Final Results

Milestone Group PLC 31 March 2006 For Immediate Release 31 March 2006 MILESTONE GROUP PLC RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2005 Milestone Group PLC, the AIM listed media group, announces results for the year ended 30 September 2005. FINANCIAL HIGHLIGHTS • Turnover on continuing activities: £4.5 million (2004: £5.9 million) • Gross Profit: £1.5 million (2004: £2.5 million) • Loss before tax: £6.5 million, in line with expectations (2004: loss of £6.9 million) STRATEGIC REVIEW • 36.8% shareholding in Reading 107 FM sold for cash consideration of £514,000 • Completion of disposal of controlling shareholdings in all remaining non wholly owned radio assets - Kick FM, Kestrel FM and Rugby FM - for a cash consideration of approximately £1.7 million subsequent to year end • Focus on four wholly-owned media businesses: Courier Newspapers, Basingstoke Observer, Passion Radio and SIX TV DIVISIONAL PERFORMANCE • Publishing • Sales £2.9 million (2004: £3.8 million) • Operating loss £0.9 million (2004: loss £0.2 million) • Comprehensive division review following resignation of Group Publishing Director Tom McGowran • Radio • Sales £1.5 million (2004: £1.8 million) • Operating loss £0.4 million (2004: loss £0.2 million) • Television • Sales £0.2 million (2004: £0.2 million) • Operating loss £0.3 million (2004: loss £0.5 million) Commenting on the results, Andy Craig, Chief Executive, said: 'The Board is continuing to review all opportunities to maximise shareholder value. The Board has two complementary aims: to enhance value for shareholders today and to position the group's brands for long term growth. The Board is further exploring opportunities to develop its media presence, particularly in and around Oxfordshire, on both traditional and digital platforms.' For further information: Milestone Group PLC Tel: 01235 547 800 Andy Craig, Chief Executive Arden Partners Limited Tel: 020 7398 1632 Richard Day Buchanan Communications Tel: 020 7466 5000 Bobby Morse/Suzanne Brocks/Eleanor Williamson Results for the year ended 30 September 2005 The financial information set out in these statements does not constitute the company's statutory accounts as set out in section 240 of the Companies Act 1985 for the year ended 30 September 2005. The financial information for the year ended 30 September 2004 set out in this statement has been extracted from the group accounts delivered to the Registrar of Companies for that period. The financial statements for the year ended 30 September 2005 will be delivered following the company's annual general meeting. The auditors have reported on the accounts for the year ended 30 September 2005 and their report is unqualified. However, it does contain a statement regarding a fundamental uncertainty in respect to the ability of the group to achieve its forecast levels of cashflow that has been used to support the going concern basis of preparation. Chairman's Statement My first statement as Chairman of Milestone, since appointment in February 2006, comes at a crucial time for the company. I agreed to join Milestone because I am convinced there is a role for entrepreneurial media businesses in the future of local content delivery. Milestone has current operational experience in local print, radio and television in a single geographic locality. With this unique understanding and experience, the Board's task is to position the group to exploit fully the opportunities presented by multi platform delivery of local news and entertainment content in a digital environment. It has indisputably been a challenging time for the group. As independent Chairman, my principal responsibility is to shareholders. I look forward to meeting as many shareholders as possible over the coming months. John Sanderson Chairman Chief Executive's review Overview Group turnover on operating activities for the year was £4.5 million (2004: £5.9 million) and gross profit was £1.5 million (2004: £2.5 million). Operating losses for the year (excluding goodwill amortisation and impairment) were £2.6 million (2004: £2.4 million), in line with expectations at the time of the group's interim announcement. Losses for the year including goodwill amortisation and impairment were £6.5 million (2004: £6.9 million), resulting in a basic and diluted loss per share of 25.6p: (2004:31.11p). In June 2005, the Board announced a comprehensive review of strategy, which was quickly followed in August 2005 by the disposal of the group's 36.8% shareholding in Reading 107 FM for a cash consideration, including repayment of Milestone loans and interest, of £571,000. Subsequent to the year-end, in February 2006, the group announced the completion of the disposal of its controlling shareholdings and loans in all remaining non-core radio assets: Kick FM, Kestrel FM and Rugby FM, securing a further cash consideration, in aggregate, of approximately £2 million. Milestone now has four continuing local media businesses all of which are wholly owned: Courier Newspapers, Basingstoke Observer, Passion Radio and SIX TV contributed £3.3 million (75%) of the total turnover of the group in 2004/5. The Board is continuing to review all opportunities to maximise shareholder value. The Board has two complementary aims: to enhance value for shareholders today and to position the group's brands for long-term growth in years to come. The Board is further exploring opportunities to develop its media presence, particularly in and around Oxfordshire, on both traditional and digital platforms. Publishing Sales £2.9 million (2004: £3.7 million), operating loss £0.9 million (2004: loss £0.2 million). The performance of the division's two publishing companies is set out in the table below. These amounts are stated net of any intra group transactions. Company Sales Sales Operating loss Operating loss Audited Distribution Figures 2005 2004 2005 2004 £ £ £ £ Courier 2,332,000 2,998,000 (762,000) (147,000) Courier Journal: 56,276 VFD Jul-Dec Newspapers 2005 (door-to-door excluding (Oxford) Limited pick-up) Property Weekly: 21,945 VFD Jul-Dec 2005 (South Oxfordshire edition door-to-door excluding pickup) Basingstoke 600,000 768,000 (152,000) (103,000) Basingstoke Observer: 20,585 ABC Observer Limited Jul-Dec 2005 (pick-up only) Following the resignation of Tom McGowran as Group Publishing Director in May 2005, the Board implemented a comprehensive review of the division, taking the following action over the second half of calendar 2005 to enhance profitability. These measures have been introduced against a deteriorating publishing market. • The re-launch of the Oxford City Journal as a separate weekly 'pick up' title; • The expansion of Property Weekly into two separate editions in the north and south of Oxfordshire; • The initiation of new contracts for national revenue and ongoing action to restore lost leaflet revenue; • The placement of the monthly Oxfordshire Living under new specialist lifestyle magazine management; • Production of a 'new media' revenue plan, which will shortly offer, for the first time, the opportunity to book advertisements and submit or amend copy on-line. Whilst the policy of previous management to rationalise staffing has had a significant impact on short-term revenues, the board believes there are a number of reasons to be cautiously confident about the future potential of the business: • Long-term contracts remain strong and continue to be renewed; • Pick-up rates from dispensers are extremely high, reflecting the popularity of the group's publications; • The group's market-leading property title in Oxfordshire remains highly profitable; • The group remains the largest distributor of free newspapers in Oxfordshire. Radio Sales attributable to the group from the four Milestone-controlled FM stations £1.5 million (2004: £1.8 million), operating loss £0.4 million (2004: £0.2 million). The performance of the four licensed radio stations that were majority controlled by the group during the financial year is detailed in the table below. These amounts are stated net of any intra group transactions. Station Sales Sales Operating Operating Milestone RAJAR weekly Consideration 2005 2004 profit / profit / beneficial adult audience achieved for (loss) 2005 (loss) 2004 ownership reach (Q4/05) disposal of Milestone shares and loans (Feb 2006) approx. £ £ £ £ Per cent £ Passion 107.9 178,000 320,000 (284,000) (156,000) 100 23,000 N.A. (Oxford) Kick FM (West 343,000 428,000 (119,000) (94,000) 55 18,000 658,000 Berkshire) Kestrel FM 515,000 606,000 (10,000) 81,000 54 32,000 704,000 (North Hampshire) Rugby FM 466,000 432,000 6,000 (47,000) 52 27,000 645,000 Following the group's restructuring, completed in February 2006, Milestone's senior management expertise and resources are being concentrated on Passion 107.9 in Oxford. In February 2006, following an enhanced transmission agreement with Ofcom, Passion significantly increased the size of its Total Survey Area as measured by RAJAR (now encompassing 236,000 adults), offering enhanced sales and marketing opportunities. The Board recognises that it is challenging for Passion to operate as a stand-alone unit in an area with well established commercial competition. In March 2006 Ofcom advertised a new FM licence for Oxford/south Oxfordshire. Ofcom currently awards all new FM licences by means of a 'beauty parade'. On this basis, it is the opinion of the Board that the group possesses the skills, experience and resources to launch a complementary station to Passion in Oxford, whilst achieving substantial cost and sales synergies. The Board recognises the further challenge and opportunity created by the planned advertisement by Ofcom of a new terrestrial DAB digital radio multiplex for Oxfordshire, potentially within the next 12 months. According to Ofcom's indicative predictions, the adult population within the primary protected area served by this multiplex may be as high as 767,000. The Board intends to further explore appropriate opportunities to be a partner in the new digital radio multiplex for Oxfordshire. Television Revenue £0.2 million (2004: £0.2 million), operating loss £0.3 million (2004: loss £0.5 million). Losses are continuing to fall following the implementation of a programme of restructuring and cost efficiencies, a focus on 'advertisement features', joint sales pitches with Passion and the launch of new 'public access' programming initiatives. In the third quarter, the Board expects SIX TV to continue towards a position much closer to break-even. Local news is the only type of mainstream news delivery in which TV is not currently the predominant platform provider in the UK. Milestone has always recognised that digital technology could change this, and has gained valuable experience developing local services under its 'SIX TV' brand broadcasting in Oxford and Southampton. In January 2006, Ofcom announced that it is extending all analogue terrestrial Local TV licences (such as that operated by SIX TV) until around the time digital 'switchover' takes place leading up to 2012. In the meantime, Milestone welcomes Ofcom's commitment to consider further, with Government and stakeholders, appropriate policies that will help ensure a future roll-out for public service orientated Local TV content. Milestone strongly advocates immediate experiments of Local TV using digital terrestrial transmissions. New Chairman On 31 January 2006, the Board welcomed John Sanderson as its new Non-Executive Chairman. John's experience of advising entrepreneurial media companies has already proven an asset and he is a welcome addition to the Board. I would like to take this opportunity to thank the former Chairman, Julian Blackwell, for his advice and support since the flotation of the group in 2003, and to wish him well in the future. Finance & Dividend Policy On 17 February 2005, the Company placed 5,500,000 new ordinary shares with directors and institutional investors for a total of £1.1 million. Post-year-end, on 1 February 2006, the group announced the disposals of its non-wholly-owned radio assets, set out above, and a funding arrangement with Manchester Securities Corporation, a connected company of Elliott International Limited and Elliott Associates L.P., substantial shareholders in the company. The Board appreciates the long-standing support of the Elliott Group for the company. The proceeds from the asset sales have been used in part to repay the group's debts to Manchester Securities, with the remainder being allocated to reduce the group's reliance on banking facilities and provide ongoing working capital to the group. Whilst Milestone's major shareholders have consistently demonstrated their commitment to meet the financial requirements of the group, the Board is focused on reducing the level of cash burn. The Board's intention is for the company to re-invest any net earnings to finance and support its business and accordingly the directors do not intend that the company shall pay dividends in the foreseeable future. The Board will continue to review the appropriateness of its dividend policy as the business of the group develops. Staffing The Board is grateful for the loyalty, dedication and commitment of staff across the group, who ensure Milestone provides a high quality service to its clients. Extraordinary General Meeting As a consequence of the Board's prudent impairment of both goodwill and intercompany debts, the aggregate value of the Company's net assets is under fifty per cent of the Company's nominal called up share capital. The Board is calling an extraordinary general meeting, to be held immediately following the Group's annual general meeting on 28 April 2006, in order to enable shareholders to consider this, as required under Section 142 of the Companies Act 1985. Outlook In the first five months of the new financial year, the radio and television divisions performed broadly in line with management expectations. The publishing division continued to under-perform, incurring losses greater than anticipated in a commercial advertising market that continues to deteriorate. Since February 2006, the group's senior management team, which formerly operated across multiple sites, has concentrated on its 100% owned businesses in Oxfordshire and Hampshire. The group has established local brands and the Board and management is committed to improving their performance against the back drop of the challenging market place. Whilst focusing on these businesses, the Board will continue to maintain its duty to carefully appraise all strategic options to maximise shareholder value. Andy Craig Chief Executive Consolidated profit and loss account for the year ended 30 September 2005 2005 2004 Note £ £ Turnover 2 4,469,261 5,852,803 Cost of sales 2,925,009 3,351,014 _________ _________ Gross Profit 1,544,252 2,501,789 Distribution costs 118,375 123,875 Administrative expenses: 3,4 Impairment of goodwill 6 3,316,960 2,884,549 Other administrative expenses 3,956,054 5,891,833 7,273,014 8,776,382 _________ _________ (5,847,137) (6,398,468) Other operating income 5 13,826 68,806 _________ _________ Group operating loss 6 (5,833,311) (6,329,662) Share of operating loss in associated undertakings 14 171,253 229,750 Loss on disposal of group operations 7 365,360 305,927 _________ _________ Loss on ordinary activities before interest (6,369,924) (6,865,339) Interest receivable - group 8 26,093 36,766 - associated undertakings 14 354 604 Interest payable - group 9 (102,998) (11,735) - associated undertakings 14 (23,042) (21,341) _________ _________ Loss on ordinary activities before taxation (6,469,517) (6,861,045) Taxation on loss from ordinary activities 10,14 - (29,211) _________ _________ Loss on ordinary activities after taxation (6,469,517) (6,831,834) Minority interest 49,902 25,671 _________ _________ Loss for the financial year 21 (6,419,615) (6,806,163) _________ _________ Basic and diluted loss per share 11 (25.6)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 30 September 2005 Note 2005 2005 2004 2004 £ £ £ £ Fixed assets Intangible assets 12 4,777,799 8,686,209 Tangible assets 13 752,594 1,011,068 Fixed asset investments 14 22,529 1,089,470 _________ _________ 5,552,922 10,786,747 Current assets Debtors 15 1,023,910 1,392,062 Cash at bank and in hand 680,815 299,786 _________ ________ 1,704,725 1,691,848 Creditors: amounts falling due within one year 16 2,138,448 1,909,633 _________ ________ Net current liabilities (433,723) (217,785) _________ _________ Total assets less current liabilities 5,119,199 10,568,962 Creditors: amounts falling due after more than one year 17 133,970 142,095 Provisions for liabilities and charges 19 22,523 15,395 _________ _________ 4,962,706 10,411,472 _________ _________ Consolidated balance sheet at 30 September 2005 (Continued) Note 2005 2004 £ £ Capital and reserves Called up share capital 20 2,760,510 2,210,510 Share premium account 21 7,692,985 7,222,235 Merger reserve 21 11,119,585 11,119,585 Profit and loss account 21 (16,654,472) (10,234,857) _________ _________ Equity shareholders' funds 22 4,918,608 10,317,473 Minority interests (equity) 44,098 93,999 _________ _________ 4,962,706 10,411,472 _________ _________ Company balance sheet at 30 September 2005 Note 2005 2005 2004 2004 £ £ £ £ Fixed assets Tangible assets 13 221,518 295,204 Investments 14 18,379 18,379 _________ ________ 239,897 313,583 Current assets Debtors - due within 1 year 15 1,107,564 332,951 Debtors - due after more than 1 year 15 - 6,695,745 1,107,564 7,028,696 Cash at bank and in hand 500,780 - _________ _________ 1,608,344 7,028,696 Creditors: amounts falling due within one year 16 285,313 481,549 _________ _________ Net current assets 1,323,031 6,547,147 _________ _________ Total assets less current liabilities 1,562,928 6,860,730 Creditors: amounts falling due after more than one year 17 3,585,342 2,832,557 _________ _________ (2,022,414) 4,028,173 _________ _________ Capital and reserves Called up share capital 20 2,760,510 2,210,510 Share premium account 21 7,692,985 7,222,235 Profit and loss account 21 (12,475,909) (5,404,572) _________ _________ Equity shareholders' (deficit)/funds 22 (2,022,414) 4,028,173 _________ _________ Consolidated cash flow statement for the year ended 30 September 2005 Note 2005 2005 2004 2004 £ £ £ £ Net cash outflow from operating activities 27 (1,599,691) (1,776,239) Returns on investments and servicing of finance Interest received 26,093 36,766 Interest paid (102,998) (11,735) ________ _________ Net cash (outflow)/inflow from returns on investments and servicing of finance (76,905) 25,031 Capital expenditure Payments to acquire tangible fixed assets (15,166) (86,170) Receipts from sale of tangible fixed assets - 20,354 _________ _________ Net cash outflow from capital expenditure (15,166) (65,816) Acquisitions and disposals Sale of business operations 7 514,768 1,250,000 Bank overdraft disposed of with business operations 7 - 12,027 Costs of disposal of business operations 7 - (151,479) Investment in associated undertaking 14 - (73,087) ________ ________ Net cash inflow from acquisitions and disposals 514,768 1,037,461 __________ _________ Cash outflow before financing (1,176,994) (779,563) Financing Issue of share capital 1,100,000 - Cost of issuing share capital (79,250) - Loan repayments (2,501) (2,298) Capital element of finance leases repaid (15,815) (44,039) Advances under invoice discounting 283,321 - agreements ________ _________ Cash inflow/(outflow) from financing 1,285,755 (46,337) _________ _________ Increase/(decrease) in cash in the year 28,29 108,761 (825,900) _________ _________ Notes 1 Accounting policies The financial statements have been prepared under the historical cost convention, and are in accordance with applicable accounting standards. 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 2005 is £7,071,337 (2004 - £3,642,763). The following principal accounting policies have been applied: Going concern The directors have produced forecasts that suggest that the group has sufficient funding to enable it to continue its operations in the foreseeable future. The directors have prepared these financial statements on a going concern basis which assumes in particular the maintenance of the forecast levels of revenue. In the longer term the trading subsidiaries will either need to significantly improve their trading performance or the directors will seek funding from other sources or make strategic asset sales to provide the financial support that the group requires. The financial statements do not include any adjustments that would arise if the going concern basis of preparation became no longer appropriate. Basis of consolidation The consolidated financial statements incorporate the results of Milestone Group PLC and all of its subsidiary undertakings as at 30 September 2005 using the acquisition method of accounting. Under the acquisition method, the results of subsidiary undertakings are included from the date of acquisition. Valuation of 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 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. Notes (Continued) 1 Accounting policies (continued) Associates An entity is treated as an associated undertaking where the group has a participating interest and exercises significant influence over its operating and financial policy decisions. In the group financial statements, interests in associated undertakings are accounted for using the equity method of accounting. The consolidated profit and loss account includes the group's share of the operating results, interest, pre-tax results and attributable taxation of such undertakings based on audited financial statements. In the consolidated balance sheet, the interests in associated undertakings are shown as the group's share of the identifiable net assets including any unamortised premium paid on acquisition. The premium on acquisition is dealt with under the goodwill policy. Turnover Turnover represents sales to external customers at invoiced amount less value added tax. Turnover represents advertising income from the group's radio, television and publishing divisions. Airtime is recognised on the date of broadcast and advertising revenues from publishing are recognised on publication of the related advert. Income relating to invoices raised in advance of the airing or publication of an advert are treated as deferred income and are carried forward on the balance sheet. 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 annum, or over the period of the lease or licence Fixtures, fittings and computer and office equipment - 12.5%-33% per annum, or over the period of the licence Plant and machinery - 10-50% per annum Production and studio equipment - 20% per annum Motor vehicles - 25-33% 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. Financial instruments In relation to the disclosures made in note 18: • short term debtors and creditors are not treated as financial assets or financial liabilities; • the group does not hold or issue derivative financial instruments for trading purposes. Notes (Continued) 1 Accounting policies (continued) Deferred taxation 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. 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. 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. Share based employee remuneration When shares and share options are awarded to employees a charge is made 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 is 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. Notes (Continued) 2 Turnover, loss and net assets The turnover, pre tax loss 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. Turnover Pre-tax loss Turnover Pre-tax loss 2005 2005 2004 2004 £ £ £ £ Analysis by class of business: Publishing Division - group 2,855,785 (3,705,636) 3,721,833 (517,283) Radio Division: Group 1,437,732 (1,447,331) 1,890,203 (3,951,751) Associated undertakings - (193,940) - (236,799) Television Division - group 175,744 (239,708) 240,767 (1,113,164) ________ _________ ________ _________ 4,469,261 (5,586,615) 5,852,803 (5,818,997) Head office costs - (882,902) - (1,042,048) ________ _________ ________ _________ 4,469,261 (6,469,517) 5,852,803 (6,861,045) _________ _________ ________ _________ Net assets Net assets 2005 2004 £ £ Net operating assets: Publishing Division - group 2,274,490 6,137,337 Radio Division: Group 2,211,575 3,430,653 Associated undertakings (22,523) 1,051,546 Television Division - group (82,782) (84,879) _________ _________ 4,380,760 10,534,657 Head office cost assets/(liabilities) 581,946 (123,185) _________ _________ 4,962,706 10,411,472 _________ _________ Notes (Continued) 3 Employees The average number of employees of the group during the year, including executive directors, was as follows: 2005 2004 Number Number Sales, operations and administration 100 132 Management 9 12 _________ ________ 109 144 _________ ________ Staff costs for all employees, including executive directors, consist of: 2005 2004 £ £ Wages and salaries 2,585,389 2,769,061 Social security costs 245,343 281,872 Pension costs 23,335 25,528 _________ ________ 2,854,067 3,076,461 _________ ________ 4 Directors' remuneration 2005 2004 £ £ Directors' emoluments and fees 314,235 249,774 Company contributions to money purchase pension schemes 21,000 21,000 _________ _______ There were two directors in the company's defined contribution pension scheme during the year (2004 - 2). Further disclosures on the remuneration of each individual director is included in the Remuneration Report. 5 Other operating income 2005 2004 £ £ Other operating income 13,056 15,708 Rental income 770 53,098 ________ _______ 13,826 68,806 ________ _______ 6 Operating loss 2005 2004 £ £ This is arrived at after charging: Depreciation 283,933 242,376 Loss on disposal of fixed assets 791 14,719 Amortisation of goodwill arising on consolidation 591,450 1,580,121 Hire of plant and machinery - operating leases 128 17,138 Hire of other assets - operating leases 31,034 85,233 Hire of land and buildings - operating leases 138,000 139,500 Auditors' remuneration - audit services (2005: company £74,000) (2004: company £47,000) 142,000 127,000 - non-audit services 49,600 65,095 Impairment of goodwill 3,316,960 2,884,549 _________ ________ The directors have considered the carrying value of goodwill in accordance with FRS 11 'Impairment of Fixed Assets and Goodwill'. Based on their review they have concluded that the goodwill is impaired and have therefore written it down to the recoverable amount based on net realisable value. 7 Disposal of group operations On 24 August 2005, the group disposed of Reading Broadcasting Limited. The loss on disposal has been calculated as follows: Total £ Cash proceeds 514,768 Net assets disposed of (880,128) ________ Loss on disposal (365,360) ________ 8 Interest receivable 2005 2004 £ £ Bank interest 5,121 8,267 Interest from associated undertaking 20,972 21,354 Other interest - 7,145 ________ _______ 26,093 36,766 ________ _______ 9 Interest payable and similar charges 2005 2004 £ £ Bank loans and overdrafts 45,313 11,694 Finance lease and hire purchase interest - 41 Other loans 57,685 - ________ _______ 102,998 11,735 ________ _______ 10 Taxation on loss from ordinary activities 2005 2004 £ £ UK corporation tax Current tax on losses of the year - - Deferred tax Origination and reversal of timing differences - (15,523) Other tax Share of associated undertaking's tax credit - (13,688) ________ _______ Taxation on loss from ordinary activities - (29,211) ________ _______ The tax assessed for the year is different than the standard rate of corporation tax in the UK. The differences are explained below: 2005 2004 £ £ Loss on ordinary activities before tax (6,469,517) (6,861,045) _________ ________ Loss on ordinary activities at the standard rate of corporation tax in the UK of 19% (2004 - 19%) (1,229,208) (1,303,599) Effects of: Expenses not deductible for tax purposes 789,597 543,154 Capital allowances for year in excess of depreciation 41,925 11,839 Unutilised tax losses 487,790 846,110 Income not taxable for tax purposes (80,669) (75,105) Utilisation of tax losses (6,461) (19,517) Other items (2,974) (2,882) ________ _________ Current tax charge for the year - - ________ _________ 10 Taxation on loss from ordinary activities (continued) Factors that may affect future tax charges Deferred tax assets of approximately £1.8 million (group) and £500,000 (company) (2004 - £1.5 million (group) and £155,000 (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 £9.1 million (2004 - £8 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 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 year. The weighted average number of equity shares in issue was 25,118,794 (2004 - 21,877,541) and the loss was £6,419,615 (2004 - £6,806,163). 12 Intangible assets Group Goodwill on consolidation £ Cost At 1 October 2004 and at 30 September 2005 14,347,031 _________ Amortisation and impairment At 1 October 2004 5,660,822 Provided for the year 3,908,410 _________ At 30 September 2005 9,569,232 _________ Net book value At 30 September 2005 4,777,799 _________ At 30 September 2004 8,686,209 _________ Included within the amortisation charge for the year is an amount of £3,316,960 (2004 - £2,884,549) in respect of the impairment in value of goodwill, as detailed in note 6. 13 Tangible assets Fixtures, fittings, Production Leasehold equipment and studio Motor Group improvements and plant equipment vehicles Total £ £ £ £ £ Cost At 1 October 2004 395,521 1,108,237 568,395 91,175 2,163,328 Additions - 26,250 - - 26,250 Reclassification (1,318) 1,318 - - - Disposals - (2,374) - (13,084) (15,458) _______ ________ _______ _______ ________ At 30 September 2005 394,203 1,133,431 568,395 78,091 2,174,120 _______ ________ _______ _______ ________ Depreciation At 1 October 2004 183,365 602,120 286,359 80,416 1,152,260 Provided for the year 60,520 147,664 66,773 8,976 283,933 Reclassification (879) 879 - - - Disposals - (1,583) - (13,084) (14,667) _______ _______ _______ _______ ________ At 30 September 2005 243,006 749,080 353,132 76,308 1,421,526 _______ _______ _______ _______ ________ Net book value At 30 September 2005 151,197 384,351 215,263 1,783 752,594 _______ _______ _______ _______ ________ At 30 September 2004 212,156 506,117 282,036 10,759 1,011,068 _______ _______ _______ _______ ________ The net book value of tangible fixed assets for the group includes an amount of £27,798 (2004 - £24,345) in respect of assets held under finance leases or hire purchase contracts, all of which relate to fixtures and fittings held. The depreciation charge in respect of such assets amounted to £7,122 (2004 - £1,678) for the year. 13 Tangible assets (continued) Production Computer Leasehold and studio Fixtures and office Company improvements equipment and fittings equipment Total £ £ £ £ £ Cost At 1 October 2004 1,318 275,000 12,759 128,264 417,341 Additions - - - 4,151 4,151 Transfer to subsidiary (1,318) - - - (1,318) _______ ________ _______ _______ ________ At 30 September 2005 - 275,000 12,759 132,415 420,174 _______ ________ _______ _______ ________ Depreciation At 1 October 2004 615 - 7,663 113,859 122,137 Charge for the year 264 64,162 4,174 8,798 77,398 Transfer to subsidiary (879) - - - (879) _______ ________ _______ _______ ________ At 30 September 2005 - 64,162 11,837 122,657 198,656 _______ ________ _______ _______ ________ Net book value At 30 September 2005 - 210,838 922 9,758 221,518 _______ _______ _______ _______ ________ At 30 September 2004 703 275,000 5,096 14,405 295,204 _______ _______ _______ _______ _______ 14 Fixed asset investments Other Associated Group investment undertakings Total £ £ £ Cost At 1 October 2004 22,529 1,358,487 1,381,016 Disposal - (1,358,487) (1,358,487) _______ ________ ________ At 30 September 2005 22,529 - 22,529 _______ ________ ________ Share of retained losses At 1 October 2004 - 291,546 291,546 Share of losses for the year - 186,813 186,813 Disposal - (478,359) (478,359) _______ ________ ________ At 30 September 2005 - - - _______ ________ ________ Net book value At 30 September 2005 22,529 - 22,529 _______ ________ ________ At 30 September 2004 22,529 1,066,941 1,089,470 _______ ________ ________ 14 Fixed asset investments (continued) The other investment represents a 13% shareholding of Milestone Radio Holdings Limited in CKFM Kernow Limited. The book value of this investment is not materially different to the market value. A 37% shareholding of The Milestone Radio Company Limited in Reading Broadcasting Company Limited was disposed of in August 2005. Included within the carrying value of associated undertakings is goodwill of £Nil (2004 - £1,408,038) and the share of operating losses for the year includes a goodwill amortisation charge of £103,773 (2004 - £110,162). The group had the following interests in Reading Broadcasting Company Limited, an associated undertaking as at the date of disposal: 2005 2005 2004 2004 £ £ £ £ Share of turnover 242,678 263,923 ________ ________ Share of assets Share of fixed assets 54,675 68,858 Share of current assets 18,067 76,189 ________ ________ 72,742 145,047 Share of liabilities Due within one year (32,521) (44,818) Due after more than one year (464,356) (441,325) ________ ________ (496,877) (486,143) ________ ________ Share of net liabilities (424,135) (341,096) ________ ________ 14 Fixed asset investments (continued) Shares in subsidiary Company undertakings £ Cost At 1 October 2004 and at 30 September 2005 2,645,385 _________ Provision for diminution in value At 1 October 2004 and at 30 September 2005 2,627,006 _________ Net book value At 30 September 2005 18,379 _________ At 30 September 2004 18,379 _________ Subsidiary and associated undertakings At 30 September 2005, the principal investments of the group, all of which have been included in the consolidated financial statements were as stated below: Principal subsidiary undertakings Proportion of voting rights and ordinary Name Nature of business share capital held Tri Media Publishing Limited (1) Holding Company 100 Basingstoke Observer Limited (2) Newspaper Publishing 100 Courier Newspapers (Oxford) Limited (2) Newspaper Publishing 100 Milestone Television Company Limited (1) Holding Company 100 Six TV Limited (3) Holding Company 100 Aroma Broadcasting Limited (4) Holding Company 100 Oxford Broadcasting Limited (1) Television Broadcasting 100 Soundview Investments Limited (1) Holding Company 100 Listenear Limited (5) Media Consultancy 100 Milestone Radio Holdings Limited (5) Holding Company 100 Milestone Radio Group Limited (6) Holding Company 100 Links Investments Limited (6) Holding Company 100 Passion Radio (Oxford) Limited (6) Radio Broadcasting 100 Jazztech Limited (6) Holding Company 100 Milestone Radio Stations Limited (7) Holding Company 100 Milestone Radio Sales Limited (7) Radio Advertising and Management Services 100 Milestone FM Limited (8) Holding Company 100 The Milestone Radio Company Limited (9) Holding Company 100 Milestone Pictures Limited (9) Holding Company 100 Newbury Community Radio (Investments) Limited (10) Holding Company 100 Rugby Broadcasting Company Limited (10) Radio Broadcasting 52 Kestrel FM Limited (11) Radio Broadcasting 54 West Berkshire Radio Limited (12) Radio Broadcasting 55 14 Fixed asset investments (continued) Principal associated undertaking and participating interest Proportion of voting rights and ordinary Name Nature of business share capital held The Burn FM Limited (13) Radio Broadcasting 44 All undertakings listed above were incorporated or registered in the United Kingdom. All undertakings operate from the United Kingdom. 1. Subsidiary undertakings held by Milestone Group PLC. 2. Subsidiary undertakings held by Tri Media Publishing Limited. 3. Subsidiary undertaking held by Milestone Television Limited. 4. Subsidiary undertaking held by Six TV Limited. 5. Subsidiary undertakings held by Soundview Investments Limited. 6. Subsidiary undertakings held by Milestone Radio Holdings Limited. 7. Subsidiary undertakings held by Milestone Radio Group Limited. 8. Subsidiary undertaking held by Links Investments Limited. 9. Subsidiary undertakings held by Jazztech Limited. 10. Subsidiary undertakings held by The Milestone Radio Company Limited. 11. Subsidiary undertaking held by The Milestone Radio Company Limited and Milestone Pictures Limited. 12. Subsidiary undertaking held by Newbury Community Radio Investments Limited and The Milestone Radio Company Limited. 13. Associated undertaking held by Milestone Radio Holdings Limited. 15 Debtors Group Company Group Company 2005 2005 2004 2004 £ £ £ £ Trade debtors 680,881 1,560 978,361 3,212 Amounts due from subsidiary undertakings - 962,603 - 6,966,848 Amounts due from associated undertakings - - 29,565 28,390 Other debtors 120,354 114,953 66,384 9,458 Corporation tax recoverable - - 1,835 - Prepayments and accrued income 222,675 28,448 315,917 20,788 ______ ________ ________ ________ 1,023,910 1,107,564 1,392,062 7,028,696 ________ ________ ________ ________ With the exception of £Nil included in amounts due from subsidiary undertakings (2004 - £6,695,745 (company)), all amounts fall due for payment within one year. 16 Creditors: amounts falling due within one year Group Company Group Company 2005 2005 2004 2004 £ £ £ £ Bank loans and overdrafts (secured) 754,397 - 482,129 40,569 Trade creditors 469,793 126,588 683,834 239,168 Amounts due to subsidiary undertakings - - - 1,312 Other creditors 96,779 4,888 79,659 6,499 Taxation and social security 163,341 40,965 326,562 109,932 Directors' loan account 13,950 - 13,950 - Obligations under finance leases and hire purchase contracts 11,882 - 10,989 - Advances under invoice 283,321 - - - discounting arrangements Accruals and deferred income 344,985 112,872 312,510 84,069 ________ ________ ________ _______ 2,138,448 285,313 1,909,633 481,549 ________ ________ ________ _______ The bank loans and overdrafts and advances under invoice discounting arrangements are secured by a fixed and floating charge over all the current and future assets of the group and the company. There is also a composite guarantee dated 14 June 2001 between the following companies: Milestone Group PLC, Milestone Radio Holdings Limited, Milestone Radio Group Limited, Links Investments Limited, Passion Radio (Oxford) Limited and Milestone Radio Sales Limited (see note 26). The amount of factored debtors outstanding at 30 September 2005 was £377,761 (2004 - £Nil). The obligations under finance leases and hire purchase contracts carry interest at an effective rate of 10.2% over the life of the contract. The advances under invoice discounting arrangements carry a discounting charge of 2% above base rate. 17 Creditors: amounts falling due after more than one year Group Company Group Company 2005 2005 2004 2004 £ £ £ £ Bank loan 5,400 - 7,901 - Amounts owed to subsidiary undertakings - 3,585,342 - 2,832,557 Obligations under finance leases and hire purchase contracts - - 5,624 - Other loans 128,570 - 128,570 - _________ ________ ________ ________ 133,970 3,585,342 142,095 2,832,557 _________ ________ ________ ________ The bank loan commenced in 1999 and is repayable in monthly instalments over a 10 year term. Interest is payable at 3.35% per annum above Barclays Bank base rate. The other loans represent interest-free shareholder loans with no fixed repayment dates. 17 Creditors: amounts falling due after more than one year (continued) Group Finance Finance leases leases Bank and hire Bank and hire loans and purchase loans and purchase overdrafts contracts overdrafts contracts 2005 2005 2004 2004 £ £ £ £ Maturity of debt: In one year or less, or on demand 754,397 11,882 482,129 10,989 ________ ________ _______ _______ In more than one year but not more than two years 3,118 - 3,118 5,218 In more than two years But not more than five years 2,282 - 4,783 406 ________ ________ _______ _______ 5,400 - 7,901 5,624 ________ ________ _______ _______ 18 Financial instruments The group holds or issues 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 13 '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 2005 2004 £ £ Cash at bank and in hand 680,815 299,786 _________ _______ As at 30 September 2005, £680,815 (2004 - £299,786) 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. 18 Financial instruments (continued) Financial liabilities The group's financial liabilities were: Floating rate Interest free As at 30 September 2005 financial liabilities financial liabilities £ £ Bank loans and overdrafts - due in less than 1 year 754,397 - Amounts due under invoice discounting arrangements - due in less than 1 year 283,321 - Bank loans - due in more than 1 year 5,400 - Other loans - due in more than 1 year - 128,570 _______ _______ Floating rate Interest free As at 30 September 2004 financial liabilities financial liabilities £ £ Bank loans and overdrafts - due in less than 1 year 482,129 - Bank loans - due in more than 1 year 7,901 - Other loans - due in more than 1 year - 128,570 _______ _______ Financial liabilities The group's financial liabilities falling due within one year of £1,037,718 at 30 September 2005 (2004 - £482,129) comprised three bank overdrafts and an invoice discounting arrangement. The overdrafts were provided by National Westminster Bank Plc, Barclays Bank Plc and HSBC. At the year end the amounts outstanding in respect of each of these overdrafts was £670,582 (2004 - £384,396), £27,390 (2004 - £94,614) and £53,307 (2004 - £nil) respectively. All of the overdrafts were repayable on demand. At 30 September 2005 the remaining balance of £3,118 (2004 - £3,119) related to a flexible business bank loan, as referred to below. The group also had amounts due under an invoice discounting arrangement at the year end totalling £283,321 (2004 - £nil), comprising of a balance for Courier Newspapers (Oxford) Limited of £242,021 and £41,300 for Basingstoke Observer Limited. The overdraft facility provided by National Westminster Bank Plc was given to cover Milestone Group PLC and Milestone Radio Holdings Limited and its subsidiary companies and carried interest at 3% per annum over the bank's base rate. At 30 September 2005 the bank rate was 4.5% (2004 - 4.75%). The overdraft was secured by a fixed and floating charge over the assets of Milestone Group PLC and Milestone Radio Holdings Limited and its subsidiary companies. This facility was due for renewal on 30 November 2005 at which time the facility was extended and remained at £550,000 until February 2006 when it was fully paid down. During the year the group entered into an invoice discounting arrangement with The Royal Bank of Scotland Commercial Services. This arrangement provides a maximum invoice discounting facility of £550,000 for Courier Newspapers (Oxford) Limited and £200,000 for Basingstoke Observer Limited. The maximum facility available is based on a draw down of 75% of the value of gross invoices raised by the respective companies, capped at £733,333 for Courier Newspapers (Oxford) Limited and £266,667 for Basingstoke Observer Limited. This arrangement is secured by a fixed and floating charge over the assets of each company. 18 Financial instruments (continued) Financial liabilities The overdraft facility of £50,000 provided by Barclays Bank Plc, carried interest at 3% per annum over the bank's base rate. At 30 September 2005 the bank base rate was 4.5% (2004 - 4.75%). The overdraft was secured by a fixed and floating charge over the assets of Oxford Broadcasting Limited and a letter of comfort from Milestone Group PLC. This facility was due for review in November 2005 and although still available to the group has been reduced to £25,000. As at 30 September 2005 the group also had available to it a further facility of £50,000 (2004 - £50,000) from HSBC. This facility was due for review in January 2006 and although still available to the group has been reduced to £20,000. The group's financial liabilities falling due after more than one year at 30 September 2005 of £5,400 (2004 - £7,901) comprised a flexible business bank loan, from Barclays Bank Plc. This loan carried interest at 3.5% over Barclays Bank's base rate and is due for repayment by 2009. The bank loan is secured by a floating charge over all the current and future assets of Oxford Broadcasting Limited. The other loans do not have a fixed repayment date but are expected to be repaid within five years. The fair value at the balance sheet date is not considered to be materially different from the book value. During the year, as explained above, 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% 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. Other facilities available subsequent to the year end Subsequent to the year end, on 29 November 2005, Elliott International L.P. made available to the company up to £550,000 15% guaranteed senior secured notes, to provide necessary working capital for the group's operations. This arrangement was scheduled to mature at the earlier of 31 March 2006 or the occurrence of any equity placing (or series of equity placing) by the company, or asset disposal which in aggregate exceeds £550,000 on a net basis. The company was required to use 100% of the proceeds of asset disposals, capital events and insurance claims to redeem the notes at 105% of par value plus capitalised interest and any accrued but uncapitalised interest. In addition, the company was required to redeem the notes in full upon the occurrence of a change of control at 110% of par value, plus capitalised interest and any accrued but uncapitalised interest. 18 Financial instruments (continued) On 31 January 2006, the Company was provided with £200,000 funding by way of an issue of loan notes of the company to Manchester Securities Corporation, a connected company of Elliott International L.P. and Elliott Associates L.P., substantial shareholders in the company. The loan was secured by way of a general debenture and guarantee entered into by the company and two of its subsidiaries, Jazztech Limited and The Milestone Radio Company Limited. The loan notes bore interest at 15 per cent. per annum and were repayable (subject to a repayment fee of 5 per cent. of the value of the notes) out of the proceeds of any asset disposal by the company. In accordance with these terms, on 17 February 2006, £211,400 of the monies received on the disposal of the company's shares in West Berkshire Radio Limited and Kestrel FM Limited were used to discharge this loan. The directors (other than Mark Levine who was deemed to be connected to the loan note holder) considered that these arrangements were made at arms' length and on normal commercial terms and, having consulted with the company's nomad, Arden Partners Limited, considered that the terms of this financing were fair and reasonable. These arrangements was secured by a fixed and floating charge over the assets of the company and those of The Milestone Radio Company Limited. On disposal of certain subsidiaries in February 2006 (see note 31) all amounts were settled in respect to these arrangements. 19 Provision for liabilities and charges Associated Group undertakings £ Cost At 1 October 2004 and at 30 September 2005 7,788 ________ Share of retained losses At 1 October 2004 (23,183) Share of losses for the year (7,128) ________ At 30 September 2005 (30,311) ________ Net book value At 30 September 2005 (22,523) ________ At 30 September 2004 (15,395) ________ The associated undertakings represent a 44% shareholding of Milestone Radio Holdings Limited in The Burn FM Limited. 20 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 _________ _________ ________ _________ On 14 March 2005, 5,500,000 ordinary shares of 10p each were issued and credited as fully paid for a consideration of £1,100,000. The difference between the nominal value of the shares issued and the consideration paid of 20p per share has been credited to the share premium account (see note 21). Share options At 30 September 2005 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'. At 30 September 2005, the following share options were outstanding under the Milestone Group PLC 2003 Unapproved Share Option Scheme: Option Holder Date of Ordinary Exercise Exercise Grant Shares Price Period (p) Andy Craig 25/06/2003 1,404,000 100 26/06/2006 to 24/06/2013 Brian Chester 25/06/2003 432,000 100 26/06/2006 to 24/06/2013 Dan Cass 25/06/2003 216,000 100 26/06/2006 to 24/06/2013 The company also granted Collins Stewart an option over 432,000 ordinary shares. This option is exercisable at any time during a three year period following the group's admission to the Alternative Investment Market at an exercise price of £1. At 30 September 2005, no share options had been issued under the Milestone Group PLC 2003 Approved Share Option Scheme. 21 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 year - - (6,419,615) Premium on shares issued in the year (see note 20) 550,000 - - Share issue costs (79,250) - - _________ _________ _________ At 30 September 2005 7,692,985 11,119,585 (16,654,472) _________ _________ _________ Share Profit premium and loss Company account account £ £ At 1 October 2004 7,222,235 (5,404,572) Loss for the year - (7,071,337) Premium on shares issued in the year (see note 20) 550,000 - Share issue costs (79,250) - _________ ________ At 30 September 2005 7,692,985 (12,475,909) _________ ________ 22 Reconciliation of movements in shareholders' funds Group Company Group Company 2005 2005 2004 2004 £ £ £ £ Loss for the year (6,419,615) (7,071,337) (6,806,163) (3,642,763) Shares issued in the year 550,000 550,000 50,512 50,512 Merger reserve - - 229,607 - Premium on shares issued in the year 550,000 550,000 225,000 225,000 Share issue costs (79,250) (79,250) - - _________ ________ _________ ________ Net reduction in shareholders' funds (5,398,865) (6,050,587) (6,301,044) (3,367,251) Opening shareholders' funds 10,317,473 4,028,173 16,618,517 7,395,424 _________ ________ ________ ________ Closing shareholders' funds 4,918,608 (2,022,414) 10,317,473 4,028,173 _________ _________ _________ _________ 23 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. 24 Commitments under operating leases As at 30 September 2005, the group had annual commitments under non-cancellable operating leases as set out below: Land and Land and buildings Other buildings Other 2005 2005 2004 2004 £ £ £ £ Operating leases which expire: Within one year 5,847 25,688 - 12,684 In two to five years 182,250 93,569 161,102 28,564 After five years - - 34,380 - ________ ________ _______ _______ 188,097 119,257 195,482 41,248 ________ ________ _______ _______ 25 Related party transactions During the year subsidiary undertakings of Milestone Group PLC made purchases amounting to £14,000 (2004 - £21,448) from MGH Investments Limited. Amounts owed by these companies to MGH Investments Limited at 30 September 2005 amounted to £3,440 (2004 - £5,123). Mr A T Craig is an executive director of the company and MGH Investments Limited is a company in which he has a controlling interest. As at 30 September 2005 an amount of £8,500 (2004 - £8,500) was owed to J Blackwell, a non-executive director of the company. This was the maximum amount outstanding at any time during the year. No interest is charged in respect of this balance. As at 30 September 2005 a directors' loan account of £5,450 (2004 - £5,450) existed. This was the maximum amount outstanding at any time during the year. No interest is charged in respect of this balance. Mark Levine, a non-executive director of the company, 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 2005, 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. Details of other material transactions with related parties are disclosed in notes 17 and 18 to these financial statements. 26 Contingent liabilities Milestone Radio Holdings Limited has a gross group overdraft facility with certain subsidiary undertakings up to a limit of £350,000 (2004 - £300,000). At 30 September 2005 the liabilities covered by this facility totalled £670,582 (2004 - £378,432). 27 Reconciliation of operating loss to net cash outflow from operating activities 2005 2004 £ £ Operating loss (5,833,311) (6,329,662) Amortisation and impairment of intangible fixed assets 3,908,410 4,464,670 Loss on disposal of fixed assets 791 14,719 Depreciation of tangible fixed assets 283,933 242,376 Decrease/(increase) in debtors 368,150 (132,131) Decrease in creditors (327,664) (36,211) ________ ________ Net cash outflow from operating activities (1,599,691) (1,776,239) _________ ________ 28 Reconciliation of net cash outflow to movement in net debt 2005 2004 £ £ Increase/(decrease) in cash 108,761 (825,900) Cash (inflow)/outflow from changes in debt, lease financing and advances under invoice discounting agreements (265,005) 46,337 ________ _______ Movement in net debt resulting from cashflows (156,244) (779,563) Inception of finance leases (11,084) (39,665) ________ _______ Movement in net debt (167,328) (819,228) Opening net debt (206,857) 612,371 ________ _______ Closing net debt (374,185) (206,857) ________ _______ 29 Analysis of net debt At Other At 30 September Cash non-cash 30 September 2004 flow items 2005 £ £ £ £ Cash at bank and in hand 299,786 381,029 - 680,815 Bank overdrafts (482,129) (272,268) - (754,397) _______ ________ ________ _______ (182,343) 108,761 - (73,582) Debt due after one year (7,901) 2,501 - (5,400) Finance leases (16,613) 15,815 (11,084) (11,882) Advances under invoice discounting arrangements - (283,321) - (283,321) _______ ________ ________ _______ Total (206,857) (156,244) (11,084) (374,185) _______ ________ ________ _______ 30 Major non-cash transactions During the year the group entered into finance lease arrangements for assets with a total capital value at the inception of the leases of £11,084 (2004 - £39,665). 31 Post balance sheet events On 17 February 2006, the company completed the sale of its beneficial 54 per cent. shareholding (held through subsidiaries of the company) in Kestrel FM Limited to Provincial Broadcasting Companies Limited ('Provincial') for a consideration of approximately £594,000. In addition, the company and related group companies have assigned to Provincial the outstanding loans due to them from Kestrel FM Limited for a consideration of approximately £110,000. The consideration is subject to an adjustment (upwards or downwards) based on the net asset value of Kestrel FM Limited at the time of the completion. On 17 February 2006, the company completed the sale of its beneficial 55 per cent. shareholding (held through subsidiaries of the company) in West Berkshire Radio Limited trading as Kick FM, to Provincial for a consideration of approximately £490,000. In addition, the company and related group companies have assigned to Provincial the outstanding loans due to them from West Berkshire Radio Limited for a consideration of approximately £168,000. The consideration is subject to an adjustment (upwards or downwards) based on the net asset value of West Berkshire Radio Limited at the time of the completion. On 17 February 2006, the company and its subsidiaries received £1,302,000 representing the first instalment of the aggregate consideration due from Provincial for the transfer of the shares and loans in Kestrel FM Limited and West Berkshire Radio Limited. The company and its subsidiaries have agreed to defer in aggregate £60,000 of the consideration due in relation to the sales from Provincial until 30 September 2006. On 28 February 2006, the company completed the sale of its beneficial 52 per cent. shareholding (held at that time through the Milestone Radio Company Limited) in Rugby Broadcasting Company Limited trading as Rugby FM, to CN Group Limited. The total consideration of approximately £644,000 was received on 28 February 2006. As at 30 September 2005 the net asset value and the attributable goodwill in respect to these disposals was: Net asset Attributable value goodwill £ £ Kestrel FM Limited 26,659 567,341 West Berkshire Radio Limited (99,401) 589,401 Rugby Broadcasting Company Limited 159,504 485,457 No tax arose in respect to these transactions. As the disposal of these companies took place more than three months after the year end their results have been included in the consolidated profit and loss account and have been classified as continuing operations. This information is provided by RNS The company news service from the London Stock Exchange

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