Final Results
20 December 2006
Talent Group Plc ("Talent" or "the Company")
Preliminary Results
for the year ended 30 September 2006
Chairman's Statement
I am pleased to report your company's results for the year ended 30 September
2006. Although turnover for the year has reduced slightly to £5,418,000 from £
5,619,000 last year, profit before taxation increased by 26 per cent. to £
173,000, compared to £137,000 in 2005. Earnings per share have increased by 25
per cent. to 0.85p, compared to 0.68p last year. Cash resources have been
managed carefully and there has been a positive cash flow during the year. Your
directors are not proposing a dividend for the year.
Your Board has decided to adopt IFRS in 2006, a year earlier than we are
required to and the effects of this are covered in this report.
This has been another year of consolidation for Talent. I am conscious that
shareholders are keen to see a major step change in the fortunes of the company
and this year has been a year in which a further foundation has been laid to
achieve this. Against the background of significant structural change within
the major broadcasters last year, the company's turnover and profitability
represents a creditable performance. It has also been a year in which the
company carried out a corporate strategic review and, as a result, has focused
more closely on its more profitable activities and reduced its costs.
Initiatives have already started in the US and we are looking towards areas of
new media and other avenues for broadcasting content.
At the same time, we remain dedicated to developing and producing major
entertainment and children's programming such as the recently commissioned
Viewer of the Year show for ITV 1 and, in the field of children's
entertainment, the recently commissioned Skatoony for Cartoon Network. The
company is in good heart and feels well positioned to take advantage of the
rapidly changing independent production market. We therefore look forward to
further growth in the current year.
Your Board remains aware of the fragmented nature of the independent television
industry and we continue to investigate ways to grow both organically and by
acquisition.
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
20 December 2006
Group Income Statement
For the year ended 30 September 2006
Notes Yearended Year ended
30 September 30 September
2006 2005
£'000 £'000
Revenue 5,418 5,619
Cost of sales (3,625) (3,964)
Gross profit 1,793 1,655
Administrative expenses (1,645) (1,536)
Finance income 25 18
Profit before taxation 173 137
Income tax expense
- Current tax 3 (35) (16)
- Deferred tax (-) (11)
Profit for the year 138 110
Earnings per share (pence) 4 0.85p 0.68p
Diluted earnings per share 4 0.81p 0.65p
(pence)
The income statement has been prepared on the basis that all operations are
continuing operations.
The accompanying accounting policies and notes form an integral part of these
financial statements.
Group Balance Sheet
As at 30 September 2006
30 September 2006 30 September 2005
£'000 £'000 £'000 £'000
Assets
Non-current assets
Goodwill 987 987
Other Intangible Assets 49 54
Property, Plant and 66 43
Equipment
Investments - -
1,102 1,084
Current assets
Inventories 39 41
Trade Receivables 369 736
Cash and Cash 1,216 1,182
Equivalents
1,624 1,959
Total Assets 2,726 3,043
Equity and Liabilities
Equity
Share Capital 6,310 6,310
Share Premium 11,634 11,634
Share Option Reserve 112 95
Retained Earnings (16,411) (16,549)
Total Equity 1,645 1,490
Current Liabilities
Trade & Other Payables 1,046 1,537
Current Tax Liability 35 16
Total Liabilities 1,081 1,553
Total Equity & 2,726 3,043
Liabilities
Group Cash Flow Statement
For the year ended 30 September, 2006
Notes Year ended Year ended
30 September 2006 30 September 2005
£'000 £'000 £'000 £'000
Cash flows from operating
activities
Profit before taxation 173 137
Adjustments for:
Depreciation 20 17
Amortisation of intangible 5 5
assets
Loss on disposal of assets 1 -
Interest received (25) (18)
174 141
Decrease/(increase) in trade and 367 (90)
other receivables
Decrease in inventories 2 13
Decrease in trade and other (474) (40)
payables
69 24
Tax paid (16) -
Net cash from operating 53 24
activities
Cash flows from investing
activities
Purchase of property, plant and (44) (18)
equipment
Interest received 25 18
Net cash used in investing (19) -
activities
Net increase in cash and cash 5 34 24
equivalents
Cash and cash equivalents at the 5 1,182 1,158
beginning of the year
Cash and cash equivalents at the 5 1,216 1,182
end of the year
Statement of Changes in Equity
For the year ended 30 September 2006
Share Share Share Retained Total
Capital Premium Option Earnings
Reserve
£'000 £'000 £'000 £'000 £'000
At 1 October 2004 6,310 11,634 67 (16,659) 1,352
Changes in equity
Profit for the year - - - 110 110
Equity share option recognised - - 28 - 28
At 30 September 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 30 September 2006 6,310 11,634 112 (16,411) 1,645
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 2006 and the group profit and loss
account, group cash flow statement 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 2006.
3 TAXATION
Year ended Year ended
30 September
30 September 2005
2006 £'000
£'000
Domestic current year tax
UK corporation tax 35 11
Foreign current year tax
Foreign income tax - 5
Current tax 35 16
Deferred tax
Origination and reversal of timing differences - 11
35 27
Factors affecting the tax charge for the period: 138 110
Profit on ordinary activities before taxation
Profit on ordinary activities multiplied by the
standard rate of
corporation tax in the UK of 30 per cent. (2005: 19 41 20
per cent.)
Expenses not deductible for tax purposes 6 24
Depreciation in excess of capital allowances for the (2) 2
year
Other timing differences (10) -
Tax losses utilised - (19)
Current tax charge for the year 35 27
Deferred tax arises as a result of the utilisation of brought forward losses
and does not reflect a cash amount payable.
4 Earnings per share
Year ended Year ended
30 September
30 September 2005
2006 £'000
£'000
Numerator
Basic/Diluted: Net Profit 138 110
Denominator
Basic: Weighted average shares 16,210,284 16,210,284
Effect of diluted securities: stock options 764,005 768,630
Diluted: Adjusted weighted average shares 16,974,289 16,978,914
Basic earnings per share is calculated by dividing the net profit for the
period attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period.
Diluted 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 Year ended 30
September
30 September 2005
2006 £'000
£'000
Net increase in Cash and Cash equivalents 34 24
Cash and Cash equivalents at beginning of year 1,182 1,158
Cash and Cash equivalents at end of year 1,216 1,182
6 Adoption of IAS 38 and IFRS 2
In accordance with the option allowed by IFRS 1 the group has adopted IAS 38
and IFRS 2 prospectively from 1 October 2005. The impact on the Group's opening
balance sheet at 1 October 2005, by balance sheet category, is outlined below:
IAS IAS Effect IAS
of IAS 38
30 September AND IFRS 2 1 October
2005 2005
£'000
£'000 £'000
Group
Goodwill (a) 868 119 987
(a) Adjustment of goodwill on initial application of IAS 38.
There has been no change in Trade and Other receivables or cash and cash
equivalents as a result of adoption of IFRS.
* Share-based payment transactions
IAS 2006 IAS 2006 IAS 2005 IAS 2005
Weighted Weighted
Number of average Number of average
options exercise options exercise
price price
(pence) (pence)
Outstanding at 1 October 1,600,000 23.11 1,325,000 23.95
Granted during the year 18,000 19.87 275,000 19.07
Forfeited during the year (240,000) 29.75 - -
Exercised during the year - - - -
Expired during the year (125,000) 17.88 - -
Outstanding at 30 September 1,253,000 22.04 1,600,000 23.11
Exercisable at 30 September - - 225,000 11.25
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 9.28p.
Date of grant Exercise Latest Estimated Number of Number of
price exercise date fair value options options 30
30 September
September 2005
2006
January 2003 29.75 January 2013 12.52 485,000 725,000
June 2003 11.25 June 2013 4.73 225,000 225,000
December 2003 17.87 December 2013 7.52 75,000 100,000
June 2003 21.25 June 2014 8.94 175,000 275,000
December 2004 21.25 December 2014 8.94 175,000 175,000
June 2005 15.25 June 2015 6.42 100,000 100,000
December 2005 19.87 December 2015 8.36 18,000 -
1,253,000 1,600,000
The options included in the fair value calculation are those which had not
vested as at 1 January 2005.
Following the Group's adoption of IFRS, the 2005 comparative financial
information in these accounts has been restated and represented under IFRS. The
reconciliations below highlight the key impacts on profit for the year and on
total equity.
Reconciliation of profit for the year from UK GAAP to IFRS
Year ended Year ended
30 September 30 September
2005
2006 £'000
£'000
Profit for the year (UK GAAP) 35 19
IAS 38 (Intangible Assets) 119 119
IFRS 2 (Share-based payment) (16) (28)
Profit for the year (IFRS) 138 110
Reconciliation of total equity from UK GAAP to IFRS
Year ended Year ended Year ended
30 September 30 September
30 September 2005 2004
2006 £'000 £'000
£'000
Total equity (UK GAAP) 1,407 1,371 1,352
IAS 38 (Intangible Assets) 238 119 -
Total equity (IFRS) 1,645 1,490 1,352
The principal IFRS adjustments are as follows:
a) IAS 38 - Intangible Assets Under IAS 38 (Intangible assets) goodwill is not
amortised over its useful economic life but is subject to a yearly impairment
review. The directors confirm that no impairment was required up to 30
September 2006.
b) IFRS 2 - Share-based payments Under IFRS 2 (Share-based payments) the charge
through the income statement is based upon the fair value of share options and
awards granted. The fair value of the equity instrument is measured at grant
date and spread over the vesting period through the income statement with a
corresponding increase in equity. The fair value of the share options and
awards is measured using the Black Scholes model taking into account the terms
and conditions of the individual scheme. The amount recognised as an expense is
adjusted to reflect changes to the expected vesting except where forfeiture is
due only to changes in the expected achievement of market based criteria.
IFRS 2 requires a charge for all grants including awards, options and SAYE
schemes unlike 2005 GAAP which based the charge on the intrinsic market value
of the underlying shares at the date of grant and so, for the Group, a charge
arose on awards only.
The Group has applied IFRS 2 only to share options and awards granted after 16
January 2003 that had not vested at 1 January 2005 as permitted under IFRS 1.
As the Group has not previously presented the fair value of share options and
awards granted, the IFRS 1 option to apply IFRS 2 to all share options and
awards granted, including those granted before 16 January 2003, cannot be taken
by the Group.
8 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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