Final Results
To be embargoed, not to be released until 7.00am on
22 November 2007
Talent Group Plc
("TalentGroup", "Talent" or "the Company")
Final Results
for the year ended 30 September 2007
Chairman's Statement
I am pleased to report your company's results for the year ended 30 September
2007.
This has been a difficult year for your company and the first half of the year
was particularly disappointing. The second half has seen an improvement in
performance and this is due to an increase in trading, together with a prudent
approach to our cost base. The cost savings which we have made are designed to
assist a speedy return to profits and this, assisted by our positive balance
sheet, should enable Talent Group to move forward once again.
Turnover for the period has fallen to £3,333,000 against £5,418,000 last year.
With tight control of administrative expenses (down 27 per cent. compared with
the same period last year) the trading loss (before exceptional costs and
taxation) was £158,000 compared to a profit before taxation of £173,000 last
year. After exceptional costs of £162,000, the loss before taxation for the
period was £320,000. The exceptional costs related to the expenses of an
aborted potential acquisition.
As mentioned in my interim statement, the background to the UK Broadcasting
Industry remains competitive and uncertain although the second half of the
financial year has seen some highlights for Talent. These are the commencement
of production for two further series of Best of Friends, a Childrens' Bafta
nomination for Skatoony, which has also commenced production for a third series
and a commission from ITV for a new entertainment programme, Number One Soap
Fan, which was launched as a new format Number One Fan at Mipcom, the
television market trade show, last month.
We have also focused resources on developing content for multi-platform
environments. To this end, we are pleased to announce a development deal with
the Fleming Media Fund to explore ways of exploiting our portfolio of quiz and
game show formats. On the international front, a fifth Test the Nation will run
in Japan in 2008 and we have also recently signed a `relationship agreement'
with our Japanese production partner, TV Man Union, to explore further ways of
working together in our respective territories and beyond.
We were disappointed not to conclude an acquisition this year and remain
dedicated to expanding and diversifying the business to fulfil our strategic
objectives.
I would like to take this opportunity to thank the entire team at Talent, and
all the advisers and shareholders who have supported us during the year.
Robert J Benton
Chairman
22 November 2007
Business review and principal activities
As noted in the Chairman's Statement, this has been a particularly difficult
year for the whole television industry. Your company has not been immune to
these difficulties particularly with regard to entertainment and childrens'
programmes, which are our principal areas of activity.
You will no doubt be aware from the extensive media coverage, that there have
been several incidents of malpractice related to competitions and telephone
voting within television entertainment programmes. I am pleased to say that
none of the Company's shows were in any way involved in these malpractices, but
the revelations have dented public confidence and forced broadcasters to review
whether these kinds of programmes should continue within their schedules. This
hesitancy, coupled with the Sky/Virgin Media dispute over channel carriage
charges, a lower than requested licence fee settlement for the BBC and pressure
on programming budgets, resulted in unprecedented delays occurring in the
commissioning and re-commissioning of programmes and some of our anticipated
production orders were not confirmed. Despite these upheavals, broadcasters
still have schedules to fill which means that the production industry is now
slowly returning to normal.
In the childrens' sector, the HFSS ("High in fat, sugar or salt") food
advertising ban came in force in March and this has had a serious impact on
current levels of programme commissions. Notwithstanding these difficulties,
your company has had some success in this area as reported below. Childrens'
television funding has become a matter of urgent national debate in which your
company is fully involved.
Given this backdrop, your Board has continued to focus on introducing further
operational efficiencies and reducing costs.
Reviewing our main production activity over the last year, we delivered our
seventeenth Test The Nation for BBC One in the summer and, at the same time,
went into simultaneous production of our fourth and fifth series of Best of
Friends for CBBC. A third series of Skatoony was also commissioned by Cartoon
Network and I am pleased to say that this breakthrough, live-action/animation
game show has also been nominated for a childrens' BAFTA in the Best
Entertainment category.
We have developed further our teenage comedy drama, now entitled Fazed
(previously known as My Teen Genie), with our French co-production partner
Moonscoop and French state broadcaster France 2. In addition, we have continued
to develop a strong slate of new entertainment projects and game show formats,
which are currently being pitched to broadcasters both in the UK and in the US.
One of our new formats, Number One Fan, (commissioned by ITV earlier this year)
was recently acquired by the international distributor, Distraction Formats,
which launched it in October at MIPCOM, the international television market in
Cannes.
Continuing on the international front, a fifth Test the Nation has been
confirmed for Japan and we have also recently signed a `relationship agreement'
with our Japanese production partner, TV Man Union, to explore further ways of
working together in our respective territories and beyond.
In the area of digital and new media platforms, the Chairman has already
mentioned our very recent development deal with the Fleming Media Fund to
develop on-line social networking gaming opportunities. We are particularly
excited about this relationship. It gives us the potential to develop our
existing and future portfolio of quiz and game show formats simultaneously for
television and other platforms.
We were disappointed not to conclude a potential acquisition, the expenses of
which were responsible for the exceptional costs in the first half of the year.
This has not deterred us from continuing our exploration for other suitable M&A
opportunities.
Key performance indicators & outlook
Whilst turnover was down across the year, the reported loss was largely
incurred in the first half of the year. The trading loss (before exceptional
items and taxation) was £155,000 for the first six months and £158,000 for the
full year. In order to assist a return to profitability as soon as possible,
significant cost savings have been made which will enable Talent Group to move
forward. As a business operating in a fast-changing creative industry, we often
have to review and change the Company's focus and structure in the light of
sector developments. We remain confident for the future and look forward to
reporting progress over the coming year.
Tony Humphreys
Managing Director
22 November 2007
Group Income Statement
For the year ended 30 September 2007
Notes Year ended Year ended
30 September 30 September
2007 2006
£'000 £'000
Revenue 3,333 5,418
Cost of sales (2,312) (3,625)
Gross profit 1,021 1,793
Administrative expenses (1,200) (1,645)
Finance income 21 25
(Loss)/profit before taxation (158) 173
and exceptional costs
Exceptional costs (162) -
(Loss)/profit before taxation (320) 173
Income tax expense
- Prior Year (10) -
- Current tax 7 (35)
(Loss)/profit for the year (323) 138
(Loss)/earnings per share 4 (1.99p) 0.85p
(pence)
Diluted (loss)/earnings per 4 (1.94p) 0.81p
share (pence)
The income statement has been prepared on the basis that all operations are
continuing operations.
There are no recognised gains and losses other than those passing through the
income statement.
Group Balance Sheet
As at 30 September 2007
30 September 2007 30 September 2006
£'000 £'000 £'000 £'000
Assets
Non-current assets
Goodwill 987 987
Other Intangible Assets 43 49
Property, Plant and Equipment 62 66
1,092 1,102
Current assets
Inventories 54 39
Trade Receivables 411 369
Cash and Cash Equivalents 943 1,216
1,408 1,624
Total Assets 2,500 2,726
Equity and Liabilities
Equity
Share Capital 6,310 6,310
Share Premium 11,634 11,634
Share Option Reserve 117 112
Retained Earnings (16,734) (16,411)
Total Equity 1,327 1,645
Current Liabilities
Trade & Other Payables 1,173 1,046
Current Tax Liability - 35
Total Liabilities 1,173 1,081
Total Equity and Liabilities 2,500 2,726
Group Cash Flow Statement
For the year ended 30 September, 2007
Year ended Year ended
30 September 2007 30 September 2006
£'000 £'000 £'000 £'000
Cash flows from operating
activities
(Loss)/profit before taxation (320) 173
Adjustments for:
Depreciation 19 20
Amortisation of intangible 6 5
assets
Loss on disposal of assets - 1
Interest received (21) (25)
(316) 174
(Increase)/decrease in trade (42) 367
and other receivables
(Increase)/decrease in (15) 2
inventories
Increase/(decrease) in other 139 (474)
payables
(234) 69
Tax paid (45) (16)
Net cash (used in)/from (279) 53
operating activities
Cash flows from investing
activities
Purchase of property, plant and (15) (44)
equipment
Interest received 21 25
Net cash from/(used in) 6 (19)
investing activities
Net (decrease)/increase in cash (273) 34
and cash equivalents
Cash and cash equivalents at 1,216 1,182
the beginning of the year
Cash and cash equivalents at 943 1,216
the end of the year
Statement of Changes in Equity
For the year ended 30 September 2007
Share Share Share Retained Total
Capital Premium Option Earnings
Reserve £'000
£'000 £'000 £'000
£'000
At 1 October 2005 6,310 11,634 95 (16,549) 1,490
Changes in equity
Profit for the year - - - 138 138
Equity share option recognised - - 17 - 17
At 1 October 2006 6,310 11,634 112 (16,411) 1,645
Changes in equity
Loss for the year - - - (323) (323)
Equity share option recognised - - 5 - 5
At 30 September 2007 6,310 11,634 117 (16,734) 1,327
Notes to the preliminary Results
1 PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The group balance sheet at 30 September 2007 and the group income statement,
group cash flow statement, group statement of changes in equity and associated
notes for the year then ended have been extracted from the Group's financial
statements. Those financial statements, on which the auditors have reported an
unqualified opinion, have not yet been delivered to the Registrar of Companies.
2 DIVIDENDS
The Directors are not proposing the payment of a dividend in respect of the
year ended 30 September 2007.
3 TAXATION
Year ended 30 Year ended
September 30 September
2007 2006
£'000 £'000
Domestic current year tax
UK corporation tax (7) 35
Foreign current year tax
Foreign income tax 10 -
Current tax 3 35
Factors affecting the tax charge for the period:
(Loss)/profit on ordinary activities before taxation (320) 138
Profit on ordinary activities multiplied by the
standard rate of
Corporation tax in the UK of 20 per cent. (2006: 19 (64) 41
per cent.)
Expenses not deductible for tax purposes 2 6
Depreciation in excess of capital allowances for the (1) (2)
year
Other timing differences - (10)
Unutilised tax losses 56 -
Prior year tax paid 10 -
Current tax charge for the year (3) 35
4 (LOSS)/EARNINGS PER SHARE
Year ended 30 Year ended
September 30 September
2007 2006
£'000 £'000
Numerator
Basic/Diluted: Net (loss)/profit (323) 138
Denominator
Basic: Weighted average shares 16,210,284 16,210,284
Effect of diluted securities: stock options 454,667 764,005
Diluted: Adjusted weighted average shares 16,664,951 16,974,289
Basic (loss)/earnings per share is calculated by dividing the net (loss)/profit
for the period attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Diluted (loss)/earnings per share is computed using the weighted average number
of shares outstanding during the period adjusted for the dilutive effect of
stock options outstanding for the period.
5 Reconciliation of net cash flow to movement in cash and cash equivalents
Year ended 30 Year ended
September 30 September
2007 2006
£'000 £'000
Net (decrease)/increase in cash and cash (273) 34
equivalents
Cash and cash equivalents at beginning of year 1,216 1,182
Cash and cash equivalents at end of year 943 1,216
6 Share-based payment transactions
IAS 2007 IAS 2007 IAS 2006 IAS 2006
Weighted Weighted
Number average Number of average
exercise options exercise
of price price
options (pence) (pence)
Outstanding at 1 October 1,253,000 22,04 1,600,000 23.11
Granted during the year - - 18,000 19.87
Forfeited during the year - - (240,000) 29.75
Exercised during the year - - - -
Expired during the year (431,000) 17.05 (125,000) 17.88
Outstanding at 30 September 822,000 24.66 1,253,000 22.04
Exercisable at 30 September - - - -
The estimated fair value was calculated by applying the Black Scholes model.
The exercise price of all the options granted is equal to the share price at
time of grant. The period of exercise for all options granted is 10 years from
date of grant and the vesting period is 2 years from the date of grant.
The model inputs, in addition to the above, were:
Risk free rate 4.25 per cent.
Expected volatility 20 per cent.
Gross dividend yield 0 per cent.
The weighted average estimated fair value of each share option granted in the
general employee share option plan is 10.37p.
Date of grant Exercise Latest Estimated Number of Number of
price exercise date fair value options options 30
30 September
September 2006
2007
January 2003 29.75 January 2013 12.52 485,000 485,000
June 2003 11.25 June 2013 4.73 75,000 225,000
December 2003 17.87 December 2013 7.52 75,000 75,000
June 2004 21.25 June 2014 8.94 100,000 175,000
December 2004 21.25 December 2014 8.94 25,000 175,000
June 2005 15.25 June 2015 6.42 50,000 100,000
December 2005 19.87 December 2015 8.36 12,000 18,000
822,000 1,253,000
The options included in the fair value calculation are those which had not
vested as at 1 January 2006.
7 COPIES OF REPORT AND ACCOUNTS
Copies of the Report and Accounts will be sent to shareholders shortly and will
be available to members of the public from the Company's registered office,
Lion House, 72-75 Red Lion Street, London, WC1R 4GB.
Enquiries
Talent Group Plc
Tony Humphreys Tel: 020 7421 7800
John East & Partners Limited
John East/Simon Clements Tel: 020 7628 2200
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