Final Results

Milestone Group PLC 31 March 2008 MILESTONE GROUP PLC RESULTS FOR THE 12 MONTHS ENDED 30 SEPTEMBER 2007 Milestone Group PLC ('Milestone' or the 'Group'), the AIM listed media group, announces results for the year ended 30 September 2007. * HIGHLIGHTS * • Group loss for the year on continuing activities reduced to £1.0m (2006: £1.3m) • Post balance sheet acquisition of The Flex and agreement of £0.5m loan facility • Appointment of Deborah White as Chief Executive and Ian Lodwick as Finance Director Milestone Chairman, John Sanderson, said: 'I am delighted to report that Deborah White has agreed to step up to the role of Chief Executive with immediate effect. Having built her own financial services company from scratch, Deborah has an exceptional track record in establishing and leading businesses. It has been a privilege to work with Deborah since she joined the Board in January, an experience which enables me to be confident she has the discipline, tenacity and inspiration to drive the Group forward. 'I am also pleased to announce the appointment of Ian Lodwick as the new Group Finance Director with immediate effect. Ian has considerable experience working with developing media companies, including previously acting as the finance director of Viavision Limited, the satellite TV operator, which he helped to successfully build and sell.' Milestone further announces today that Non-Executive Director, Jamie Bloom, has resigned due to ill health. The ongoing Board of Directors comprises of John Sanderson, Deborah White and Ian Lodwick. * FOR FURTHER INFORMATION * Milestone: John Sanderson, Non-Executive Chairman Tel: 07850 313 214 / 020 7580 2444 Deborah White, Chief Executive Tel: 07768 694 671 / 020 7648 1043 Ian Lodwick, Finance Director Tel: 07850 190 958 Arden Partners: Richard Day / Adrian Trimmings: Tel: 020 7398 1632 / 020 7398 1640 * BELOW * Regulatory Information Chairman's statement Consolidated profit and loss account Consolidated balance sheet Company balance sheet Consolidated cash flow statement Notes forming part of the financial statements Notice of annual general meeting * REGULATORY INFORMATION * This announcement contains certain information required to be disclosed in respect of Ian Lodwick's appointment in accordance with Rule 17 and Schedule Two paragraph (g) of the AIM Rules. *Full name* Ian David Lodwick *Date of birth* 15 June 1957 *Current interest in shares in the Company* None *Current directorships / partnerships* None *Past directorships / partnerships (in the previous 5 years)* Game In TV Limited Save as disclosed in this announcement, Ian Lodwick has confirmed that there are no other disclosures required pursuant to Schedule Two paragraph (g) of the AIM Rules. * FINAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 * The financial information set out below does not constitute the company's statutory accounts for the years ended 30 September 2007 or 2006, but is derived from those accounts. Statutory accounts for 2006 have been delivered to the Registrar of Companies and those for 2007 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under s. 237(2) or (3) Companies Act 1985. However, the 2007 accounts contain a statement regarding a fundamental uncertainty in respect to the ability of the Group to draw-down the facility that has been used to support the going concern basis of preparation (see note 1 - accounting policies). * CHAIRMAN'S STATEMENT * *Review of the year* In line with the Board's strategy, the Group slimmed down its operations in 2006 /07 in order to minimise expenditure whilst the strategic review was ongoing. The Group's loss for the year on continuing activities was reduced to £1.0m (2006: £1.3m) on a turnover of £0.05m (2006: £0.1m). Having previously disposed of the Group's traditional media assets in publishing and radio, the operating loss for the ongoing television division was marginally reduced to (£0.1m) (2006: £0.2m) on a turnover of £0.05m (2006: (£0.1m underlying operating loss). *Strategic Review* The Board undertook a wide ranging investigation of acquisition opportunities during the year, a process which took longer than originally anticipated. Subsequent to the year-end, in January 2008, this review culminated in the acquisition of an 80 per cent interest in The Flex (International) Limited ('The Flex'). Milestone Group PLC ('Milestone' or the 'Group') intends to use The Flex to develop a digital media portal capable of providing support to a portfolio of assets, subject to raising adequate additional finance. Whilst a further transaction is not a priority, the Board intends to continue to explore potential new business opportunities where these are regarded as complementary to the Group. This process will be overseen by the Group's new executive directors, Deborah White and Ian Lodwick. *Post Balance Sheet Events* 1. Local Television on Freeview For the past three years, Milestone has been lobbying for its existing analogue local television licences (currently operating in Oxford and Southampton) to be converted to digital licences. In December 2007, Ofcom announced that it would allow existing local television licences to be converted from analogue to digital transmissions upon request. Milestone holds more terrestrial local television licences than any other company in the UK. Ofcom's decision now allows Milestone to launch local television channels on the Freeview (digital terrestrial) platform in all the areas in which it has been granted these licences: Oxford, Southampton, Reading and Portsmouth. The Board is exploring the opportunity to scale-up its television operations and re-launch services on Freeview. Milestone is confident there is considerable demand from viewers and advertisers for local television. However, given that Milestone's local television licences are due to expire in 2011 and 2012, it only leaves the Group three years in which to gain a commercial return on any new investment. Significant questions remain about the opportunity for local television to develop in the UK following Ofcom's decision to withdraw the existing local television licensing regime when current licences expire. Milestone is playing an active role in 'United for Local Television', a new umbrella group which has been formed to lobby for adequate provision to be made to expand local television on Freeview. As of 31 March 2008, over 130 MPs had signed an Early Day Motion in Parliament calling on the Government to introduce a local Freeview channel in every part of the UK. It is understood that the Government intends to review its policy towards local television further in the coming months and Milestone intends to continue to play a leading role in these discussions. In the second half of this financial year, the Board intends to review the opportunity to launch local television channels on Freeview in the areas where it holds licences. The Southampton service is currently temporarily off-air whilst contractual arrangements with the transmission site owner are formalised. The Board does not anticipate this impacting on any future re-launch on Freeview. 2. Acquisition of The Flex On 15 January 2008, Milestone acquired an 80 per cent interest in The Flex for a nominal consideration. The Flex concept has been in development for over a year. Following discussions with Milestone, the company's founders (who are also shareholders in Milestone) felt the business would benefit from the oversight of a Board with experience in managing and nurturing young media enterprises. The aim of The Flex is to aid individuals to maximise the commercial exploitation of their own skills, talents and interests in a converged communications environment. The Flex plans to enable young talent to monetise their creative abilities by providing them with a platform upon which they can sell their own copyright. The intention is that The Flex will provide a platform for amateur and semi-professional artists to promote and sell creative content such as music, merchandise, art and film. Aspiring artists and talented individuals will be able to place their content and merchandise on The Flex website where it will be made available for direct sale to users. The Flex remains an early-stage, pre-launch, business and the Board intends to fully review its cost-base and business model. The Board does not intend to make a significant investment in The Flex until completing this review. One option under review is not necessarily to launch the full Flex platform as a standalone proposition but to seek to 'bolt on' elements of its business model and technology to new ventures under consideration. The Board is also exploring the obvious synergies between The Flex and its existing local television operations. *Board Changes* There have been a number of changes to the Board's structure during the financial year and subsequent to the year-end. The Board's two executive directors, Andy Craig (Chief Executive) and Brian Chester (Finance Director), agreed to allow their full-time service agreements to be terminated in May 2007. Both continued to serve on the Board until March 2008 (Andy as a Non-Executive and Brian as part-time Finance Director). The services of both Andy and Brian were retained as Board Directors to help see through the Group's review of strategy to its current stages. A large number of possible ventures were explored and I am grateful to both Andy and Brian for their efforts in seeking to identify appropriate new opportunities for the Group, culminating in the acquisition of The Flex. Following the end of the financial year, in November 2007, Mark Levine resigned as a Non-Executive Director in order to focus on his international business commitments. In January 2008, the Board welcomed Jamie Bloom and Deborah White as Non-Executive Directors following the Group's acquisition of The Flex. Unfortunately, Jamie Bloom has been suffering from poor health in recent weeks and the Board accepted his resignation on 31 March 2008. We all wish him well and a speedy recovery. I am delighted to report that Deborah White has agreed to step up to the role of Chief Executive from 31 March 2008. Having built her own financial services company from scratch, Deborah has an exceptional track record in establishing and leading businesses. It has been a privilege to work with Deborah since she joined the Board in January, an experience which enables me to be confident she has the discipline, tenacity and inspiration to drive the Group forward. Deborah will initially work in a part-time capacity, becoming full time as soon as resources allow. I am also pleased to announce the appointment of Ian Lodwick as the new Group Finance Director from 31 March 2008. Ian will initially be working for the Group in a part-time, flexible, capacity, alongside his existing consultancy business. Ian has considerable experience working with developing media companies, including previously acting as the finance director of Viavision Limited, the satellite TV operator, which he helped to successfully build and sell. Most recently Ian has been acting as a financial consultant to a number of companies, including assisting Milestone in recent weeks following the resignation of Brian Chester. I would like to again place on record my gratitude to all of my colleagues who have demonstrated their loyalty and commitment to Milestone as it develops its new strategy. I wish my former colleagues all the best in their new projects and look forward to working closely with my new colleagues to develop Milestone's business. *Finance* The Group has a loan facility of £500,000 in place with Jamie Bloom, on 'arms length' terms, which should enable it to continue to trade for the foreseeable future. Whilst this facility is regarded as legally binding, the Board is sympathetic to Jamie Bloom's current personal health problems and have not been able to draw down on this facility. The Board intends to use all reasonable endeavours to resolve this issue amicably but, if necessary, intends to take to take appropriate action to ensure the facility is honoured. The Board is in the process of considering further potential funding options to enable a more aggressive expansion of the Group and its businesses. As part of this process, a resolution is being tabled at the Annual General Meeting, to be held on 30 April 2008, giving the Board the authority to allot new shares to a value representing approximately 20 per cent of the issued share capital of the Company. *Outlook* In the short term, the Group's new management intends to operate the existing businesses on a modest cost-base. The Board anticipates that further investment will be required if revenues and earnings are to be significantly enhanced. The Board is reviewing funding options and intends to explore growth opportunities, both organic and via acquisition. The Board particularly intends to assess potential opportunities in the media, entertainment, leisure and related sectors. John Sanderson Non-Executive Chairman 31 March 2008 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 SEPTEMBER 2007 __________________________________________________________________________________________ Note 2007 2006 £ £ Turnover Continuing operations 2 51,328 137,719 Discontinued operations - 2,825,183 Cost of sales 3 50,059 2,422,238 ________ _________ Gross Profit 1,269 540,664 Distribution costs - 55,295 Administrative expenses: 3,4,5 Redundancy costs 7 179,054 - Impairment of goodwill 7 - 471,538 Other administrative expenses 886,651 2,842,288 1,065,705 3,313,826 _________ _________ (1,064,436) (2,828,457) Other operating income 3,6 87,530 19,888 _________ _________ Group operating loss Continuing operations 7 (976,906) (1,260,482) Discontinued operations - (1,548,087) Loss on disposal of discontinued operations - (1,227,652) _________ _________ Loss on ordinary activities before interest (976,906) (4,036,221) _________ _________ Interest receivable 8 27,421 8,295 Interest payable 9 (2,361) (68,933) _________ _________ Loss on ordinary activities before taxation (951,846) (4,096,859) Taxation on loss from ordinary activities 10 - 8,885 ________ _________ Loss on ordinary activities after taxation (951,846) (4,087,974) Minority interest - 47,717 _________ _________ Loss for the financial year 20 (951,846) (4,040,257) _________ _________ Basic and diluted loss per share from continuing operations 11 (3.4)p (4.4)p _________ _________ All recognised gains and losses are included in the profit and loss account. CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 2007 __________________________________________________________________________________________ Note 2007 2007 2006 2006 £ £ £ £ Fixed assets Tangible assets 13 7,664 7,535 _______ _______ 7,664 7,535 Current assets Debtors 15 81,942 163,743 Cash at bank and in hand 102,443 1,221,181 _________ ________ 184,385 1,384,924 Creditors: amounts falling due within one year 16 265,544 511,045 _________ ________ Net current (liabilities)/assets (81,159) 873,879 ________ ________ Total assets less current liabilities (73,495) 881,414 Creditors: amounts falling due after more than one year 17 - 3,063 ________ ________ (73,495) 878,351 ________ ________ Capital and reserves Called up share capital 19 2,760,510 2,760,510 Share premium account 20 7,692,985 7,692,985 Merger reserve 20 11,119,585 11,119,585 Profit and loss account 20 (21,646,575) (20,694,729) _________ _________ Shareholders' funds 21 (73,495) 878,351 _________ _________ The financial statements were approved by the board of directors and authorised for issue on 31 March 2008. COMPANY BALANCE SHEET AT 30 SEPTEMBER 2007 __________________________________________________________________________________________ Note 2007 2007 2006 2006 £ £ £ £ Fixed assets Tangible assets 13 7,151 4,158 ________ ________ 7,151 4,158 Current assets Debtors 15 39,218 111,459 Cash at bank and in hand 102,443 1,220,961 _________ _________ 141,661 1,332,420 Creditors: amounts falling due within one year 16 212,761 403,806 _________ ________ Net current assets (71,100) 928,614 ________ ________ Total assets less current liabilities (63,949) 932,772 ________ ________ Capital and reserves Called up share capital 19 2,760,510 2,760,510 Share premium account 20 7,692,985 7,692,985 Profit and loss account 20 (10,517,444) (9,520,723) _________ ________ Shareholders' funds 21 (63,949) 932,772 _________ ________ The financial statements were approved by the board of directors and authorised for issue on 31 March 2008. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 __________________________________________________________________________________________ Note 2007 2007 2006 2006 £ £ £ £ Net cash outflow from operating activities (999,944) (1,338,318) 25 Returns on investments and servicing of finance Interest received 27,421 8,295 Interest paid (2,361) (68,933) _______ ________ Net cash outflow from returns on investments and servicing of finance 25,060 (60,638) Taxation - 8,885 Capital expenditure Payments to acquire tangible fixed assets (7,882) (1,744) Receipts from sale of tangible fixed assets 1,193 500 _______ ________ Net cash outflow from capital expenditure (6,689) (1,244) Acquisitions and disposals Sale of business operations - 3,394,066 Cash disposed of with business operations - (210,887) Costs of disposal of business operations - (333,662) _______ ________ Net cash inflow from acquisitions and disposals - 2,849,517 ________ ________ Cash (outflow)/inflow before financing (981,573) 1,458,202 Financing New loans advanced - 211,400 Loan repayments (3,063) (213,737) Capital element of finance leases repaid - (11,882) Repayment of invoice discounting agreements - (283,321) _______ ________ Cash outflow from financing (3,063) (297,540) ________ ________ (Decrease)/increase in cash in the year 26,27 (984,636) 1,160,662 ________ ________ The notes that follow form part of these financial statements. NOTES FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 __________________________________________________________________________________________ 1 * Accounting policies * The financial statements have been prepared under the historical cost convention, and are in accordance with applicable United Kingdom accounting standards. In preparing these financial statements the Group has adopted for the first time FRS 20 'Share-based payment'. As a consequence of all share options in the Milestone Group PLC Approved Share Option Scheme being waived on 18 May 2007 as part of the members employment termination agreements with the company the directors have decided not to apply the provisions of the standard. The Directors calculations indicated that the charges would not have been significant. This decision had no material effect on the distributable reserves of the company and its subsidiaries and has not resulted in any changes to the current or comparative period financial information. The Group incurred a loss for the year of £951,846 and had net liabilities of £73,495. The Group is reliant on the loan facility with Jamie Bloom, which the Group regards as legally binding, in order to continue to trade as a going concern. At the time of approving these financial statements, Jamie Bloom has been unable to provide liquid funds in order for the Group to draw down on this facility. Whilst the Board is sympathetic to Jamie Bloom's current personal health problems, it intends to use all reasonable endeavours to resolve this issue amicably but, if necessary, intends to take to take appropriate action to ensure the facility is honoured. The material uncertainty in respect to the Directors ability to draw down on the loan facility may cast significant doubt over the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the company was unable to continue as a going concern. The company has taken advantage of the exemption allowed under Section 230 of the Companies Act 1985 from presenting its own profit and loss account in these financial statements. The company's own loss for the year ended 30 September 2007 is £996,721 (2006: £2,955,186 profit). The following principal accounting policies have been applied: Basis of consolidation The consolidated financial statements incorporate the results of Milestone Group PLC and all of its subsidiary undertakings as at 30 September 2007 using the acquisition method of accounting. Under the acquisition method, the results of subsidiary undertakings are included from the date of acquisition. Investments Investments in subsidiaries are stated at cost (being the par value of shares issued where merger relief applies) less impairment. Other investments held as fixed assets are stated at cost less any provision for impairment in value. Goodwill Goodwill arising on an acquisition of a subsidiary or associated undertaking is the difference between the fair value of the consideration paid and the fair value of the assets and liabilities acquired. Positive goodwill is capitalised and amortised through the profit and loss account over the directors' estimate of its useful economic life. This has been estimated as follows: *Publishing Division - 20 years *Radio Division - over the licence period Television Division - over the licence period * The publishing and radio divisions were discontinued during the year ended 30 September 2006. Impairment tests on the carrying value of goodwill are undertaken: • at the end of the first full financial year following acquisition; • in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable. Turnover Turnover represents sales to external customers at invoiced amount less value added tax. Turnover represents advertising and other income from the group's television division. Advertising income is recognised on the date of broadcast. In the year to 30 September 2006 advertising income included revenues from publishing which were recognised on publication of the related advert. No revenues from publishing were recognised in the year to 30 September 2007. Depreciation Depreciation is provided to write off the cost, less estimated residual values, of all tangible fixed assets, evenly over their expected useful lives. It is calculated at the following rates: Leasehold improvements - 10-20 per cent per annum, or over the period of the lease or licence Fixtures, fittings, computer and office equipment & machinery - 10-50 per cent per annum, or over the period of the licence Production and studio equipment - 20 per cent per annum Finance costs Finance costs are charged to profit over the term of the debt so that the amount charged is at a constant rate on the carrying amount. Finance costs include issue costs which are initially recognised as a reduction in the proceeds of the associated capital instrument. Pension costs Contributions to the group's defined contribution pension scheme and the directors' personal pension scheme are charged to the profit and loss account in the year in which they become payable. Taxation The charge for taxation is based on the result for the year and taken into account taxation deferred. Current tax is measured at amounts expected to be paid using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date except that the recognition of deferred tax assets is limited to the extent that the company anticipates it will make sufficient taxable profits in the future to absorb the reversal of the underlying timing differences. Deferred tax balances are not discounted. Leased assets Where assets are financed by leasing agreements that give rights approximating to ownership (finance leases), the assets are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments payable over the term of the lease. The corresponding leasing commitments are shown as amounts payable to the lessor. Depreciation on the relevant assets is charged to the profit and loss account, over the period of the lease. Lease payments are analysed between capital and interest components. The interest element of the payment is charged to the profit and loss account over the period of the lease and is calculated so that it represents a constant proportion of the balances of capital repayments outstanding. The capital element reduces the amounts payable to the lessor. All other leases are treated as operating leases. Their annual rentals are charged to the profit and loss account on a straight line basis over the term of the lease. Share based employee remuneration The Group has adopted FRS 20 'Share based payment' which is obligatory for periods commencing on or after 1 January 2006. The Group has issued equity settled share based payments in the form of share options to certain Directors and employees. In accordance with the FRS, equity-settled share based payments are measured at fair value at the date of grant using an appropriate option pricing model. The fair value determined at the date of grant is expensed to the profit and loss account on a straight line basis over the vesting period. At the balance sheet date the cumulative change in respect of each award is adjusted to reflect the actual levels of options vesting or expected to vest. Prior to the adoption of FRS 20, the Group recognised the financial effect of the share based payments when shares and share options were awarded to employees by making a charge to the profit and loss account based on the difference between the market value of the Company's shares at the date of grant and the option exercise price in accordance with UITF Abstract 17 (revised 2003) ' Employee Share Schemes'. The credit entry for this charge was taken to the profit and loss reserve and reported in the reconciliation of movements in shareholders' funds. National Insurance on Share Options To the extent that the share price at the balance sheet date is greater than the exercise price on options granted under unapproved schemes after 19 May 2000, provision for any National Insurance contribution has been made based on the prevailing rate of National Insurance. The provision is accrued over the performance period attaching to the award. Impairment of fixed assets and goodwill The need for any fixed asset impairment write down is assessed by comparing the carrying value of the asset against the higher of its realisable value and value in use. Liquid resources For the purposes of the cash flow statement, liquid resources are defined as current asset investments and short term deposits. 2 * Turnover, (loss)/profit and net assets * The turnover, pre tax (loss)/profit and net assets at the balance sheet date are attributable to the principal activities of the group. These categories have been analysed by class of business as set out below. The United Kingdom is the only geographical market. Pre-tax Pre-tax (loss) (loss) Turnover /profit Turnover /profit 2007 2007 2006 2006 £ £ £ £ Analysis by class of business: *Publishing Division - - 2,267,481 (1,084,641) *Radio Division - - 557,702 (2,342,227) Television Division 51,328 (109,301) 137,719 183,348 _________ ________ _________ _________ 51,328 (109,301) 2,962,902 (3,243,520) Head office costs - (842,545) - (853,339) ________ ________ _________ ________ 51,328 (951,846) 2,962,902 (4,096,859) _________ ________ _________ _________ *The publishing and radio divisions were discontinued during the year ended 30 September 2006. The underlining result of the Television Division for the year ended 30 September 2006 was a loss of £150,699 before a consolidation adjustment of £334,047. Net assets Net assets 2007 2006 £ £ Net (liabilities) / assets Television Division (9,545) (54,212) Head office (63,949) 932,563 _______ ________ (73,494) 878,351 _______ ________ 3 * Cost of sales, gross profit and other operating expenses * 2007 2007 2007 2006 2006 2006 Continuing Discontinued Continuing Discontinued Operations operations Total operations Operations Total £ £ £ £ £ £ Cost of sales 50,059 - 50,059 110,156 2,312,082 2,422,238 _______ _______ _______ ________ ________ ________ Gross profit 1,269 - 1,269 27,563 513,101 540,664 _______ _______ _______ ________ ________ ________ Distribution costs - - - - 55,295 55,295 Impairment of Goodwill - - - - 471,538 471,538 Other administrative Expenses 886,651 - 886,651 1,293,165 1,549,123 2,842,288 Redundancy costs 179,054 - 179,054 - - - Other operating income (87,530) - (87,530) (5,120) (14,768) (19,888) _______ _______ _______ ________ ________ ________ 978,175 - 978,175 1,288,045 2,061,188 3,349,233 _______ _______ _______ ________ ________ ________ During the year ended 30 September 2006 the Group disposed of its interests in the ordinary share capital of West Berkshire Radio Limited, Kestrel FM Limited, Rugby Broadcasting Limited, Passion Radio Oxford Limited and Tri Media Publishing Limited. The results of those entities up to the date of disposal for the year ended 30 September 2006 are shown under discontinued operations. 4 * Employees * The average number of employees of the Group and company during the year, including executive directors, was as follows: Group Company Group Company 2007 2007 2006 2006 Number Number Number Number Sales, operations and administration 1 - 70 5 Management 3 2 2 6 _________ ________ _________ ________ 3 2 76 8 _________ ________ _________ ________ Staff costs for all employees, including executive directors, consist of: 2007 2006 £ £ Wages and salaries 531,573 1,716,853 Social security costs 26,354 163,539 Pension costs 22,266 21,000 _________ ________ 580,193 1,901,392 _________ ________ 5 * Directors' remuneration * 2007 2006 £ Directors' emoluments and fees 363,984 224,136 Compensation for loss of office 109,120 - Benefits in kind 2,460 28,451 _________ ________ 475,564 252,587 _________ ________ Company contributions to money purchase pension schemes 22,266 21,000 _________ ________ In order to reduce the Group's long-term exposure to management costs, the contracts of Andy Craig and Brian Chester were terminated on 18 May 2007 after which Andy Craig became a Non-Executive Director and Brian Chester became part-time Finance Director. Under the terms of these compromise, consultancy and directorship arrangements the aggregate amounts payable to Andy Craig (and companies under his control) was £155,000 and to Brian Chester (and companies under his control) £121,000. There were two directors in the company's defined contribution pension scheme during the year (2006 - 2). 6 * Other operating income * 2007 2006 £ £ Other operating income 7,838 14,768 Rental income 79,692 5,120 ________ _______ 87,530 19,888 ________ _______ Other operating income relates to premium lines (telephone) and readers offers. 7 * Operating loss * 2007 2006 £ £ This is arrived at after charging/(crediting): Depreciation charge and impairment of fixed assets 7,003 368,430 Profit on disposal of fixed assets (11,442) (500) Amortisation of goodwill arising on consolidation - 231,745 Hire of plant and machinery - operating leases 4,848 14,093 Hire of other assets - operating leases 50,058 16,649 Hire of land and buildings - operating leases 28,567 134,855 Auditors' remuneration audit services (2007: company £37,000) (2006: company £53,908) 45,000 79,228 - taxation services 5,900 22,750 - other services - 29,574 Impairment of goodwill - 471,538 Redundancy costs 179,054 - _________ ________ The other services charge in the year ended 30 September 2006, reflected the level of work undertaken in respect to the five disposals and the reorganisation of the Group during the period. 8 * Interest receivable* 2007 2006 £ £ Bank interest 27,421 8,295 _______ _______ 9 * Interest payable and similar charges * 2007 2006 £ £ Bank loans and overdrafts 229 21,611 Finance lease and hire purchase interest - 812 Interest on overdue tax - 5,345 Invoice discounting charges - 41,165 Other 2,132 - ________ _______ 2,361 68,933 ________ _______ 10 * Taxation on loss from ordinary activities * 2007 2006 £ £ UK corporation tax Current tax on losses of the year - (8,885) _________ _________ Taxation on loss from ordinary activities - (8,885) _________ _________ The tax assessed for the year is different than the standard rate of corporation tax in the UK. The differences are explained below: 2007 2006 £ £ Loss on ordinary activities before tax (951,846) (4,096,859) _________ _________ 2007 2006 £ £ Loss on ordinary activities at the standard rate of corporation tax in the UK of 30% (2006 - 30%) (285,554) (1,229,057) Effects of: Expenses not deductible for tax purposes 7,308 584,848 Depreciation for year in (arrears)/excess of capital allowances (1,272) 93,691 Unutilised tax losses 279,580 526,106 Income not taxable for tax purposes - 24,412 Other items (62) (8,885) ________ _________ Current tax credit for the year - (8,885) ________ _________ Factors that may affect future tax charges Deferred tax assets of approximately £2 million (Group) and £940,000 (company) (2006 - £1.8 million (Group) and £750,000 (company)) have not been recognised in the financial statements as there is currently insufficient evidence that any deferred tax assets would be recoverable. The Group has unutilised tax losses of approximately £6.8 million (2006 - £5.7 million) available for relief against future profits, subject to agreement by H M Revenue & Customs. 11 * Loss per share * Basic loss per share has been calculated in accordance with FRS 22. Basic loss per share has been calculated by dividing the loss on ordinary activities after taxation by the weighted average number of ordinary shares in issue during the year. The weighted average number of equity shares in issue was 27,605,095 (2006 - 27,605,095) and the loss was £951,846 (2006 - £4,040,257). The effect of all potential ordinary shares is antidilutive. 2007 2006 Basic and diluted loss per share: Continuing activities (3.4)p (4.4)p Discontinued activities - (10.3)p 12 * Intangible assets * Group Goodwill on Consolidation £ Cost At 1 October 2006 and 30 September 2007 14,347,031 _________ Amortisation and impairment At 1 October 2006 and 30 September 2007 14,347,031 _________ Net book value At 30 September 2007 and 30 September 2006 - _________ In the course of the year ended 30 September 2006, the Directors considered the carrying value of goodwill in accordance with FRS 11 'Impairment of Fixed Assets and Goodwill'. Based on their review they concluded that the goodwill was impaired and therefore wrote it down to the recoverable amount based on net realisable value. 13 * Tangible assets * Fixtures Fittings, Production Leasehold Equipment and studio Group Improvements & machinery equipment Total £ £ £ £ Cost At 1 October 2006 65,197 183,341 568,395 816,933 Additions - 7,882 - 7,882 Disposals - (857) (275,000) (275,857) _______ _______ ________ ________ At 30 September 2007 65,197 190,366 293,395 548,958 _______ _______ ________ ________ Depreciation At 1 October 2006 65,197 177,621 566,580 809,398 Provided for the year - 5,248 1,755 7,003 Disposals - (107) (275,000) (275,107) _______ _______ ________ ________ At 30 September 2007 65,197 182,762 293,335 541,294 _______ _______ ________ ________ Net book value At 30 September 2007 - 7,604 60 7,664 _______ _______ ________ ________ At 30 September 2006 - 5,720 1,815 7,535 _______ _______ ________ ________ The net book value of tangible fixed assets for the group includes an amount of £Nil (2006 - £854) in respect of assets held under finance leases or hire purchase contracts, all of which related to fixtures and fittings held. The depreciation charge for 2007 in respect of such assets amounted to £Nil (2006 - £466). Production Computer and studio Fixtures and office Company Equipment and fittings equipment Total £ £ £ £ Cost At 1 October 2006 275,000 12,759 132,415 420,174 Additions - - 7,882 7,882 Disposals (275,000) - (857) (275,857) ________ _______ _______ _______ At 30 September 2007 - 12,759 139,440 152,199 ________ _______ _______ _______ Depreciation At 1 October 2006 275,000 12,725 128,291 416,016 Charge for the year - 34 4,105 4,139 Disposals (275,000) - (107) (275,107) ________ _______ _______ _______ At 30 September 2007 - 12,759 132,289 145,048 ________ _______ _______ _______ Net book value At 30 September 2007 - - 7,151 7,151 ________ _______ _______ ________ At 30 September 2006 - 34 4,124 4,158 ________ _______ _______ ________ 14 * Fixed assets Investments * Shares in subsidiary undertakings Company £ Cost At 1 October 2006 and 30 September 2007 2,645,384 _________ Provision for diminution in value At 1 October 2006 and 30 September 2007 2,645,384 _________ Net book value At 30 September 2007 and at 30 September 2006 - ________ During the year, the principal investments of the Group, all of which have been included in the consolidated financial statements, were as stated below: Proportion of voting rights and ordinary Name Nature of business share capital held Milestone Television Company Limited Holding Company 100 Oxford Broadcasting Limited Television Broadcasting 100 Milestone Radio Holdings Limited (1) Holding Company 100 (1) Struck off on 23 October 2007. 15 * Debtors * Group Company Group Company 2007 2007 2006 2006 £ £ £ £ Trade debtors 28,268 4,140 55,940 17,683 Other debtors 25,761 25,761 76,903 76,303 Prepayments and accrued income 27,913 9,317 30,900 17,473 ________ ________ ________ ________ 81,942 39,218 163,743 111,459 ________ ________ ________ ________ All amounts fall due for payment within one year. 16 * Creditors: amounts falling due within one year * Group Company Group Company 2007 2007 2006 2006 £ £ £ £ Bank loans and overdrafts (secured) - - 134,101 125,545 Trade creditors 122,328 104,493 89,039 59,811 Other creditors - - 13,626 3,750 Taxation and social security 2,404 - 17,852 16,694 Accruals and deferred income 140,812 108,268 256,427 198,006 ________ ________ ________ _______ 265,544 212,761 511,045 403,806 ________ ________ ________ _______ The bank loans and overdrafts at 30 September 2006 were secured by a fixed and floating charge over all the current and future assets of the group and the company. 17 * Creditors: amounts falling due after more than one year * Group Group 2007 2006 £ £ Bank loan - 3,063 ________ ________ The bank loan commenced in 1999 and was repayable in monthly instalments over a 10 year term. Interest was payable at 3.35 per cent per annum above Barclays Bank base rate. The remaining balance of the loan was settled in full during the year. . Group Bank Bank loans and loans and overdrafts Overdrafts 2007 2006 £ £ Maturity of debt: In one year or less, or on demand - 134,101 _______ _______ In more than one year but not more than two years - 3,063 _______ _______ 18 * Financial instruments * The Group may hold or issue financial instruments to finance its operations and to manage the interest rate risks arising from its operations and from its sources of finance. In addition various financial instruments such as trade debtors and trade creditors, arise directly from the Group's operations. The Board have not treated short term debtors and creditors as financial assets and financial liabilities respectively for the purposes of the disclosures required by FRS 25 'Derivatives and other Financial Instruments: Disclosures'. The Group's financial instruments, all of which are denominated in sterling, comprised financial assets and financial liabilities, details of which are as follows: Financial assets The group's financial assets were: Floating rate financial assets 2007 2006 £ £ Cash at bank and in hand 102,443 1,221,181 _________ _________ As at 30 September 2007, £102,443 (2006 - £1,221,181) of the Group's financial assets was money held in bank current and reserve accounts, which were instant access. This money is used to provide the necessary finance for the group's operations. The Group does not undertake any foreign currency transactions and therefore is not susceptible to exchange rate fluctuations. The Group does not hold or issue derivative financial instruments. Financial liabilities The group's financial liabilities were: Floating rate financial liabilities 2007 2006 £ £ Bank loans and overdrafts - due in less than 1 year - 134,101 Bank loans - due in more than 1 year - 3,063 _______ _______ Financial liabilities The Group had no bank loans or overdrafts as at 30 September 2007 (2006 - £134,101). The Group's had financial liabilities falling due after more than one year at 30 September 2007 of £Nil (2006 - £3,063). The 2006 balance comprised a flexible business bank loan, from Barclays Bank Plc. This loan carried interest at 3.5 per cent over Barclays Bank's base rate and was due for repayment by 2009. The bank loan was secured by a floating charge over all the current and future assets of Oxford Broadcasting Limited. The loan was repaid in January 2007. During the year to 30 September 2006, the group's operations were funded largely by the provision of bank overdraft facilities and invoice discounting arrangements. The group was subject to interest rate risk to the extent that the overdraft facilities provided bore interest at approximately 3 per cent above the bank base rate. This interest rate was subject to change. The Directors considered the fair value of the Group's financial assets and liabilities to be the same as their book values. 19 * Share capital * Group and company Group and company 2007 2007 2006 2006 £ Number £ Number Authorised Ordinary shares of 10p each 5,000,000 50,000,000 5,000,000 50,000,000 _________ _________ _________ _________ Group and company Group and company 2007 2007 2006 2006 £ Number £ Number Allotted, called up and fully paid Ordinary shares of 10p each 2,760,510 27,605,095 2,760,510 27,605,095 _________ _________ _________ _________ Share options At 30 September 2007 there were two share option schemes in place - the 'Milestone Group PLC 2003 Unapproved Share Option Scheme' and the 'Milestone Group PLC 2003 Approved Share Option Scheme'. On 18 May 2007 all option holders waived their rights to participate in the Milestone Group PLC 2003 Unapproved Share Option Scheme as part of their employment termination agreements with the company. At 30 September 2007, no share options had been issued under the Milestone Group PLC 2003 Approved Share Option Scheme. 20 * Reserves * Share Profit Premium Merger and loss account reserve account Group £ £ £ At 1 October 2006 7,692,985 11,119,585 (20,694,729) Loss for the year - - (951,846) _________ _________ _________ At 30 September 2007 7,692,985 11,119,585 (21,646,575) _________ _________ _________ Share Profit premium and loss account account Company £ £ At 1 October 2006 7,692,985 (9,520,723) Loss for the year - (996,721) ________ ________ At 30 September 2007 7,692,985 (10,517,444) _________ _________ 21 * Reconciliation of movements in shareholders' funds * Group Company Group Company 2007 2007 2006 2006 £ £ £ £ (Loss)/profit for the year (951,846) (996,721) (4,040,257) 2,955,186 Opening shareholders' funds 878,351 932,772 4,918,608 (2,022,414) _________ _________ _________ _________ Closing shareholders' funds (73,495) (63,949) 878,351 932,772 _________ _________ _________ _________ 22 * Pensions * The Group companies operate defined contribution pension schemes. The assets are held separately from those of the companies in independently administered funds. Pension contributions are also paid into Directors' personal pension schemes. 23 * Commitments under operating leases * As at 30 September 2007, the Group had annual commitments under non-cancellable operating leases as set out below: Land and Land and buildings Other buildings Other 2007 2007 2006 2006 £ £ £ £ Operating leases which expire: In one to two years 29,750 - - - In two to five years - 50,352 28,750 52,212 ________ ________ _______ _______ 29,750 50,352 28,750 52,212 ________ ________ _______ _______ 24 * Related party transactions * During the year, Milestone Group PLC made purchases amounting to £87,000 (2006 - £6,000) from MGH Investments Limited. £17,500 was owed to MGH Investments Limited at 30 September 2007 (2006 - £Nil). Mr A T Craig was a director of the company during the year and MGH Investments Limited is a company in which he has a beneficial controlling interest. During the year, Milestone Group PLC made purchases amounting to £20,000 (2006 - £Nil) from Chesterbrown Consultants Limited. £12,230 was owed to Chesterbrown Consultants Limited at 30 September 2007 (2006 - £Nil). Mr B R Chester was a director of the company during the year and Chesterbrown Consultants Limited is a company in which he has a controlling interest. Mark Levine, a director of the company during the year, is an employee of Elliott Advisors (UK) Limited. Elliott Advisors (UK) Limited are connected to Elliott International L.P. and Elliott Associates L.P. As at 30 September 2007, 6,280,413 and 1,466,285 ordinary shares of 10p each in the company were held by Elliott International L.P. and Elliott Associates L.P., respectively. Further details are provided in the Report of the Directors. 25 * Reconciliation of operating loss to net cash outflow from operating activities * 2007 2006 £ £ Operating loss (976,906) (2,808,569) Amortisation and impairment of intangible fixed assets - 703,283 Profit on disposal of fixed assets (11,442) (500) Depreciation of tangible fixed assets 7,003 368,430 Decrease in debtors 92,800 111,910 (Decrease)/increase in creditors (111,400) 287,128 _________ ________ Net cash outflow from operating activities (999,944) (1,338,318) ________ _________ 26 * Reconciliation of net cash outflow to movement in net funds * 2007 2006 £ £ (Decrease/)increase in cash (984,637) 1,160,662 Cashflows from changes in debt financing 3,063 297,540 ________ ________ Movement in net debt resulting from cashflows (981,574) 1,458,202 Opening net funds/(debt) 1,084,017 (374,185) ________ ________ Closing net funds 102,443 1,084,017 ________ ________ 27 * Analysis of net funds * At 30 At 30 September Cash September 2006 flow 2007 £ £ £ Cash at bank and in hand 1,221,181 (1,118,738) 102,443 Bank overdrafts (134,101) 134,101 - ________ ________ ________ 1,087,080 (984,637) 102,443 Bank loan due after one year (3,063) 3,063 - ________ ________ ________ Total 1,084,017 (981,574) 102,433 ________ ________ ________ 28 * Post balance sheet events * On 15 January 2008, Milestone acquired 6,400,000 A ordinary shares of £0.01 each in The Flex (International) Limited ('The Flex'), representing 80 per cent of the issued share capital of The Flex, for a nominal consideration of £100. The Flex is a new social networking website business due to launch beta trials in 2008. Two of the directors of The Flex, Jamie Bloom and Deborah White, were appointed to the Board of Milestone simultaneous with this transaction. On 31 March 2008 Deborah White was promoted to the role of Chief Executive and Jamie Bloom resigned from the Board for personal health reasons. Also, on 15 January 2008, the Company entered into an 'arms length' loan arrangement with Jamie Bloom in order to fund the general working capital requirements of the Group. The facility of £500,000 is unsecured and can be drawn down by request of the Company over a period of 18 months. Any use of the facility will bear interest at a rate of 3 per cent per annum above the Bank of England base rate. No other charges are payable in connection with the facility including no penalties for early repayment. All loans and interest accrued under the facility become repayable in full in December 2010. The Group is reliant on the loan facility with Jamie Bloom in order to continue to trade as a going concern. Whilst this facility is regarded as legally binding, the Board is sympathetic to Jamie Bloom's current personal health problems and have not been able to draw down on this facility. The Board intends to use all reasonable endeavours to resolve this issue amicably but, if necessary, intends to take to take appropriate action to ensure the facility is honoured. Laurence Bloom, the brother of Jamie Bloom, was, at the time of the transaction on 15 January 2008, the largest single shareholder in Milestone with a beneficial interest in 28.06 per cent of the Company's total issued share capital. Laurence Bloom and Jamie Bloom, their family and associates are minority shareholders in The Flex. The Flex employs Ryan Bloom, the son of Laurence Bloom, and also rents office space in London's Victoria ultimately owned by Laurence Bloom. After consulting with the Company's Nominated Advisers, Arden Partners plc, the Board agreed that the acquisition of the majority shareholding in The Flex and the terms of the loan facility to the Company from Jamie Bloom were made at arms' length and on normal commercial terms. Following the acquisition of The Flex it was agreed to continue to operate the business on a skeleton staffing whilst undertaking a full review of its launch business plan. The Board is in the process of considering further potential funding options to enable a more aggressive expansion of the Group and its businesses. As part of this process, a resolution is being tabled at the Annual General Meeting, to be held on 30 April 2008, giving the Board the authority to allot new shares to a value representing approximately 20 per cent of the issued share capital of the Company. * NOTICE OF ANNUAL GENERAL MEETING * NOTICE IS HEREBY GIVEN that the fifth Annual General Meeting of the Company will be held at 12noon on Wednesday 30 April 2008 at the offices of Silver Planet, 2 Royal Exchange Steps, The Royal Exchange, London EC3V 3DG. Full details are being posted to shareholders. This information is provided by RNS The company news service from the London Stock Exchange QABKDPNN

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