Interim Results

Milestone Group PLC
27 June 2005


For Immediate Release                                               27 June 2005

                              MILESTONE GROUP PLC


            INTERIM RESULTS FOR THE SIX MONTHS ENDED 31st MARCH 2005


Milestone Group PLC ('Milestone' or 'the Group'), the AIM-listed media group,
today announces Interim results for the six months ended 31st March 2005.


Overview:


  • Group turnover on operating activities: £2.4m (2004: £3.1m)

  • Gross profit: £0.9m (2004: £1.5m)

  • Operating loss: £1.3m (2004: £1.8m)

  • Basic and diluted loss: 5p (2004: 10p)

  • goetzpartners corporate advisers instructed to undertake comprehensive
    review of strategy with Arden Partners


Highlights:


Publishing:


  • Management streamlined under new Group Publishing Manager, Howard Taylor

  • Sales yields improved at core newspaper titles over period, reflecting
    investment

  • Division well positioned to grow revenue from core titles


Radio:

  • Significant progress achieved in development of Milestone's radio brands
    and audiences.

  • Operating model refined at all four Milestone-controlled stations

  • Increase in total hours listened to the four stations goes against
    national trend for local commercial radio and reflects strong programming
    and marketplace perception of Milestone's brands


Television:


  • Losses falling as cost reductions impact

  • Ofcom exploring opportunities for digital local television

Commenting on the results, Andy Craig, Chief Executive, said:

'Management is focused on growing revenues whilst controlling costs to target
overall profitability in what is widely acknowledged to be a challenging
advertising marketplace. In addition, strategically, the Board are appraising
options to maximise value for shareholders.


'Management has confidence in the quality of its businesses, the assets in the
Group, its workforce and the longer term prospects for the markets in which it
operates.'


For further information:
Milestone Group                                               Tel: [phone]
Andy Craig, Chief Executive

Arden Partners Limited                                        Tel: [phone]
Richard Day

Buchanan Communications                                       Tel: [phone]
Bobby Morse / Suzanne Brocks/ Eleanor Williamson

Milestone Group PLC Interim Report

Chief Executive's Review for the six month period ended 31 March 2005


Overview:


  • Group turnover on operating activities: £2.4m (2004: £3.1m)

  • Gross profit: £0.9m (2004: £1.5m)

  • Operating loss: £1.3m (2004: £1.8m)

  • Basic and diluted loss: 5p (2004: 10p)

  • goetzpartners corporate advisers instructed to undertake comprehensive
    review of strategy with Arden Partners


In the first quarter of the current year, losses from trading were broadly in
line with management expectations. However, the second quarter's results have
been impacted significantly as a result of subdued advertising spend from the
retail sector. Overall trading has been affected by a combination of staff
changes and associated increased costs, volatility in non-traditional revenues
and a toughening of market conditions.


Publishing


  • Division sales: £1,530,000 (2004: £1,874,000)

  • Division loss: £264,000 (2004: £115,000)


The division continues to publish a range of advertising-based titles; a number
of the most successful being enhanced and expanded during the period. Revenues
have broadly held up despite the decision last year to rationalise some non-core
titles. At the same time, the division has witnessed a marked reduction in
debtor days, bad debts and credits, in comparison with the last financial year,
as a result of new procedures implemented.


The 'Courier Journal' free newspaper title for Oxfordshire has been redesigned
and is being distributed in new areas of the county for the first time.
Management is pleased with the high rates of newspapers being picked up in these
and other selected areas where the Courier Journal has introduced a 'dispenser'
distribution. The new in-house advertisement production department is now fully
operational.


As announced on 23 June 2005, Publishing Director Tom McGowran resigned with
immediate effect from both the Group's Board and the publishing division. In
these challenging times, Mr McGowran decided to look at other opportunities and
the Board thanks him for his efforts and contributions. A major restructuring of
the division is underway with immediate action being taken to rationalise
management, simplify reporting lines and incentivise staff so as to target
profitability.


The Board is pleased to announce that the division's Head of Production, Howard
Taylor, has been promoted to the new position of Group Publishing Manager.
Howard has over 30 years of experience in the publishing industry, including
launching and subsequently selling his own titles in the Thames Valley. The
Board is in no doubt that Howard's entrepreneurial flair and local publishing
experience will be an asset to the division at this stage of its development.


Sales yields have improved at the core newspaper titles over the period,
reflecting investment already made in product, staff training and new client
management systems. As a consequence, the division is well positioned to grow
its revenue from core titles. It is anticipated that this will provide a solid
foundation from which to build sustainable increased revenues as market
conditions improve.


Radio


Performance of four continuing radio stations controlled by the Group:


  • Rugby FM sales: £236,000 (2004: £217,000)

  • Rugby FM profit: £8,000 (2004: loss of £23,000)


  • Kestrel FM sales: £279,000 (2004: £276,000)

  • Kestrel FM loss: £383 (2004: profit of £18,000)


  • Kick FM sales: £194,000 (2004: £215,000)

  • Kick FM loss: £47,000 (2004:loss of £59,000)


  • Passion sales: £79,000 (2004: £182,000)

  • Passion loss: £123,000 (2004: loss of £54,000)


Significant progress has been achieved in the development of Milestone's radio
brands and audiences. Rugby FM, the majority-owned Milestone station based in
Warwickshire, has further consolidated its market-leading audience figures and
posted a maiden profit for the period. This operating model is being refined at
all four Milestone-controlled stations.


It is anticipated that recent substantial improvements in audiences will further
support the development of long-term revenue bookings. The increase in total
hours listened to the four stations from 737,000 (RAJAR, Q1, 2004) to 894,000
(RAJAR Q1, 2005) goes against the national trend for local commercial radio and
reflects the strong programming and marketplace perception of Milestone's
brands.


The Group has been unsuccessful in the three new radio licence applications it
has supported this year in Blackburn, Cornwall and Banbury. The Board is
reviewing its development strategy and will participate in forthcoming
applications where it believes it has the greatest chance of implementing
commercially-successful cross media operations. Two areas falling into this
category - southern Oxfordshire and Andover - are expected to be advertised in
2006. Whilst it is realistic to expect licence applications to remain
competitive, the Board will continue to follow a policy of submitting targeted,
well-researched, applications with sensible prospects of success.


Television


  • Division sales: £111,000 (2004: £237,000)

  • Division loss: £169,000 (2004: loss of £202,000)


Losses from Milestone's existing television interests (Oxford & Southampton on
air / Reading & Portsmouth launch date to be confirmed) are falling as cost
reductions impact. The Group's experiment in moving to a new commission only
sales model demonstrates how local television can generate revenue from
advertiser-funded local programming whilst operating on a low fixed overhead.


The Board continues to support the long term potential for local television in a
digital environment and strongly welcomes Ofcom's most recent suggestion that
DCMS consider allocating funding for digital local TV trials. In the meantime,
the Group's existing analogue local television ('RSL') licences have been
extended by Ofcom until June 2007.


Financing


On 17th February 2005, the Company placed 5,500,000 new ordinary shares with
Directors and institutional investors for a total of £1.1m.


Outlook


Management is focused on growing revenues whilst controlling costs to target
overall profitability in what is widely acknowledged to be a challenging
advertising marketplace. The Group will continue a policy of pursuing
appropriate opportunities to apply for targeted new radio licences. In addition,
strategically, the Board are appraising a wide range of potential options'
including realising the value of assets of the Group and providing the Group
with greater scale to maximise value for shareholders. The Board have instructed
the media management and corporate consultancy, goetzpartners, to work alongside
its NOMAD and Broker, Arden Partners, to advise them in regard to this review.
It is anticipated that this review of the current structure will lead to some
exceptional costs being incurred in the current financial year. In light of the
deterioration in its markets, management no longer considers it likely to
achieve its earlier stated intention that all three trading divisions will start
making a positive cash contribution prior to the end of September 2005.


Management has confidence in the quality of its businesses, the assets in the
Group, its workforce and the longer term prospects for the markets in which it
operates and continues to ensure the requisite finance is available to support
Milestone through this period.




Andy Craig

Chief Executive

27th June 2005


Consolidated profit and loss account for the six month period ended 31 March
2005


Consolidated profit and loss account for the six month period ended 31 March
2005
                               Unaudited      Unaudited        Audited
                              six months     six months           Year
                                   ended          ended          ended
                                31 March       31 March   30 September
                       Note         2005           2004           2004
                                       £              £              £
Turnover                       2,358,732      3,083,549      5,852,803

Cost of sales                 (1,448,537)    (1,606,397)    (3,351,014)

Gross Profit                     910,195      1,477,152      2,501,789

Distribution costs               (61,203)             -       (123,875)
Administrative expenses:
Impairment of goodwill                 -              -     (2,884,549)
Other administrative
expenses                      (2,167,010)    (3,308,438)    (5,891,833)

                              (2,167,010)    (3,308,438)    (8,776,382)

                              (1,318,018)    (1,831,286)    (6,398,468)

Other operating income            10,340              -         68,806

Group operating loss          (1,307,678)    (1,831,286)    (6,329,662)

Share of operating
loss in associated
undertakings                     (98,239)       (74,400)      (229,750)
Loss on disposal of
group operations          2            -       (296,083)      (305,927)


Loss on ordinary activities
before interest               (1,405,917)    (2,201,769)    (6,865,339)

Interest receivable               
-Group                            15,097         15,020         36,766
Interest
receivable-assoc                     
undertakings                         285              -            604
Interest payable -               
Group                            (22,258)             -        (11,735)
Interest payable -
assoc undertakings               (12,552)        (3,044)       (21,341)


Loss on ordinary activities
before taxation               (1,425,345)    (2,189,793)    (6,861,045)

Taxation on loss from
ordinary
activities                3            -              -         29,211

Loss on ordinary activities
after taxation                (1,425,345)    (2,189,793)    (6,831,834)
Minority interest                 17,489         49,747         25,671
Loss for the financial
period                        (1,407,856)    (2,140,046)    (6,806,163)

Basic and diluted loss
per share                 4     (5.16) p       (10.0) p       (31.11)p

All amounts relate to continuing activities

All recognised gains and losses are included in the profit and loss account


Consolidated balance sheet at 31 March 2005

                                Unaudited                 Unaudited                    Audited
                            31 March 2005             31 March 2004          30 September 2004
           Note            £             £            £            £            £             £

Fixed
assets
Intangible    
assets        5                  8,390,484                12,483,432                  8,686,209
Tangible                           
assets                             912,302                   862,465                  1,011,068
Fixed asset
investments                        962,306                 1,163,387                  1,074,075

                                10,265,092                14,509,284                 10,771,352

Current
assets
Debtors            1,313,096                  1,692,431                 1,392,062
Cash at bank and
in hand            1,499,257                    675,317                   299,786


                   2,812,353                  2,367,748                 1,691,848
Creditors:
amounts falling
due within        
one year          (2,932,706)                (2,008,307)               (1,909,633)


Net current
(liabilities)/assets              (120,353)                  359,441                   (217,785)

Total assets less
current liabilities             10,144,739                14,868,725                 10,553,567

Creditors:
amounts falling
due after more than
one year                          (137,862)                  (92,736)                  (142,095)

Provisions for
liabilities and
charges                                  -                   (15,523)                         -

                                10,006,877                14,760,466                 10,411,472

Capital and
reserves
Called up
share
capital       6                  2,760,510                 2,185,510                  2,210,510
Share         
premium
account       7                  7,692,985                 6,997,235                  7,222,235
Merger        
reserve       7                 11,119,585                11,119,585                 11,119,585
Profit and
loss
account       7                (11,642,713)               (5,568,740)               (10,234,857)

Equity shareholders'
funds                            9,930,367                14,733,590                 10,317,473

Minority                            76,510                    26,876                     93,999
interests

                                10,006,877                14,760,466                 10,411,472


Consolidated cash flow statement for the six month period ended 31 March 2005

                                Unaudited                Unaudited                  Audited
                            31 March 2005            31 March 2004             30 Sept 2004
              Note           £           £           £            £           £            £

Net cash
outflow
from
operating        
activities       8                (828,491)              (1,103,550)              (1,776,239)

Returns on
investments
and
servicing of
finance

Interest                
received                15,097                  15,020                   36,766

Interest               
paid                   (22,258)                 (3,044)                 (11,735)

Net cash (outflow)/
inflow from returns
on investment and
servicing of finance                (7,161)                  11,976                   25,031

Taxation
UK                                       
corporation                              -                        -                        -
tax

Capital
expenditure

Purchase of            (10,796)                (82,185)                 (86,170)
tangible               
fixed assets

Receipts from
sale of
tangible
fixed                        
assets                       -                       -                   20,354

                                   (10,796)                 (82,185)                 (65,816)

Acquisitions and
disposals

Proceeds from
disposal of Group
operations                   -               1,250,000                1,250,000

Overdraft from
disposal of Group
operations                                      12,027                   12.027

Cost of disposal of
Group operations             -                (141,636)                (151,479)

Investment in
associate                    
undertakings                 -                       -                  (73,087)

Net cash inflow from
acquisitions and
disposals                                -                1,120,391                1,037,461

Cash outflow before
financing                         (846,448)                 (53,368)                (779,563)

Financing

Issue of             
share capital        1,100,000                       -                        -

Cost of
issuing share          
capital                (79,250)                      -                        -

Loan repayments         (1,135)                (31,186)                  (2,298)

Capital element of
finance leases          
repaid                  (5,629)                      -                  (44,039)

Cash inflow/
(outflow)                        
from financing                   1,013,986                  (31,186)                 (46,337)

Increase/
(Decrease) in
cash in
the period    9,10                 167,538                  (84,554)                (825,900)


Notes to the Interim financial information for the six month period ended 31
March 2005

 1. Basis of preparation

The Interim Report was approved by the Board of Directors on 27 June 2005.

The financial information contained in this Interim Report has been prepared on
the basis of the accounting policies set out in the Group's audited accounts for
the year ended 30 September 2004.

The financial information for the six months ended 31 March 2005 and 31 March
2004 is unaudited.

The financial information for the Group set out above does not constitute
'statutory accounts' within the meaning of Section 240 of the Companies Act
1985. The information for the year ended 30 September 2004 has been extracted
from the statutory accounts of Milestone Group PLC for that year which received
an unqualified audit report and have been delivered to the Registrar of
Companies.

 2. Loss on disposal of group operations

There has been no disposal of Group operations during the period ended 31 March
2005.

On 15 January 2004 the Group completed the disposal of two subsidiary
undertakings, Time FM 106.8 Limited and Fusion 107.3 FM Limited. The
consideration for the sale of Time FM 106.8 Limited was £625,000 and resulted in
a loss of £106,007 to the Group. The consideration for the sale of Fusion 107.3
FM Limited was £625,000 and resulted in a loss of £190,076 to the Group.

The total loss on disposal of operations of £296,083 recognised in the period
ended 31 March 2004 includes an amount of £1,222,847 in respect of a write down
of unamortised goodwill.

 3. Taxation

Deferred tax assets have not been recognised on the basis that their future
economic benefit is not certain.

 4. Loss per share

Basic loss per share has been calculated in accordance with FRS 14. Basic loss
per share has been calculated by dividing the loss on ordinary activities before
taxation by the weighted average number of ordinary shares in issue during the
period. The weighted average number of equity shares in issue was 27,605,095 and
the loss was £1,425,345. The effect of all potential ordinary shares is
antidilutive.

 5. Intangible assets
                        
                                                           Goodwill on
                                                         Consolidation
                                                                     £
Cost

At 1 October 2004 and 31 March 2005                         14,347,031

Amortisation
At 1 October 2004                                            5,660,822
Provided for the period                                        295,725


At 31 March 2005                                             5,956,547


Net book value
At 31 March 2005                                             8,390,484


At 30 September 2004                                         8,686,209


6. Share capital
                             Group and company           Group and company
                           2005           2005          2004          2004
                              £         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
                           2005           2005          2004          2004
                              £         Number             £        Number

Allotted, called up
and fully paid

Ordinary shares of    
10p each              2,760,510     27,605,095     2,210,510    22,105,095


Following the resolution passed at the Extraordinary General Meeting on 14 March
2005, 5,500,000 new ordinary shares of 10p each were issued on 15 March 2005 at
0.20p each having been admitted for listing on that day.


 7. Reserves

                             Share                           Profit
                           premium          Merger         and loss
                           account         reserve          account
                                 £               £                £
Group

At 1 October 2004        7,222,235      11,119,585      (10,234,857)

Loss for the period              -               -       (1,407,856)

Premium on shares issued   470,750               -                -


At 31 March 2005         7,692,985      11,119,585      (11,642,713)


 8. Reconciliation of operating loss to net cash outflow from operating
    activities

                                                                     2005
                                                                        £

Operating loss                                                 (1,307,678)

Amortisation                                                      295,725

Depreciation                                                      109,562

Decrease in debtors                                                78,966

Decrease in creditors                                              (5,066)

Net cash outflow from operating activities                       (828,491)


 9. Reconciliation of net cash outflow to movement in net debt

                                                                     2005
                                                                        £

Increase in cash in the period                                    167,538
Cash outflow from decrease in debt and lease financing              6,764

Movement in the period                                            174,302

Net debt at 1 October 2004                                       (206,857)

Net debt at 31 March 2005                                         (32,555)


10. Analysis of net debt

                                At                               At
                         1 October            Cash         31 March
                              2004            flow             2005
                                 £               £                £

Cash at bank and in hand   299,786       1,199,471        1,499,257

Bank overdrafts           (482,129)       (721,232)      (1,203,361)

Factoring loan                   -        (310,701)        (310,701)


                          (182,343)        167,538          (14,805)


Debt due after one year     (7,901)          1,135           (6,766)

Finance leases             (16,613)          5,629          (10,984)

Total                     (206,857)        174,302          (32,555)

END



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