlight, on Channel 5.
DCD Publishing (including DVD label Digital Classics)
The licensing arm of DCD Media exploiting wholly-owed and third party brands for IP in publishing, merchandising, DVD
and music had a year of consolidation in 2011. It continued to take advantage of its access to the world’s largest music
publishing catalogues and launched a number of innovative products.
DCD Publishing have broadened their representation to include talent and to that end have signed representation deals
with Emma Forbes, Russell Grant, Vincent and Flavia of BBC’s Strictly Come Dancing, Windsor Concourse of
Elegance, Mahiki, and TV company Splash Media.
DCD Media Plc
4
Financial statements for the year ended 31 December 2011
Executive Chairman’s review
DCD Publishing (including DVD label Digital Classics) (continued)
Richard Hammond’s Blast Lab merchandise continues to sell well and the ‘Bluw’ toys range of music-based products
got off to a flying start.
Digital Classics DVD, the Group’s wholly owned DVD label, continued to increase the number of titles in the catalogue
through third-party acquisitions as well as DCD-owned programmes. Continuing to work on titles by Stephen Fry, the
label released a number of boxed sets all of which sold well. In 2011 the label suffered stock loss when Sony’s Enfield
warehouse burnt down in the riots but financial impact was limited by an effective insurance cover. Digital Classics DVD
also took the opportunity of changing distribution arrangements, signing a new deal with distribution partner Demand in
August, and sales volumes have increased significantly as a result. Highlighted titles in the period were Tony
Robinson’s Crime and Punishment, At Home with the Georgians and Peter Ackroyd’s Thames.
David Green
Executive Chairman
28 May 2012
DCD Media Plc
5
Financial statements for the year ended 31 December 2011
Chief Executive Officer’s review
The Group continued to face challenges over the last 12 months but has produced a stabilising set of results which will
allow it to move forward with a renewed focus and growth in the coming months and years.
In the first half of the year, the Group saw further rationalisation of resources, including further restructuring of the
business units and moving to new, more cost effective office accommodation.
In the second half of the year, the Group saw a number of key events which are discussed below, including £1.75m fund
raising, the departure of the Event Management business Done and Dusted Group Limited and changes to members of
the Board of Directors.
The results are for the 12 months to 31 December 2011 and the comparatives are for the eighteen months to 31
December 2010.
Fund raising
During the latter half of the year the Company raised £1.75m through the issuance of new convertible debt of £975,000
and 77,500,000 ordinary shares at 1p each. This followed the announcement in the prior year financial statements of the
need for funding and was the culmination of extensive discussions with investors. This investment provided a cash
injection to stabilise the Group and to allow investment in the development and growth of the business.
Board changes
The year saw a number of changes to the Board. On 28 July 2011 John McIntosh, Chief Financial Officer, departed from
the Board and, in November 2011, the existing Board Directors David Green (CEO) and Tarik Wildman (Non- Executive)
were joined by John Cusins (Non Executive Chairman) and myself. Post year end I became CEO and David Green
became Executive Chairman, with Non Executives John Cusins and Tarik Wildman forming the Audit Committee and
Remuneration Committee.
Performance
The Group made an unadjusted loss after tax for the year of £7.1m (2010: £7.9m). This figure is affected by the
impairment and amortisation of intangible assets, including goodwill and trade names.
Adjusted EBITDA and Adjusted PBT are the key performance measures that are used by the Board, as they more fairly
reflect the underlying business performance by excluding the significant impacts of goodwill, trade name and programme
rights amortisation and impairments.
The headline Adjusted EBITDA in the year ended 31 December 2011 was £0.6m, an annualised decrease of 61% on the
eighteen months to 31 December 2010 (2010: £2.3m). Adjusted PBT was £0.1m, an annualised decrease of 92% on the
eighteen month period to 31 December 2010 (2010: £1.8m).
Performance during the year was as expected but impacted by a number elements including
•
•
•
•
the extensive refinancing discussions with investors, requiring Directors and key management to focus on
refinancing rather than the core element of producing content and the development of new business;
reduced momentum following on from the prior year, and as a result of continued difficult market conditions
within the industry;
delayed development of programming through funding constraints, until the final quarter of the year after
funding raising was completed; and
continued re-organisation and restructuring costs within the Group as part of the strategy to refocus on the core
element of the business of television programming.
Revenue for the year ended 31 December 2011 for continuing operations was £21.8m, a 1% annualised increase on the
eighteen month revenue to 31 December 2010 for continuing operations (2010: £32.4m).
Revenue for discontinued operations (note 10) for the year ended 31 December 2011 was £8.1m, an annualised 24%
reduction on the eighteen months to 31 December 2010 (2010: 15.9m).
DCD Media Plc
6
Financial statements for the year ended 31 December 2011
Chief Executive Officer’s review
Performance (continued)
The following table represents the reconciliation between the operating loss per the consolidated statement of
comprehensive income to adjusted Profit before Tax (PBT) and adjusted Earnings Before Tax Depreciation and
Amortisation (EBITDA):
Operating loss per statutory accounts (continuing operations)
Add: Discontinued operations
Operating loss per statutory accounts
Add Amortisation of programme rights (note 12)
Add: Impairment of programme rights (note 12)
Add: Amortisation of trade names (note 12)
Add: Impairment of goodwill and related intangibles (note 12)
Less: Capitalised programme rights intangibles (note 12)
Add: Depreciation (note 13)
EBITDA
Add: Restructuring costs (legal and statutory)
Add: Discontinued US operations costs
Add: Staff cost normalisation
Adjusted EBITDA
Less: Net financial income/(expense) (note 8)
Less: Depreciation
Adjusted PBT
Intangible Assets
Year ended
31 December
2011
£m
18 months
period ended
31 December
2010
£m
(6.0)
(1.8)
(7.8)
5.5
0.9
1.0
5.1
(5.4)
0.1
(0.6)
0.1
0.5
0.6
0.6
(0.4)
(0.1)
0.1
(10.1)
(1.1)
(11.2)
8.7
1.4
1.5
9.4
(8.1)
0.1
1.8
0.5
-
-
2.3
(0.4)
(0.1)
1.8
The Group’s consolidated statement of comprehensive income and consolidated statement of financial position has
again this year been impacted by the amortisation and impairment of intangible assets, see note 12.
The Group has seen amortisation and impairment of goodwill and trade names for the year of £6.1m (2010 eighteen
months: £10.9m) and a net amortisation and impairment of programme rights of £1.0m (2010 eighteen months £2.0m).
This expenditure within the Group’s consolidated statement of comprehensive income negatively impact the overall
result, creating a loss for the year.
The accounting implications, in terms of the effect of reporting impaired intangible assets under International Financial
Standards, are explained below.
September Films
September Films Limited, an operating unit within the Entertainment cash generating unit (CGU) had its performance
impaired by market conditions and delayed investment in programme development, as described more generally above.
The business has started to rebuild its development and commissioning pipeline, but in the short term the future cash
flows and profitability of the business were deemed by management not to be able to support the current carrying value
of the goodwill. An impairment of £1.5m was therefore applied to the goodwill, leaving a carrying value of £3.9m (2010:
£5.4m).
Done and Dusted
The key management of the Event Management CGU left the Group at the year end, and no replacement staff or trade
were identified which resulted in the CGU being classified as a discontinued operation. No future cashflows are expected
from the CGU moving forward. The remaining goodwill of £1.5m after management review was impaired down to reflect
the fair value of the consideration likely to be received for the goodwill post year end. It was then re-categorised as an
asset held for sale (note 16). The impairment amounted to £1.4m and the carrying value of the asset held for sale was
£0.1m (note 10).
DCD Media Plc
7
Financial statements for the year ended 31 December 2011
Chief Executive Officer’s review
Trade Names
Trade names are amortised over ten years on a straight line basis and a non cash expense of £0.9m was expensed in
the year relating to trade names. A review of the trade name net book value at the year end identified that the carrying
value of the assets were not appropriate and an impairment of £2.3m against the West Park Pictures and Prospect trade
names was applied. The carrying value of trade names after the amortisation and impairment was £2.5m.
Restructuring costs
Restructuring costs of £0.1m have been disclosed in the consolidated statement of comprehensive income.
Restructuring costs relate to redundancy payments and an office move. In April 2011 the office in central London was
closed and the head office operations were moved to the Hammersmith office, resulting in one off restructuring costs of
£0.02m. This relocation to the Hammersmith office will provide the business with annual savings of £0.4m.
Discontinued US operations costs
The Event Management US operations incurred operational costs for maintaining a presence in the US which was not
offset by normal revenue streams for the same period. The reduction in revenue was due to a reduced focus on the US
operations as a result of the impending cessation of the Event Management activities, as part of the discontinued
operations. The impact of this was £0.4m and is considered to be a one off exceptional item which will not recur in future
years.
Staff cost normalisation
Staff normalisation costs relate to other costs incurred in the year which will not be incurred in future years through the
rationalisation of resourcing across the business with a reduction in headcount. The reduced costs in the future amount
to £0.6m and is considered to be a one off exceptional item which will not recur in future years.
Earnings per share
Basic loss per share in the period was 9.36p (eighteen month period ended 31 December 2010: 13.38p loss per share)
and was calculated on the losses after taxation of £7.1m (eighteen month period ended 31 December 2010: loss £7.9m)
divided by the weighted average number of shares in issue during the year being 75,354,034 (2010: 59,019,293). The
number of shares has increased due to a conversion of debt to equity and a subscription of shares in the year, detailed in
note 23.
Balance Sheet
Since the prior period end the Group debt profile has increased marginally by £0.3m with current debt at £6.1m (31
December 2010: £5.8m). During the year £1.0m of bank debt was repaid. Convertible debt increased by the issue of
£1.0m of new convertible loan notes and through £0.4m of rolled up interest. The debt at the year end is made up of
outstanding bank loans £1.2m (2010: £2m) and overdraft of £0.6m (£0.7m) and convertible debt of £4.3m (2010: £3.1m).
Following the restructuring explained in the Chief Executive Officer section above, the Group undertook its regular
impairment review after the period end. As a consequence of that review under the principles of International Financial
Reporting Standards the Group has taken a non-cash charge of £6.1m (2010: £9.4m) against goodwill and trade names
and £1.0m (2010: £1.4m) against the intangible programme rights catalogue. This impairment has been recorded in the
statement of comprehensive income (see note 12).
The Group’s net cash balances as at 31 December 2011 were £5.8m (31 December 2010: £4.1m). A substantial part of
the Company cash balances represent the Company’s working capital commitment in relation to its programme making
and is not considered to be free cash.
As at the 31 December 2011 the Group had a term loan of £1.0m which is due for repayment on 28 November 2012. The
Group has repaid £0.25m of this term loan in the post year end period and the current outstanding balance is £0.75m.
The term loan is currently under review and being renegotiated with the Group’s principal bankers, with a view to
changing the repayment period to one greater than 18 months. The Group’s bankers have indicated that it is their
intention to agree new terms. The Group’s overdraft facility has also recently been extended by its principal bankers until
30 November 2012. Accordingly, the Directors have a reasonable expectation that both the term loan and the overdraft
facility will continue to be available to the Group for the foreseeable future.
On 28 November 2012, convertible debt, totalling £4.3m of principal loan and cumulative interest as at 31 December
2011, is due to become payable. Timeweave Plc acquired £3.1m of this convertible debt on 8 February 2012.
Timeweave PLC converted £0.6m of the convertible debt on 18 April 2012 to acquire a 29.99% holding in the Company.
The Directors have been, and continue to be, in discussions with the Directors of Timeweave to understand their
intentions and are working with Timeweave on a proposal for Timeweave to reduce, or negate, the impact of the
repayment of the convertible debt in November 2012.. There remains, however, a material uncertainty that the Company
may not be able to repay in cash the convertible debt on 28 November 2012 as it arises, if discussions with Timeweave
result in a withdrawal of their support.
DCD Media Plc
8
Financial statements for the year ended 31 December 2011
Chief Executive Officer’s review
Shareholders’ Equity
Retained earnings as at 31 December 2011 were £(59.8m) (2010: £(52.7m)) and total shareholders’ equity at that date
was £3.3m (2010: £9.8m).
Amounts attributable to non-controlling interests
In the prior period, the Group bought a stake in Matchlight Limited, a collaboration with a group of leading Scottish
programme makers. The Group has recognised a loss of £0.04m (2010: £0.15m) attributable to non controlling interests
in the statement of comprehensive reserves and an amount of £0.62m (2010: £0.39m) as equity representing the non
controlling interest of the company as at the financial year end.
Current Trading
The Group has had a slow start to 2012, however several big returning shows have been recommissioned and their
income will be realised in the second half of the year. There is also a strong development pipeline and the directors
expect this to further contribute to an improved second half of the year. The Group has also been focused on a
rationalisation and restructure of the number of divisions and subsidiaries. Cash reserves remain tight, but the Group
continues to generate cash from its activities and are confident that they will be able cover the operational costs.
Going Concern
On 28 November 2012, convertible debt, totalling £4.3m of principal loan and cumulative interest as at 31 December
2011, is due to become payable. Timeweave Plc acquired £3.1m of this convertible debt on 8 February 2012.
Timeweave PLC converted £0.6m of the convertible debt on 18 April 2012 to acquire a 29.99% holding in the Company.
The Directors have been, and continue to be, in discussions with the Directors of Timeweave to understand their
intentions and are working with Timeweave on a proposal for Timeweave to reduce, or negate, the impact of the
repayment of the convertible debt in November. There remains, however, a material uncertainty that the Company may
not be able to repay in cash the convertible debt on 28 November 2012 as it arises, if discussions with Timeweave result
in a withdrawal of their support.
S Nourmand
Chief Executive Officer
28 May 2012
DCD Media Plc
9
Financial statements for the year ended 31 December 2011
Report of the Directors for the year ended 31 December 2011
The Directors present their report together with the audited financial statements for the year ended 31 December 2011.
Principal activities
The main activities of the Group continued to be content production, event management and distribution and rights
exploitation.
A detailed review of the Group’s business is contained in the Executive Chairman’s review on pages 3 to 5 and the Chief
Executive Officer’s review on pages 6 to 9.
Results
The Group’s loss before taxation for the year ended 31 December 2011 was £8.2m (eighteen month period ended 31
December 2010: £8.4m). The loss for the year post-taxation was £7.1m (eighteen month period ended 31 December
2010: £7.9m) and has been carried forward in reserves.
The Directors do not propose to recommend the payment of a dividend.
Business review
Risks and uncertainties
The Group’s management aims to minimise risk by developing a broad, balanced stable of production/ distribution
activity and intellectual property. Clear risk assessment and strong financial and operational management is essential to
control and manage the Group’s existing business, retain key staff and balance current development with future growth
plans. As the Group operates in overseas markets it is also subject to exposures on transactions undertaken in foreign
currencies.
Acquisition activity
As described in the Chief Executive Officer’s review, during the year of reporting the Group has focused on stabilising its
existing business while seeking suitable partner opportunities. It is an aim of the Group to continue to look for suitable
opportunities which will create synergy and enhance earnings. The known risks of such a strategy can be summarised
as: finding appropriate targets or joint ventures opportunities, integration risk of acquiring targets, finding and retaining
key staff and failure to achieve financial/operational synergies from those targets.
To minimise risk, the Group uses its financial and operational diligence process, backed by legal diligence. The Group
has already integrated its previous acquisitions, which are regularly monitored through the Group’s internal control
function.
Production and distribution revenue
Revenue is subject to fluctuations throughout the year and will peak after sales markets during the year.
Funding and Liquidity
Costs incurred during production are not always funded by the commissioning broadcaster. The Group policy is to
maintain its production cash balances to ensure there is no financial shortfall in the ability to produce a programme. It is
inherent in the production process that in the short-term cash flows on productions can sometimes be negative initially.
This is due to costs incurred before contracted sales have been received, in order to meet delivery and transmission
dates. The Group funds these initial outflows, when they occur, in two ways: internally, ensuring that overall exposure is
minimised; or, through a short term advance from a bank or finance house, which will be underwritten by the contracted
sale. The Group regularly reviews the cost/benefit of such decisions in order to obtain the optimum use from its working
capital. The Group’s cash and cash equivalents net of overdraft at the end of the period was £5.8m (31 December 2010:
£3.4m) including certain production related cash held to maintain the Group policy. The Group debt consists of
convertible loan notes and conventional bank debt. Details of the interest payable and convertible loans notes are
disclosed in note 8, 18 and 20 to the financial statements, respectively.
Liquidity risks
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments
on its debt instruments. A full description of the Group's position regarding its convertible loan notes is disclosed in the
Directors’ consideration of the going concern basis of preparation of the financial statements (note 1). The Group’s
exposure to interest rate fluctuations on its conventional bank debt is appropriately hedged. The Group's exposure to
exchange rate fluctuations has historically been small based on its revenue and cost base. Dependent on the extent the
Group’s international revenue grows the appropriate hedging strategy will be introduced.
It is Group policy to continue to seek the most optimum structure for its borrowings and this policy will be pursued over
the coming year.
DCD Media Plc
10
Financial statements for the year ended 31 December 2011
Report of the Directors for the year ended 31 December 2011
Directors and their interests
The Directors of the Company, and their beneficial interests in the share capital of the Company, during the year were as
follows:
At 31 December 2011
At 31 December 2010
Ordinary
shares of
1p each
Deferred
shares of
0.9p each
Deferred
shares of
9p each
Ordinary
shares of
10p each
Deferred
shares of
0.9 p each
Deferred
shares of
9p each
J Cusins
(appointed 16 November 2011)
D Green
J McIntosh
(resigned 28 July 2011)
S Nourmand
(appointed 16 November 2011)
2,000,000
24,246,614
-
4,452,972
-
-
-
-
-
-
24,246,614
4,246,614
-
-
4,452,972
452,972
-
-
-
-
T Wildman
29,285
645,157
29,285
29,285
645,157
-
-
-
-
-
Other than as disclosed in note 26 to the financial statements, none of the Directors had a material interest in any other
contract of any significance with the Company and its subsidiaries during or at the end of the financial period.
Substantial shareholdings
As at 21 May 2012, the following notifications had been made by holders of beneficial interests in 3% or more of the
Company's issued ordinary share capital as follows:
Timeweave Plc
Henderson Global Investors Limited
D Green (Director)
H Kronsten
Share capital
No. of 1p ordinary shares
59,575,000
39,885,996
24,246,614
15,500,000
%
29.99
20.07
12.20
7.80
Details of share capital are disclosed in note 23 to the financial statements.
Employment Involvement
The Group’s policy is to encourage employee involvement at all levels as it believes this is essential for the success of
the business. There is significant competition for experienced and skilled creative staff and administrators. The Directors
are aware of this and have looked to encourage and develop internal resources and to put in place succession plans. In
addition, the Group has adopted an open management style to encourage communication and give employees the
opportunity to contribute on business issues.
The Group does not discriminate against anyone on any grounds. Criteria for selection and promotion are based on
suitability of an applicant for the job. Applications for employment by disabled persons are always fully considered,
bearing in mind the respective aptitudes of the applicants concerned. In the event of members of staff becoming
disabled, every effort will be made to ensure that their employment with the Group continues and that appropriate
training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons
should, as far as possible, be at least comparable with that of other employees.
Financial instruments
Details of the use of financial instruments by the company are contained in note 22 of the financial statements.
The Board
As at the date of approval of these financial statements, the Board of Directors consisted of four members, two of whom
are Non-Executive Directors. Their biographies are to be found on page 14. The Group has adopted a framework for
corporate governance which it believes is suitable for a company of its size with reference to the key points within the
Principles of Good Governance and Code of Best Practice (“the Combined Code”).
DCD Media Plc
11
Financial statements for the year ended 31 December 2011
Report of the Directors for the year ended 31 December 2011
Corporate governance
The Board meets regularly, normally monthly, and covers strategic, operational, financial performance and remuneration
committee matters as they arise from time to time. A Management Executive Group made up of key executives from the
divisions normally meets monthly to cover cross-Group matters and develop new business opportunities. Matters of
significance are raised with the Board. The Board reviews financial and operational information derived from the
Management Executive Group, and the effectiveness of external audit and internal financial controls. The terms of
reference of the Audit Committee are to assist themselves as Directors in discharging their individual and collective legal
responsibilities for ensuring that:
•
•
•
the Group’s financial and accounting systems provide accurate and up-to-date information on its current
financial position;
the Group’s published financial statements represent a true and fair reflection of this position; and
the external audit, which the law requires in order to provide independent confirmation that these legal
responsibilities are being met, is conducted in a thorough, efficient and effective manner.
The external auditors attend the audit committee meeting and as such it provides them with a direct line of
communication to the Directors.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position
are set out in the Chief Executive Officer’s review. The financial position of the Group, its cash position and borrowings
are set out in the financial review section of the statement (note 18). In addition note 22 sets out the Group's objectives,
policies and processes for managing its financial instruments and risk.
As highlighted in note 1 to the financial statements, the Group's day-to-day operations are funded from cash generated
from trading.
As at the 31 December 2011 the Group had a term loan of £1.0m which is due for repayment on 28 November 2012. The
Group has repaid £0.25m of this term loan in the post year end period and the current outstanding balance is £0.75m.
The term loan is currently under review and being renegotiated with the Group’s principal bankers, with a view to
changing the repayment period to one greater than 18 months. The Group’s bankers have indicated that it is their
intention to agree new terms. The Group’s overdraft facility has also recently been extended by its principal bankers until
30 November 2012. Accordingly, the Directors have a reasonable expectation that both the term loan and the overdraft
facility will continue to be available to the Group for the foreseeable future.
On 28 November 2012, convertible debt, totalling £4.3m of principal loan and cumulative interest as at 31 December
2011, is due to become payable. Timeweave Plc acquired £3.1m of this convertible debt on 8 February 2012.
Timeweave PLC converted £0.6m of the convertible debt on 18 April 2012 to acquire a 29.99% holding in the Company.
The Directors have been, and continue to be, in discussions with the Directors of Timeweave to understand their
intentions and are working with Timeweave on a proposal for Timeweave to reduce, or negate, the impact of the
repayment of the convertible debt in November 2012. There remains, however, a material uncertainty that the Company
may not be able to repay in cash the convertible debt on 28 November 2012 as it arises, if discussions with Timeweave
result in a withdrawal of their support.
The Board remain positive about the resilience of the Group despite the pressures from the current economic conditions
and those outlined above. The Directors forecasts and projections, which make allowance for reasonably possible
changes in its trading performance, show that, with the ongoing support of its lenders and its bank, the Group can
continue to generate cash to meet their obligations as they fall due.
Through the recent negotiations with its shareholders, its loan note holders and its principal bankers, the Directors, after
making enquiries, have a reasonable expectation that the Company and the Group will have adequate resources to
continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis
in preparing the annual report and financial statements.
Directors’ responsibilities for the financial statements
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The Directors have elected to prepare the parent company financial
statements in accordance with UK GAAP. Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the
profit or loss of the Group and Company for that period. The Directors are also required to prepare financial statements
in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative
Investment Market.
DCD Media Plc
12
Financial statements for the year ended 31 December 2011
Report of the Directors for the year ended 31 December 2011
Directors’ responsibilities for the financial statements (continued)
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable and prudent;
•
state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject
to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
company will continue in business.
•
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial statements are made available on a
website. Financial statements are published on the Company's website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial statements contained therein.
Auditors
All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any
information needed by the Company’s auditors for the purposes of their audit and to establish that the auditors are aware
of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware.
By Order of the Board
S Nourmand
Chief Executive Officer
28 May 2012
DCD Media Plc
13
Financial statements for the year ended 31 December 2011
Board of Directors
David Green (Executive Chairman)
David Green was appointed as Executive Chairman of DCD Media in February 2012, after 3 years as CEO. He joined
the Group in 2007 when London and LA-based television and film production company September Films, of which he
was Chairman and Founder, was acquired by DCD Media. He originally took on the role of DCD Chief Creative Officer
with the task of driving creative synergies across all Group production and distribution companies. He now merges his
Chairman role with special responsibility for spearheading DCD Media's surge into the booming American production
market.
A veteran of the British and American film and television industries where he has successfully built his career since
graduating from Oxford in 1972, David has produced and/or directed over a thousand hours of primetime television
including the landmark 'Hollywood Women' series and September's flagship show 'Bridezillas' - both of which he created.
His four feature film directing credits notably include the Oscar-nominated 'Buster' (4 awards) one of the biggest grossing
British films of all time, and the $22m Disney action adventure 'Wings of the Apache', starring Nicolas Cage and Tommy
Lee Jones. He was also the Executive Producer of two September movies: Oscar-nominated 'Solomon and Gaenor' (7
awards) and 'House of America' (6 awards).
Sammy Nourmand (Chief Executive Officer)
Sammy Nourmand brings with him 18 years experience in the independent television sector, as a Production Accountant
and then Financial Controller before joining September Films as Head of Finance in 1998. He went on to become
Director of Finance and Deputy CEO in November 2003 taking over as CEO in April 2005. Sammy oversaw September
Films operations in the UK and the US as well as its distribution arm, September International. He was instrumental in
the sale of September Films to DCD Media in August 2007 and under his stewardship September Films enjoyed its
longest period of growth and stability. Sammy took the role of acting COO of DCD Media between 2009 and 2010,
became a Director of DCD Media in November 2011 and was appointed CEO in February in 2012.
Tarik Wildman (Non-Executive Director)
Tarik Wildman has been involved in the financial industry for over 20 years. He was a Director at Credit Suisse First
Boston and Dillon Read and remains an adviser at UBS. He is also a partner in the Madrid-based firm Forest Asset
Management, and runs his own enterprise Wildman & Company Limited, which finds financial solutions for a wide variety
of corporate clients. Tarik is currently Managing Director of PJ Investments and sits on the Board of Red Letter Days and
other companies associated with Peter Jones.
John Cusins (Non-Executive Director)
John Cusins has had a distinguished career in finance. He has held a variety of senior posts in the Investment Banking,
Insurance and Asset Management sectors. He qualified as a Chartered Accountant with KPMG before moving to UBS,
then took the role of Managing Director at Dresdner Bank, London. He was part of the private equity group that acquired
Pearl Group Limited in December 2004 and held a number of senior Directorial posts in that business. Whilst at Pearl
Group John founded Axial Investment Management Limited and held the positions of CEO, CIO and CFO within Axial.
John is an Executive Director of Strathdon Investments PLC and a Non-Executive Director of AMG Systems Limited.
DCD Media Plc
14
Financial statements for the year ended 31 December 2011
Independent auditor’s report to the members of DCD Media Plc
We have audited the financial statements of DCD Media Plc for the year ended 31 December 2011 which comprise the
consolidated statement of comprehensive income, the consolidated statement of financial position and Company balance
sheet, the consolidated statement of cash flows, the consolidated statement of changes in equity and the related notes.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting
framework that has been applied in preparation of the parent company financial statements is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with sections Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards
for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the Group’s and the parent Company’s affairs as at
31 December 2011 and of the Group’s loss for the period then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
the parent Company’s financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
DCD Media Plc
15
Financial statements for the year ended 31 December 2011
Independent auditor’s report to the members of DCD Media Plc
Emphasis of matter – Going Concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the
disclosures made in note 1 to the Financial Statements concerning the Group and Company’s ability to continue as a
going concern.
The Company’s convertible loan notes become payable in November 2012. The Directors have entered into negotiations
with these note holders and are confident that the note holders will not demand cash repayment within the next 12
months. Negotiations are currently ongoing and no guarantee exists that cash repayment will not be demanded.
These conditions indicate the existence of material uncertainties which may cast significant doubt upon the Group and
Company’s ability to continue as a going concern. The financial statements do not include the adjustments that would
result if the Group was unable to continue as a going concern.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you
if, in our opinion:
•
•
•
adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent Company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Simon Brooker (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
Bridgewater House
Finzels Reach
Counterslip
Bristol
BS1 6BX
28 May 2012
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC203127).
DCD Media Plc
16
Financial statements for the year ended 31 December 2011
Consolidated income statement for the year ended 31 December 2011
Revenue
Cost of sales
Impairment of programme rights
Gross profit
Selling and distribution expenses
Administrative expenses:
- Other administrative expenses
- Impairment of goodwill and trade names
- Amortisation of goodwill and trade names
- Restructuring costs
Other income
Operating loss
Finance income
Gain settlement on convertible loan
Finance costs
Loss before taxation
Taxation
Loss after taxation from continuing operations
Loss on discontinued operations net of tax
Loss for the year
Loss attributable to:
Owners of the parent
Non controlling interest
Note
4
5,12
5,12
5,12
5
7
18
8
9
10
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
21,843
32,439
(13,864)
(991)
(14,855)
6,988
(121)
(8,125)
(3,782)
(988)
(105)
(23,828)
(1,422)
(25,250)
7,189
(101)
(7,289)
(7,892)
(1,482)
(530)
(13,000)
(17,193)
81
7
(6,052)
(10,098)
2
-
(386)
4
3,560
(785)
(6,436)
(7,319)
1,172
(5,264)
(1,790)
(7,054)
(7,031)
(23)
(7,054)
544
(6,775)
(1,120)
(7,895)
(7,742)
(153)
(7,895)
Earnings per share attributable to the equity holders of the Company during the year (expressed as pence per
share)
Basic loss per share from continuing operations
Basic (loss)/profit per share from discontinued operations
Total basic loss per share
Diluted loss per share from continuing operations
Diluted (loss)/profit per share from discontinued operations
Total diluted loss per share
11
10
11
11
10
11
(6.99p)
(2.37p)
(11.48p)
(1.90p)
(9.36p)
(13.38p)
(6.99p)
(2.37p)
(11.48p)
(1.90p)
(9.36p)
(13.38p)
The notes on pages 22 to 51 are an integral part of these consolidated financial statements.
DCD Media Plc
17
Financial statements for the year ended 31 December 2011
Consolidated statement of comprehensive income for the year ended 31 December 2011
Loss
Other comprehensive expenses
Exchange losses arising on translation of foreign operations
Total other comprehensive expenses
Total comprehensive expense
Total comprehensive expense attributable to:
Owners of the parent
Non controlling interest
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
(7,054)
(7,895)
Note
(123)
(123)
-
-
(7,177)
(7,895)
(7,154)
(23)
(7,177)
(7,742)
(153)
(7,895)
DCD Media Plc
18
Financial statements for the year ended 31 December 2011
DCD Media Plc
Financial statements for the year ended 31 December 2011
Consolidated statement of financial position as at 31 December 2011
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Current liabilities
Bank overdrafts
Secured convertible loan
Bank and other loans
Trade and other payables
Taxation and social security
Obligations under finance lease
Provisions
Non-current liabilities
Secured convertible loan
Bank and other loans
Obligations under finance leases
Deferred tax liabilities
Net assets
Equity
Equity attributable to owners of the parent
Share capital
Share premium account
Equity element of convertible loan
Merger reserve
Translation reserve
Retained earnings
Equity attributable to owners of the parent
Non controlling interest
Total Equity
Note
12
12
13
14
15
16
18
18,22
18,22
17
17
18
19
20,22
20
20
21
23
18
Company number 03393610
Year ended
31 December
2011
£’000
Period ended
31 December
2010
£’000
4,629
3,458
78
8,165
186
5,164
6,386
83
11,819
(615)
(4,314)
(1,154)
(9,341)
(541)
(17)
-
7,568
7,768
104
15,440
276
7,930
4,135
-
12,341
(738)
-
(1,000)
(9,560)
(869)
(11)
(76)
(15,982)
(12,254)
-
-
(24)
(622)
(646)
3,356
7,393
49,391
154
6,356
(123)
(59,753)
3,418
(62)
3,356
(3,123)
(1,000)
-
(1,636)
(5,759)
9,768
6,602
49,451
120
6,356
-
(52,722)
9,807
(39)
9,768
The notes on pages 22 to 51 are an integral part of these consolidated financial statements.
The financial statements were approved and authorised for issue by the Board of Directors on 28 May 2012
S Nourmand
Director
DCD Media Plc
19
Financial statements for the year ended 31 December 2011
Consolidated statement of cash flows for the period ended 31 December 2011
Cash flow from operating activities including discontinued operations
Net loss before taxation
Adjustments for:
Depreciation of tangible assets
Amortisation and impairment of intangible assets
Profit on disposal of property, plant and equipment
Profit on refinancing of convertible loan
Net bank and other interest charges
Net exchange differences on translating foreign operations
Decrease in provision
Net cash flows before changes in working capital
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash from operations
Interest received
Interest paid
Income taxes paid/(received)
Net cash flows from operating activities
13
12
5
18
7,8,10
14
15
17
Investing activities
Acquisition of subsidiary undertakings, net of cash and overdrafts acquired
Purchase of property, plant and equipment
Purchase of intangible assets
30
13
12
Year ended
31 December
2011
£’000
Restated
period ended
31 December
2010
£’000
(8,215)
56
12,693
53
-
390
(123)
(76)
4,778
90
2,766
(547)
7,087
2
(112)
145
7,122
-
(83)
(5,527)
(8,439)
79
21,056
-
(3,560)
783
-
(8)
9,911
(66)
(763)
1,462
10,544
5
(169)
(33)
10,347
(179)
(41)
(8,092)
Net cash flows used in investing activities
(5,610)
(8,312)
Financing activities
Issue of ordinary share capital
New finance leases received
Repayment of finance leases
Repayment of loan
New loans raised
Net cash flows from financing activities
Net increase in cash
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
29
703
46
(16)
(846)
975
862
2,374
3,397
5,771
-
-
(3)
(3,480)
3,000
(483)
1,552
1,845
3,397
DCD Media Plc
20
Financial statements for the year ended 31 December 2011
Consolidated statement of changes in equity for the year ended 31 December 2011
Share
capital
£’000
Share
premium
£’000
Equity
element of
convertible
loan
£’000
Merger
reserve
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Equity
attributable
to owners of
the parent
£’000
Amounts
attributable
to non-
controlling
interest
£’000
Total
equity
£’000
Balance at
30 June 2009
Loss and total
comprehensive income
for the period
Shares issued
Movements on
refinancing
Minority interest
recognised on obtaining a
controlling interest
Balance at
31 December 2010
Loss and total
comprehensive income
for the year
Convertible loan note
issued
Shares issued
Shares issued on
conversion of loan
Exchange differences on
translating
foreign operations
Balance at
31 December 2011
5,806
49,100
328
6,356
-
796
-
351
-
-
-
-
-
-
(208)
-
-
-
-
-
6,602
49,451
120
6,356
-
-
775
16
-
-
(72)
12
-
-
-
35
-
(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(123)
(45,188)
16,402
-
16,402
(7,742)
-
(7,742)
1,147
(153)
-
(7,895)
1,147
208
-
-
-
-
-
114
114
(52,722)
9,807
(39)
9,768
(7,031)
(7,031)
(23)
(7,054)
-
-
-
-
35
703
27
(123)
-
-
-
-
35
703
27
(123)
7,393
49,391
154
6,356
(123)
(59,753)
3,418
(62)
3,356
DCD Media Plc
21
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
The principal activity of DCD Media plc and subsidiaries (the Group) is the production of television programmes in the
United Kingdom and United States, and the worldwide distribution of those programmes for television and other media;
the Group also distributes programmes on behalf of other independent producers.
DCD Media plc is the Group's ultimate parent company, and it is incorporated and domiciled in Great Britain. The
address of DCD Media plc’s registered office is One America Square, Crosswall, London EC3N 2SG, and its principal
place of business is London. DCD Media plc’s shares are listed on the Alternative Investment Market of the London
Stock Exchange.
DCD Media plc’s consolidated financial statements are presented in Pounds Sterling (£), which is also the functional
currency of the parent company. The accounts have been drawn up to the date of 31 December 2011.
1
Principal accounting policies
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below.
The policies have been consistently applied to all the years presented, unless otherwise stated. The Group financial
statements have been prepared in accordance with International Financial Reporting Standards, International Accounting
Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as
adopted by European Union ("Adopted IFRSs"), and with those parts of the Companies Act 2006 applicable to
companies preparing their financial statements under Adopted IFRSs.
Change of accounting reference date
During the period to 31 December 2010, the accounting reference date (ARD) was changed from 30 June to 30
December. Under the Companies Act 2006, accounts can be made up to a date within 7 days of the ARD. The Directors
have therefore selected 31 December as the year end date. The financial statements shown for 2011 are for the year 1
January 2011 to 31 December 2011. Comparative figures are for the period 1 July 2009 to 31 December 2010, a period
of 18 months.
Basis of preparation – going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position
are set out in the CEO's statement. The financial position of the Group, its cash position and borrowings are set out in
the financial review section of the statement. In addition note 22 sets out the Group's objectives, policies and processes
for managing its financial instruments and risk.
The Group's day-to-day operations are funded from cash generated from trading and the use of an overdraft facility of
£0.75m, with other activities funded from a combination of equity and short and medium term debt instruments. In
considering the going concern basis of preparation of the Group’s financial statements, the Board have prepared profit
and cash flow projections which incorporate reasonably foreseeable impacts of the ongoing challenging economic
environment. These projections reflect the ongoing management of the day to day cash flows of the Group which
includes assumptions on the profile of payment of certain existing liabilities of the Group. They show that the day to day
operations will continue to be cash generative which will underpin the Group’s stability and enable management to
continue to focus the Group’s activities into profitable production development. The forecasts show that the Group will
continue to utilise its term loan and overdraft facility provided by its principal bankers for the foreseeable future.
As at the 31 December 2011 the Group had a term loan of £1.0m which is due for repayment on 28 November 2012. The
Group has repaid £0.25m of this term loan in the post year end period and the current outstanding balance is £0.75m.
The term loan is currently under review and being renegotiated with the Group’s principal bankers, with a view to
changing the repayment period to one greater than 18 months. The Group’s bankers have indicated that it is their
intention to agree new terms. The Group’s overdraft facility has also recently been extended by its principal bankers until
30 November 2012. Accordingly, the Directors have a reasonable expectation that both the term loan and the overdraft
facility will continue to be available to the Group for the foreseeable future.
On 28 November 2012, convertible debt, totalling £4.3m of principal loan and cumulative interest as at 31 December
2011, is due to become payable. Timeweave Plc acquired £3.1m of this convertible debt on 8 February 2012.
Timeweave PLC converted £0.6m of the convertible debt on 18 April 2012 to acquire a 29.99% holding in the Company.
The Directors have been, and continue to be, in discussions with the Directors of Timeweave to understand their
intentions and are working with Timeweave on a proposal for Timeweave to reduce, or negate, the impact of the
repayment of the convertible debt in November 2012 There remains, however, a material uncertainty that the Company
may not be able to repay in cash the convertible debt on 28 November 2012 as it arises, if discussions with Timeweave
result in a withdrawal of their support.
The Board remain positive about the resilience of the Group despite the pressures from the current economic conditions
and those outlined above. The Directors forecasts and projections, which make allowance for reasonably possible
changes in its trading performance, show that, with the ongoing support of its lenders and its bank, the Group can
continue to generate cash to meet their obligations as they fall due.
DCD Media Plc
22
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
1
Principal accounting policies (continued)
Basis of preparation – going concern (continued)
Through the recent negotiations with its shareholders, its loan note holders and its principal bankers, the Directors, after
making enquiries, have a reasonable expectation that the Company and the Group will have adequate resources to
continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis
in preparing the annual report and financial statements.
The financial statements do not include the adjustments that would result if the Group or Company was unable to
continue as a going concern.
Changes in accounting policies
The following new standards, interpretations and amendments, applied for the first time from 1 January 2011, have had
an affect on the financial statements:
Revised IAS 24 Related Party Disclosures
The revision to IAS 24 is in response to concerns that the previous disclosure requirements and the definition of a related
party were too complex and difficult to apply in practice, especially in environments where government control is
pervasive. The revised standard addresses these concerns by providing a revised definition of a related party. The
structure of definition of a related party has been simplified and inconsistencies eliminated. The revised definition will
mean that some entities within the Group will have more related parties for which disclosures will be required.
Improvements to IFRSs (2010)
The improvements in this Amendment clarify the requirements of IFRSs and eliminate inconsistencies within and
between Standards. The changes include amendments to:
•
•
•
•
IFRS 3 (Revised 2008) ‘Business combinations’ including: (i) Clarification that the treatment of contingent
consideration arising in business combinations occurring before the effective date of IFRS 3(R) continues to be
treated under the old requirements. (ii) Limiting the choice to measure non-controlling interests at a
proportionate share in recognised amounts of the acquiree’s identified net assets to present ownership interests
with other components of the non-controlling interest being measured at fair value. (iii) The inclusion or
otherwise in the cost of investment of replacement share-based payment awards provided to employees of the
acquiree
IFRS 7 ‘Financial instruments: Disclosures’ including clarification that an entity should provide qualitative
disclosures in the context of quantitative disclosures to enable users to link related disclosures and hence form
an overall picture of the nature and extent of risks arising from financial instruments
IAS 1 (Revised 2007) ‘Presentation of financial statements’ clarifying that the analysis of components of other
comprehensive income in the statement of changes in equity may be presented in a note
IAS 34 ‘Interim financial reporting’ clarifying the disclosures required in respect of significant events and
transactions during the period.
Improvements to IFRSs (2010) also made minor amendments to the wording of IFRIC 13 ‘Customer loyalty programmes’
regarding the valuation of award credits and the transitional arrangements for amendments to IAS 21 ‘The effects of
changes in foreign exchange rates’ and IAS 28 ‘Investments in associates’ in respect of the loss of control or significant
influence which were introduced by IAS 27 (as amended 2008) ‘Consolidated and separate financial statements’.
A number of standards and interpretations have been issued by the IASB. They become effective after the current year
and have not been adopted by the Group. Management have reviewed these standards and believe none of these
standards, which are effective for periods beginning after 1 January 2011 are expected to have a material effect on the
Group’s future financial statements.
Revenue and attributable profit
Production revenue represents amounts receivable from producing programme/production content, and is recognised
over the period of the production in accordance with the milestones within the underlying signed contract. Profit
attributable to the period is calculated by capitalising all appropriate costs up to the stage of production completion, and
amortising production costs in the proportion that the revenue recognised in the year bears to estimated total revenue
from the programme. The carrying value of programme costs in the statement of financial position is subject to an annual
impairment review.
Event management revenue arises where the Group produced and filmed events in the period. Event management
revenue is recognised in accordance with the milestones agreed within the underlying signed contract. Associated costs
are recognised in-line with the agreed budgets aligned to the contractual milestones.
DCD Media Plc
23
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
1
Principal accounting policies (continued)
Revenue and attributable profit (continued)
Where productions are in progress at the year end and where billing is in advance of the completed work per the
contract, the excess is classified as deferred income and is shown within trade and other payables.
Distribution revenue arises from the licensing of programme rights which have been obtained under distribution
agreements with either external parties or Group companies. Distribution revenue is recognised in the statement of
comprehensive income on signature of the licence agreement, and represents amounts receivable from such contracts.
Revenue from sales of DVDs and other sales is the amounts receivable from invoiced sales during the year.
All revenue excludes value added tax.
Basis of consolidation
The Group financial statements consolidate those of the Company and of its subsidiary undertakings drawn up to 31
December 2011. Subsidiaries are entities over which the Group has the power to control the financial and operating
policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.
Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency
with the accounting policies adopted by the Group.
The Group also holds an investment of 19.9% in Classical TV Limited. This interest is not accounted for as a subsidiary
or associate as the Group does not have sufficient control or influence to do so. The investment had a carrying value of
nil in both the current year and previous financial period.
Non-controlling interests
For business combinations completed prior to 1 July 2009, the Group initially recognised any non-controlling interest in
the acquiree at the non-controlling interest’s proportionate share of the acquiree’s net assets. For business combinations
completed on or after 1 July 2009 the Group has the choice, on a transaction by transaction basis, to initially recognise
any non-controlling interest in the acquiree which is a present ownership interest and entitles its holders to a
proportionate share of the entity’s net assets in the event of liquidation at either acquisition date fair value or, at the
present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets.
Other components of non-controlling interest such as outstanding share options are generally measured at fair value.
The Group has not elected to take the option to use fair value in acquisitions completed to date.
From 1 July 2009, the total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent
and to the non-controlling interests in proportion to their relative ownership interests. Before this date, unfunded losses in
such subsidiaries were attributed entirely to the Group. In accordance with the transitional requirements of IAS 27 (2008),
the carrying value of non-controlling interests at the effective date of the amendment has not been restated.
Goodwill
Goodwill represents the excess of the cost of a business combination over, in the case of business combinations
completed prior to 1 January 2010, the Group’s interest in the fair value of identifiable assets, liabilities and contingent
liabilities acquired and, in the case of business combinations completed on or after 1 July 2009, the total acquisition date
fair value of the identifiable assets, liabilities and contingent liabilities acquired. For business combinations completed
prior to 1 July 2009, cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus
any direct costs of acquisition. Changes in the estimated value of contingent consideration arising on business
combinations completed by this date are treated as an adjustment to cost and, in consequence, result in a change in the
carrying value of goodwill.
For business combinations completed on or after 1 July 2009, cost comprised the fair value of assets given, liabilities
assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the
business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent
consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as
a financial liability, re-measured subsequently through profit or loss. For business combinations completed on or after 1
January 2010, direct costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities
exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive
income on the acquisition date.
DCD Media Plc
24
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
1
Principal accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are stated at cost net of depreciation and any provision for impairment. Depreciation is
calculated to write down the cost less estimated residual value by equal annual instalments over their expected useful
lives. The rates generally applicable are:
Short leasehold property improvements
Motor vehicles
Office and technical equipment
Over the life of the lease
25% on cost
25%-33% on cost
The assets’ residual values and useful lives are reviewed at each statement of financial position date and adjusted if
appropriate.
Other intangible assets
Trade names
Trade names acquired through business combinations are stated at their fair value at the date of acquisition. They are
amortised through the statement of comprehensive income, following a periodic impairment review, on a straight line
basis over their useful economic lives, such periods not to exceed 10 years.
Programme rights
Internally developed programme rights are stated at the lower of cost, less accumulated amortisation, or recoverable
amount. Cost comprises the cost of all productions and all other directly attributable costs incurred up to completion of
the programme and all programme development costs. Where programme development is not expected to proceed, the
related costs are written off to the statement of comprehensive income. Amortisation of programme costs is charged in
the ratio that actual revenue recognised in the current year bears to estimated ultimate revenue. At each statement of
financial position date, the Directors review the carrying value of programme rights and consider whether a provision is
required to reduce the carrying value of the investment in programmes to the recoverable amount. The expected life of
these assets is not expected to exceed 7 years.
Purchased programme rights are stated at the lower of cost, less accumulated amortisation, or recoverable amount.
Purchase programme rights are amortised over a period inline with expected useful life, not exceeding 7 years.
Amortisation and any charge in respect of writing down to recoverable amount during the year are included in the
statement of comprehensive income within cost of sales.
Leased assets
Property, plant and equipment acquired under finance leases or hire purchase contracts are capitalised and depreciated
in the same manner as other property, plant and equipment, and the interest element of the lease is charged to the
statement of comprehensive income over the period of the finance lease. Minimum lease payments are apportioned
between the finance charge and the reduction of the outstanding liability by using an effective interest rate. The related
obligations, net of future finance charges, are included in liabilities.
Rentals payable under operating leases are charged to the statement of comprehensive income on a straight line basis
over the period of the lease.
Inventories
Inventories comprise pre-production costs incurred in respect of programmes deemed probable to be commissioned, and
finished stock of DVDs available for resale. Where it is virtually certain production will occur, pre-production costs are
capitalised in inventories and transferred to intangibles on commencement of production. Finished stock of DVDs
available for re-sale is also included within inventories. Inventories are valued at the lower of cost or recoverable amount.
Programme distribution advances
Advances paid in order to secure distribution rights on third party catalogues or programmes are included within current
assets. Distribution rights entitle the Company to license the programmes to broadcasters and DVD labels for a sales
commission, whilst the underlying rights continue to be held by the programme owner. The advances are stated at the
lower of the amounts advanced to the rights' owners less actual amounts due to rights owners based on sales to date.
DCD Media Plc
25
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
1
Principal accounting policies (continued)
Impairment of non-current assets
For the purposes of assessing impairment, assets are grouped into separately identifiable cash-generating units.
Goodwill is allocated to those cash-generating units that have arisen from business combinations.
At each statement of financial position date, the Group reviews the carrying amounts of its non-current assets, to
determine whether there is any indication those assets have suffered an impairment loss. If any such indication exists the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Goodwill is
tested for impairment annually. Goodwill impairment charges are not reversed.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of fair value and value in use based on an internal
discounted cash flow evaluation.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits. Bank overdrafts that are repayable on
demand and form an integral part of the Group's cash management are included as a component of cash and cash
equivalents. Bank overdrafts are shown in current liabilities on the statement of financial position. Overdrafts are included
in cash and cash equivalents for the purpose of the cash flow statement.
Assets held for sale
Non-current assets and disposal groups are classified as held for sale when:
•
they are available for immediate sale;
• management is committed to a plan to sell;
•
•
•
•
it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;
an active programme to locate a buyer has been initiated;
the asset or disposal group is being marketed at a reasonable price in relation to its fair value; and
a sale is expected to complete within 12 months from the date of classification.
Non-current assets and disposal groups classified as held for sale are measured at the lower of:
•
•
their carrying amount immediately prior to being classified as held for sale in accordance with the Group's
accounting policy; and
fair value less costs to sell.
Following their classification as held for sale, non-current assets (including those in a disposal group) are not
depreciated.
Discontinued operations
The results of operations disposed during the year are included in the consolidated statement of comprehensive income
up to the date of disposal.
A discontinued operation is a component of the Group's business that represents a separate major line of business or
geographical area of operations or is a subsidiary acquired exclusively with a view to resale, that has been disposed of,
has been abandoned or that meets the criteria to be classified as held for sale.
Discontinued operations are presented in the consolidated statement of comprehensive income as a single line which
comprises the post-tax profit or loss of the discontinued operation along with the post-tax gain or loss recognised on the
re-measurement to fair value less costs to sell or on disposal of the assets or disposal groups constituting discontinued
operations.
Restatement of prior period cash flow statement
The restatement is due to the correction of the movements in trade and other receivables, the movements in trade and
other payables and the net cash flows from financing activities. £0.966m has been reanalysed as a cash outflow from the
movement in trade and other payables to net cash flows from financing activities. £0.38m has been reanalysed as a cash
outflow from movements in trade and other receivables to movements in trade and other payables. The net effect on
cash flows is nil.
DCD Media Plc
26
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
1 Principal accounting policies (continued)
Equity
Equity comprises the following:
• Share capital represents the nominal value of issued Ordinary shares and Deferred shares;
• Share premium represents the excess over nominal value of the fair value of consideration received for equity
shares, net of expenses of the share issue;
• Equity element of convertible loan represents the part of the loan classified as equity rather than liability (see
note 18);
• Merger reserve represents the excess over nominal value of the fair value of consideration received for equity
shares issued on acquisition of subsidiaries, net of expenses of the share issue (in accordance with s.612 of the
Companies Act 2006);
Translation reserve represents the exchange rate differences on the translation of subsidiaries from a
functional currency to Sterling at the year end;
•
• Retained earnings represents retained profits and losses; and
• Non controlling interest represents net assets owed to non-controlling interests.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of
financial position differs from its tax base, except for differences arising on:
•
•
•
the initial recognition of goodwill;
the initial recognition of an asset or liability in a transaction which is not a business combination and at the time
of the transaction affects neither accounting or taxable profit; and
investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the
reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available
against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the
statement of financial position date and are expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered).
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets
and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
•
•
the same taxable Group company; or
different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred
tax assets or liabilities are expected to be settled or recovered.
Foreign currency
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the statement of financial
position date. Exchange differences arising on the settlement and retranslation of monetary items are taken to the
statement of comprehensive income.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated at the exchange rate ruling at the statement of financial position date. Income and expense
items are translated at the average exchange rates for the year. Exchange differences arising are classified as equity
and transferred to the Group’s retained earnings reserve.
Financial instruments
Financial assets and financial liabilities are initially recognised in the Group’s statement of financial position when the
Group becomes a party to the contractual provisions of the instrument at their fair value and thereafter at amortised cost.
Trade Receivables
Trade receivables are recorded at their amortised cost less any provision for doubtful debts. Trade receivables due in
more than one year are discounted to their present value.
DCD Media Plc
27
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
1
Principal accounting policies (continued)
Financial instruments (continued)
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the
part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the
amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying
amount and the present value of the future expected cash flows associated with the impaired receivable. For trade
receivables, which are reported net, such provisions are reported in a separate allowance account with the loss being
recognised within administrative expenses in the statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Convertible Loans
Convertible loan notes are regarded as compound instruments, consisting of a liability component and an equity
component. At the date of issue the fair value of the liability component is estimated using the prevailing market interest
rate for similar non-convertible debt. The difference between the proceeds of issue of the convertible loan note and the
fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the
Group, is included in equity.
Issue costs are apportioned between the liability and equity components of the convertible loan notes based on their
relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against
equity.
The interest expense of the liability component is calculated by applying the effective interest rate to the liability
component of the instrument. The difference between this amount and the interest paid is added to the carrying amount
of the convertible loan note.
Bank Borrowings
Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate
method, which ensures that any interest expense over the year to repayment is at a constant rate on the balance of the
liability carried in the consolidated statement of financial position. Finance charges are accounted for on an effective
interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the year
in which they arise.
Trade Payables
Trade payables are stated at their amortised cost.
Equity Instruments
Equity instruments issued by the Group are recorded as the proceeds received, net of direct costs.
Retirement benefits
The Group operates pension schemes for the benefit of a number of its Directors. The schemes are defined contribution
schemes and the contributions are charged against profits as they accrue.
2
Critical accounting judgements and key sources of estimation uncertainty
The preparation of the financial statements requires management to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of
the financial statements. If in the future such estimates and assumptions which are based on management’s best
judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and
assumptions will be modified as appropriate in the year in which the circumstances change. Where necessary, the
comparatives have been reclassified or extended from the previously reported results to take into account presentational
changes.
Critical judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, which are described in note 1, management has made the
following judgements that have the most significant effect on the amounts recognised in the financial statements (apart
from those involving estimations, which are dealt with below).
Sale and leaseback
As explained in note 24, the Group enters into sale and leaseback arrangements to finance programme production. The
obligations to the lessee are matched by deposits held with financial institutions. The Group is not able to control the
deposit accounts, nor is it able to withhold payments to the investor from the accounts. Accordingly, the Group has
determined that, under IAS39 ‘Financial instruments: Recognition and Measurement’, each sale and leaseback
transaction entered into by the Group has, from inception, failed to meet the definition of an asset and liability and has
therefore not been recognised in these financial statements. The Group has applied guidance from SIC27 ‘Evaluating the
substance of transactions involving the legal form of a Lease’.
DCD Media Plc
28
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
2
Critical accounting judgements and key sources of estimation uncertainty (continued)
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial
position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
Recoverability of programmes in the course of production
During the year, management reviewed the recoverability of its programmes in the course of production which are
included in its statement of financial position. The projects continue to progress satisfactorily and management continue
to believe that the anticipated revenues will enable the carrying amount to be recovered in full.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which
the goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows
expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The
carrying amount of goodwill at the statement of financial position date was £4.6m. Details relating to the allocation of
goodwill to cash-generating units and potential impairment calculations are given in note 12.
Impairment of programme rights
Determining whether programme rights are impaired requires an estimation of the value in use of the cash-generating
unit to which the rights have been allocated. The value in use calculation requires the entity to estimate the future cash
flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The
carrying amount of programme rights at the statement of financial position date was £0.5m. Details of the impairment
review calculations are given in note 12.
3
Segment information
Under IFRS 8 the accounting policy for identifying segments is based on the internal management reporting information
that is regularly reviewed by the senior management team.
The Group has four main reportable segments:
•
Factual Television Production - This division is involved in the production of factual based television content
from the aggregate of the following reporting lines: Prospect Pictures, West Park Pictures and DCD Factual
brands;
• Entertainment Television Production – This division is involved in the production of entertainment based
television content. This includes productions by September Films and Matchlight Limited;
• Event Management – This division organises and manages events, primarily music concerts through Done
and Dusted, and has been classified as a discontinued operation at the year end; and
• Rights and Licensing – This division is involved with the sale of distribution rights, DVDs, music and
publishing deals through the aggregate of the following reporting lines: DCD Rights, DC DVD, DCD Music and
DCD Publishing.
The Group’s reportable segments are strategic business divisions that offer different products to different markets, while
its Other division is its head office function which manages other business which cannot be reported within the other
reportable segments. They are managed separately because each business required different management and
marketing strategies.
Uniform accounting policies are applied across the entire Group. These are described in note 1 of the financial
statements.
The Group evaluates performance of the basis of profit or loss from operations but excluding exceptional items such as
goodwill impairments. The Board considers the most important KPIs within its business segments to be revenue and
segmental profit.
Inter-segmental trading occurs between the Rights and Licensing division and the production divisions where sales are
made of distribution rights. Royalties and commissions paid are governed by an umbrella agreement covering the Group
that applies an appropriate rate that is acceptable to the local tax authorities.
Segment assets include all trading assets held and used by the segments for their day to day operations. Goodwill and
trade-names are not included within segmental assets as management views these assets as owned by the Group.
Segment liabilities include all trading liabilities incurred by the segments. Loans and borrowings and deferred tax
liabilities incurred by the Group are not allocated to segments. Details of these balances are provided in the
reconciliations below:
DCD Media Plc
29
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
3
Segment information (continued)
2011 Segmental Analysis – income statement
l
a
u
t
c
a
F
t
n
e
m
n
i
a
t
r
e
t
n
E
t
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e
v
E
t
n
e
m
e
g
a
n
a
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d
e
u
n
i
t
n
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s
i
d
(
)
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n
o
i
t
a
r
e
p
o
d
n
a
s
t
h
g
R
i
g
n
i
s
n
e
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i
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r
e
h
t
O
1
1
0
2
l
a
t
o
T
£’000
£’000
£’000
£’000
£’000
£’000
Total revenue
Inter-segmental revenue
Total revenue from external customers
4,446
(48)
4,398
15,421
(2,295)
13,126
8,391
(275)
8,116
5,044
(810)
4,234
84
-
84
33,386
(3,428)
29,958
Discontinued operations
-
-
(8,116)
-
-
(8,116)
Group’s revenue per consolidated statement of
comprehensive income
Operating loss before tax – continuing operations
Operating loss before tax – discontinued operations
4,398
13,126
-
4,234
84
21,842
(6,052)
(1,773)
Operating (loss)/profit before tax
(452)
(1,213)
(1,773)
(1,101)
(3,286)
(7,825)
Capitalisation of programme rights
Amortisation of programme rights
Impairment of programme rights
Amortisation of goodwill and trade names
Impairment of goodwill and trade names
Depreciation
(438)
404
4
569
2,296
13
(4,712)
4,678
148
419
1,486
8
(285)
284
2
-
1,370
18
-
36
-
-
-
14
-
66
839
-
-
3
(5,435)
5,468
993
988
5,152
56
Segmental EBITDA
2,396
814
(384)
(1,051)
(2,378)
(603)
Restructuring costs
Discontinued US operations costs
Staff normalisation costs
Intercompany debt write off
47
-
167
(250)
-
-
-
2,526
-
512
-
-
-
-
269
-
58
-
120
(2,276)
Segmental adjusted EBITDA
2,360
3,340
128
(782)
(4,476)
105
512
556
-
570
Net finance expense
Depreciation
(6)
(13)
-
(8)
(6)
(18)
(40)
(14)
(332)
(3)
(384)
(56)
Segmental adjusted profit/(loss) before tax
2,341
3,332
104
(836)
(4,811)
130
DCD Media Plc
30
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
3
Segment information (continued)
2011 Segmental Analysis – financial position
l
a
u
t
c
a
F
t
n
e
m
n
i
a
t
r
e
t
n
E
t
n
e
v
E
t
n
e
m
e
g
a
n
a
M
d
e
u
n
i
t
n
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s
i
d
(
)
s
n
o
i
t
a
r
e
p
o
d
n
a
s
t
h
g
R
i
g
n
i
s
n
e
c
i
L
r
e
h
t
O
1
1
0
2
l
a
t
o
T
£’000
£’000
£’000
£’000
£’000
£’000
Non-current assets
109
717
1
41
-
868
Reportable segment assets
1,292
4,798
1,580
4,832
92
12,594
Central assets
Goodwill
Trade-names
Assets held for sale
Total Group assets
-
132
236
-
-
3,873
2,304
-
-
-
-
83
-
624
-
-
138
-
-
-
138
4,629
2,540
83
1,660
10,975
1,663
5,456
230
19,984
Reportable segment liabilities
(1,228)
(2,686)
(1,021)
(4,532)
(456)
(9,923)
Loans and borrowings
Deferred tax liabilities
-
(58)
-
(564)
-
-
-
-
(6,083)
-
(6,083)
(622)
Total Group liabilities
(1,286)
(3,250)
(1,021)
(4,532)
(6,539)
(16,628)
DCD Media Plc
31
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
3
Segment information (continued)
2010 Segmental Analysis – income statement
l
a
u
t
c
a
F
t
n
e
m
n
i
a
t
r
e
t
n
E
t
n
e
v
E
t
n
e
m
e
g
a
n
a
M
d
e
u
n
i
t
n
o
c
s
i
d
(
)
s
n
o
i
t
a
r
e
p
o
d
n
a
s
t
h
g
R
i
g
n
i
s
n
e
c
i
L
r
e
h
t
O
0
1
0
2
l
a
t
o
T
£’000
£’000
£’000
£’000
£’000
£’000
Total revenue
Inter-segmental revenue
Total revenue from external customers
8,449
-
8,449
16,263
15,920
16,263
15,920
9,513
(1,829)
7,684
43
-
43
50,188
(1,829)
48,359
Discontinued operations
-
-
(15,920)
-
-
(15,920)
Group’s revenue per consolidated statement of
comprehensive income
Operating loss before tax – continuing operations
Operating loss before tax - discontinued operations
8,449
16,263
-
7,684
43
32,439
(10,098)
(1,117)
Operating (loss)/profit before tax
(9,900)
(352)
(1,117)
(65)
219
(11,215)
Capitalisation of programme rights
Amortisation of programme rights
Impairment of programme rights
Amortisation of goodwill and trade names
Impairment of goodwill and trade names
Depreciation
Segmental EBITDA
Restructuring costs
Segmental adjusted EBITDA
Net finance income/(expense)
Depreciation
(1,248)
1,551
275
854
7,889
8
(6,844)
6,938
230
628
-
28
-
-
36
-
1,525
23
(571)
628
467
-
(571)
1
(8)
-
628
(1)
(28)
599
-
467
(2)
(23)
442
-
-
91
-
-
19
45
-
-
246
790
-
3
1
(8,092)
8,735
1,422
1,482
9,417
79
1,259
1,828
530
530
45
1,789
2,358
(1)
(19)
(440)
(1)
(443)
(79)
25
1,348
1,836
Segmental adjusted profit/(loss) before tax
(578)
DCD Media Plc
32
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
3
Segment information (continued)
2010 Segmental Analysis – financial position
l
a
u
t
c
a
F
t
n
e
m
n
i
a
t
r
e
t
n
E
t
n
e
v
E
t
n
e
m
e
g
a
n
a
M
d
e
u
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i
t
n
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s
i
d
(
)
s
n
o
i
t
a
r
e
p
o
d
n
a
s
t
h
g
R
i
g
n
i
s
n
e
c
i
L
r
e
h
t
O
1
1
0
2
l
a
t
o
T
£’000
£’000
£’000
£’000
£’000
£’000
Non-current assets
853
866
23
47
259
2,048
Reportable segment assets
959
4,101
3,149
5,910
270
14,389
Goodwill
Trade-names
132
3,102
5,359
2,722
1,453
-
624
-
-
-
7,568
5,824
Total Group assets
4,193
12,182
4,602
6,534
270
27,781
Reportable segment liabilities
(780)
(1,845)
(2,352)
(4,391)
(1,072)
(10,440)
Loans and borrowings
Provisions
Deferred tax liabilities
-
-
(872)
-
-
(764)
-
-
-
-
-
-
(5,861)
(76)
-
(5,861)
(76)
(1,636)
Total Group liabilities
(1,652)
(2,609)
(2,352)
(4,391)
(7,009)
(18,013)
4 Revenue
The Group's headquarters is based in the United Kingdom. It also has offices in New York and Los Angeles to conduct
any business in the United States. Outside the United Kingdom, sales are generally denominated in US dollars.
Revenue, which excludes value added tax and transactions between Group companies, represents the sale of television
production services, event management services, commissions on television and film distribution rights and the sale of
television and film distribution rights on behalf of third party producers.
The following table provides an analysis of the Group's revenue by geographical market, irrespective of the origin of the
goods or services:
United Kingdom
Rest of Europe
North and South America, including Canada
Rest of the World
5
Expenses by nature
Auditors' remuneration:
Fees payable to the company's auditor:
For the audit of the company's annual accounts
For the audit of other Group companies
For provision of accounting advice
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
8,642
1,878
10,267
1,056
21,843
16,388
2,672
10,584
2,795
32,439
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
10
55
-
10
65
7
DCD Media Plc
33
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
5
Expenses by nature (continued)
Operating lease rentals:
Plant and machinery
Other
Loss on foreign exchange fluctuations
Loss on disposal of property, plant and equipment
Depreciation, amortisation and impairment:
Intangible assets - programme amortisation in cost of sales (note 12)
Intangible assets - programme impairment in cost of sales - continued
operations (note 12)
Intangible assets - programme impairment in cost of sales - discontinued
operations (note 12)
Intangible assets - goodwill in administrative expenses (note 12)
Intangible assets - trade names in administrative expenses (note 12)
Intangible assets - assets held for sale (note 12)
Property, plant and equipment (note 13)
Staff costs (note 6)
Restructuring costs (see below)
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
-
293
(6)
(53)
5,468
991
2
3,782
988
1,370
56
5,206
105
211
543
(65)
-
8,735
1,422
-
9,417
1,482
-
79
7,842
530
The restructuring costs relate to the change in premise of the head office, separation costs for the departure of Done and
Dusted Group Limited from the Group and redundancy costs within the Group including legal costs and compensation to
individuals for loss of office.
6
Directors and employees
Staff costs during the year, including Directors, were as follows:
Wages and salaries
Social security costs
Other pension costs
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
4,698
490
18
5,206
6,891
890
61
7,842
Other pension costs include contributions totalling £nil (2010: £21,799) to money purchase pension schemes in respect
of three employees. There are no defined benefit schemes in operation.
The average number of employees of the Group during the year were as follows:
Sales and distribution
Production
Directors and administration
Year ended
31 December
2011
No.
18 month
period ended
31 December
2010
No.
9
29
24
62
9
31
31
71
DCD Media Plc
34
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
6
Directors and employees (continued)
Remuneration in respect of the Directors, who are the key management personnel of the Group was as follows for the
year versus the comparative figures for the eighteen month period:
Emoluments
£'000
Pension
Contributions
£'000
Money value
of non-cash
benefits
received
£'000
J Cusins (appointed 17 November 2011)
D Green
J McIntosh (resigned 28 July 2011)
S Nourmand (appointed 17 November 2011)
T Wildman
2011
5
301
165
252
40
763
-
-
-
5
-
5
-
-
-
-
-
-
Emoluments
£'000
Pension
Contributions
£'000
Money value
of non-cash
benefits
received
£'000
64
30
177
302
278
192
1,043
-
-
7
-
6
21
34
-
-
-
-
-
-
-
D Elstein (resigned 12 October 2010)
T Wildman
S Pizey (resigned 7 December 2010)
D Green
S Nourmand (appointed 17 November 2011)
J McIntosh
2010
7
Finance income
Interest on short term bank deposits
8
Finance costs
Bank overdraft
Convertible loan interest charge
Convertible loan equity interest charge
Bank loan
Other interest charges
2011
Total
£'000
5
301
165
257
40
768
2010
Total
£'000
64
30
184
302
284
213
1,077
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
2
2
4
4
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
27
282
-
70
7
386
37
496
123
129
-
785
As explained in note 18, the convertible loan note issued on 5 September 2011 was accounted for as a compound
instrument under IFRS 32. As a result, there has been an interest charge in the year of £nil (2010: £123,000) to equalise
the equity element of the loan credited to reserves. The redemption date of the remaining loan notes was extended to 30
November 2012.
DCD Media Plc
35
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
9
Taxation on ordinary activities
Recognised in the statement of comprehensive income:
Current tax (expense)/credit:
Continuing operations
UK corporation tax
US federal and state income taxes
Withholding tax suffered
Discontinued operations
US federal and state income taxes
Current year credit/(expense)
Deferred tax (expense)/credit:
Reversal of temporary differences under IFRS
Total tax in statement of comprehensive income
Tax charge represents:
Loss on ordinary activities – continuing operations
(Loss)/profit on ordinary activities – discontinued operations
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK
of 26.49% (2010: 28%)
Effects of:
Expenses not deductible for tax purposes
Provisions deductible on paid basis
Net losses in year carried forward/(brought forward losses utilised)
Depreciation in excess of capital allowances
Rate differential on foreign taxes
Overseas withholding tax suffered
Total tax credit
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
-
159
(1)
(11)
147
1,014
1,161
2011
£’000
(7,806)
(409)
(8,215)
(2,176)
2,832
-
304
8
194
(1)
1,161
-
(29)
(4)
-
(33)
577
544
2010
£’000
(8,844)
405
(8,439)
(2,363)
2,907
53
36
16
(109)
4
544
A deferred tax asset of approximately £3.1m (2010: £4.2m) arising principally from losses in the company has not been
recognised. The Directors believe that it is prudent not to recognise the deferred tax asset within the financial statements.
The Directors believe that the brought forward losses would not be utilised in 2012 and so have calculated the asset
value based upon the 2012 tax rate of 23%. If the brought forward losses were not utilised until 2014 a tax rate of 22%
would be applicable, resulting in a deferred tax asset of £2.9m, a reduction of £0.2m.
10 Discontinued operations
In June 2011, the Board took the decision to part company with key management at one of its subsidiaries, Done and
Dusted Group Limited. This decision was to allow the Company to focus on its key markets, that of television production
and distribution. Done and Dusted Group Limited will remain within the Group, however trade names have been passed
to key management in consideration of key management returning their shares in the Company. The return of ordinary
shares in the Company had not completed as at the signing date of the financial statements. Operations within Done and
Dusted Group Limited have ceased from 1 January 2012.
DCD Media Plc
36
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
10 Discontinued operations (continued)
Asset held for sale (note 16)
Result of discontinued operations
Revenue
Expenses other than finance costs
Other income
Finance costs
Impairment of goodwill
(Loss)/profit from discontinued operations before tax
Tax expense
(Loss)/profit from discontinued operations after tax
Basic (loss)/earnings per share (pence)
Diluted (loss)/earnings per share (pence)
Statement of cash flows
31 December
2011
£’000
31 December
2010
£’000
83
83
-
-
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
8,116
(8,519)
-
(6)
(1,370)
15,921
(15,560)
47
(3)
(1,525)
(1,779)
(1,120)
(11)
-
(1,790)
(1,120)
(2.37p)
(1.90p)
(2.37p)
(1.90p)
The statement of cash flows includes the following amounts related to discontinued operations:
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Net cash flow from discontinued operations
11 Earnings per share
Year ended
31 December
2011
£’000
18 month
period ended
31 December
2010
£’000
9
(289)
-
(280)
488
(26)
-
462
The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year. The calculation of diluted loss per share is based on the
basic loss per share, adjusted to allow for the issue of shares and the post tax effect of dividends and interest, on the
assumed conversion of all other dilutive options and other potential ordinary shares.
Weighted
average
number of
shares
2011
Per share
amount
pence
Loss
£'000
Weighted
average
number of
shares
2010
Per share
amount
pence
Loss
£'000
Basic loss per share
Loss attributable to ordinary shareholders
Diluted loss per share
Loss attributable to ordinary shareholders
(7,054) 75,354,034
(9.36)
(7,895)
59,019,293
(13.38)
(7,054) 75,354,034
(9.36)
(7,895)
59,019,293
(13.38 )
DCD Media Plc
37
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
11 Earnings per share (continued)
If convertible loan balances held at the year end were converted at their respective conversion prices of 18 pence and 1
pence, and the share options were converted at their respective conversion prices of 1 pence and 10 pence, the number
of shares issued would be 204,848,375. The consequence of this transaction has not been considered for 2011 figures
as the effect would be anti-dilutive.
12 Goodwill and intangible assets
Cost
At 1 July 2009
Additions
Created on business combinations (note 30)
Goodwill
£'000
Trade
Names
£'000
Programme
Rights
£'000
Total
£'000
34,467
-
136
9,882
-
-
31,605
8,092
-
75,954
8,092
136
At 31 December 2010
34,603
9,882
39,697
84,182
At 1 January 2011
Additions
Transfer of goodwill to assets held for sale (note 10, 16)
34,603
-
(12,264)
9,882
-
-
39,697
5,435
-
84,182
5,435
(12,264)
At 31 December 2011
22,339
9,882
45,132
77,353
Amortisation and impairment
At 1 July 2009
Amortisation provided in period in cost of sales
Impairment provided in period in cost of sales
Amortisation provided in period in administrative expenses
Impairment provided in period in administrative expenses
18,218
-
-
-
8,817
1,976
-
-
1,482
600
27,596
8,735
1,422
-
-
47,790
8,735
1,422
1,482
9,417
At 31 December 2010
27,035
4,058
37,753
68,846
At 1 January 2011
Amortisation provided in year in cost of sales
Impairment provided in year in cost of sales - continued operations
Impairment provided in year in cost of sales - discontinued operations
Amortisation provided in year in administrative expenses
Impairment provided in year in administrative expenses – continued
operations
Impairment provided in year in administrative expenses –
discontinued operations
Transfer of accumulated amortisation
27,035
-
-
-
-
4,058
-
-
-
988
1,486
2,296
1,370
(12,181)
-
-
37,753
5,468
991
2
-
-
-
-
68,846
5,468
991
2
988
3,782
1,370
(12,181)
At 31 December 2011
Net book value
At 31 December 2011
At 31 December 2010
17,710
7,342
44,214
69,266
4,629
7,568
2,540
5,824
918
1,944
8,087
15,336
DCD Media Plc
38
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
12 Goodwill and intangible assets (continued)
Current estimates of useful economic lives of intangible assets are as follows:
Goodwill
Trade names
Programme Rights
Indefinite
10 years
5-7 years
Trade names currently have a remaining useful economic life of five and a half years.
Goodwill and trade names
Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGUs) that are
expected to benefit from that business combination.
Details of goodwill allocated to cash generating units for which the amount of goodwill so allocated is as follows:
Cash generating units (CGU):
DCD Rights Limited
Done and Dusted Group Limited*
September Holdings Limited
Prospect Pictures Limited
West Park Pictures Limited
Matchlight Limited
Segment (note 3)
Rights and Licensing
Event Management
Entertainment
Factual
Factual
Factual
Goodwill carrying amount
31 December
2011
£’000
31 December
2010
£’000
624
83
3,873
-
-
132
4,712
624
1,453
5,359
-
-
132
7,568
*The goodwill relating to Done and Dusted Group Limited has been reclassified as a current asset held for sale. See note
10 and 16.
Trade names were identified on acquisition. These trade names are being amortised over a 10 year life. The details of
the trade names allocated by CGU are below:
Cash generating units (CGU):
DCD Rights Limited
Done and Dusted Group Limited*
September Holdings Limited
Prospect Pictures Limited
West Park Pictures Limited
Matchlight Limited
Segment (note 3)
Rights and Licensing
Event Management
Entertainment
Factual
Factual
Factual
Trade name carrying amount
31 December
2011
£’000
31 December
2010
£’000
-
-
2,304
236
-
-
2,540
-
-
2,723
2,501
600
-
5,824
Goodwill and trade names are allocated to CGUs for the purpose of the impairment review. The recoverable amounts of
the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those
regarding the discount rates, growth rates and expected profitability of the CGUs over the future seven years.
Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of
money and the risks inherent in the CGUs.
The board choose to perform an annual impairment review of all intangible assets, including goodwill and trade names.
With the exception of Done and Dusted Group Limited, the recoverable amounts of all the above CGUs have been
determined from value in use calculations. Formally approved budgets cover a two year period to December 2014. The
results are then extrapolated for a further five years to December 2019. The board uses this seven year period of
projection as they believe it is reasonably aligned with the expected lifespan of a TV production. The impairments arising
from this value in use calculation are recorded below.
DCD Media Plc
39
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
12 Goodwill and intangible assets (continued)
Goodwill
Cash generating units (CGU):
DCD Rights Limited
Done and Dusted Group Limited*
September Holdings Limited
Prospect Pictures Limited
West Park Pictures Limited
Matchlight Limited
Trade names
Cash generating units (CGU):
DCD Rights Limited
Done and Dusted Group Limited*
September Holdings Limited
Prospect Pictures Limited
West Park Pictures Limited
Matchlight Limited
Impairment charge
31 December
2011
£’000
31 December
2010
£’000
-
1,370
1,486
-
-
-
2,856
-
1,525
-
4,925
2,367
-
8,817
Amortisation charge
Impairment charge
31 December
2011
£’000
31 December
2010
£’000
31 December
2011
£’000
31 December
2010
£’000
-
-
419
385
184
-
988
-
-
628
577
277
-
1,482
-
-
-
1,880
416
-
2,296
-
-
-
-
600
-
600
In the previous financial period, management has assessed the value of the event management unit which contains no
intellectual property, and has considered the risk associated with change of circumstance in the evolving niche market for
event management and opportunity for future potential cashflows; and replacing its key staff in the event of failure to
retain their service. This had an adverse impact on the projected value in use of the operation concerned and
consequently resulted in an impairment to goodwill of £1.524m.
During the period the Directors of Done and Dusted Group Limited chose to leave the Group. The board considered the
value in use of the Goodwill being an estimate of amounts recoverable as proceeds from the return of certain DCD Media
plc shares to the Group from the Directors. This charge was £1.37m. As a result the goodwill in relation to Done &
Dusted Limited of £1.453m was impaired to a carrying value of £0.083m. This asset has now been transferred to non-
current assets held for sale (note 16).
During the previous financial period key creative executives left West Park Pictures Limited. This event was seen by
management as an indicator of impairment against the trade name in addition to the annual requirement for an
impairment review of goodwill. This departure had an adverse impact on the projected value in use of the operation
concerned resulting in an impairment of £2.967m. The impairment charge has eliminated goodwill to nil and reduced the
carrying value of the trade-name to £0.6m.
During the period management made the decision to not invest in the West Park brand any longer. This event meant that
no further value in use was identified in the trade name and it was impaired to a value of nil. The CGU has been wound
down and closed in the post year end period.
During the previous period key creative executives left Prospect Picture Limited and the business was also restructured
as part of the overall re-organisation of the Group. This event was seen by management as an indicator of impairment
against the trade name in addition to the annual requirement for an impairment review of goodwill. This impairment
review against the aggregated intangible assets has resulted in an impairment of £4.925m. Projected value in use
justified the carrying value of the trade name at the financial year end of £2.501m.
During the current period further key executives left Prospect Pictures Limited and the decision was taken to restructure
the operations of the division. The effect of this restructuring has led to a further impairment of £0.416m in the period.
The Group will continue to trade this division.
Management has assessed the value of September Films Limited and has considered the risk associated with the
refocusing of the business and re-assessed future cashflows based on revised cash flows from the prior year. This had
an adverse impact on the projected value in use of the operation concerned and consequently resulted in an impairment
to goodwill of £1.486m.
DCD Media Plc
40
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
12 Goodwill and intangible assets (continued)
The key assumptions used for value in use calculations are the discount factor and growth rates applied to the forecasts.
The rate used to discount the forecast cash flows is 12% for all CGUs. If the discount rates used were increased by 3%
to 15%, it is estimated that the recoverable amount of goodwill would have impaired by approximately £0.64m. If the
discount rates were decreased to 9%, it is estimated that the recoverable amount of goodwill would be increased by
approximately £0.75m.
Varying growth rates are applied dependent upon the historical growth of the CGU. These growth rates are only applied
for the five years subsequent to the initial period of formally approved budgets.
Trade names
Cash generating units (CGU):
DCD Rights Limited
Done and Dusted Group Limited
September Holdings Limited
Prospect Pictures Limited
Matchlight Limited
Discount factor
Growth rate
31 December
2011
%
31 December
2010
%
31 December
2011
%
31 December
2010
%
12
12
12
12
12
12
12
12
12
12
5
5
8
5
5
5
-
5
5
5
The carrying value of goodwill in the DCD Rights CGU is exceeded by a recoverable amount of £0.74m.The carrying
value of goodwill in the Matchlight CGU is exceeded by a recoverable amount of £0.03m.
Programme Rights
Management performed an impairment review of intangible programme rights held by the business. The valuations of
programme rights are based on the recoverable amounts from their value in use using a discount factor of 12%. The
forecasts are based on historic sales of the programmes, and future sales are forecast over a seven year period on a
reducing basis. Seven years is used for the forecasts because the programme rights are held for periods longer than five
years, but not more than ten years. If the discount rate was increased by 3% to 15% the carrying values would
decreased by £0.021m. If the discount rate was decreased by 3% to 9% the carrying value of assets would increase by
£0.011m.
DCD Media Plc
41
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
13 Property, plant and equipment
Short leasehold
property
improvements
£'000
Office and
technical
equipment
£'000
Motor
vehicles
£'000
Cost
At 1 July 2009
Additions
On acquisition of subsidiaries
Disposals
At 31 December 2010
At 1 January 2011
Additions
Disposals
At 31 December 2011
Depreciation
At 1 July 2009
Provided in period
Disposed in period
At 31 December 2010
At 1 January 2011
Provided in year
Disposed in year
At 31 December 2011
Net book value
At 31 December 2011
At 31 December 2010
157
-
-
-
157
157
-
(157)
-
157
-
-
157
157
-
(157)
-
-
-
918
45
24
(6)
981
981
36
(154)
863
831
63
(6)
888
888
43
(109)
822
41
93
44
-
-
-
44
44
47
(44)
47
17
16
-
33
33
13
(36)
10
37
11
Total
£'000
1,119
45
24
(6)
1,182
1,182
83
(355)
910
1,005
79
(6)
1,078
1,078
56
(302)
832
78
104
The net book value of property, plant and equipment includes an amount of £36,909 (2010: £29,247) in respect of assets
held under finance leases and hire purchase contracts. The related depreciation charge on these assets for the year was
£13,791 (2010: £14,753).
14
Inventories
Pre-production costs
Finished stocks
31 December
2011
£’000
31 December
2010
£’000
71
115
186
114
162
276
DCD Media Plc
42
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
15 Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Taxation and social security
Other receivables
Prepayments and accrued income
Total trade and other receivables
Total financial assets other than cash and cash equivalents classified as loans
and receivables
31 December
2011
£’000
31 December
2010
£’000
3,986
(11)
3,975
180
786
223
5,164
4,761
5,437
(110)
5,327
215
908
1,480
7,930
6,235
The average credit period taken on sales of goods is 43 days (2010: 60 days). No interest is charged on receivables
within the agreed credit terms. Thereafter, interest may be charged.
An allowance for impairment is made where there is an identified event which, based on previous experience, is
evidence of a reduction in the recoverability of the outstanding amount. The Group provides, in full, for any debts it
believes have become non recoverable. The figures shown above are after deducting a specific provision for bad and
doubtful debts of £11,000 (2010: £110,000). No amounts are included within trade and other receivables are expected to
be recovered in more than one year (2010: £nil). The decrease in the bad debt provision is related to a reduced number
of debts being identified where the Directors deem recovery of amounts owed to be unlikely. The Directors have
reviewed their customer portfolio and marketplace and do not consider the risk of bad debt to be material to the
business.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable set out above.
The ageing of trade receivables that have not been provided for are:
Not due yet
0-29 days
Overdue
30-59 days
60-89 days
90-119 days
120+ days
16 Assets held for sale
Intangible assets
31 December
2011
£’000
31 December
2010
£’000
1,875
3,239
459
230
210
1,201
3,975
1,175
203
499
211
5,327
31 December
2011
£’000
31 December
2010
£’000
83
83
-
-
Non-current assets are transferred to assets held for sale when it is expected that their carrying amounts will be
recovered principally through disposal and a sale is considered likely. They are held at the lower of carrying amount and
fair value less costs to sell.
The creation of assets held for sale arises from the transfer of goodwill relating to Done and Dusted Group Limited. The
amount held is the fair value of DCD Media Plc shares held by the exiting key management of Done and Dusted Group
Limited which are contractually returnable to DCD Media Plc as part of exit contract which became effective on 1 January
2012. See discontinued operations note 10.
DCD Media Plc
43
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
17 Trade and other payables
Trade payables
Other payables
Accruals and deferred income
Taxation and social security
Total trade and other payables
Total financial liabilities, excluding loans and borrowings, classified as financial
liability measure at amortised cost
18
Interest bearing loans and borrowings - due within one year
Bank overdrafts (secured)
Bank loan (secured)
Other loan (unsecured)
Convertible debt (secured)
Obligations under finance leases
31 December
2011
£’000
31 December
2010
£’000
1,452
1,674
6,215
541
9,882
3,126
2,424
2,043
5,093
869
10,429
4,467
31 December
2011
£’000
31 December
2010
£’000
615
1,000
154
4,314
17
6,100
738
1,000
-
-
11
1,749
The principal terms and the debt repayment schedule for the Group’s loans and borrowings are as follows as at 31
December 2010 and 2011:
Bank overdrafts (secured)
Bank loan (secured)
Other loan
Convertible debt (secured)
Obligations under finance leases
Bank borrowings
Currency Nominal rate %
Sterling
Sterling
Sterling
Sterling
Sterling
3.00 over Base
Rate
3.50 over
LIBOR
3.50 over
LIBOR
8.22
18.50
Year of
maturity
2011
2012
2012
2012
2014
Bank overdrafts and bank loans are secured by a fixed charge over the Group’s intangible programme rights and a
floating charge over the remaining assets of the Group.
Convertible debt
Convertible debt is secured by a floating charge over the assets of the Group and is subordinate to bank overdrafts and
bank borrowings.
A new convertible loan note debt of £975,000 was issued on 5 September 2011. The convertible loan note debt is
redeemable by November 2012 if not previously converted at a fixed price of 1p. The remaining convertible loan debt is
redeemable by November 2012 if not previously converted at a fixed price of 18p.
The convertible loan as at 30 November 2009 was accounted for as a compound instrument, and a calculation has been
made to separate the equity element from the liability element of the loan. A discount rate of 12% has been applied to the
future interest payments and repayment of the loan. This has resulted in a reduction of the liability by crediting an equity
element of £120,000 to reserves.
The new convertible loan note debt was also accounted for as a compound instrument, and a calculation has been made
to separate the equity element from the liability element of the loan. A discount rate of 12% has been applied to the
future interest payments and repayment of the loan. This has resulted in a reduction of the liability by crediting an equity
element of £34,623 reserves.
DCD Media Plc
44
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
18
Interest bearing loans and borrowings - due within one year (continued)
The total equity element of the convertible loan at the year end is £154,623.
On 11 April 2011, a portion of convertible debt was converted to equity at 18p per share resulting in 154,018 shares
being issued for a consideration of £27,723. An amount of £1,029 was debited to the equity element in reserves.
On the 30 November 2009 the Group announced that the primary holder of convertible loan notes, Highbridge Capital
LLC (‘Highbridge’) agreed to cancel approximately £6.9m of convertible loan notes in exchange for 7,631,048 of new
ordinary shares in the Company and satisfied by a further payment of £2.5m of cash.
The consideration paid is allocated to liabilities and equity using the same method as used upon originally valuing the
instruments. The Directors have performed a valuation exercise in respect to the consideration. The fair value of the
consideration has been allocated against the liability component of the convertible instruments, realising an exceptional
gain on early redemption of £3,559,737. This has been recognised in the statement of comprehensive income for the
period ended 31 December 2010.
19 Provision
1 January 2011
Amounts released against provision during the year
31 December 2011
Restructuring Provision
£’000
76
(76)
-
The provision brought forward related to restructuring costs relating to closure of office space in central London,
restructuring related redundancies and associated legal costs. All costs were received in the current year and as such
the provision was utilised and any over provision was released.
20
Interest bearing loans and borrowings - due after more than one year
Bank loan (secured) (note 18)
Convertible debt (secured) (note 18)
Obligations under finance leases
21 Deferred tax liabilities
Deferred tax liabilities are attributable to the following:
31 December
2011
£’000
31 December
2010
£’000
-
-
24
24
1,000
3,123
-
4,123
Liabilities
Net
31 December
2011
£'000
31 December
2010
£'000
31 December
2011
£'000
31 December
2010
£'000
Intangible assets
Tax value of carry-forward losses
Net tax liabilities
622
-
622
1,636
-
1,636
622
-
622
1,636
-
1,636
A deferred tax asset of £3.1 million, arising principally from losses in the Group of £13.4m, has not been recognised
(2010: £4.2 million and £15.6m). These losses can be offset against future trading profits generated. The Directors
believe at this stage that it is prudent not to recognise the deferred tax asset within the financial statements as the
Directors do not believe that profits will be recognised in the near future.
DCD Media Plc
45
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
21 Deferred tax liabilities (continued)
Movement in deferred tax during the year:
Intangible assets
Tax value of temporary difference
22 Financial instruments and risk management
Financial risk factors
1 January
2011
£'000
Recognised in
income
£'000
31 December
2011
£'000
1,636
1,636
1,014
1,014
622
622
The Group's financial instruments comprise cash, including short term deposits, trade and other receivables and trade
and other payables that arise directly from its operations, overdrafts, bank loans and convertible debt. The main risks
arising from the Group's financial instruments are interest rate risk, liquidity risk, credit risk and currency risk. The Board
has reviewed and agreed policies for managing each of these risks and they are summarised below. The Group has no
financial assets other than trade receivables and cash at bank. The values in the Consolidated Statement of Financial
Position for the financial assets and liabilities are not materially different from their fair values.
Interest rate risk
The Group finances its operations at present through funds raised on share placings, convertible debt and production
loan facilities provided by banks. The Group manages its exposure to interest rate fluctuations by mixing the duration of
its deposits and borrowings to reduce the impact of interest rate fluctuations. Production loan facilities are short term and
secured on the licence fee payable by the commissioning broadcaster at various stages of the production, which
minimises the impact of any variation in interest rates. The interest rate on the convertible loans referred to in note 18 is
fixed at 8.22%.
Liquidity risk
The Group seeks to manage financial risk to ensure sufficient liquidity is available to meet foreseeable needs and to
invest cash assets safely and profitably. Some liquidity risk arises from the nature of production income, which does not
always arise in an even manner, and the Group's policy is to ensure there are sufficient cash reserves to meet liabilities
during such periods.
Liquidity risk also arises from the interest charges and repayment terms of convertible debt, which the Group seeks to
manage by means of periodic charges for central administration services and support to each Group entity. These are
incorporated into rolling twelve month Group cash flow forecasts, which are reviewed by the Board monthly, and the cash
flows are monitored at Group level by weekly cash reports from each operating entity. Short term flexibility is provided
through the availability of bank overdraft facilities.
Credit risk
The Group’s principal financial assets are bank balances, cash and trade and other receivables. The Group’s credit risk
is primarily attributable to its trade receivables. The Group operates to ensure that the payment terms of customers are
matched to the Group's own contractual obligations in terms of delivery of programmes and rights. The principal source
of Group income is commissioning broadcasters, who are not considered to be a significant credit risk because of their
size and financial resources. Other Group income is derived from distribution sales worldwide, and credit risk is assessed
in relation to knowledge of the customer or by credit references. To minimise credit risk contractual terms may require
that payment is made before delivery of materials.
Currency risk
The Group operates in overseas markets and is subject to exposures on transactions undertaken during the year. The
Group's exposure to exchange rate fluctuations is small based on its revenue and cost base and its policy is not to hedge
against foreign currency transactions.
DCD Media Plc
46
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
22 Financial instruments and risk management (continued)
Currency risk (continued)
The sterling equivalent of the Group's assets and liabilities denominated in foreign currencies at 31 December 2011 and
31 December 2010 was as follows:
US dollar
Euros
Other
Net assets/(liabilities)
Assets
Liabilities
31 December
2011
£'000
31 December
2010
£'000
31 December
2011
£'000
31 December
2010
£'000
4,075
95
1
4,171
4,786
588
464
5,838
(1,832)
-
-
(1,832)
(1,904)
(441)
(348)
(2,693)
Whilst the main currency that the Group is exposed to is US dollar, a 10% movement in its rate would not have a material
impact on its reported results.
Interest rate and liquidity risk
Interest rate sensitivity
The sensitivity analysis has been based on the average exposure to floating rate debt during the year. It has been
assumed that floating interest rates were 200 basis point higher than those actually incurred.
The effect of such a change would be to increase the loss before tax for the year by £32,300 (2010: loss of £67,000).
Capital risk management
The capital structure of the Group consists of convertible loan note loan financing, bank loan financing and the
shareholders’ equity comprising issued share capital and reserves.
The capital structure of the Group is reviewed on an ongoing basis with reference to the costs applicable to each element
of capital, future requirements of the Group, flexibility of capital to be drawn down and availability of further capital should
it be required. Management prepare cash flow projections to plan for repayment of loan facilities used. These projections
are reviewed on a regular basis to check that the Group will be able to settle liabilities as they fall due.
The Group’s objectives when maintaining capital are:
•
•
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
to provide an adequate return to shareholders by pricing products and services commensurately with the level
of risk.
Liquidity and interest risk tables
The following table details the Group’s remaining contractual maturity for its financial liabilities. The tables have been
drawn up based on the undiscounted contractual maturities of the financial liabilities (including interest that will accrue to
maturity). The discount column reflects the adjustments necessary to reconcile to the carrying amounts of the financial
liabilities.
31 December 2011
Fixed rate
Finance lease obligations
Trade payables
Floating rate
Bank overdrafts
Non-convertible debt
Convertible debt
Interest on convertible debt
Weighted
average
effective
interest
rate
%
Less
than 1
month
or on
demand
£'000
1-3
months
£'000
3-12
months
£'000
1-5
years
£'000
More
than 5
years Discount
£'000
£'000
18.5%
0%
1
1,452
3.5%
3.5%
7.7%
7.7%
615
-
-
-
4
-
-
404
-
-
12
-
-
750
3,778
536
24
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
£'000
41
1,452
615
1,154
3,778
536
DCD Media Plc
47
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
22 Financial instruments and risk management (continued)
31 December 2010
Fixed rate
Finance lease obligations
Trade payables
Floating rate
Bank overdrafts
Non-convertible debt
Convertible debt
Interest on convertible debt
Weighted
average
effective
interest
rate
%
Less
than 1
month
or on
demand
£'000
1-3
months
£'000
3-12
months
£'000
1-5
years
£'000
More
than 5
years Discount
£'000
£'000
Total
£'000
18.5%
0%
1
2,424
3.5%
3.5%
7.7%
7.7%
728
-
-
-
1
-
-
250
-
-
6
-
24
-
-
750
-
-
-
1,000
2,959
164
-
-
-
-
-
(5)
-
27
2,424
-
-
-
-
728
2,000
2,959
164
Refer to note 18 for explanation of the increase of the convertible debt.
23 Share capital
Authorised
350,000,000 (2010: 100,000,000) ordinary shares of 1p (2010: 10p) each
50,933,729 (2010: 50,933,729) deferred shares of 0.9p (2010: 0.9p) each
350,000,000 (2010: nil) deferred shares of 9p (2010: nil) each
Allotted, called up and fully paid
139,095,283 (2010: 61,441,265) ordinary shares of 1p (2010: 10p) each
50,933,729 (2010: 50,933,729) deferred shares of 0.9p (2010: 0.9p) each
61,595,283 (2010: nil) deferred shares of 9p (2010: nil) each
31 December
2011
£'000
31 December
2010
£'000
3,500
458
31,500
35,458
1,391
458
5,544
7,393
10,000
458
-
10,458
6,144
458
-
6,602
On 3 October 2011, each existing ordinary share of 10p was sub-divided into one ordinary share of 1p each and one
deferred share of 9p each. Immediately following the subdivision, each shareholder held the same number of ordinary
shares of 1p each as the number of ordinary shares of 10p each held immediately before the sub-division.
During 2011 the Company made an open subscription offer on equal terms to all shareholders. On 21 October 2011, the
Company issued 77,500,000 ordinary shares as part of an open subscription.
The subscribers in the subscription were as follows:
Name
Henderson Global Investors Limited
D Green
H Kronsten
L Hamilton
S Nourmand
A Sington
J Cusins
Others
Total number of
Ordinary Shares
following the
Subscription
Percentage of
enlarged issued
share capital
39,885,996
24,246,614
15,500,000
5,174,507
4,452,972
3,272,157
2,000,000
-
28.27%
17.18%
10.99%
3.67%
3.16%
2.32%
1.44%
-
Number of
Subscription
Shares
27,500,000
20,000,000
15,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
77,500,000
DCD Media Plc
48
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
23 Share capital (continued)
At 21 October 2011, Henderson Global Investors Limited (as a substantial shareholder), D Green (as a Director of the
Company), S Nourmand and A Sington (as subsidiary Directors), and L Hamilton (as a subsidiary Director within the
preceding twelve months) were considered related parties under the AIM Rules. The subscription of Subscription Shares
to them was considered a related party transaction under the AIM Rules. The Independent Director (T Wildman)
considered, having consulted with the Company's nominated adviser at the date of the Subscription, that the terms of the
related party transactions were fair and reasonable insofar as the Company's shareholders were concerned.
The deferred shares are not entitled to receive a dividend or other distribution, to attend or vote at any General Meeting
and on return of capital on a winding up, shall only be entitled to receive the amount paid up on the shares after holders
of the ordinary shares have received £100,000 for each ordinary share.
On 11 April 2011, a small portion of convertible debt was converted to equity at 18p per share resulting in 154,018
shares being issued for a consideration of £27,723.
24 Contingent liabilities – sale and leaseback agreements
One subsidiary company has a liability to pay annual rentals under a sale and leaseback agreement relating to television
programme rights until 2015. This obligation has not been recognised in the financial statements because at 31
December 2011 an amount of £518,072 (31 December 2010: £522,034) is held in a bank deposit account which may
only be used to settle those rental obligations. The deposit is held with the same bank to whom the rentals are paid, and
full set-off is applicable in the event of the failure of the bank.
Other subsidiary companies have entered into sale and leaseback agreements relating to television programme rights
where the obligations to pay rentals are guaranteed by amounts payable from bank deposits. These obligations have not
been recognised in the financial statements because the contingent liability would only crystallise upon the failure of the
bank holding the deposit. Further:
•
•
•
the Group is not able to control the deposit account in pursuit of its own objectives and any payments under the
lease are due out of this restricted account. The Group has neither control over the bank balance nor over any
interest earned thereon;
the risk of reimbursing the amount of fee receivable by the Group in respect of tax losses transferred and the
risk of paying an amount due under the guarantee in case of collapse of the bank holding the deposit are
remote; and
other than the initial cash flows at inception of the arrangement, the only cash flows expected under this
arrangement are the lease payments satisfied solely from funds withdrawn from the separate account
established for this arrangement.
Given the above, the asset and the liability in respect of the sale and leaseback transactions do not represent an asset
and a liability of the Group and according to SIC-27 "Evaluating the Substance of Transactions Involving the Legal Form
of a Lease", and have not been recognised in these financial statements.
The liabilities from these agreements are as follows:
As at 31 December 2011
As at 31 December 2010
25 Capital commitments
Due within 1
year
£'000
Due within 2
to 5 years
£'000
Due after 5
years
£'000
Total
£'000
1,295
1,207
8,194
7,039
771
10,260
2,576
10,822
There were no capital commitments at 31 December 2011 or 31 December 2010.
26 Transactions with Directors and other related parties
Loans from Directors
At 31 December 2011 there were £480,148 loans due to Directors. The amounts outstanding are as follows: David
Green £319,137 (2010: £139,280), Sammy Nourmand £161,011 (2010: £67,379) and Tarik Wildman £nil (2010:
£25,000). All loans due relate to deferred emoluments and expenses for services performed as Directors within DCD
Media Plc.
DCD Media Plc
49
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
26 Transactions with Directors and other related parties (continued)
Other transactions
During the year the following amounts were paid to companies in which the Directors have an interest:
Company
Director
Amount paid
2011
£'000
2010
£'000 Description
Polygon Productions Inc
Greed Limited
JRC Business Consulting
Services Limited
Wildman and Co
D Green
S Nourmand
J Cusins
T Wildman
157
34
5
40
The balances outstanding at the year end were as follows:
328 Production services at September Films USA Inc
120 Production services at September Films USA Inc
- Services as Director of DCD Media Plc
25 Services as Director of DCD Media Plc
Company
Director
Amount payable
2011
£'000
2010
£'000 Description
Polygon Productions Inc
Greed Limited
JRC Business Consulting
Services Limited
Wildman and Co
D Green
S Nourmand
J Cusins
T Wildman
246
122
209 Net trading balance
104 Net trading balance
-
-
- Net trading balance
- Net trading balance
27 Retirement benefit schemes
The Group operates defined contribution pension schemes for the benefit of three employees. The assets of the scheme
are administered by trustees in funds independent from those of the Group.
No costs were charged during the year (2010: £nil).
28 Operating lease rental commitments
The Group maintains property, plant and equipment on operating leases. The terms of the property lease is tenant
repairing with a break clause after five years. Other leases review period vary between one and three years.
The total future value of minimum lease payments are is due as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
29 Notes supporting the cash flow statement
Cash and cash equivalents for the purposes of the cash flow statement comprises:
Cash available on demand
Overdraft
31 December
2011
£'000
31 December
2010
£'000
174
594
-
768
208
-
-
208
31 December
2011
£'000
31 December
2010
£'000
6,386
(615)
5,771
4,135
(738)
3,397
DCD Media Plc
50
Financial statements for the year ended 31 December 2011
Notes to the financial statements for the year ended 31 December 2011
30 Acquisitions in prior periods
On 9 July 2009 the Group acquired a controlling interest of the voting equity instruments of Matchlight Limited, a
company whose principal activity is the development and production of television programmes primarily intended for
exploitation on television. The principle reason for acquiring this controlling interest was to increase the Group’s
exposure to markets and opportunities across the UK. The Group also hopes to utilise expertise and know-how acquired
in the development of new opportunities.
The Group owns 50% of the Matchlight Limited’s called up and allotted share capital but have the casting vote.
Details of the fair value of identifiable assets and liabilities acquired, purchased consideration and goodwill are as
follows:
Book value
£000
Adjustment
£000
Fair value
£000
Property, plant & equipment
Receivables
Cash
Payables
Total net assets
Calculation of Goodwill
Fair value of non recoupable loan capital paid
Book value of non-controlling interests
Fair value of assets
Goodwill (note 12)
28
188
71
(59)
228
-
-
-
-
-
28
188
71
(59)
228
£’000
250
114
364
228
136
The main factor leading to the recognition of goodwill is expertise and know-how acquired for which the Group is
prepared to pay a premium.
The goodwill recognised will not be deductable for tax purposes.
31 Events after the reporting date
Convertible Loan Notes
On 8 February 2012 Timeweave Plc acquired £3.068m of convertible loan notes in DCD Media plc. The loan notes were
purchased from Gartmore Smaller Companies Trust, Standard Life UK Smaller Companies Trust, Barnard Nominees,
Universities Superannuation Scheme, Rockmore Investment Master Fund, Artemis Investment Management and
Henderson Global Investors.
All of the acquired loan notes have a maturity date of 28 November 2012 and £2.093m of the loan notes are convertible
into ordinary shares in DCD Media plc at 18p and £975,000 of the loan notes are convertible into ordinary shares in DCD
Media at 1p.
On 18 April 2012, Timeweave plc converted £595,750 in principal of its convertible loan notes into 59,575,000 ordinary
shares of 1p each in the share capital of the Company. Following the conversion, Timeweave plc had 59,575,000
Ordinary shares representing 29.99% of the Company's issued share capital as enlarged by the conversion.
The total number of Ordinary shares in issue following the conversion is 198,670,283.
Changes in Directorate
On 24 February 2012, the company announced changes in the Directorate. S Nourmand became the Chief Executive
Officer and D Green became the Executive Chairman. J Cusins became a Non-Executive Director and T Wildman
remained a Non-Executive Director of the Company.
DCD Media Plc
51
Financial statements for the year ended 31 December 2011
Company balance sheet as at 31 December 2011
Company number 03393610
Fixed assets
Intangible assets
Property, plant and equipment
Investments
Current assets
Stock
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current (liabilities)/assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Equity element of convertible loan
Profit and loss account
Shareholders' funds
31 December
2011
£’000
31 December
2010
£’000
Note
3
4
5
6
7
8
9
11
12
12
12
39
1
7,037
7,077
96
648
29
773
-
2
12,244
12,246
95
6,553
150
6,798
(6,693)
(4,525)
(5,920)
2,273
1,157
14,519
-
(4,123)
1,157
10,396
7,393
49,391
154
(55,781)
6,602
49,451
120
(45,777)
1,157
10,396
The financial statements were approved and authorised for issue by the Board of Directors on 28 May 2012.
S Nourmand
Director
DCD Media Plc
52
Financial statements for the year ended 31 December 2011
Notes to the company accounts for the year ended 31 December 2011
1
Principal accounting policies
These financial statements have been prepared in accordance with the historical cost convention and applicable
accounting standards, on a going concern basis under UK GAAP. The principal accounting policies have remained
consistent with those adopted in the previous year.
The Group's business activities, together with the factors likely to affect its future development, performance and position
are set out in the CEO's statement. The financial position of the Group, its cash position and borrowings are set out in
the financial review section of the statement. In addition note 22 sets out the Group's objectives, policies and processes
for managing its financial instruments and risk. The Directors have adopted the going concern assumption in the
preparation of the financial statements; please see note 1 of the Group accounts for more detail.
Intangible Assets - Programme rights
Internally developed programme rights are stated at the lower of cost, less accumulated amortisation, or recoverable
amount. Cost comprises the cost of all productions and all other directly attributable costs incurred up to completion of
the programme and all programme development costs. Where programme development is not expected to proceed, the
related costs are written off to the income statement. Amortisation of programme costs is charged in the ratio that actual
revenue recognised in the current year bears to estimated ultimate revenue. At each statement of financial position date,
the Directors review the carrying value of programme rights and consider whether a provision is required to reduce the
carrying value of the investment in programmes to the recoverable amount. The expected life of these assets is not
expected to exceed 5 years.
Purchased programme rights are stated at the lower of cost, less accumulated amortisation, or recoverable amount.
Purchase programme rights are amortised over a period inline with expected useful life, not exceeding 5 years.
Amortisation and any charge in respect of writing down to recoverable amount during the year are included in the income
statement within cost of sales.
Tangible fixed assets and depreciation
Depreciation is provided at rates calculated to write off the cost or valuation of fixed assets, less their estimated residual
value, over the expected useful economic lives on the following bases:
Short leasehold property improvements
Office and technical equipment
straight line over the life of the lease
25-33% straight line
Financial instruments
Financial assets are recognised in the statement of financial position at the lower of cost and net realisable value.
Provision is made for diminution in value where appropriate. Income and expenditure arising on financial instruments is
recognised on the accruals basis, and credited or charged to the income statement in the financial year to which it
relates.
Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or events that give the company an obligation
to pay more tax in the future, or right to pay less tax in the future, have occurred by the statement of financial position
date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is
measured using rates of tax that have been enacted or substantively enacted by the statement of financial position date.
Deferred tax balances are not discounted.
Leasing
Rentals payable under operating leases are charged to the income statement on a straight line basis over the period of
the lease.
Pension costs
The Company operates pension schemes for the benefit of a number of its Directors. The schemes are defined
contribution schemes and the contributions are charged against profits as they accrue.
Foreign currency
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the statement of financial
position date. Any differences are taken to the income statement.
DCD Media Plc
53
Financial statements for the year ended 31 December 2011
Notes to the company accounts for the year ended 31 December 2011
1
Principal accounting policies (continued)
Convertible debt
The proceeds received on issue of the Company's convertible debt are allocated into their liability and equity
components and presented separately in the statement of financial position.
The amount initially attributed to the debt component equals the discounted cash flows using a market rate of interest
that would be payable on a similar debt instrument that did not include an option to convert.
Investments
Investments held as fixed assets are stated at cost less any provision for impairment. Investments held as current assets
are stated at the lower of cost or net realisable value.
The difference between the net proceeds of the convertible debt and the amount allocated to the debt component is
credited direct to equity and not subsequently re-measured. On conversion, the debt and equity elements are credited to
share capital and share premium as appropriate.
Transaction costs that relate to the issue of the instrument are allocated to the liability and equity components of the
instrument in proportion to the allocation of proceeds.
2
Profit for the financial year
DCD Media plc has taken advantage of section s408 Companies Act 2006 and has not included its own income
statement in these financial statements. The Company's loss for the year after tax was £10,004,430 (2010: Profit
£3,126,315).
3
Intangible assets
Cost
At 1 July 2009 and 31 December 2010
At 1 January 2011
Additions
At 31 December 2011
Amortisation and impairment
At 1 July 2009 and 31 December 2010
At 1 January 2011
Amortisation provided in year in cost of sales
Impairment provided in year in cost of sales
At 31 December 2011
Net book value
At 31 December 2011
At 31 December 2010
Programme Rights
£'000
-
-
320
320
-
-
10
271
281
39
-
DCD Media Plc
54
Financial statements for the year ended 31 December 2011
Notes to the company accounts for the year ended 31 December 2011
4
Property, plant and equipment
Cost
At 1 July 2009
Additions
At 31 December 2010
At 1 January 2011
Disposals
At 31 December 2011
Depreciation
At 1 July 2009
Provided in period
At 31 December 2010
At 1 January 2011
Disposals
Provided in year
At 31 December 2011
Net book value
At 31 December 2011
At 31 December 2010
5
Fixed asset investments
Cost or valuation
At 1 July 2009 and 31 December 2010
At 1 January 2011
Transfer to assets held for sale
At 31 December 2011
Accumulated amortisation
At 1 July 2009
Provided in period
At 31 December 2010
At 1 January 2011
Provided in year
Transferred to assets held for sale
At 31 December 2011
Net book value
At 31 December 2011
At 31 December 2010
Short leasehold
property
improvements
£'000
Office and
technical
equipment
£'000
122
-
122
122
(122)
-
122
-
122
122
(120)
(2)
-
-
-
564
5
569
569
-
569
557
10
567
567
-
1
568
1
2
Total
£'000
686
5
691
691
(122)
569
679
10
689
689
(120)
(1)
568
1
2
Shares in subsidiary
Undertakings
£’000
47,652
47,652
(12,264)
35,388
21,120
14,308
35,428
35,428
5,104
(12,181)
28,351
7,037
12,224
DCD Media Plc
55
Financial statements for the year ended 31 December 2011
Notes to the company accounts for the year ended 31 December 2011
5
Fixed asset investments (continued)
The principal operating subsidiary companies are listed below. All are 100% owned, unless noted otherwise:
Digital Classics Distribution Limited
Digital Classics DVD Limited
DCD Rights Limited
Done and Dusted Group Limited
Done and Dusted Incorporated
Done and Dusted Productions Incorporated
Done and Dusted West Coast Incorporated
September Films Limited
September Films USA Incorporated
Exterminator Limited Liability Company
September Scripted Incorporated
September Scripted Productions Limited Liability Company
Prospect Pictures Limited
West Park Pictures Limited
Matchlight Limited*
Done and Dusted Group Limited, September Films Limited, Prospect Pictures Limited and West Park Pictures Limited
are involved with the production of programmes for television and other media. Digital Classics Distribution Limited and
DCD Rights Limited sell programme rights worldwide to all media. Digital Classics DVD Limited produces and markets
DVD's to the retail market.
September Scripted Incorporated and September Scripted Productions Limited Liability Company were incorporated
during the year are involved with the production of programmes for television and other media. They are both
incorporated in California.
Box TV Limited, DCD Drama Limited, DCD Media USA Incorporated and Done and Dusted West Coast Incorporated are
not part of ongoing trading operations.
*September Films Limited holds a 50% equity stake in Matchlight, a company that produces programmes for television
and other media.
The Company also holds a 19.9% trade investment in Classical TV Limited. This was granted to the Company in May
2008 in exchange for services to be provided to Classical TV Limited by DCD employees. The carrying value of this
asset of this investment is nil (2010: nil).
All the subsidiary companies are incorporated in England and Wales, except for:
• Done and Dusted Incorporated which is incorporated in New York, and Done and Dusted Productions
Incorporated which is incorporated in California. Both of these companies are 100% owned by Done and
Dusted Group Limited;
• Done and Dusted West Coast Incorporated which is incorporated in California and is 100% owned by Done and
Dusted Productions Incorporated;
• September Films USA Incorporated, which is incorporated in California and is 100% owned by September Films
Limited;
• Exterminator Limited Liability Company, which is incorporated in Louisiana and is 100% owned by September
Films USA Incorporated;
• September Scripted Incorporated, which is incorporated in California and is 100% owned by September Films
Limited;
• September Scripted Productions Limited Liability Company, which is incorporated in California and is 100%
owned by September Scripted Incorporated;
• West Park Pictures West Limited, which is incorporated in the Republic of Ireland and is 100% owned by West
Park Pictures Limited; and
• Matchlight Limited, which is incorporated in Scotland and is 50% owned by September Films Limited.
6
Stock
Finished products
31 December
2011
£‘000
31 December
2010
£‘000
96
95
DCD Media Plc
56
Financial statements for the year ended 31 December 2011
Notes to the company accounts for the year ended 31 December 2011
7
Debtors
Trade debtors
Amounts owed by Group undertakings
Other debtors
Prepayments and accrued income
Asset held for sale
8
Creditors: amounts falling due within one year
Bank overdraft (secured)
Bank loans (secured)
Convertible debt (secured)
Trade creditors
Amounts owed to Group undertakings
Taxation and social security
Other creditors
Accruals and deferred income
31 December
2011
£'000
31 December
2010
£'000
50
375
17
123
83
648
136
6,163
43
211
-
6,553
31 December
2011
£'000
31 December
2010
£'000
615
1,000
4,314
178
-
150
236
200
6,693
738
1,000
-
864
1,059
222
299
343
4,525
Included in trade creditors, other creditors and accruals are amounts owed to Directors as follows: Tarik Wildman £nil
(2010: £25,000). All loans due relate to deferred emoluments and expenses for services performed as Directors within
DCD Media Plc.
9 Creditors: amounts falling due after more than one year
Bank and other borrowings (secured)
Convertible debt (secured)
10 Bank and other borrowings
Due within one year or on demand
Bank loans and overdrafts
Secured (a)
Convertible loan notes (b)
Convertible loan notes (c)
31 December
2011
£'000
31 December
2010
£'000
-
-
-
1,000
3,123
4,123
31 December
2011
£'000
31 December
2010
£'000
1,621
1,621
3,349
965
5,935
1,738
1,738
-
-
1,738
DCD Media Plc
57
Financial statements for the year ended 31 December 2011
Notes to the company accounts for the year ended 31 December 2011
10 Bank and other borrowings (continued)
Due after more than one year
Bank loans
Secured (a)
Unsecured
Convertible loan notes (b)
Total borrowings
31 December
2011
£'000
31 December
2010
£'000
-
-
-
-
-
5,935
1,000
-
1,000
3,123
4,123
5,861
(a) On 30 November 2009 a new senior bank loan was secured from Coutts & Co. of £3.0m. It was provided on normal
commercial terms and is repayable over three years in equal quarterly instalments. The secured bank loans and
overdrafts are secured by a fixed charge over the company’s intangible programme rights assets.
(b) The terms of some convertible loan notes were extended on 30 November 2009 and the convertible loan note is
redeemable in November 2012 if not previously converted at the fixed price of 18p per share. The difference between the
carrying value at the date extension and value over the subsequent 10 months will be accounted through the effective
interest rate of the instrument.
(c) A new convertible note of £975,000 was issued in September 2011. The convertible loan note is redeemable in
November 2012 if not previously converted at the fixed price of 1p per share. The difference between the carrying value
at the issue date and value over the subsequent 10 months will be accounted through the effective interest rate of the
instrument.
The convertible loan as at 30 November 2009 was accounted for as a compound instrument, and a calculation has been
made to separate the equity element from the liability element of the loan. A discount rate of 12% has been applied to the
future interest payments and repayment of the loan. This has resulted in a reduction of the liability by crediting an equity
element of £120,000 to reserves.
The new convertible loan note debt was also accounted for as a compound instrument, and a calculation has been made
to separate the equity element from the liability element of the loan. A discount rate of 12% has been applied to the
future interest payments and repayment of the loan. This has resulted in a reduction of the liability by crediting an equity
element of £34,623 to reserves.
On 11 April 2011, a small portion of convertible debt was converted to equity at 18p per share resulting in 154,018
shares being issued for a consideration of £27,723. An amount of £1,029 was debited to the equity element in reserves.
11 Share capital
See Group accounts note 23.
12 Share premium account and reserves
At 1 July 2009
Loss for the year
Equity element of convertible loan
Share capital issued
At 31 December 2010
At 1 January 2011
Loss for the year
Capitalisation of professional fees
Convertible loan note issued
Shares issued on conversion of loan
At 31 December 2011
Equity
element of
convertible
loan
£'000
Share
premium
£'000
49,100
-
-
351
49,451
49,451
-
(72)
-
12
49,391
328
-
(208)
-
120
120
-
-
35
(1)
154
Profit and
loss
account
£'000
(34,321)
(11,664)
208
-
Total
£'000
15,107
(11,664)
-
351
(45,777)
3,794
(45,777)
(10,004)
-
-
-
3,794
(10,004)
(72)
35
11
(55,781)
(6,236)
DCD Media Plc
58
Financial statements for the year ended 31 December 2011
Notes to the company accounts for the year ended 31 December 2011
13 Capital commitments
There were no capital commitments at 31 December 2011 or 31 December 2010.
14 Pension costs
The Company operated defined contribution pension schemes for the benefit of one Director. This scheme is no longer in
operation. The assets of the scheme are administered by trustees in funds independent from those of the Group.
There were costs charged of £nil during the year (2010: £nil).
15 Events after the reporting date
See Group accounts note 31.
16 Transactions with Directors and other related parties
Loans from Directors
At 31 December 2011 there were £nil (£25,000) loans due to Directors. The amounts outstanding are as follows: Tarik
Wildman £nil (2010: £25,000). All loans due relate to deferred emoluments and expenses for services performed as
Directors within DCD Media Plc.
Other transactions
During the year the following amounts were paid to companies in which the Directors have an interest:
Company
Director
JRC Business Consulting
Services Limited
Wildman and Co
J Cusins
T Wildman
Amount paid
2011
£'000
2010
£'000 Description
5
40
- Services as Director of DCD Media Plc
25 Services as Director of DCD Media Plc
There were no outstanding balances at the current and prior year ends.
DCD Media Plc
59
Financial statements for the year ended 31 December 2011
Corporate information
Company Secretary and Registered Offices
Registrars
John Bottomley FCIS
One America Square
Crosswall
London
EC3N 2SG
www.sghmartcosec.com
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA
www.capitaregistrars.com
Nominated Adviser and Broker
Auditors
BDO LLP
Bridgewater House
Finzels Reach
Counterslip
Bristol
BS1 6BX
www.bdo.co.uk
Solicitors
Addleshaw Goddard
Milton Gate
60 Chiswell Street
London
EC1Y 4AG
www.addleshawgoddard.com
finnCap
60 New Broad Street
London
EC2M 1JJ
www.finncap.com
Bankers
Coutts & Co
440 Strand
London
WC2R 0QS
www.coutts.com
Company Headquarters
DCD Media plc
Glen House
22 Glenthorne Road
London
W6 0NG
T +44 (0)20 8563 9393
info@dcdmedia.co.uk
www.dcdmedia.co.uk
DCD Media Plc
60
Financial statements for the year ended 31 December 2011