DCD Media plc
Annual Report 2016

Plain-text annual report

DCD MEDIA PLC FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 Company number 03393610 Contents Audited results for the year ended 31 December 2016 Executive Chairman’s review Group strategic report Group report of the Directors for the year ended 31 December 2016 Board of Directors Independent auditor’s report to the members of DCD Media Plc Consolidated income statement for the year ended 31 December 2016 Consolidated statement of comprehensive income for the year ended 31 December 2016 Consolidated statement of financial position as at 31 December 2016 Consolidated statement of cash flows for the year ended 31 December 2016 Consolidated statement of changes in equity for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 Parent company balance sheet as at 31 December 2016 Notes to the parent company financial statements for the year ended 31 December 2016 Corporate information Page 1 3 4 9 13 14 15 16 17 18 19 20 45 47 53 DCD Media Plc Financial statements for the year ended 31 December 2016 DCD Media Plc (“DCD Media” or the “Company”) Audited results for the year ended 31 December 2016 DCD Media and its subsidiaries, the independent TV distribution and production group (the “Group”), today report results for the year ended 31 December 2016. Financial Summary Continuing operations: • Revenue • Gross profit • Operating loss Discontinued operations: • Revenue • Gross profit • Operating profit Group results: £8.6m (2015: £11.1m) £2.8m (2015: £2.9m) £0.1m (2015: £2.2m) £0.0m (2015: £0.0m) £0.0m (2015: £0.0m) £0.1m (2015: £0.0m) • Operating loss • Adjusted EBITDA • Adjusted profit/(loss) before tax £0.0m (2015: £2.2m) £0.8m (2015: £0.2m) £0.8m (2015: (£0.1m)) Please refer to the table within the Performance section below for an explanation of the profit adjustments. Business highlights • Continued focus on our rights business yields positive adjusted EBITDA of £0.8m and provides a platform for further growth. • Continued focus and execution of strategy to expand DCD Media into one of the UK’s leading independent pure-play TV rights and distribution businesses. • Relocation of DCD Media to new premises close to the heart of London’s media centre. • DCD Rights distributed drama Rake scoops awards for best drama series in both the Screen Producer Awards and the AWGIEs. Several other distributed dramas earn nominations. • DCD Rights benefitted from the launch of a number of programmes at MIPTV such as Real Detective, signing deals with Sony True Crime, Nine Networks Australia, Universal, and Sky Italy. • DCD Rights delivered the second series and secured the co-production of the third series of Penn & Teller: Fool Us in Vegas. The series is a co-production between 1/17 Productions and September Films for the CW Network in the USA. • DCD Rights secures additional funding for content acquisition and expands its acquisition team. • Rize USA’s hugely popular talent show for teenagers Got What it Takes? aired on CBBC. The second series, a co-production with Disney, began filming in the summer and was delivered post year end. • Sequence Post successfully completed the 4K post-production of ‘The Rolling Stones: Havana Moon’ released on 23 September 2016. DCD Media Plc 1 Financial statements for the year ended 31 December 2016 Overview We are very pleased to announce that the comprehensive package of measures designed to place DCD Media on a strong footing to deliver on its strategic ambitions will ensure that the business can deliver value to our shareholders in the medium to long-term. Over the last five years, under the Timeweave stewardship, the DCD Media Board has taken action to restructure the business model, implement extensive cost-saving measures and importantly, to refocus the business for the improving sales and distribution environment, including rationalising the production divisions ensuring that output from productions has remained very strong through outsourced co-production arrangements. Simultaneously, DCD Media has been working on a range of other programme funding options, which underpin the continued improvements and growth we announced today. We are in discussions with a variety of alternative finance providers as well as EIS funds and remain grateful to our lenders Timeweave and EIS fund, Back Catalogue Distribution Ltd for their continued support. The Board remains confident in the long-term potential of the DCD Media business, and is of the view that the completed restructuring and consequent business growth will enhance value for all stakeholders. During the year, the rights division saw its fourth consecutive year of turnover growth and the Board expects this to continue to drive the financial performance of the Group in the current financial year. The business was profitable and delivered an increase in turnover of approximately 12% over the previous year alongside a 23% increase in gross profit overall. This result was particularly pleasing given the obvious distractions of a relocation and restructuring of the production businesses. The Board recognises the strength and depth of talent now assembled in the DCD Media rights business which again places the organisation on sound foundations going forward. As the marketplace evolves and the consumption model for consumers shifts heavily towards on-demand content provision, DCD Media has capitalised with significant block sales deals with major international cable and SVOD platforms which are expected to continue throughout 2017. As a consequence of the rise in investment in programming, we also saw an expansion of our catalogue across all genres, although many of the new series are due to be delivered toward the end of the year, resulting in a push of benefits into 2017. In spite of the strategic shift to the rights and distribution model, the Board delivered on two notable recommissions for production franchises in the year. DCD Rights secured a new series of the 1/17 Productions and September Films co- production of hit network show Penn & Teller: Fool Us in Vegas for the CW Network in the USA. In addition, the UK market, Rize USA won a new commission to produce a ten part series of the hugely popular talent show for teenagers Got What it Takes? for CBBC. David Craven, Executive Chairman and Chief Executive Officer, commented: “We are delighted that the hard work and commitment to the task over the last four years is yielding results. The DCD Media team have prevailed against the tough commercial challenges which face small independent TV distributors. DCD Media is now well-placed to benefit from a scaled operation and we fully expect the business to thrive in the marketplace. The team continues to build its strong catalogue with creative and commercial guidance from a highly experienced team to consistently provide the market with entertaining TV product. “The DCD Media business reports an adjusted EBITDA profit of £0.8m compared to £0.2m in 2015. While this is a modest increase, it reflects a steady performance underpinning the consolidation work undertaken in the last few years. The strategy was to deliver consistent, higher quality earnings, and we are now delivering year on year growth with a commercial platform for a sustainable rights and distribution business. This is largely brought about through a strong and experienced management team, more sources of programme funding and a strong creditable reputation in the marketplace. “The Board remains optimistic for the future and while we see expansion from the rights division, the immediate goal is delivery against targets in the new financial year which looks very promising. We believe we have now created a thriving rights business capable of sustained growth in the coming years.’’ For further information please contact: Angelica Tziotis Investor Relations/ Media Relations, DCD Media Plc Tel: +44 (0)20 3869 0190 Stuart Andrews / Carl Holmes / Giles Rolls finnCap Tel: +44 (0)20 7220 0500 ir@dcdmedia.co.uk DCD Media Plc 2 Financial statements for the year ended 31 December 2016 Executive Chairman’s review The distribution and licencing business continued on its growth path with strong top-line growth and a credible underlying EBITDA performance in the financial year to 31 December 2016. Last year was a transitional year and perhaps a seminal point in the Company’s history which witnessed a shift into pure- play rights and distribution of content, away from an unsustainable vertical model which was prefaced with an underperforming and time-intensive production division, resulting in a redundancy programme being completed. The vision for the business under the aegis of Timeweave has been the creation of a large independent rights business meeting the growing demands of TV consumers to watch compelling content when and where they choose. In this respect the Board is pleased to report a 12% growth in rights and licensing turnover from the previous year with significant further expansion expected in the next financial year. Underpinning this financial performance, DCD Rights improved on its position as one of the world’s top independent TV rights distributors in 2016. The DCD Rights drama catalogue was a strong performer and its appeal to international distributors augurs well for the future growth plans. Legal drama series Rake (season 4) scooped two prestigious industry awards together with nominations for other drama series represented by DCD Rights, Deep Water, Janet King: The Invisible Wound, Jack Irish: Blind Faith, and The Code 2. At MIPTV 2016, the business launched its 4th star-studded season of Off Camera with Sam Jones, and MIPTV also saw the launch of the second season of Sarah Graham Food Safari, with food blogger Sarah Graham exploring new corners of Africa’s culinary scene. DCD Rights partnered with Scottish production company Tern TV to present four new factual series at the October TV Market in Cannes with programmes including Shoreline Detectives, Beechgrove Garden, Can I Catch It? and Art Detectives. The music catalogue also had a good year, with more than 50 hours of music programming sold globally. These included Berlin Live, a new documentary on David Gilmour – Wider Horizons, Imagine: John Lennon 75th Birthday Concert and a seven part series The Great Songwriters that featured exclusive performances and compelling interviews with Barry Gibb, Carly Simon, Norah Jones, Chuck D, Ryan Adams, Jimmy Webb and Bill Withers. We were also delighted in the year to welcome to the acquisitions team, Philippa Chuter, previously a senior executive at Passion Media, joining the company as a Senior Acquisitions Executive. The Board believes that we are well-placed for the rights division to deliver strong growth in 2017 and beyond. D Craven Executive Chairman and Chief Executive Officer 31st May 2017 DCD Media Plc 3 Financial statements for the year ended 31 December 2016 Group strategic report Strategic outlook The historic model for success in media and entertainment with multiple revenue streams and distinct exploitation windows is no longer viable in today’s media world. To thrive in today’s environment, DCD Media recognised some years ago that it needed to drive both innovation and efficiency, embracing new approaches to content development, and more efficient and cost-effective distribution. In short, the DCD Rights business has adapted its strategy, capabilities, and operating model to address several key trends, namely, technology shifts which are affecting the value of content and distribution. This takes into account that the consequent costs for content delivery are lower than ever and that online video, social media and mobile media are expanding rapidly. In order to harness these new opportunities in the changing market, DCD Media has implemented new strategies to embrace the on-demand media culture in particular. DCD Media will continue to prime the global media and entertainment industry growth through the traditional mature markets across existing and new technical platforms, but also by tapping into the emerging markets of Latin America, Asia, Russia and the Middle East. In short, the strategy to scale up on a business that is working well has been a successful approach and now by embracing the new trends in the media and entertainment industry, the outlook is very positive for DCD Media. We look forward to future growth in 2017. Review of divisions for the year to 31 December 2016 Rights and Licensing DCD Rights The business remained profitable and delivered an increase in turnover of approximately 12% over the previous year alongside a 23% increase in gross profit overall. During the year DCD Rights relocated to a more central location in London’s Edgware Road, and focused on building and consolidating the management teams in order to accommodate an increase in acquisitions funding, this was confirmed during the year as part of a new relationship with an EIS fund for television programming rights. The business remained profitable and delivered an increase in turnover of approximately 12% over the previous year having benefited from some large sales to major international cable and SVOD platforms which are expected to continue throughout 2017. As a result of the rise in company investment, we also saw an expansion of our catalogue across all genres, although many of the new series delivered toward the end of the year which will push benefits into 2017. The DCD Rights Drama catalogue continued to generate strong results throughout the year. Satirical Legal drama series Rake (season 4) won two awards at the prestigious AACTA Awards in Australia, including “Best Direction in a TV Drama or Comedy”. This was alongside nominations for other drama series represented by DCD Rights, Deep Water, Janet King: The Invisible Wound, Jack Irish: Blind Faith, and The Code 2. In terms of the sales of our drama catalogue, significant deals include that with BBC 4 who acquired the UK broadcast rights for Deep Water, and on the other side of the Atlantic, Acorn TV who acquired all rights for The Code in the USA. Senior school drama The Principal and office comedy Dreamland (Utopia) also received awards at the 6th Annual Equity Awards for “Best Ensemble Performance in a Drama Series” and “Best Ensemble Performance in a Comedy Series” respectively and secured strong international sales. At MIPTV 2016, DCD Rights launched its 4th star-studded season of Off Camera with Sam Jones, introducing exclusive interviews with a new range of celebrities. MIPTV also saw the launch of the second season of Sarah Graham Food Safari, an Okhule Media production that sees food blogger Sarah Graham explore new corners of Africa’s culinary scene. DCD Rights partnered with production company Tern TV to present 4 new factual series at the October TV Market in Cannes, MIPCOM 2016. Programs included Shoreline Detectives, Beechgrove Garden, Can I Catch It? and Art Detectives. Also launching at MIPCOM was Irish legal drama Striking Out prior to its debut launch on RTE in January. The music catalogue continued to expand with the acquisition of over 50 hours of music programming to be sold across the globe. These included Berlin Live, a 44 x 60’ series produced by BMG Rights Management GMBH for Arte, a new documentary on David Gilmour – Wider Horizons, Imagine: John Lennon 75th Birthday Concert and a 7 part series The Great Songwriters that featured exclusive performances and compelling interviews with Barry Gibb, Carly Simon, Norah Jones, Chuck D, Ryan Adams, Jimmy Webb and Bill Withers. This year, DCD Media expanded its acquisitions team, hiring Philippa Chuter, previously an acquisitions executive at Passion Media, to join the company as a Senior Acquisitions Executive as part of the ongoing consolidation and expansion of the business. DCD Media Plc 4 Financial statements for the year ended 31 December 2016 Group strategic report Productions The DCD Media productions division comprised the following brands: Rize USA London, UK September Films UK London, UK The output of each organisation is overseen by DCD Media and complimented by the Group’s Rights and Licensing division. September Films September Films co-produced with the second US based 1/17 Productions the 13x60’ series, Penn & Teller: Fool Us in Vegas, fronted this time by Alyson Hannigan, which aired in primetime on The CW in the US. September Films will continue to be involved in the production of future series of Penn & Teller: Fool Us in Vegas. The company continues to review its library of formats and titles. Rize USA Productions hit a high note at the start of 2016, with the transmission of episode one of Got What it Takes? airing on CBBC in the first week of January. The 10-episode talent series saw children competing for the chance to perform at Radio 1’s Big Weekend in May. The show was received extremely well, has regularly made the top 25 on BBC’s iPlayer chart, and has continued to attract attention both in the press and on social media. Rize USA will continue to be involved in the production of future series of Got What it Takes?. Post - Production Sequence Post Over the last year, Sequence has continued to forge new relationships with local commercial producers resulting in finishing post-production for the likes of Cadbury’s, Budweiser, Martini, Dermalogica, Barry M, Shu Uemura, Chanel and Farfetched along with many more. The work undertaken for such recognisable brands is invaluable to the business allowing it showcase its expertise and professional output. During the year Sequence completed two features for The Rolling Stones, namely Havana Moon and Ole, Ole, Ole: A Trip Across Latin America. Both films were showcased at numerous film festivals garnering lots of positive reviews. These films were a huge investment and achievement for the team, spanning a total of eight months from start to finish. At present, the team are completing delivery on a 360º virtual reality workflow involving a collaboration between the band Royal Blood and Samsung. With a fast turn-around and new technology to explore, it has been a real learning curve and should serve to provide great publicity once delivered. Performance At a turnover level, the Group delivered £8.6m in revenue all from continuing operations compared with £11.1m in 2015. The reduction as mentioned is a result of streamlining the business into a predominantly rights and distribution business and consciously moving away from new productions. The Group made an operating result for the year of £0.0m (2015: loss of £2.2m), which is stated after 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 non-cash impacts of goodwill, trade name and programme rights amortisation and impairments. The headline Adjusted EBITDA in the year ended 31 December 2016 was £0.8m (2015: £0.2m), inclusive of £0.5m of foreign exchange gains (2015: £0.0m). Adjusted profit before tax for the Group was £0.8m in 2016 against an adjusted loss of £0.1m for the year to 31 December 2015. DCD Media Plc 5 Financial statements for the year ended 31 December 2016 Group strategic report Performance (continued) The following table represents the reconciliation between the operating loss per the consolidated income statement and adjusted Profit Before Tax (PBT) and adjusted Earnings Before Interest Tax Depreciation and Amortisation (EBITDA): Operating loss per statutory accounts (continuing operations) Add: Discontinued operations (note 9) Operating result per statutory accounts Add: Amortisation of programme rights (note 11) Add: Impairment of programme rights (note 11) Add: Amortisation of trade names (note 11) Add: Impairment of goodwill and related intangibles (note 11) Less: Capitalised programme rights intangibles (note 11) Add: Depreciation (note 12) EBITDA Add: Restructuring costs/(income) (note 5) Adjusted EBITDA Continuing adjusted EBITDA Discontinued adjusted EBITDA Less: Net financial expense (note 7) Less: Depreciation Adjusted profit/(loss) before tax Continuing adjusted profit/(loss) before tax Discontinued adjusted profit/(loss) before tax Intangible assets Year ended 31 December 2016 £m Year ended 31 December 2015 £m (0.1) 0.1 0.0 0.3 0.0 0.4 0.0 (0.2) 0.0 0.5 0.3 0.8 0.8 0.0 (0.0) (0.0) 0.8 0.8 0.0 (2.2) 0.0 (2.2) 0.7 0.2 0.4 1.8 (0.7) 0.1 0.3 (0.1) 0.2 0.2 0.0 (0.2) (0.1) (0.1) (0.1) 0.0 The Group’s consolidated income statement and consolidated statement of financial position has again this year been impacted by the amortisation and impairment of intangible assets, see note 11. The Group has seen amortisation and impairment of goodwill and trade names for the year of £0.4m (2015: £2.2m) and a net amortisation and impairment of programme rights of £0.3m (2015: £0.8m). The accounting implications, in terms of the effect of reporting impaired intangible assets under International Financial Standards, are explained below. Goodwill The Directors have assessed the carrying value of goodwill attributable to September Films and have booked no impairment in 2016. (2015: £1.8m). This in light of the back-end catalogue income expected to be received within the business. Trade names Trade names are amortised over ten years on a straight line basis and a non-cash expense of £0.4m was expensed in the year relating to trade names. The carrying value of trade names after the amortisation was £0.2m (2015: £0.6m). Restructuring costs Restructuring costs of £0.3m (2015: income of £0.1m) have been disclosed in the consolidated statement of comprehensive income and relates to non-recurring costs within the production entities whose activity was wound down in the year. DCD Media Plc 6 Financial statements for the year ended 31 December 2016 Group strategic report Earnings per share Basic profit per share in the year was 1p (year ended 31 December 2015: 254p loss per share) and was calculated on the result after taxation of £0.0m (year ended 31 December 2015: loss £2.3m) divided by the weighted average number of shares in issue during the year being 2,541,419 (2015: 915,470). Balance sheet The Group’s net cash balances have increased to £2.2m at 31 December 2016 from £1.2m at 31 December 2015. A substantial part of the Group cash balances represent working capital commitment in relation to its rights business and is not considered free cash. The increase in the year is largely due to temporary movements in receivables and payables in working capital. During the year, the Group accrued £0.2m of recharges for director, management and financial services from Timeweave Ltd, its major shareholder that remain unpaid. At the year end, the Group had an available gross overdraft facility of £0.5m and a net facility of £0.25m. Shareholders’ equity Retained earnings as at 31 December 2016 were £(61.0m) (2015: £(60.8m)) and total shareholders’ equity at that date was £2.5m (2015: £2.5m). Current trading 2017 has begun well for the Group’s rights and distribution arm with encouraging turnover and availability of programme acquisition funding. Going concern The Group's business activities, together with the factors likely to affect its future development, performance and position are set out above. The financial position of the Group, its cash position and borrowings are set out in the Performance section of the statement. In addition, note 18 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 with other activities funded from a combination of equity and short and medium term debt instruments. The overdraft facility remained at £0.25m throughout the year and has recently been extended to April 2018. The facility will reduce by £0.025m each quarter down to a revised limit of £0.15m by January 2018. The overdraft will be reviewed further by the Group’s principal bankers, Coutts & Co (“Coutts”), on 30 April 2018 but the Directors have a reasonable expectation that an overdraft facility will continue to be available to the Group for a period in excess of 12 months from the date of approval of these financial statements. In considering the going concern basis of preparation of the Group’s financial statements, the Board has prepared profit and cash flow projections which incorporate reasonably foreseeable impacts of the ongoing challenging trading environment. These projections reflect the 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. The forecasts show that the Group will continue to utilise its overdraft facility provided by its principal bankers for the foreseeable future. In addition, the Group is in discussion with Timeweave Ltd, its major shareholder, to formalise the debt that has built-up on management charges which have not been cash-settled. The Directors’ forecasts and projections, which make allowance for potential changes in its trading performance, show that with the ongoing support of its shareholders, lenders and its bank; the Group can continue to generate cash to meet its obligations as they fall due. The Directors have regular discussions with the Group’s main shareholders and its principal bankers and 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. DCD Media Plc 7 Financial statements for the year ended 31 December 2016 Group strategic report Key Performance Indicators (KPIs) Revenue from continuing operations (£m) Operating loss from continuing operations (£m) Adjusted EBITDA (£m) Adjusted profit/(loss) before tax (£m) Principal risks and uncertainties Year ended 31 December 2016 Year ended 31 December 2015 8.6 0.1 0.8 0.8 11.1 2.2 0.2 (0.1) General commercial risks The Group’s management aims to minimise risk of over-reliance on individual business segments, members of staff, productions or customers by developing a broad, balanced stable of production and distribution activities 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. Production and distribution revenue Production revenue will fall as the Group has ceased to pursue productions in development and is due to focus on its two current franchises. Distribution revenue is forecast to rise as this division is the prime focus of the Group going forward. 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 the short-term cash flows on productions can sometimes be negative initially. This is due to costs incurred before contracted payments have been received, in order to meet delivery and transmission dates. The Group funds these initial outflows, when they occur, in three ways: internally, ensuring that overall exposure is minimised; through a short term advance from a bank or other finance house; or through a short term loan from Timeweave Ltd, its main shareholder, 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 £2.2m (2015: £1.2m) including certain production related cash held to maintain the Group policy. The Group debt consists primarily of an overdraft, some convertible debt and accrued management recharges due to Timeweave. Details of interest payable, funding and risk mitigation are disclosed in notes 7, 16 and 18 to the consolidated financial statements. Exchange rate risk Management review expected cash inflows and outflows in source currency and when required, take out forward options to protect against any short term fluctuations. D Craven Executive Chairman and Chief Executive Officer 31 May 2017 DCD Media Plc 8 Financial statements for the year ended 31 December 2016 Group report of the Directors for the year ended 31 December 2016 The Directors present their report together with the audited financial statements for the year ended 31 December 2016. Principal activities The main activities of the Group in the year continued to be distribution and rights exploitation and content production. The main activity of the Company continued to be that of a holding company, providing support services to its subsidiaries. Business review A detailed review of the Group’s business including key performance indicators and likely future developments is contained in the Executive Chairman’s Review and Group Strategic Report on pages 4 to 8, which should be read in conjunction with this report. Results The Group’s loss before taxation for the year ended 31 December 2016 was £0.1m (2015: £2.4m). The result for the year post-taxation was £0.0m (2015: loss of £2.2m) and has been carried forward in reserves. The Directors do not propose to recommend the payment of a dividend (2015: £nil). Directors and their interests At 31 December 2016 At 31 December 2015 Ordinary shares of £1 each Deferred shares of £1 each Ordinary shares of £1 each Deferred shares of £1 each D Green* N Davies Williams D Craven N McMyn A Lindley * David Green resigned from the board on 18 August 2016. - 69,317 - - - - 781 - - - 132,197 781 - - - 503,428 69,317 - - - Mr Lindley and Mr McMyn are Non-Executive Directors. Biographies of the Company’s Directors can be found on page 13. Other than as disclosed in note 22 to the consolidated 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 year. Substantial shareholdings The Company has been notified, as at 30 May 2017, of the following material interests in the voting rights of the Company under the provisions of the Disclosure and Transparency Rules: Name Timeweave Ltd* Lombard Odier Investment Managers Colter Ltd* No. of £1 ordinary shares 1,694,377 671,978 124,000 % 66.67 26.44 4.88 *Timeweave Ltd and Colter Ltd are under common ownership (see note 26). Share capital Details of share capital are disclosed in note 19 to the consolidated 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 to future strategy discussions and decisions on business issues. DCD Media Plc 9 Financial statements for the year ended 31 December 2016 Group report of the Directors for the year ended 31 December 2016 Employment Involvement (continued) 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 18 of the consolidated financial statements. CORPORATE GOVERNANCE Statement of compliance 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 UK Corporate Governance Code issued by the Financial Reporting Council (“the Combined Code”). DCD Media Plc's shares are quoted on AIM, a market operated by the London Stock Exchange Plc and as such there is no requirement to publish a detailed Corporate Governance Statement nor comply with all the requirements of the Combined Code. However, the Directors are committed to ensuring appropriate standards of Corporate Governance are maintained by the Group and this statement sets out how the Board has applied the principles of good Corporate Governance in its management of the business in the year ended 31 December 2016. The Board recognises its collective responsibility for the long-term success of the Group. It assesses business opportunities and seeks to ensure that appropriate controls are in place to assess and manage risk. During a normal year, there are a number of scheduled Board meetings with other meetings being arranged at shorter notice as necessary. The Board agenda is set by the Chairman in consultation with the other Directors and Company Secretary. The Board has a formal schedule of matters reserved to it for decision which is reviewed on an annual basis. Under the provisions of the Company’s Articles of Association all Directors are required to offer themselves for re- election at least once every three years. In addition, under the Articles, any Director appointed during the year will stand for election at the next annual general meeting, ensuring that each Board member faces re-election at regular intervals. The Directors are entitled to take independent professional advice at the expense of the Company and all have access to the advice and services of the Company Secretary. Board committees The Board has established an Audit, Nomination and Remuneration Committee. All are formally constituted with written terms of reference. The terms of reference are available on request from the Company Secretary. Relations with shareholders The Company communicates with its shareholders through the Annual and Interim Reports and maintains an on-going dialogue with its principal institutional investors from time to time. The Board welcomes all shareholders at the annual general meeting where they are able to put questions to the Board. This assists in ensuring that the members of the Board, in particular the Non-Executive Directors, develop a balanced understanding of the views of major investors of the Company. The Group uses the website www.dcdmedia.co.uk to communicate with its shareholders. Internal control The Board has overall responsibility for ensuring that the Group maintains a sound system of internal control to provide it with reasonable assurance that all information used within the business and for external publication is adequate, including financial, operational and compliance control and risk management. It should be recognised that any system of control can provide only reasonable and not absolute assurance against material misstatement or loss, as it is designed to manage rather than eliminate those risks that may affect the Group achieving its business objectives. DCD Media Plc 10 Financial statements for the year ended 31 December 2016 Group report of the Directors for the year ended 31 December 2016 Going concern For the reasons set out in the Executive Chairman’s Review, the Directors consider it is appropriate to continue to adopt the going concern basis in preparing the annual report and financial statements. Statement of Directors’ responsibilities 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, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland’ and applicable law). 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 for that period. 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 IFRSs as adopted by the European Union and applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the Group and parent company financial statements respectively; 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 Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Supplier payment policy The Company and Group’s policy is to agree terms of payment with suppliers when agreeing the overall terms of each transaction, to ensure that suppliers are aware of the terms of payment and that Group companies abide by the terms of the payment. Share Capital Details of the Company’s share capital and changes to the share capital are shown in note 19 to the consolidated financial statements. Resolutions at the Annual General Meeting The Company’s AGM will be held on Thursday 29 June 2017. Accompanying this Report is the Notice of AGM which sets out the resolutions to be considered and approved at the meeting together with some explanatory notes. The resolutions cover such routine matters as the renewal of authority to allot shares, to dis-apply pre-emption rights and to purchase own shares. 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 (www.dcdmedia.co.uk) 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 on-going integrity of the financial statements contained therein. Charitable and political donations Group donations to charities worldwide were £nil (2015: £nil). No donations were made to any political party in either year. DCD Media Plc 11 Financial statements for the year ended 31 December 2016 Group report of the Directors for the year ended 31 December 2016 Auditors A resolution to re-appoint SRLV as the Company’s auditors will be put forward at the AGM to be held on 29 June 2017. Disclosure of information to the Auditors In the case of each of the persons who are Directors at the time when the annual report is approved, the following applies: • • so far as that Director is aware, there is no relevant audit information of which the Company's auditor is unaware; and that Director has taken all the steps that they ought to have taken as a Director in order to be aware of any relevant audit information and to establish that the Company's auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Directors’ Report approved by the Board on 31 May 2017 and signed on its behalf by: D Craven Executive Chairman and Chief Executive Officer 31 May 2017 DCD Media Plc 12 Financial statements for the year ended 31 December 2016 Board of Directors David Craven (Executive Chairman & CEO) David Craven was appointed CEO of DCD Media in October 2012 and Executive Chairman in January 2014. He is also CEO and a Director of Timeweave Ltd, which he joined in April 2011. David brings significant sector-specific and broad commercial experience to the Group, having held senior roles with News Corporation, UPC Media and Trinity Newspapers. He was also joint MD of the Tote for six years and was closely involved in its privatisation, and has held senior executive roles at UK Betting Plc and Wembley Plc. David was also a co-founder of broadband and interactive TV media group, UPC Chello, and is a co-founder of the Gaming Media Group. Nicky Davies Williams (Executive Director) Nicky Davies Williams was appointed CEO of DCD Rights, DCD Media’s distribution and licencing division, in December 2005 when she sold NBD TV, a company she founded and ran successfully for over 22 years, to the Group. An English Literature graduate from Leeds University, she began her career in the music business, moving into film and television distribution at Island Pictures, where she rose to the post of Sales Director, prior to founding her own company in 1983. She has managed DCD Rights’ growth into one of the world’s leading independent distributors. Her experience includes non-executive directorships on the Board of The Channel Television Group from 1991-1998, and as a founding non-executive of the Women in Film and Television in the UK. Neil McMyn (Non-Executive Director) Neil McMyn is a chartered accountant and Chief Financial Officer of Tavistock Europe, an international private investment organisation. Previously Neil spent nine years with Arthur Andersen Corporate Finance in Edinburgh and six years in advisory and funds management roles at Westpac Institutional Bank in Sydney. Neil was also appointed as Finance Director of Ultimate Finance Group in July 2015. He became a Non-Executive Director of DCD Media in September 2012. Andrew Lindley (Non-Executive Director) Andrew Lindley joined the Board of DCD Media in September 2012. He is a practicing solicitor and holds another non- executive role with Turf TV as well as being a consultant with Axiom LLP. Andrew was a Director of the Tote for the six years up to its sale in 2011 and before that spent five years at Northern Foods plc, where he focused on M&A and complex contracts. DCD Media Plc 13 Financial statements for the year ended 31 December 2016 Independent auditor’s report to the members of DCD Media Plc We have audited the Group and parent company financial statements (the ‘‘financial statements’’) of DCD Media Plc for the year ended 31 December 2016 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of cash flows, the consolidated statement of changes in equity, the notes to the consolidated financial statements, the parent company balance sheet and the notes to the parent company financial statements. 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 the preparation of the parent company financial statements is applicable law and the Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland (‘FRS 102’). Respective responsibilities of directors and auditors As explained more fully in the statement of Directors’ responsibilities set out on page 11, 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 Financial Reporting Council’s Ethical Standards for Auditors. This report is made solely to the Company’s members, as a body, in accordance with 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. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information presented on pages 1 to 13 to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion In our opinion: • • • • the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2016 and of the Group’s result for the year then ended; the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with FRS 102; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit, the information given on pages 1 to 13 for the financial year for which the financial statements are prepared is consistent with those financial statements and this report has been prepared in accordance with applicable legal requirements. In the light of our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the Director's Report. 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. Richard Gilbert (Senior Statutory Auditor) for and on behalf of SRLV Chartered Accountants and Statutory Auditor 89 New Bond Street London W1S 1DA 31 May 2017 DCD Media Plc 14 Financial statements for the year ended 31 December 2016 Consolidated income statement for the year ended 31 December 2016 Revenue Cost of sales Impairment of programme rights Gross profit Selling and distribution expenses Administrative expenses: - Other administrative expenses - Impairment of goodwill - Amortisation of trade names - Restructuring (costs)/income Operating loss Finance costs Loss before taxation Taxation Loss after taxation from continuing operations Profit on discontinued operations net of tax Profit/(loss) for the financial year Profit/(loss) attributable to: Owners of the parent Non-controlling interest Note 4 5,11 5,11 5,11 5 7 8 9 Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 8,597 (5,744) (9) (5,753) 2,844 - (2,253) - (419) (287) (2,959) (115) (24) (139) 76 (63) 96 33 33 - 33 11,115 (8,041) (152) (8,193) 2,922 (37) (2,936) (1,772) (419) 54 (5,073) (2,188) (164) (2,352) 118 (2,234) - (2,234) (2,324) 90 (2,234) 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 earnings per share from discontinued operations Total basic profit/(loss) per share Diluted loss per share from continuing operations Diluted earnings per share from discontinued operations Total diluted profit/(loss) per share 9 10 9 10 (3p) 4p 1p (3p) 4p 1p (254p) - (254p) (254p) - (254p) The notes on pages 20 to 44 are an integral part of these consolidated financial statements. DCD Media Plc 15 Financial statements for the year ended 31 December 2016 Consolidated statement of comprehensive income for the year ended 31 December 2016 Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 Note Profit/(loss) for the financial year 33 (2,234) Other comprehensive income Exchange gains arising on translation of foreign operations Total other comprehensive income Total comprehensive income/(expense) Total comprehensive income/(expense) attributable to: Owners of the parent Non-controlling interest 177 177 210 210 - 210 4 4 (2,230) (2,320) 90 (2,230) The notes on pages 20 to 44 are an integral part of these consolidated financial statements. DCD Media Plc 16 Financial statements for the year ended 31 December 2016 Consolidated statement of financial position as at 31 December 2016 Non-current assets Goodwill Other intangible assets Property, plant and equipment Trade and other receivables Current assets Inventories and work in progress Trade and other receivables Cash and cash equivalents Total assets Current liabilities Bank overdrafts Other loans Unsecured convertible loan Trade and other payables Taxation and social security Obligations under finance leases Non-current liabilities Obligations under finance leases Deferred tax liabilities Total liabilities Net assets Equity Equity attributable to owners of the parent Share capital Share premium account Equity element of convertible loan Translation reserve Own shares held Retained earnings Equity attributable to owners of the parent Non-controlling interest Total Equity Note 11 11 12 14 13 14 16 16,18 16 15 15 16 16 17 19 Company number 03393610 Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 1,017 265 94 224 1,600 - 8,975 2,628 11,603 13,203 (427) (133) (67) (10,014) (25) (23) (10,689) - (40) (40) (10,729) 2,474 12,272 51,215 1 - (37) (60,977) 2,474 - 2,474 1,017 745 68 398 2,228 5 8,149 1,594 9,748 11,976 (413) (61) (62) (8,676) (101) (10) (9,323) (22) (125) (147) (9,470) 2,506 12,272 51,215 1 (177) (37) (60,800) 2,474 32 2,506 The notes on pages 20 to 44 are an integral part of these consolidated financial statements. The financial statements were approved and authorised for issue by the Board of Directors on 31 May 2017. DCM Craven Director DCD Media Plc 17 Financial statements for the year ended 31 December 2016 Consolidated statement of cash flows for the year ended 31 December 2016 Cash flow from operating activities including discontinued operations Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 12 11 7 13 14 15 12 11 Net loss before taxation Adjustments for: Depreciation of tangible assets Amortisation and impairment of intangible assets Net bank and other interest charges Increase in provisions Net exchange differences on translating foreign operations Net cash flows before changes in working capital Decrease in inventories Increase in trade and other receivables Increase in trade and other payables Cash from continuing operations Cash flow from discontinued operations Net profit before taxation Adjustments for: Profit on discontinued operations Net cash flows before changes in working capital Cash from discontinued operations Cash from operations Interest paid Net cash flows from operating activities Investing activities Purchase of property, plant and equipment Purchase of intangible assets Net cash flows used in investing activities Financing activities Repayment of finance leases Repayment of loan New loans raised Net cash flows from financing activities Net increase/(decrease) in cash Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 25 The notes on pages 20 to 44 are an integral part of these consolidated financial statements. (43) 37 676 24 - - 694 5 (652) 1,257 1,304 96 (96) - - 1,304 (25) 1,279 (63) (196) (259) (10) (61) 71 - 1,020 1,181 2,201 (2,422) 57 2,996 164 (51) 4 748 - (1,750) 1,712 710 - - - - 710 (22) 688 (46) (653) (699) (8) (147) 61 (94) (105) 1,286 1,181 DCD Media Plc 18 Financial statements for the year ended 31 December 2016 Consolidated statement of changes in equity for the year ended 31 December 2016 Share capital £’000 Share premium £’000 Equity element of convertible loan £’000 Translation reserve £’000 Own shares held £’000 Retained earnings £’000 Equity attributable to owners of the parent £’000 Amounts attributable to non- controlling interest £’000 Total equity £’000 10,145 51,118 98 (181) (37) (58,476) 2,667 (58) 2,609 Balance at 31 December 2014 Loss and total comprehensive income for the year Shares allotted on conversion of loan notes Equity element on issue of convertible loans Exchange differences on translating foreign operations - 2,127 - - - - 97 - Balance at 31 December 2015 12,272 51,215 Profit and total comprehensive income for the year Exchange differences on translating foreign operations Movement between reserves - - - - - - Balance at 31 December 2016 12,272 51,215 - - (97) - 1 - - - 1 - - - 4 - - - - (2,324) (2,324) 90 (2,234) - - - 2,127 - 4 - - - 2,127 - 4 (177) (37) (60,800) 2,474 32 2,506 - (33) 210 - - - 33 - (210) 33 (33) - - (37) (60,977) 2,474 (32) - - - 1 (33) - 2,474 DCD Media Plc 19 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 During the year, the principal activity of DCD Media Plc and subsidiaries (the Group) was the worldwide distribution of programmes for television and other media; the Group also distributes programmes on behalf of other independent producers. On 27 May 2016, the Group announced the cessation of development in its TV production divisions and the continued focus is primarily on the distribution division where the business has significant expertise and knowledge. DCD Media Plc is the Group's ultimate parent company, and it is incorporated and registered in England and Wales. The address of DCD Media Plc’s registered office is 9th Floor, Winchester House, 259 - 269 Old Marylebone Road, London, NW1 5RA, 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 2016. 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. 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 Executive Chairman’s Review and the Strategic Report. The financial position of the Group, its cash position and borrowings are set out in the financial review section of the Strategic Report. In addition, note 18 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 a net overdraft facility of £0.25m (£0.5m gross), with other activities funded from a combination of equity and short and medium term debt instruments. The Group’s overdraft facility has been extended by its principal bankers until 30 April 2018. The overdraft facility will reduce in even instalments quarterly down to £0.15m as at January 2018. The Directors have a reasonable expectation that an overdraft facility will continue to be available to the Group for the foreseeable future and beyond the current extension period. 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 market environment. 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 its obligations as they fall due. 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 were unable to continue as a going concern. DCD Media Plc 20 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 1 Principal accounting policies (continued) Changes in accounting policies A number of amendments to standards issued by IASB become effective from 1 January 2016. These have been reviewed and no adjustments deemed necessary. Those becoming effective from 1 January 2017 have not been adopted early by the Group. Management have reviewed these standards and believe none are expected to have a material effect on the Group’s future financial statements. Application of new and revised International Financial Reporting Standards (IFRSs) New and revised IFRSs in issue but not yet effective The Group has not applied the following new and revised IFRSs that have been issued but are not yet effective: Standard Description Issued date Effective date IFRS 1 First Time Adoption of IFRSs IFRS 2 Share-based Payments IFRS 4 Insurance Contracts IFRS 12 Disclosure of Interests in Other Entities IFRS 16 Leases IAS 7 Statement of Cash Flows IAS 12 Income Taxes IAS 28 Investments in Associates and Joint Ventures IAS 40 Investment Property Amendments resulting from Annual Improvements 2014– 2016 Cycle (removing short-term exemptions) Amendments to clarify the classification and measurement of share-based payment transactions Original issue Amendments resulting from Annual Improvements 2014– 2016 Cycle Original issue Amendments as result of the Disclosure initiative Amendments regarding the recognition of deferred tax assets for unrealised losses Amendments resulting from Annual Improvements 2014– 2016 Cycle (clarifying certain fair value measurements) Amendments to clarify transfers or property to, or from, investment property Dec-16 Jan-18 Jun-16 Jan-18 Sep-16 Dec-16 Jan-18 Jan-17 Jan-16 Jan-16 Jan-16 Jan-19 Jan-17 Jan-17 Dec-16 Jan-18 Dec-16 Jan-18 No early adoption has been taken up where permitted on any of the above revisions, amendments and original issue IFRSs. 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. 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. 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 2016. 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. DCD Media Plc 21 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 1 Principal accounting policies (continued) 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. 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: Motor vehicles Office and technical equipment 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. DCD Media Plc 22 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 1 Principal accounting policies (continued) Programme rights (continued) Purchased programme rights are stated at the lower of cost, less accumulated amortisation, or recoverable amount. Purchased programme rights are amortised over a period in-line 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. 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 in 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. DCD Media Plc 23 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 1 Principal accounting policies (continued) Assets held for sale (continued) 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. 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; • Translation reserve represents the exchange rate differences on the translation of subsidiaries from a functional currency to Sterling at the year end; • Own shares held represents shares in employee benefit trust; • 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. DCD Media Plc 24 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 1 Principal accounting policies (continued) 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. 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 contributes to the personal pension plans for the benefit of a number of its employees. Contributions are charged against profits as they accrue. DCD Media Plc 25 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 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 20, the Group has entered 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’. 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. Revenue recognition 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. 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. Carrying value of goodwill and trade names Determining whether goodwill and trade names are 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 and trade names at the statement of financial position date was £1.2m. Details relating to the allocation of goodwill to cash-generating units and potential impairment calculations are given in note 11. Carrying value 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 £0.1m. Details of the impairment review calculations are given in note 11. Adequacy of accruals and provisions Determining whether accruals and provisions are adequate requires an estimate to be made of the likelihood of a liability crystallising and the potential amount. Management has reviewed each provision and, where considered necessary, has taken external advice to ensure adequacy. 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 three main reportable segments: • Rights and Licensing – This division is involved with the sale of distribution rights, DVDs, music and publishing deals through DCD Rights. • Production - This division is involved in the production of television content. • Post-Production – This division is involved in post-production and contains Sequence Post. DCD Media Plc 26 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 3 Segment information (continued) 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 activities that cannot be reported within the other reportable segments. They are managed separately because each business requires 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, segmental adjusted EBITDA and adjusted profit before tax. 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 allocated to their respective segments. Segment liabilities include all trading liabilities incurred by the segments. Loans and borrowings incurred by the Group are not allocated to segments. Details of these balances are provided in the reconciliations below: 2016 Segmental Analysis – income statement Total revenue Inter-segmental revenue Total revenue from external customers Discontinued operations Group’s revenue per consolidated statement of comprehensive income Operating (loss)/profit before tax – continuing operations Operating profit before tax – discontinued operations Operating (loss)/profit before interest and tax Capitalisation of programme rights Amortisation of programme rights Impairment of programme rights Amortisation of goodwill and trade names Depreciation Segmental EBITDA Restructuring expense Segmental adjusted EBITDA Net finance expense Depreciation Segmental adjusted profit/(loss) before tax n o i t c u d o r P d n a s t h g R i g n i s n e c i L t s o P n o i t c u d o r P r e h t O 6 1 0 2 l a t o T £’000 £’000 £’000 £’000 £’000 703 (147) 556 7,558 - 7,558 - - 455 (23) 432 - 105 (54) 51 - 8,821 (224) 8,597 - 556 7,558 432 51 8,597 (750) - (750) (196) 248 9 419 - 655 - 655 - - - - 27 (270) 682 287 - 17 682 3 - (2) (27) 20 653 (9) - (9) - - - - 9 - - - - (9) (9) (11) 96 (115) 96 85 (19) - - - - 1 86 - 86 (25) (1) 60 (196) 248 9 419 37 498 287 785 (24) (37) 724 DCD Media Plc 27 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 3 Segment information (continued) 2016 Segmental analysis – financial position Non-current assets Reportable segment assets Goodwill Trade-names Total Group assets n o i t c u d o r P d n a s t h g R i g n i s n e c i L t s o P n o i t c u d o r P r e h t O 6 1 0 2 l a t o T £’000 £’000 £’000 £’000 £’000 - 46 570 11,179 - 210 1,017 - 21 83 - - 27 94 144 10,523 - - 1,017 210 780 12,196 83 144 13,203 Reportable segment liabilities (361) (9,060) (33) (1,019) (9,020) Loans and borrowings Deferred tax liabilities Total Group liabilities 2015 Segmental analysis – income statement Total revenue Inter-segmental revenue Total revenue from external customers Discontinued operations Group’s revenue per consolidated statement of comprehensive income Operating (loss)/profit before tax – continuing operations Operating (loss)/profit before interest and tax 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 income (126) (40) (23) - - - (67) - (216) (40) (527) (9,083) (33) (1,086) (10,729) n o i t c u d o r P d n a s t h g R i g n i s n e c i L t s o P n o i t c u d o r P r e h t O 5 1 0 2 l a t o T £’000 £’000 £’000 £’000 £’000 3,936 (148) 3,788 6,841 - 6,841 - - 535 (91) 444 - 147 (105) 42 11,459 (344) 11,115 - - 3,788 6,841 444 42 11,115 (1,939) (1,939) (653) 653 152 419 1,772 - 680 680 - - - - - 19 404 699 (54) - 14 14 - - - - - 32 46 - (943) (2,188) (943) (2,188) - - - - - 6 (937) - (653) 653 152 419 1,772 57 212 (54) 158 Segmental adjusted EBITDA 350 699 46 (937) Net finance expense Depreciation - - (3) (19) - (32) (161) (6) (164) (57) Segmental adjusted profit/(loss) before tax 350 677 14 (1,104) (63) DCD Media Plc 28 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 3 Segment information (continued) 2015 Segmental analysis – financial position n o i t c u d o r P d n a s t h g R i g n i s n e c i L t s o P n o i t c u d o r P r e h t O 5 1 0 2 l a t o T £’000 £’000 £’000 £’000 £’000 Non-current assets 117 46 21 1 185 Reportable segment assets 828 9,097 145 261 10,331 Goodwill Trade-names Total Group assets 393 628 624 - - - - - 1,017 628 1,849 9,721 145 261 11,976 Reportable segment liabilities (488) (7,684) (91) (927) (9,190) Loans and borrowings Deferred tax liabilities Total Group liabilities 4 Revenue (61) (125) (32) - - - (62) - (155) (125) (674) (7,716) (91) (989) (9,470) The Group's headquarters is based in the United Kingdom. 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, 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 from continuing operations 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 Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 1,684 5,053 1,345 515 8,597 5,939 1,416 3,056 704 11,115 DCD Media Plc 29 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 5 Expenses by nature Auditor’s remuneration: Fees payable to the Company's auditor: For the audit of the Company's annual accounts For the audit of other Group companies Operating lease rentals: Other Gain on foreign exchange fluctuations Depreciation, amortisation and impairment: Intangible assets - programme amortisation in cost of sales (note 11) Intangible assets - programme impairment in cost of sales (note 11) Intangible assets - goodwill impairment in administrative expenses (note 11) Intangible assets - trade names amortisation in administrative expenses (note 11) Property, plant and equipment (note 12) Staff costs (note 6) Restructuring costs/(income) (see below) Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 25 37 151 (535) 248 9 - 419 37 1,394 287 25 44 208 (24) 653 152 1,772 419 57 1,790 (54) In 2016, restructuring costs arise from wages for staff who are now redundant and the corresponding redundancy charges made within the production side of the business that is now closed. Other restructuring costs include non- recurring expenses in relation to production activity that will no longer be incurred going forward. In 2015 net restructuring income arose out of the Group’s US production companies. 6 Directors and employees Staff costs during the year, including Directors, were as follows: Wages and salaries Social security costs Other pension costs (note 23) Redundancy costs The average number of employees of the Group during the year were as follows: Sales and distribution Production Post-production Directors and administration Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 1,145 120 6 123 1,394 1,611 176 3 - 1,790 Year ended 31 December 2016 No. Year ended 31 December 2015 No. 12 2 4 4 22 13 6 7 5 31 DCD Media Plc 30 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 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: D Green* D Craven N Davies Williams N McMyn A Lindley Emoluments £'000 Pension Contributions £'000 Money value of non-cash benefits received £'000 - 75 160 32 5 272 - - 1 - - 1 - - 11 - - 11 * David Green resigned from the board on 18 August 2016 Emoluments £'000 Pension Contributions £'000 Money value of non-cash benefits received £'000 - 100 141 131 9 381 - - - - - - - - 10 - - 10 D Green D Craven N Davies Williams N McMyn A Lindley Employee Benefit Trust 2016 Total £'000 - 75 172 32 5 284 2015 Total £'000 - 100 151 131 9 391 In 2012, 7,218,750 shares, that had been held by the directors of Done and Dusted Ltd, were transferred into an employee benefit trust. After the share consolidation in 2013, the number of shares reduced to 7,218 and following a transfer of 4,000 to an ex-director in 2013, the number of shares at 31 December 2016 was 3,218 (2015: 3,218). Employee Share Option Scheme In 2013, 18,800,000 options over the Company’s 1p ordinary share capital were granted. As a result of share consolidations in the interim, the equivalent number of options would be 18,800 over the Company’s £1.00 ordinary share capital. 25% of the options were due to vest in January 2014 and a further 25% in January of each of the three following years should certain share price hurdles be met. Should the price hurdle in one year not be met, the options will be available for vesting should the share price meet the subsequent hurdle. No options have been exercised to date. If all hurdles were to be met in line with the agreement, the weighted average number of options outstanding at 31 December 2016 is 1,650 (2015: 1,500). The Directors have assessed the likelihood that the future hurdle rates will be met and that any charge to the income statement in the current or future years to be immaterial and as a consequence, no charge has been booked. The Directors will reassess this on a regular basis. 7 Finance costs Bank overdraft Convertible loan interest charge Other interest charges Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 16 5 3 24 13 141 10 164 DCD Media Plc 31 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 8 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 Current year credit Deferred tax credit: Reversal of temporary differences under IFRS Total tax credit in statement of comprehensive income Tax credit represents: Loss on ordinary activities – continuing operations Profit on ordinary activities – discontinued operations Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 19.25% (2015: 20.0%) Effects of: Expenses not deductible for tax purposes (amortisation and impairment of intangibles) Net losses in year carried forward/(brought forward losses utilised) Depreciation in excess of capital allowances Rate differential on foreign taxes Total tax credit Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 - (10) (10) 86 76 - 23 23 95 118 Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 (139) 96 (43) (8) 114 (28) 7 (9) 76 (2,352) - (2,352) (470) 533 2 11 42 118 A deferred tax asset of approximately £2.5m (2015: £3.9m) 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 asset has been calculated based upon the 2016 tax rate of 19% (2015 asset based on the 2015 rate of 20%). 9 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 Ltd (“Done and Dusted”). This decision was to allow the Company to focus on its key markets, that of television production and distribution. Done and Dusted remained within the Group, however trade names were passed to key management in consideration of key management returning their shares in the Company. Operations within Done and Dusted ceased from 1 January 2012. Result of discontinued operations Profit from discontinued operations before tax Tax expense Profit from discontinued operations after tax Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 96 - 96 - - - DCD Media Plc 32 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 9 Discontinued operations (continued) Profit on discontinued operations Basic earnings per share (pence) Year ended 31 December 2016 £’000 Year ended 31 December 2015 £’000 96 4p - - Diluted earnings per share would remain at 4 pence were convertible loan balances held at the year-end converted at their respective conversion prices. 10 Earnings per share The calculation of the basic profit/(loss) per share is based on the profit/(loss) attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted profit/(loss) per share is based on the basic profit/(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 2016 Per share amount pence Profit £'000 Weighted average number of shares 2015 Per share amount pence Loss £'000 Basic and diluted loss per share Profit/(loss) attributable to ordinary shareholders 33 2,541,419 1 (2,324) 915,470 (254) If convertible loan balances held at the year-end were converted at their respective conversion prices the number of shares issued would be 2,608,890 (2015: 2,603,880 shares if all the convertible loan balances held at the prior year end had been converted at their respective conversion prices). Diluted earnings per share would remain at 1 pence were this transaction to take place. Prior year figures have not been restated as, due to the overall loss position of the group in that year, the effect would be anti-dilutive. DCD Media Plc 33 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 11 Goodwill and intangible assets Cost At 1 January 2015 Additions Disposals At 31 December 2015 At 1 January 2016 Additions At 31 December 2016 Amortisation and impairment At 1 January 2015 Amortisation provided in year in cost of sales Impairment provided in year in cost of sales Amortisation provided in year in administrative expenses Impairment provided in year in administrative expenses Disposals At 31 December 2015 At 1 January 2016 Goodwill £'000 Trade Names £'000 Programme Rights £'000 Total £'000 17,388 - - 8,036 - - 37,697 653 (1,600) 63,121 653 (1,600) 17,388 8,036 36,750 62,174 17,388 - 8,036 - 36,750 196 62,174 196 17,388 8,036 36,946 62,370 14,599 6,989 37,428 59,016 - - - 1,772 - - - 419 - - 653 152 - - (1,600) 653 152 419 1,772 (1,600) 16,371 7,408 36,633 60,412 16,371 7,408 36,633 60,412 Amortisation provided in year in cost of sales Impairment provided in year in cost of sales Amortisation provided in year in administrative expenses - - - - - 419 248 9 - 248 9 419 At 31 December 2016 Net book value At 31 December 2016 At 31 December 2015 Goodwill and trade names 16,371 7,827 36,890 61,088 1,017 1,017 209 628 56 117 1,282 1,762 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 Ltd September Films Ltd Segment (note 3) Rights and Licensing Production Goodwill carrying amount 31 December 2016 £’000 31 December 2015 £’000 624 393 624 393 1,017 1,017 DCD Media Plc 34 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 11 Goodwill and intangible assets (continued) Goodwill and trade names (continued) Segment (note 3) Trade name carrying amount 31 December 2016 £’000 31 December 2015 £’000 Cash generating units (CGU): September Films Ltd Production 209 209 628 628 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 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 performs an annual impairment review of all intangible assets, including goodwill and trade names. The recoverable amounts of all the above CGUs have been determined from value in use calculations. Detailed budgets and forecasts cover a two year period to December 2018. The forecasts are then extrapolated for a further five years using models that estimate the distribution income profile of the GGU’s library. The Board uses this seven year period of projection as it believes it is reasonably aligned with the expected lifespan of a TV production. The impairments arising from this value in use calculation are recorded below. Goodwill Segment (note 3) Cash generating units (CGU): September Films Ltd Production Impairment charge 31 December 2016 £’000 31 December 2015 £’000 - - 1,772 1,772 Trade names Segment (note 3) Amortisation charge Impairment charge 31 December 2016 £’000 31 December 2015 £’000 31 December 2016 £’000 31 December 2015 £’000 Cash generating units (CGU): September Films Ltd Production 419 419 419 419 - - - - The key assumption used for value in use calculations is the discount factor applied to the forecasts. The rate used to discount the forecast cash flows is 4.9% for all CGUs. If the discount rates used were increased by 3% to 7.9%, the carrying value of goodwill would still not be impaired. DCD Media Plc 35 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 11 Goodwill and intangible assets (continued) Cash generating units (CGU): DCD Rights Ltd September Films Ltd Programme rights Discount factor 31 December 2016 % 31 December 2015 % 4.9 4.9 12.5 12.5 The Board performed an impairment review of 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 4.9%. 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 7.9% the carrying values would decrease by £753. If the discount rate was decreased by 3% to 1.9% the carrying value of assets would increase by £831. 12 Property, plant and equipment Cost At 1 January 2015 Additions At 31 December 2015 At 1 January 2016 Additions Disposals At 31 December 2016 Depreciation At 1 January 2015 Provided in year At 31 December 2015 At 1 January 2016 Provided in year Disposals At 31 December 2016 Net book value At 31 December 2016 At 31 December 2015 Office and technical equipment £'000 Motor vehicles £'000 404 45 449 449 63 (246) 266 365 47 412 412 27 (246) 193 73 37 47 1 48 48 - - 48 7 10 17 17 10 - 27 21 31 Total £'000 451 46 497 497 63 (246) 314 372 57 429 429 37 (246) 220 94 68 The net book value of property, plant and equipment includes an amount of £21,221 (2015: £30,709) in respect of assets held under finance leases and hire purchase contracts. The related depreciation charge on these assets for the year was £10,008 (2015: £10,008). DCD Media Plc 36 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 13 Inventories and work in progress Pre-production costs 14 Trade and other receivables Due after one year Trade receivables Other receivables Total trade and other receivables due after one year Due within one year Trade receivables Less: provision for impairment of trade receivables Trade receivables – net Taxation and social security Other receivables Due from related parties (note 22) Prepayments and accrued income Total trade and other receivables due within one year Total financial assets other than cash and cash equivalents classified as loans and receivables 31 December 2016 £’000 31 December 2015 £’000 - - 5 5 31 December 2016 £’000 31 December 2015 £’000 147 77 224 325 73 398 31 December 2016 £’000 31 December 2015 £’000 3,800 (11) 3,789 340 736 902 3,208 8,975 4,347 2,088 (35) 2,053 75 787 611 4,623 8,149 2,664 The average credit period taken on sales of goods is 168 days (2015: 96 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 £11k (2015: £35k). The movement in the bad debt provision is related to a small decrease in the 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. DCD Media Plc 37 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 14 Trade and other receivables (continued) 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 Trade debtors in current assets Trade debtors in non-current assets 15 Trade and other payables Trade payables Other payables Accruals and deferred income Taxation and social security Amount owed to related parties (note 22) Total trade and other payables Total financial liabilities, excluding loans and borrowings, classified as financial liability measured at amortised cost 16 Interest bearing loans and borrowings Due within one year Bank overdrafts (secured) Convertible debt (unsecured) Amount owed to related parties (note 22) Obligations under finance leases 31 December 2016 £’000 31 December 2015 £’000 1,686 1,501 596 185 8 1,461 3,936 3,789 147 3,936 405 97 105 270 2,378 2,053 325 2,378 31 December 2016 £’000 31 December 2015 £’000 697 1,167 6,811 25 1,339 10,039 2,206 636 652 6,480 101 908 8,777 1,288 31 December 2016 £’000 31 December 2015 £’000 427 67 133 23 650 413 62 61 10 546 The principal terms and the debt repayment schedule for the Group’s loans and borrowings are as follows as at 31 December 2016: Bank overdrafts (secured) * Convertible debt (unsecured) Other debt Obligations under finance leases Currency Nominal rate % Sterling Sterling Sterling Sterling 3.5 over Base Rate 8.0 10.0 6.7 Year of maturity 2017 2017 2017 2017 DCD Media Plc 38 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 16 Interest bearing loans and borrowings (continued) Bank borrowings * The bank overdraft has been extended to 30 April 2018, but is repayable on demand. The Directors expect an overdraft facility to be available to the Group for the foreseeable future. Bank overdrafts 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 unsecured and is subordinate to the bank overdraft. Due in less than one year Obligations under finance leases Due after more than one year Obligations under finance leases 31 December 2016 £’000 31 December 2015 £’000 22 22 10 10 31 December 2016 £’000 31 December 2015 £’000 - - 22 22 17 Deferred tax liabilities Deferred tax liabilities are attributable to the following: Intangible assets Net tax liabilities Liabilities Net 31 December 2016 £'000 31 December 2015 £'000 31 December 2016 £'000 31 December 2015 £'000 40 40 125 125 40 40 125 125 A deferred tax asset of £2.5m, arising principally from losses in the Group of £13.1m, has not been recognised (2015: £3.9m and £18.8m). 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 sufficient profits will be recognised in the near future to make use of these losses. Movement in deferred tax during the year: Intangible assets Tax value of temporary difference 1 January 2016 £'000 Recognised in income £'000 31 December 2016 £'000 125 125 84 84 41 41 DCD Media Plc 39 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 18 Financial risk management Financial risk factors The Group's financial assets and liabilities 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 assets and liabilities 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 equity, bank overdraft, convertible debt and production and other loan facilities provided by banks and other organisations. 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. 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. The sterling equivalent of the Group's assets and liabilities denominated in foreign currencies at 31 December 2016 and 31 December 2015 was as follows: US dollar Euros Other Total assets/(liabilities) Assets Liabilities 31 December 2016 £'000 31 December 2015 £'000 31 December 2016 £'000 31 December 2015 £'000 3,644 444 175 4,263 2,178 147 190 2,515 (12) (33) - (45) (352) (48) (148) (548) Whilst the main foreign 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. DCD Media Plc 40 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 18 Financial risk management (continued) 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 points higher than those actually incurred. The effect of such a change would be to increase the loss before tax for the year by £9,000 (2015: loss of £8,000). 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. 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 £'000 Total £'000 6.7% n/a 8.0% n/a 10% 3.5% 1 807 - - - 427 2 - - - 94 - 19 - 39 28 39 - - - - - - - - - - - - - 22 807 39 28 133 427 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 £'000 Total £'000 6.7% N/a 8.0% N/a 10.0% 1 636 - - 3.5% 413 2 - - - - 7 - 39 23 61 - 22 - - - - - - - - - 32 636 39 23 61 413 31 December 2016 Fixed rate Finance lease obligations Trade payables Convertible debt Interest on convertible debt Other debt Floating rate Bank overdrafts 31 December 2015 Fixed rate Finance lease obligations Trade payables Convertible debt Interest on convertible debt Other debt Floating rate Bank overdrafts DCD Media Plc 41 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 19 Share capital Share capital Share premium Issued capital comprises: Allotted, called up and fully paid 2,541,419 ordinary shares of £1 each (2015: 2,541,419 ordinary shares of £1 each) 9,730,514 deferred shares of £1 each (2015: 9,730,514 deferred shares of £1 each) 31 December 2016 £'000 31 December 2015 £'000 12,272 51,215 63,487 12,272 51,215 63,487 31 December 2016 £'000 31 December 2015 £'000 2,541 9,731 2,541 9,731 12,272 12,272 Fully paid ordinary shares: Ordinary shares have full voting, dividend and capital distribution rights attached to them. Number of shares Share capital £'000 Share premium £'000 Balance at 1 January 2016 and 31 December 2016 12,271,933 12,272 51,215 Pursuant to a resolution passed on 24 July 2012 and in accordance with the provisions of the Companies Act 2006 the Company ceased to have authorised share capital. 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 7 October 2015, the 2013 and 2014 Convertible Loan Notes and accrued interest to that date were converted into 2,127,138 ordinary £1 shares. 20 Contingent liabilities – sale and leaseback agreements 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. DCD Media Plc 42 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 20 Contingent liabilities – sale and leaseback agreements (continued) The liabilities from these agreements are as follows: As at 31 December 2016 As at 31 December 2015 21 Capital commitments Due within 1 year £'000 Due within 2 to 5 years £'000 Due after 5 years £'000 771 1,629 - 771 - - Total £'000 771 2,400 There were no capital commitments at 31 December 2016 or 31 December 2015. 22 Transactions with directors and other related parties Loans to Directors At 31 December 2016 and 2015 there were no loans due to Directors. Other transactions During the year the following amounts were charged by companies in which the Directors have an interest or share directorships: Company Director Amount charged 2016 £'000 2015 £'000 Description Timeweave Ltd D Craven 210 417 Provision of director, finance and management services The balances outstanding at the year-end were as follows: Company Director Amount payable 2016 £'000 2015 £'000 Description Timeweave Ltd D Craven 828 603 Provision of director, finance and management services Other related party transactions In 2012, DCD Rights Ltd secured a deal with Timeweave Ltd, a shareholder of DCD Media plc, to create a new fund for the acquisition of third-party distribution rights. At 31 December 2016, DCD Rights Ltd was owed £901,706 from Timeweave Ltd (31 December 2015: £611,122) and owed £1,339,106 to Timeweave Ltd (31 December 2015: £305,446). In September 2015, Rize Television Ltd obtained a loan from Timeweave Ltd to fund the production of Got What it Takes? for CBBC. The facility was for £125,582. At 31 December 2016, £132,582 was outstanding (31 December 2015: £60,887). At the date of signing these accounts, £31,657 is outstanding. Compensation of key management personnel of the Group Short-term employee benefits Termination payments Pension benefits 31 December 2016 £'000 31 December 2015 £'000 572 - 4 576 696 - 3 699 Only directors and employees who attend the monthly executive meetings are deemed to be key management personnel. DCD Media Plc 43 Financial statements for the year ended 31 December 2016 Notes to the consolidated financial statements for the year ended 31 December 2016 22 Transactions with directors and other related parties (continued) The principal operating subsidiary companies are listed below: Subsidiary DCD Rights Ltd September Films Ltd Sequence Post Ltd Rize Television Ltd Country of incorporation % owned Nature of business England & Wales England & Wales England & Wales England & Wales 100% 100% 100% 100% Distribution of programme rights Production of programmes for television Post production Production of programmes for television 23 Retirement benefit schemes The Group contributed to the personal pension plans of 18 employees in 2016 (2015: one). Contributions in the year amounted to £5,796 (2015: £2,880). 24 Operating lease rental commitments The Group maintains property, plant and equipment on operating leases. 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 25 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 2016 £'000 31 December 2015 £'000 209 429 638 148 77 225 31 December 2016 £'000 31 December 2015 £'000 2,628 (427) 2,201 1,594 (413) 1,181 26 Ultimate parent company and ultimate controlling party The immediate parent company is Timeweave Ltd, registered in England and Wales. The smallest and largest group that consolidates the results of the company is Mayfair Capital Investments UK Ltd, registered in England and Wales. The results of Mayfair Capital Investments UK Ltd can be obtained from Companies House website at www.companieshouse.gov.uk . The Directors consider the family interests of Mr Joe Lewis to have ultimate control by virtue of their indirect beneficial ownership of the issued share capital of Mayfair Capital Investments Ltd and Colter Ltd, a company incorporated in the Bahamas. The Directors consider Mayfair Capital Investments Ltd, a company incorporated in the Bahamas to be the ultimate parent company. DCD Media Plc 44 Financial statements for the year ended 31 December 2016 Parent company balance sheet as at 31 December 2016 Fixed assets Intangible assets Property, plant and equipment Investments Trade and other receivables Current assets Trade and other receivables Cash at bank and in hand Total assets Creditors: amounts falling due within one year Total liabilities Net assets Capital and reserves Called up share capital Share premium account Equity element of convertible loan Own shares held Profit and loss account Shareholders' funds Company number 03393610 31 December 2016 £’000 31 December 2015 £’000 Note 3 4 5 6 6 7 9 10 10 10 10 - - 3,876 76 3,952 1,309 - 1,309 5,261 - 1 4,008 73 4,082 1,050 - 1,050 5,132 (3,425) (2,939) (3,425) (2,939) 1,836 2,193 12,272 51,215 1 (37) (61,615) 12,272 51,215 1 (37) (61,258) 1,836 2,193 The notes on pages 47 to 52 are an integral part of these financial statements. The financial statements were approved and authorised for issue by the Board of Directors on 31 May 2017. DCM Craven Director DCD Media Plc 45 Financial statements for the year ended 31 December 2016 Statement of Changes in Equity for the year ended 31 December 2016 Share capital £’000 Share premium Equity element of convertible loan Own shares held Retained earnings Total equity £’000 £’000 £’000 £’000 £’000 Balance at 31 December 2014 10,145 51,118 Loss and total comprehensive income for the year Shares allotted on conversion of loan notes Equity element on issue of convertible loans - 2,127 - - - 97 Balance at 31 December 2015 12,272 51,215 Loss and total comprehensive income for the year - - Balance at 31 December 2016 12,272 51,215 98 - (97) 1 - 1 (37) (58,573) 2,751 - - - (2,685) - - (37) (61,258) - (357) (37) (61,615) (2,685) 2,127 - 2,193 (357) 1,836 DCD Media Plc 46 Financial statements for the year ended 31 December 2016 Notes to the parent company financial statements for the year ended 31 December 2016 1 Principal accounting policies These financial statements are prepared on the going concern basis, under the historical cost convention and in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 – 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland' ('FRS 102'), and with the Companies Act 2006. 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 18 of the consolidated financial statements 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. The Company has taken advantage of the reduced disclosure requirements to not prepare a cashflow statement in line with FRS 102 paragraph 1.11 and 1.12. Judgements in applying accounting policies and key sources of estimation uncertainty In preparing these financial statements, the Directors have made the following judgements: (cid:1) Determine whether amounts recoverable from group companies are recoverable and the carrying value of investments are appropriate. These decisions depend on the financial position of the relevant group company and forecasts of future cash flows. (cid:1) Assess the recoverability of other debtors. The Directors have assessed the financial position of the relevant counterparties. (cid:1) Determine whether leases are finance or operating leases. Material leases have been reviewed to assess appropriateness of classification. (cid:1) Review the carrying value of tangible fixed assets. (cid:1) Assess the adequacy of accruals and provisions. Directors have assessed the likelihood and scale of potential liabilities that were present at the balance sheet date. 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 Pension costs were paid for one employee during the year and as per prior years were charged against profits as they accrued. 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. 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. 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 7 years. Purchased programme rights are stated at the lower of cost, less accumulated amortisation, or recoverable amount. Purchased programme rights are amortised over a period in line 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 income statement within cost of sales. DCD Media Plc 47 Financial statements for the year ended 31 December 2016 Notes to the parent company financial statements for the year ended 31 December 2016 1 Principal accounting policies (continued) Tangible fixed assets and depreciation Property, plant and equipment are stated at cost net of depreciation and any provision for impairment. 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 basis: Office and technical equipment 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. 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 balance sheet. 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. 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. 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. 2 Loss 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 £357,000 (2015: loss £2,685,000). The result for the year includes £25,000 for the audit of the Company and as parent of the DCD Media Plc group (2015: £25,000). 3 Intangible assets Cost At 1 January 2016 and at 31 December 2016 Amortisation and impairment At 1 January 2016 and at 31 December 2016 Net book value At 31 December 2016 At 31 December 2015 Programme Rights £'000 320 320 - - DCD Media Plc 48 Financial statements for the year ended 31 December 2016 Notes to the parent company financial statements for the year ended 31 December 2016 4 Property, plant and equipment Cost At 1 January 2016 and at 31 December 2016 Depreciation At 1 January 2016 Provided in year At 31 December 2016 Net book value At 31 December 2016 At 31 December 2015 5 Fixed asset investments Cost or valuation At 1 January 2016 and 31 December 2016 Accumulated amortisation At 1 January 2016 Provided in year At 31 December 2016 Net book value At 31 December 2016 At 31 December 2015 Office and technical equipment £'000 32 31 1 32 - 1 Shares in subsidiary undertakings £’000 25,294 21,286 132 21,418 3,876 4,008 All shares held in subsidiary undertakings are ordinary shares with full voting, dividend and distribution rights. The principal operating subsidiary companies are listed below. All are 100% owned: Company name Place of incorporation Principal activity DCD Rights Ltd September Films Ltd Sequence Post Ltd Rize Television Ltd England & Wales England & Wales England & Wales England & Wales Distribution of programme rights Production of programmes for television Post production Production of programmes for television DCD Rights Ltd sell programme rights worldwide to all media. Net assets £’000 (728) 2,219 (638) 251 Profit/(loss) for year £’000 383 648 (70) (109) September Films Ltd and Rize Television Ltd are involved with the production of programmes for television and other media. Sequence Post Ltd is involved in post-production. September Films NY Inc., September Films West Coast Inc. September Films USA Incorporated and September Scripted Incorporated, companies incorporated in the USA, were all wound up in the year. Box TV Ltd, DCD Drama Ltd, Done and Dusted Group Ltd, DCD Publishing Ltd, DCD Productions (UK) Ltd, Prospect Pictures Ltd and Prospect Cymru/Wales Ltd are not part of ongoing trading operations. All the subsidiary companies are registered in England and Wales. DCD Media Plc 49 Financial statements for the year ended 31 December 2016 Notes to the parent company financial statements for the year ended 31 December 2016 6 Trade and other receivables Non-current assets Other debtors Current assets Amounts owed by group undertakings VAT recoverable Other debtors Prepayments and accrued income 7 Creditors: amounts falling due within one year Bank overdraft (secured) Convertible debt (unsecured) Trade creditors Amounts owed to group undertakings Amounts due to related parties Taxation and social security Accruals and deferred income 8 Bank and other borrowings Due within one year or on demand Bank overdrafts - secured (a) Convertible loan notes (b) Total borrowings 31 December 2016 £'000 31 December 2015 £'000 76 73 31 December 2016 £'000 31 December 2015 £'000 1,241 26 23 19 1,309 868 45 59 78 1,050 31 December 2016 £'000 31 December 2015 £'000 10 67 28 2,357 828 - 135 3,425 6 62 72 2,044 603 4 148 2,939 31 December 2016 £'000 31 December 2015 £'000 10 67 77 6 62 68 a) The Group's day-to-day operations are funded from cash generated from trading and the use of a net overdraft facility of £0.25m (£0.5m gross). The facility is repayable on demand. At the time of signing the accounts the facility has been extended by its principal bankers until 30 April 2018. The overdraft facility will reduce in even instalments quarterly down to £0.15m as at January 2018. The Directors have a reasonable expectation that an overdraft facility will continue to be available to the Group for the foreseeable future and beyond the current extension period. The overdraft is secured by a fixed charge over the Company’s and Group’s intangible programme rights assets. (b) The 2005 and 2008 loan notes are repayable once the Coutts facilities have been repaid. 9 Share capital See Group accounts note 19. DCD Media Plc 50 Financial statements for the year ended 31 December 2016 Notes to the parent company financial statements for the year ended 31 December 2016 10 Share premium account and reserves Equity element of convertible loan £'000 98 - (97) 1 1 1 Share premium £'000 51,118 - 97 51,215 51,215 - 51,215 Profit and loss account £'000 (58,573) (2,685) Own shares held £’000 - (37) - Total £'000 (7,394) (2,685) - - - (61,258) (37) (10,079) (61,258) (357) (61,615) (37) - (37) (10,079) (357) (10,436) At 1 January 2015 Loss for the year Equity element convertible loans on issue of At 31 December 2015 At 1 January 2016 Loss for the year At 31 December 2016 11 Financial instruments Financial assets Financial assets measured at fair value through the profit and loss Financial assets that are debt instruments measured at amortised cost Financial liabilities Financial liabilities measured at amortised cost 31 December 2016 £'000 31 December 2015 £'000 - 1,092 1,092 3,424 3,424 - 1,050 1,050 2,939 2,939 Financial assets measured at amortised cost include trade and other debtors, recoverable VAT, prepayments and accrued income and amounts owed by group undertakings. Financial liabilities measured at amortised cost include trade and other creditors, amounts owed to group undertakings and related parties, accruals and deferred income and convertible debt. 12 Pension costs The Company made contributions for one employee towards a personal pension scheme (2015: no contributions to personal pension schemes). 13 Transactions with Directors and other related parties During the year the following amounts were charged by companies in which the Directors have an interest: Company Director Amount charged 2015 £'000 Description 2016 £'000 Timeweave Ltd D Craven 210 417 Provision of director and accounting services to DCD Media Plc. At 31 December 2016, £828,352 was due to Timeweave Ltd (2015: £602,776). The company has taken advantage of the exemptions available under FRS 102 not to disclose any transactions or balances with entities that are 100% controlled by DCD Media Plc. DCD Media Plc 51 Financial statements for the year ended 31 December 2016 Notes to the parent company financial statements for the year ended 31 December 2016 14 Ultimate parent company and ultimate controlling party The immediate parent company is Timeweave Ltd, registered in England and Wales. The smallest and largest group that consolidates the results of the company is Mayfair Capital Investments UK Ltd, registered in England and Wales. The results of Mayfair Capital Investments UK Ltd can be obtained from Companies House website at www.companieshouse.gov.uk . The Directors consider the family interests of Mr Joe Lewis to have ultimate control by virtue of their indirect beneficial ownership of the issued share capital of Mayfair Capital Investments Ltd and Colter Ltd, a company incorporated in the Bahamas. The Directors consider Mayfair Capital Investments Ltd, a company incorporated in the Bahamas to be the ultimate parent company. DCD Media Plc 52 Financial statements for the year ended 31 December 2016 Corporate information Company secretary and registered offices Registrars Capita Registrars The Registry 34 Beckenham Road Beckenham BR3 4TU www.capitaregistrars.com Auditors SRLV 89 New Bond Street London W1S 1DA www.srlv.co.uk Solicitors Dickson Minto WS 16 Charlotte Square Edinburgh EH2 4DF www.dicksonminto.com Andrew Lindley 9th Floor, Winchester House, 259 - 269 Old Marylebone Road, London, NW1 5RA Nominated Adviser 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 9th Floor, Winchester House, 259 - 269 Old Marylebone Road, London, NW1 5RA +44 (0)20 3869 0190 info@dcdmedia.co.uk www.dcdmedia.co.uk DCD Media Plc 53 Financial statements for the year ended 31 December 2016 

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