RNS Number : 1086H
Entertainment Rights PLC
31 October 2008
Embargoed: 0700hrs, 31 October 2008
Entertainment Rights Plc
("Entertainment Rights" or the "Company" or "ER")
Interim Results for the Eight Month Period to 31 August 2008
Entertainment Rights Plc (LSE: ERT), the UK's leading media group specialising in the ownership, acquisition, exploitation and
distribution of children's and family programming, announces interim results for the eight month period to 31 August 2008. Comparative
figures are stated for the six months to 30 June 2007 and are therefore not directly comparable.
Financial Highlights
Turnover of �20.3m (2007: �17.3m).
Adjusted EBITDA of �(9.2)m (2007: �4.6m).
Impairment of assets of �83.0m (2007: �Nil) resulted in loss before taxation of �105.0m (2007: �7.3m).
Loss per share of 14.2p (2007: 0.6p)
Strategic & Corporate Activity
* Thorough review of operational and financial position of the Group has been undertaken.
* Appointment of new Chief Financial Officer, Edward Knighton; appointment of two new directors to the Board.
* A minimum of �5m of fixed cost savings have been identified and will be implemented by year end for full benefit in 2009 and
beyond.
* Reduction of debt is a primary objective of management through (i) selective disposal of non-core assets (ii) fixed cost savings
(iii) reduction of capital expenditure.
* Constructive discussions with lending bank have led to a short-term covenant waiver and additional interim funding. Discussions
regarding a more permanent solution are ongoing.
* Necessary renegotiation of North American DVD distribution arrangements with Genius Products, securing Christmas trading at the
expense of a short- to medium-term impact on adjusted EBITDA and cash flow.
* Negotiations for extension of US broadcast content provision agreement beyond 2010, and disposal of non-core music publishing
rights both likely to conclude post year end and may result in further EBITDA reduction of �10m to current year forecasts.
Operations
* Completion and launch of brand new series of Postman Pat� - Special Delivery Service for the BBC and international markets.
* Apple iTunes UK contract for sale of ER's pre-school and retro brands as digital downloads.
* Acquisition of worldwide distribution rights across all media for new global pre-school brand - Tinga Tinga Tales� - sold to
CBeebies in the UK and Playhouse Disney in the USA.
* New distribution agreement with Hasbro for further Transformers� Animated series.
* Announcement of Disney feature film adaptation of ER-owned brand The Lone Ranger� expected to drive all lines of business.
Chairman, Rod Bransgrove said:
"The period under review has been one of considerable disruption to our financial results and represents something of a watershed for
the Company. A number of issues have emerged from our detailed review of the business, which we commenced last year and which has been led
by our recently-appointed Chief Executive since March 2008, and these have conspired to present a worse picture than had previously been
envisaged.
Having initiated this wholesale review of the Company's operations I am personally committed to see the business through to a period of
stability. I will use my longstanding industry knowledge and relationships to secure the best outcome for all stakeholders. I anticipate
this exercise should be complete by the Company's year end and I intend to stand down as Chairman at that point to allow others to drive the
future success of the business."
Chief Executive, Nick Phillips, said:
"Our licensing business is trading strongly and we are continuing to hold promising discussions with broadcasters on future commissions,
and this is a good indication that Entertainment Rights' underlying business is in good health. Our forecasts of retail activity have taken
a conservative approach to Christmas trading in light of the wider economic conditions and the resultant impact on consumer confidence. I,
together with my entire team, am making every effort to see that the business is placed firmly on track for long term profitable growth."
Enquiries:
Entertainment Rights Plc - Tel. 020 8762 6200
Nick Phillips, Chief Executive Officer
Edward Knighton, Chief Financial Officer
M: Communications - Tel. 020 7153 1530
Ben Simons or Charlotte Kirkham
Introduction
Entertainment Rights Plc (LSE: ERT), the UK's leading media group specialising in the ownership, acquisition, exploitation and
distribution of children's and family programming, announces interim results for the eight month period to 31 August 2008. This was an
extended period of eight months owing to the Company's decision to alter its financial year end to 28 February in order to facilitate the
proper assessment of the important Christmas trading performance on the period end results. The Board of Entertainment Rights Plc has taken
decisive measures to deal with a number of issues relating to the performance and structure of the Company. These are reflected in the
results set out below.
Chairman's Statement
The period under review has been one of considerable disruption to our financial results and represents something of a watershed for the
Company. A number of issues have emerged from our detailed review of the business, which we commenced last year and which has been led by
our recently-appointed Chief Executive since March 2008, and these have conspired to present a worse picture than had previously been
envisaged.
We have now re-established our Board with the addition of new, highly-experienced Directors who recognise the need for good
communication and stronger financial management in order to stabilise and then grow our business and regain the confidence of our
shareholders. Having initiated this wholesale review of the Company's operations, I am personally committed to see the business through to a
period of stability. I will use my longstanding industry knowledge and relationships to secure the best outcome for all stakeholders. I
anticipate that this exercise should be complete by the Company's year end and I intend to stand down as Chairman at that point to allow
others to drive the future success of the business.
Whilst this period of readjustment has been entirely regrettable, our newly-enhanced Board is resolute in its pursuance of a radical
turnaround programme based on the Company's excellent range of global assets and enormous library of quality entertainment.
On behalf of all members of the Board, I should like to thank all employees of Entertainment Rights, in the USA and in the UK, for their
continuing efforts, during a demanding period of much change and uncertainty, to ensure that a sound footing for a profitable long-term
future is delivered.
Rod Bransgrove
Chairman
31 October 2008
Chief Executive's Report
These results show a significant loss before taxation of �105.0m, of which �83.0m relates to an impairment of intangible assets and
goodwill, in accordance with the requirements of IAS 36 and 39. Your Board believes this is necessary in order to reflect the value in use
of our assets in the current economic climate.
When I took over as Chief Executive in March, in conjunction with the Board I commenced a thorough strategic review of the business. The
initial conclusions of this review, as announced in July, included the initiation of a capital allocation programme aimed at more
efficiently and effectively allocating funds, prioritised on the basis of the growth potential of our asset base and new multi-platform
opportunities, including digital. This programme is designed to maximise the Company's resources and hence growth prospects. It will result
in reduced capital expenditure of about �6m per annum from 2009/10 onwards.
Furthermore it was necessary to renegotiate a key distribution agreement with our primary North American DVD distributor, Genius
Products LLC ("Genius") to put in place a more commercial agreement. On the one hand, the alterations under this revised agreement resulted
in some valuable intellectual property rights reverting to Entertainment Rights for future commercial exploitation. However, on the other,
it meant a reduction of royalty margins on DVD sales and a revised payment profile for advances, phasing receipts over a longer period of
time to 2011. We announced on 26 September 2008 that the effect of this renegotiation would be a reduction in adjusted EBITDA for the
current financial year of around �7m (of which �1.3m has been recognised in these interim results) and a reduction of �6.5m for the year
after. As a consequence, debt levels are likely to remain above previously anticipated levels for a number of months. As part of our work on
the interim accounts, we have also reviewed the likely recoverability of our long-term debtors, in accordance with IAS 39, and have decided to make a further provision of �4m in these interim results.
At the period end, net borrowings stood at �125m within previously agreed facilities. However, we have now completed a review of our
interim accounts in conjunction with our auditors and have now determined that there was a breach of our debt cover ratio at 31 August 2008,
and we anticipate a further breach at 30 November 2008. Constructive discussions have been held, and continue to be held, with our lending
bank, which has supported the Company by granting a short-term full waiver of the covenants at these dates and �1m of additional funding for
the Company's short-term needs. We continue to work closely with the bank to put in place a more permanent solution and to enable
Entertainment Rights to realise its significant longer-term potential.
The most important objectives of our operational strategy are therefore to pursue debt reduction, reduce capital expenditure and focus
heavily on the core properties which we believe will deliver not only the greatest, but also the fastest, return.
Board
We were pleased to welcome Sir Robin Miller (as Deputy Chairman) and Richard Brooke (as Chairman of the Audit Committee) to the Board
during the period under review. They replace Julian Paul and Irvin Fishman to whom we owe thanks. We are making a separate announcement
today regarding the recruitment of a new Chief Financial Officer, Edward Knighton, who joins us with extensive experience of turnaround
situations in both public and private equity backed companies.
First half trading review
In June 2008, the Company announced its acquisition of a significant new global preschool brand - Tinga Tinga Tales�. The series, aimed
at 4-6 year olds, has global appeal and sees a return to traditional storytelling, bringing to screen animal stories that have been passed
down from generation to generation throughout Africa. Importantly, Tinga Tinga Tales� has been commissioned by CBeebies in the UK and
Playhouse Disney in the USA, two of the world's leading preschool television platforms giving visibility for the brand in these two key
markets. Entertainment Rights controls all rights to this new property worldwide which has application across all media platforms.
UK and International Operations (excluding USA)
The UK operations have performed satisfactorily in the first eight months of the year with the Company exploiting its brand and content
portfolio across all media platforms including television, consumer products, home entertainment, digital, live events and music throughout
the entire world excluding the USA.
A major brand re-launch recently took place for Postman Pat� - Special Delivery Service which saw the nation's favourite postman return
to screens on BBC2 on 29th September 2008. The brand new series (26 x15 minutes) has been sold to over 80 territories worldwide and for its
UK debut the Company invested in a high-profile stunt-led marketing campaign to support the launch. This resulted in mass PR coverage
reaching 60 million people. The ratings for this new programming are excellent and the brand is well positioned for growth with the launch
of a new DVD in November and a new toy line from Character Options at retail early in 2009.
ER remains committed to the acquisition and exploitation of third party produced content. ER recently announced that it had secured
distribution rights from Hasbro for 13 brand new episodes of Transformers� Animated, bringing the total number of episodes of the series
currently available to 42 (42x22 minutes). The brand new episodes will air on Cartoon Network in the USA in Spring 2009. Entertainment
Rights acquired the worldwide TV distribution rights to the initial series of Transformers� Animated (excluding North America) from Hasbro
in 2007 and has since secured TV broadcast sales with several European TV broadcasters with broadcast agreements in over 80 territories.
This brings the total number of episodes distributed by Entertainment Rights on behalf of Hasbro to over 300.
North American Operations
Our North American operations are demonstrating progress in securing multi-platform opportunities that capitalise on our well-known
franchises with global appeal. A major recent development in the US is the announcement of a feature film adaptation for the Entertainment
Rights owned classic Western icon The Lone Ranger� in development from Walt Disney Pictures and producer Jerry Bruckheimer with Johnny Depp
currently slated to play Tonto. The announcement coincides with this year's landmark 75th Anniversary of The Lone Ranger�. As part of the
celebration, this November Entertainment Rights will release The Lone Ranger� 75th Anniversary Collector's Edition, a DVD box set. To
capitalise on the excitement around the brand, ER has created a classic merchandising programme for The Lone Ranger�. Based on a positive
response at recent U.S. trade shows, MAGIC and Toy Fair, the Company will be announcing its first round of partners later this year. In
addition, ER has already begun connecting with families around the country through a series of The Lone Ranger� live events and will expand this programme to include more events and locations in
2009/10.
Entertainment Rights continues to strengthen its leadership position in the seasonal market including increased activity around the
Christmas holiday. Earlier this year, an agreement was renewed with ABC that will see Santa Claus is Comin' to Town* airing on US network
and cable TV for years to come. Top-rated specials Rudolph the Red-Nosed Reindeer� and Frosty the Snowman�, which last year drew a combined
audience of over 44 million viewers, will air during primetime on US TV network CBS. Retail sell-in of the annual top-selling The Original
Christmas Classics* DVDs, including the popular gift set, is currently tracking ahead of last year. The DVDs will be supported by a national
advertising campaign, including TV, print and online. The perennial Christmas favourites continue to attract blue chip promotional partners.
The momentum around the Company's seasonal brands extends into consumer products where, in 2008, ER will be rolling out a line for Santa
Claus is Comin' to Town*, including publishing and social expressions as well as programmes for Here comes Peter Cottontail* and Casper the Friendly Ghost*.
The Company is growing its consumer products business with a focus on core brands such as Little Golden Books�, Where's Waldo?� and
Lassie�. That approach is demonstrated by the success of the Company's Lassie� master licence pet food agreement that distributes the
Lassie� Natural Way pet food to more than 5,000 doors and is being expanded in 2009.
Big Idea had a difficult first eight months of the trading year by comparison with 2007 as the comparative period included the
recognition of non-recurring EBITDA of �5m in respect of a long-term renewal of a Christian market distribution agreement. The Board is
taking actions to improve this trading performance and is looking to extract further cost synergies with Classic Media.
Global Digital Media and Production
Entertainment Rights operates global functions across these two lines of business as they impact all aspects of the Company's commercial
activities.
The development of Entertainment Rights' Global Digital Media business has been extremely pleasing with revenue models now delivering
visible income streams from these new digital platforms. The Company currently has content deals with key operators including YouTube,
Google, Joost, Babelgum and Hulu. The new deal with iTunes in the UK further emphasises the value of high quality content in the digital
world with core pre-school brands such as Postman Pat�, Basil Brush� and Rupert Bear� included.
Gaming, across consoles, mobile and online is an increasingly important part of our business with brands including Turok*, Casper�,
Lassie�, George of the Jungle* and Postman Pat� all being actively exploited around the world. A recent deal includes a contract with
leading games developer Ludia for the Where's Waldo?� franchise across console, mobile and online gaming. November 2008 also sees the launch
of Classic Where's Waldo?� arcade games in Japan in partnership with SEGA. We expect this area of the business to make an increasing
contribution to our profits over the next two years.
The development and production of brands and content continues to be a key component of the Company's strategy. The first eight months
of this year have seen the successful delivery of Postman Pat� Special Delivery Service, the ongoing production of animated series Casper's
Scare School*, and the delivery of the first episodes of Entertainment Rights' new pre-school brand, Guess with Jess�. All productions are
carefully managed with our production and broadcast partners and are all on schedule and on budget. This pipeline of new content ensures
visibility of earnings potential as delivery rolls out over the next 18 months and revenues against these are generated.
Resolution of Universal dispute
Entertainment Rights and Universal Pictures International Entertainment Limited ("Universal") are pleased to confirm that they have
reached a commercial resolution, without any admission of liability by either party, of their dispute regarding operational difficulties
encountered at the end of 2007. ER and Universal are continuing their good working relationship for the benefit of both businesses. ER and
Universal have agreed a 12 month extension to their current UK home video sales and distribution arrangement, and Universal has agreed to
pay ER an amount of �500,000, �250,000 of which is being paid immediately. These receipts have not formed part of the results for the eight
months ended 31 August 2008.
Since this settlement has been reached and all operational issues resolved, ER's home entertainment has been performing well. This year
sees three releases from the Barbie franchise which continues to dominate as a girls' entertainment franchise. Releases of ER's core brands
have also performed well with a strong retail presence augmented by new retail customers such as Matalan and Costco.
Principal risks and uncertainties for the remaining six months of the financial year
A number of the principal risks and uncertainties facing the Company are outlined on pages 19 and 20 of our Annual Report and Accounts
2007, which is available from www.entertainmentrights.com. These risks remain relevant for the second half of 2008 and comprise: interest
rate fluctuations; exchange rate fluctuations; technological changes; dependence on retailers and distributors; piracy and counterfeit goods
and the Company's intellectual property rights.
Other principal risks and uncertainties are listed below:
Agreement of new banking facilities
As detailed above we are in discussions with our bank in pursuit of a longer-term amendment to our existing borrowing arrangements.
Although constructive discussions are ongoing, the principal risk for the business in the second half of this financial year is that this
process is not concluded satisfactorily.
General UK and US economic conditions and retail environment
The Company's business is highly exposed to the general economic conditions in the UK and USA, with particular exposure in the USA over
the Christmas season. While initial indications for sales over the Christmas period remain positive, there is a risk that difficult economic
conditions will result in lower than expected sales of the Company's products. The Company typically operates on sale or return terms.
Working capital
The Company has previously described the risks inherent in its dependence on retailers and distributors. The requirement to renegotiate
the Company's banking facilities, and the uncertainty surrounding the outcome of those ongoing discussions, may result in pressure on
working capital from these and other trading counterparties. The Company is managing short-term cash flows to ensure that the effects of any
such risks are mitigated, whilst it seeks a more permanent solution with its bank.
Key Dependencies
As set out in the Annual Report and Accounts 2007, the Company is dependent on a small number of retailers and distributors. In
particular, approximately 60 percent of the Company's expected revenue for the second half of this financial year is sourced from two
distributors, being Genius Products LLC. and Universal Pictures (UK) Limited. The failure of either distributor to pay monies to the Group
as anticipated for whatever reason may have a material adverse effect on the Group.
Restructuring Risks
The Company has announced that following a strategic review it will be investigating a selective disposal of non-core assets and fixed
cost savings in order to improve the financial position of the Company. The restructuring programmes involve the commitment of significant
management time, capital and other resources and expose the Company to particular risks. These risks include diversion of management's
attention, failure to attract or retain key personnel, lower staff morale due to redundancies having been made, assumption of legal
liabilities (including unforeseen or contingent liabilities), and business disruption.
Future Growth Prospects
Whilst the strategic review is intended to maximise the Company's resources and growth prospects, as stated above the Company is
currently managing short-term cash flows whilst it negotiates a permanent solution with its Bank. To the extent that investment and capital
expenditure is curtailed by the requirement to focus on short-term cash requirements, it is likely that the future growth prospects of the
Company will be adversely affected and to the extent that the current situation continues in the medium-term, the Company may risk losing
certain material intellectual property rights.
Outlook
The Company had previously envisaged the completion of two negotiations within the full year, namely the extension of a broadcast
content provision agreement in the USA beyond the current terms as well as the licensing of certain non-core music publishing rights. Whilst
these may well still occur within the current financial year, we must ensure that the commercial integrity of the negotiations is not
affected by a desire to conclude them within the financial calendar. It is likely therefore that conclusion of certain deals may yet fall
post year end and thus may be deferred to future periods which would result in a further EBITDA reduction of �10m to our forecasts in the
current year.
We will seek to achieve a reduction in bank debt through the sale of certain non-core assets, together with reductions in our overheads.
Some of these savings have already been put in place and we hope to achieve further reductions to achieve a minimum annualised total of �5m
by the financial period end in order that we realise the full benefit in 2009/10 and beyond. We also intend to focus our capital expenditure
on a select number of core global brands which will limit annual expenditure to around �6m per annum from 2009/10 onwards as compared to the
2007 level of �17m.
Entertainment Rights had a history of focusing on signing one-off licences and other contracts, often with extended payment terms. From
now on we will seek to maintain a greater emphasis on the cash flow aspects of our commercial arrangements and will also seek to reduce our
reliance on one-off transactions. My Board is committed to a new level of transparency and prompt communication to external stakeholders and
we look forward to updating the market regularly on our progress.
We are entering into the most important segment of Entertainment Rights' trading calendar: the Christmas period. We are cautious on the
outlook for the Christmas DVD retail market in light of wider economic conditions and the resultant impact on consumer confidence.
Nevertheless, following key recent trade shows, our licensing business is trading strongly and we are continuing to hold promising
discussions with broadcasters on future contracts. This is a good indication that Entertainment Rights' underlying business is in good
health, and whilst this will not be reflected in short-term financial results, I, together with my entire team, am making every effort to
see that the business is placed firmly on track for long-term profitable growth.
Nick Phillips
Chief Executive Officer
Independent review report by KPMG Audit Plc to Entertainment Rights Plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the eight
months ended 31 August 2008 which comprises the Consolidated income statement, Consolidated statement of recognised income and expense,
Consolidated balance sheet, Consolidated cash flow statement and the related explanatory notes. We have read the other information contained
in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has
been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for
this report, or for the conclusions we have reached.
Directors' responsibilities
The Interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for
preparing the interim financial report in accordance with the DTR of the UK FSA.
As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the EU. The
condensed set of financial statements included in this interim financial report has been prepared in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial
report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity'" issued by the Auditing Practices Board for use in the UK. A
review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters,
and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of
all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the
interim financial report for the eight months ended 31 August 2008 is not prepared, in all material respects, in accordance with IAS 34 as
adopted by the EU and the DTR of the UK FSA.
Emphasis of matter -Going concern
Without qualifying our conclusion we draw your attention to the disclosures in note 1 to the condensed set of financial statements
concerning the group's ability to continue as a going concern. The group has recently negotiated a short term increase in working capital
facilities up to 31 January 2009 but there is still a need to secure a more permanent solution including revised covenant terms and funding
arrangements to meet the company's additional funding needs after January 2009. In addition, projections of expected future cash flows
prepared by the company are particularly sensitive to sales over the critical Christmas period and the achievement of planned management
action over the restructuring of the group. These conditions, along with the other matters explained in note 1 indicate the existence of a
material uncertainty which may cast significant doubt on the company's ability to continue as a going concern. These condensed consolidated
financial statements do not contain the adjustments which would result if the company were unable to continue as a going concern.
KPMG Audit Plc
Chartered Accountants
London
Condensed Consolidated Income Statement
8 months to 31 6 months to 30 June Year to 31 December
August
2008 2007 2007
Notes �'000 �'000 �'000
Revenue 20,253 17,346 68,065
Cost of sales (103,513) (10,347) (32,128)
Gross (loss) / profit (83,260) 6,999 35,937
Administrative expenses (17,229) (10,206) (19,496)
Adjusted EBITDA (9,213) 4,618 30,876
Included within cost of sales and administrative expenses:
Depreciation and amortisation 2 (7,166) (4,639) (9,217)
Impairment of intangible 2 (83,025) - -
assets
Offer related costs 2 (188) - -
Integration and restructuring 2 (897) (3,186) (3,980)
costs
One-off re-branding costs 2 - - (1,238)
Operating (loss) / profit (100,489) (3,207) 16,441
Financial income 3 1,969 1,818 1,974
Financial expense 3 (6,464) (5,434) (10,489)
Net financing costs (4,495) (3,616) (8,515)
Share of the loss of joint ventures accounted for - (435) -
using the equity method
(Loss) / profit before tax (104,984) (7,258) 7,926
Taxation for the period 4 714 3,063 (4,391)
(Loss) / profit attributable to equity holders of (104,270) (4,195) 3,535
the parent
Basic earnings per share 10 (14.23p) (0.59p) 0.49p
Diluted earnings per share 10 (14.23p) (0.59p) 0.47p
Condensed Consolidated Statement of Recognised Income and Expense
8 months to 31 6 months to 30 June Year to 31 December
August
2008 2007 2007
Notes �'000 �'000 �'000
Foreign exchange differences 9 8,625 (5,174) (3,457)
on retranslation of foreign
operations
Foreign exchange movements on 9 (5,557) 1,049 364
net investment hedges
Net changes in fair value of 9 (801) (251) (4,341)
cash flow hedges recognised in
equity
Income and expense recognised 2,267 (4,376) (7,434)
directly in equity
(Loss) / profit for the period 9 (104,270) (4,195) 3,535
Total recognised income and (102,003) (8,571) (3,899)
expense
The net investment hedge and the cash flow hedge are effective at the balance sheet date.
Condensed Consolidated Balance Sheet
As at 31 August As at 30 June As at 31 December
2008 2007 2007
Notes �'000 �'000 �'000
Assets
Non-current assets
Goodwill 5 40,688 93,825 97,527
Investment in programmes 6 88,414 95,120 102,555
Programme development costs 6 2,616 4,260 3,579
Trademarks and copyrights 6 54,924 55,705 54,680
Property, plant and equipment 634 757 698
Deferred tax assets 2,690 987 2,821
Investments accounted for using the equity - 1,027 -
method
Total non-current assets 189,966 251,681 261,860
Current assets
Inventory 5,272 4,672 2,972
Other financial assets - 1,326 -
Trade and other receivables 7 28,439 32,521 50,089
Cash and cash equivalents 3,466 7,747 12,710
Total current assets 37,177 46,266 65,771
Total assets 227,143 297,947 327,631
Liabilities
Current liabilities
Interest-bearing loans and 8 (127,003) (1,240) (3,740)
borrowings
Other financial liabilities (3,566) - (2,792)
Trade and other payables (6,159) (3,583) (8,330)
Accruals and deferred income (12,683) (9,169) (19,810)
Provisions (5) (24) (21)
Total current liabilities (149,416) (14,016) (34,693)
Net current (liabilities) / (112,239) 32,250 31,078
assets
Non-current liabilities
Interest-bearing loans and 8 - (115,551) (114,894)
borrowings
Deferred tax liabilities (28,916) (22,641) (27,729)
Other payables (181) (267) (356)
Provisions - (9) -
Total non-current liabilities (29,097) (138,468) (142,979)
Total liabilities (178,513) (152,484) (177,672)
Net assets 48,630 145,463 149,959
Capital and reserves
Issued share capital 9 36,665 36,620 36,627
Share premium 9 105,519 105,482 105,506
Merger reserve 9 16,470 16,470 16,470
Hedging reserve 9 (5,142) (251) (4,341)
Translation reserve 9 (25) (4,125) (3,093)
Retained earnings 9 (104,857) (8,733) (1,210)
Equity attributable to shareholders of the 48,630 145,463 149,959
parent
Total equity and liabilities 227,143 297,947 327,631
Condensed Consolidated Cash Flow Statement
8 months to 31 6 months to 30 June Year to 31 December
August
2008 2007 2007
Notes �'000 �'000 �'000
Cash flow from operating
activities
(Loss) / Profit before tax (104,984) (7,258) 7,926
Adjustments for:
Financial income and expense 3 4,495 3,616 8,515
Depreciation of property, 2 225 160 378
plant and equipment
Amortisation of intangible 6 6,941 4,479 8,839
assets
Impairment of intangible 2 83,025 - -
assets
Impairment of other assets 2 3,948 - -
Write off of programme 6 319 - -
development costs
Profit on disposal of - (1) -
non-current assets
Share of loss of joint ventures accounted for using - 435 -
equity method
Share-based payment charges 9 662 308 688
Operating cash flows before movements in working (5,369) 1,739 26,346
capital
(Increase) / Decrease in (2,300) (837) 911
inventory
(Decrease) in trade and other (9,583) (9,773) (1,445)
payables
Decrease / (Increase) in trade and other receivables 21,650 8,608 (10,564)
Cash generated from operations 4,398 (263) 15,248
Income taxes (paid) / received (1,924) 592 992
Net cash inflow from operating 2,474 329 16,240
activities
Cash flows from investing
activities
Payments to acquire intangible (7,202) (9,584) (16,849)
assets
Payments to acquire property (72) (236) (366)
plant and equipment
Acquisition of subsidiary undertakings including - (132,768) (132,845)
cash acquired
Net cash used in investing (7,274) (142,588) (150,060)
activities
Cash flows from financing
activities
Proceeds from share issues - 68,739 68,769
Proceeds from new borrowings 5,000 127,770 128,770
Repayment of borrowings (2,495) (36,017) (36,017)
Interest received 176 236 374
Interest paid (6,869) (2,517) (7,219)
Net cash generated from (4,188) 158,211 154,677
financing activities
Net (decrease) / increase in cash and cash (8,988) 15,952 20,857
equivalents
Cash and cash equivalents at 12,710 (7,827) (7,827)
start of year
Net effect of foreign exchange (256) (378) (320)
Cash and cash equivalents at 3,466 7,747 12,710
end of year
Notes to the condensed consolidated financial statements
1. Accounting policies
Entertainment Rights Plc (the "Company", "ER Plc" or "ER") is a company incorporated and domiciled in the UK. The Company and its
subsidiaries are together referred to as the "Group".
Statement of compliance
These condensed consolidated interim financial statements for the eight months ended 31 August 2008 have been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim financial reporting" as adopted by
the European Union. The condensed consolidated interim financial statements should be read in conjunction with the annual financial
statements for the year ended 31 December 2007, which were prepared in accordance with IFRSs as adopted by the European Union.
These condensed consolidated interim financial statements were approved by the Board of Directors on 31 October 2008.
Basis of preparation
In an effort to improve the timeliness and transparency of the Group's financial reporting, the Board has decided to move the Company's
financial year end from 31 December to 28 February. Because the Group's business is heavily weighted to the fourth quarter of the calendar
year, the 28 February year end will enable the Company to receive and analyse financial reporting from its key distribution partners and
licensees in a more timely fashion.
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amount of assets and liabilities, income and expense. Actual results may differ from
these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in
applying the Group accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated
financial statements as at and for the year ended 31 December 2007.
During the eight months ended 31 August 2008, management reassessed its estimates in respect of the recoverable amount of intangibles
(see note 5).
The comparative information at 30 June 2007 and 31 December 2007 is abridged and therefore not the Company's statutory accounts for
those financial periods.
Those accounts have been reported on by the Company's auditors and delivered to the registrar of companies. The report of the auditors
was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
The annual report for the 2007 year end can be viewed on the Company's corporate website, www.entertainmentrights.com/corporate.
Judgements made by the Directors in the application of accounting policies that have significant effect on the condensed consolidated
financial statements and estimates principally relate to impairment reviews and the share option valuation and are discussed in note 14.
Adjusted EBITDA is computed before depreciation, amortisation, impairment of intangible assets, bid defence costs, integration and
restructuring costs and one-off re-branding costs, which are explained in note 2.
Taxes on income in interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
Seasonality
Traditionally the Company's financial performance has been weighted to the second half of the year. In 2007 over 70% of the revenue for
the full 12 months was generated in the second half. This relates primarily to the home entertainment market including the importance of
Christmas sales of DVDs, in particular The Original Christmas Classics* in the USA and new releases of DVDs in the UK. Furthermore sales are
generated following key trade markets for both international television distribution (MIPCOM) and consumer products (Brand and Licensing
Show) which are both held in October.
Going concern
In determining the appropriate basis of preparation of the interim financial statements, the Directors are required to consider whether
the Company can continue in existence for the foreseeable future.
As announced on 26 September 2008 the Company renegotiated in July 2008 a key distribution agreement with its primary US DVD
distributor, Genius Products LLC ('Genius'). The effect of this renegotiation will be a reduction in operating cash flow and EBITDA for the
current financial year and for the year after. In addition, a revised payment profile for advances was agreed, phasing receipts over a
longer period of time to 2011. The significant adverse cash flow impact of the above renegotiation and the wider deterioration in market
conditions has resulted in the Company needing to draw down its remaining facilities with Bank of Scotland and an anticipated shortfall in
future working capital facilities for the foreseeable future.
The Company funds its working capital using a term loan and working capital facility with Bank of Scotland of �129 million. The bank
loans contain certain covenants and certain events of default which are customary in agreements of this type. These include interest cover,
debt cover and cash flow cover. Bank of Scotland has a fixed and floating charge over all the Company's assets as security for the term
loan and working capital facility. The Company has breached its debt cover ratio at August 2008 and therefore the facility is technically
repayable on demand. Based on detailed projections, management anticipate the breaches of its covenants to continue and a shortfall in
working capital facilities for the foreseeable future. Discussions however, have been held with Bank of Scotland over these covenant
breaches and the Company's future funding requirements. As a consequence, a waiver of any actual or potential covenant breaches in relation
to August and November 2008 covenant tests have been given, and a short term increase in working capital facilities of up to �1 million has been provided up to 31 January 2009. The level of debt
however is likely to remain above previously anticipated levels for a number of months and management continue to hold discussions with
Bank of Scotland with a view to securing a more permanent solution including revised covenant terms and funding arrangements to meet the
Company's additional funding needs after January 2009.
In order to assess the appropriateness of preparing the accounts on a going concern basis management have prepared detailed projections
of expected future cash flows and these have been reviewed by the Board. In reaching their decision, the board has considered the following
factors:
* The continuation and adequacy of banking facilities, including the risk of further covenant breaches and the satisfactory outcome
of discussions with the Company's lending bank for additional funding arrangements with revised covenant and payment terms before February
2009.
* Pressure on working capital including the risk that key customers and distributors fail to pay amounts owed when they fall due, as
well as pressure from other trading counterparties.
* The accuracy of key assumptions and the achievement of forecasted cash flows, particularly those concerning sales over the
critical Christmas period and the achievement of planned Management action over the restructuring of the Group.
The Directors recognise that there is a material uncertainty that may cast doubt on the Company's ability to continue as a going concern
and therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business.
However, it is the Directors' view that, based on ongoing discussions with the bank and the projections prepared by management, a
satisfactory resolution will be reached and that the Company will therefore have adequate resources to continue for the foreseeable future.
These condensed consolidated financial statements are therefore prepared on a going concern basis and do not contain any adjustments which
would result from this basis of preparation being inappropriate.
2. Expenses
Included in the profit for the period are the following:
Note 8 months to 31 6 months to 30 June Year to 31 December
August 2008 2007 2007
�'000 �'000 �'000
Recognised in cost of sales:
Amortisation of investment in 6 4,770 2,828 5,650
programmes
Amortisation of trademarks and 6 2,171 1,650 3,189
copyrights
Impairment loss on goodwill 5 59,672 - -
Impairment loss on investment 6 23,353 - -
in programmes
Write off of programme 6 319 - -
development costs
Impairment loss on other 3,948 - -
assets
Reversion of rights 1,252 - -
Recognised in administrative
expenses:
Depreciation of owned 225 161 378
property, plant and equipment
Integration and restructuring 897 3,186 3,980
costs
Offer related costs 188 - -
Provision for bad and doubtful debts and accrued 3,975 296 1,229
income
Discontinued Lassie Pet - - 193
Products operation
One-off rebranding costs - - 1,238
Excluded from adjusted EBTIDA are the following shown above as single lines: offer related costs; integration and restructuring costs;
and one-off re-branding costs.
Also excluded from adjusted EBITDA are the following which comprise a number of the above lines as noted below: depreciation and
amortisation; and impairment of intangible assets.
Note 8 months to 31 6 months to 30 June Year to 31 December 2007
August 2008 2007
�'000 �'000 �'000
Depreciation and amortisation
Amortisation of investment in 6 4,770 2,828 5,650
programmes
Amortisation of trademarks and 6 2,171 1,650 3,189
copyrights
Depreciation of owned 225 161 378
property, plant and equipment
Total 7,166 4,639 9,217
Impairment of intangible
assets
Impairment loss on goodwill 5 59,672 - -
Impairment loss on investment 6 23,353 - -
in programmes
Total 83,025 - -
Impairment
As part of the recent detailed strategic review of the business performed by management a number of indications of impairment were
identified and as such an impairment review has been carried out on all intangible assets. Further details of the methodology and key
assumptions can be found in note 5.
An impairment charge of �83m arose across a number of cash generating units ("CGUs") during the course of the eight months to 31 August
2008, resulting from the CGUs being written down to their recoverable amounts.
An additional impairment review has been performed on balance sheet amounts relating to costs which are recoverable from third party
rights owners. The Group is able to recoup these costs against royalties due on revenue generated by the relevant property. In accordance
with IAS 39 an impairment provision has been recognised where current forecasts do not support the assumption that sufficient future
revenues will be generated against which the Group can recover these costs.
Reversion of rights
The contract with a key distributor was amended during the period and alterations under the revised agreement have resulted in certain
valuable intellectual property rights reverting to Entertainment Rights for future commercial exploitation. The �1.3m shown above relates to
advances previously recognised for these rights, which are no longer due.
Integration and restructuring costs
There were a number of changes to the Board in the eight months to August 2008. Cost of �679k relating to the resignations of Mike Heap
and Elizabeth Gaines are included within this line.
In addition, redundancy costs of �218k for Big Idea senior executives and Classic Media's creative department were incurred during the
period as part of the ongoing integration of the Classic Media group.
Offer related costs
On 21 January 2008 ER announced that it was in preliminary talks with interested parties which may or may not have led to an offer being
made for the Company. On 21 April 2008 the Company announced that all such discussions in this regard have now ceased. These costs relate
to professional fees incurred during this takeover period.
3. Finance income and expense
8 months to 31 6 months to 30 June Year to 31 December
August 2008 2007 2007
�'000 �'000 �'000
Finance income
Bank interest receivable 132 217 371
Net gain on re-measurement of - 1,577 1,577
interest rate collars to fair
value
Net gain on re-measurement of 29 - -
forward foreign exchange
contract to fair value
Other interest income - 24 26
Net foreign exchange gain 1,808 - -
1,969 1,818 1974
Finance expense
Bank loans and overdrafts 6,464 4,567 9,423
Net foreign exchange loss - 787 957
Net loss on re-measurement of - - 29
forward foreign exchange
contract to fair value
Net loss on re-measurement of - 19 19
foreign exchange option to
fair value
Net loss on re-measurement of - 61 61
interest rate swap to fair
value
6,464 5,434 10,489
(4,495) (3,616) (8,515)
4. Taxation for the period
8 months to 31 6 months to 30 June Year to 31 December 2007
August 2008 2007
�'000 �'000 �'000
Current tax expense:
UK corporation tax charge - (1,718) -
Double tax relief - (112) -
Foreign tax current year - 112 2,094
charge
Foreign tax prior year charge - 43 43
Overseas tax credit on income - (1,185) -
for the period
Adjustments in respect of - - 44
prior periods
Total current tax - (2,860) 2,181
Deferred tax expense:
Origination and reversal of (714) (33) 1,550
temporary differences
Reduction in tax rate - (170) (198)
Adjustments in respect of - - 858
prior periods
Total deferred tax (714) (203) 2,210
Income tax (credit) / expense (714) (3,063) 4,391
in income statement
Factors that may affect future tax charges
The Group has �9.4m tax losses that may be available for relief against future profits.
5. Goodwill
�'000
Cost
At 1 January 2008 106,975
Additions -
Acquisition through business combinations -
Effect of movements in exchange rates 7,000
At 31 August 2008 113,975
Amortisation
At 1 January 2008 9,448
Impairment 59,672
Effect of movements in exchange rates 4,167
At 31 August 2008 73,287
Net book value
At 31 August 2008 40,688
At 31 December 2007 97,527
In accordance with stated accounting policy and IAS 36 the Group tests goodwill annually for impairment or more frequently if there are
indications that goodwill may be impaired. Other intangible assets are tested when there are indications of impairment. As part of a
recent detailed strategic review of the business performed by management a number of indications of impairment were identified and as such
an impairment review was carried out on the intangible assets of the Group as at 31 August 2008.
Cash generating unit ("CGU")
The review was carried out on each CGU. For the Group this consists of a number of properties grouped by genre unless they are
considered significant enough to stand alone. The Group's CGUs are defined as follows:
Animated, Basil Brush, Holidays, J Ward, Live Action, Postman Pat, Pre-school, Rupert Bear and Values Based.
CGUs which represent a significant component of the Group's intangible asset base (including investment in programmes and trademarks and
copyrights) are as follows net of impairment:
* Animated �68.2m
* Holidays �33.2m
* Postman Pat �20.1m
* Pre-school �20.8m
Key assumptions
Key assumptions on which management based its recoverable value projections are those regarding forecast cash flow, discount rates and
growth rates for each CGU are as follows:
* For key brands the revenue and contribution forecasts are from detailed management forecasts. For sales from other brands and
catalogue normalised historical sales generated by the Group over 8 years have been used as the best indication of future sales. Normalised
historical sales exclude any one-off non-recurring items to negate any impact of sales cycles.
* A full allocation of overheads within the model is made to each CGU in proportion to contribution generated.
* For the period 2012 onwards growth assumptions of between 0% and 3% have been made across the portfolio with the exception of a
small number of core properties where 10% growth rate has been used in the 3 years following the detailed forecast. The above growth rates
are based on management's expectations and the historical performance of each CGU.
* The weighted average cost of capital ("WACC") for the Group has been calculated based on market expectations and risk premiums
with a debt to equity weighting which represents the longer-term target gearing of the Group. This resulted in a pre-tax WACC of between 14%
and 26%. A pre-tax cost of capital of 10% was used for impairment reviews in previous periods.
If the WACC had been 1% greater the Group would have recognised an additional impairment charge of �3.8m.
If the estimated growth rates were 1% lower the Group would have recognised an additional impairment charge of �2.6m.
Impairment charge
An impairment charge of �83m arose as a result of the CGUs being written down to their recoverable amounts. Significant impairments were
recognised on the Animated (�21m), Basil Brush (�15m) and Values Based (�21m) CGUs (representing 69% of the total impairment charge).
In summary the impairment is equal to 30% of the total value of intangibles. Of this, goodwill has been impaired by 57% and investment
in programmes and trademarks and copyright by 14%. These charges have been recognised first against goodwill followed by investment in
programmes rather than trademarks and copyrights. This is a reflection of where management believes the impairment applies and that
underlying trademarks and copyrights are likely to retain their value compared to programming.
6. Intangible assets
Investment in Programme development Trademarks & Copyrights Total
programmes costs
�'000 �'000 �'000 �'000
Cost
At 1 January 2008 123,917 3,579 64,889 192,385
Additions 2,581 6,357 21 8,959
Reclassification 7,165 (7,165) - -
Derecognition - (319) - (319)
Acquisition through business - - - -
combinations
Effect of movements in 5,657 164 2,602 8,423
exchange rates
At 31 December 2008 139,320 2,616 67,512 209,448
Amortisation
At 1 January 2008 21,362 - 10,209 31,571
Charge for the year 4,770 - 2,171 6,941
Impairment 23,353 - - 23,353
Effect of movements in 1,421 - 208 1,629
exchange rates
At 31 December 2008 50,906 - 12,588 63,494
Net book value
At 31 August 2008 88,414 2,616 54,924 145,954
At 31 December 2007 102,555 3,579 54,680 160,814
Amortisation and impairment charges
The amortisation and impairment charges are recognised in cost of sales. An impairment charge of �23.4m was identified in investment in
programmes. The key assumptions on which management based its impairment review are described in note 5.
7. Trade and other receivables
8 months to 31 6 months to 30 June 2007 Year to 31 December 2007
August 2008
�'000 �'000 �'000
Amounts falling due within one
year
Trade receivables 5,856 14,807 29,594
Other receivables 3,442 2,630 1,866
Prepayments 849 568 987
Accrued income 12,100 11,511 14,244
22,247 29,516 46,691
Amounts falling due after more
than one year
Trade receivables 294 - -
Other receivables 462 - 105
Prepayments 315 127 128
Accrued income 5,121 2,878 3,165
6,192 3,005 3,398
28,439 32,521 50,089
Trade receivables are shown net of provisions for bad and doubtful debts amounting to �2,715k (June 2007: �1,379k, December 2007:
�2,135k).
Accrued income is shown net of provisions for doubtful amounts of �3,313k (June 2007: nil, December 2007: nil).
8. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings.
As at 31 August 2008
Term Loans Working Capital Total
�'000 �'000 �'000
Within 1 year 112,718 16,000 128,718
Between 1 and 2 years - - -
Between 2 and 5 years - - -
Greater than 5 years - - -
Total as at 31 August 2008 112,718 16,000 128,718
Unutilised amount - 4,000 4,000
112,718 20,000 132,718
As at 31 December 2007
Term Loans Working Capital Total
�'000 �'000 �'000
Within 1 year 3,740 - 3,740
Between 1 and 2 years 5,735 - 5,735
Between 2 and 5 years 28,189 11,000 39,189
Greater than 5 years 71,992 - 71,992
Total as at 31 December 2007 109,656 11,000 120,656
Unutilised amount - 9,000 9,000
109,656 20,000 129,656
On 10 January 2007, the Group repaid the term loans and working capital facilities then outstanding. On the same day the Group drew down
new term loans of �110m and entered into a new working capital facility of �20m. The bank loans contain certain covenants and certain events
of default which are customary in agreements of this type. These include interest cover, debt cover and cash flow cover. Please refer to
note 1 for further discussion of banking related matters.
As at 31 August 2008 borrowing costs of �1,715k (June 2007: �2,181k, December 2007: �2,022k) were set off against the term loans and
working capital facility.
Bank of Scotland has a fixed and floating charge over all the Group's assets as security for the term loan and working capital
facility.
Net debt is calculated as follows:
As at 31 August 2008 As at 31 December
2007
�'000 �'000
Interest-bearing loans and borrowings 127,003 118,634
Borrowing costs 1,715 2,022
Total borrowings as above 128,718 120,656
Less: cash and cash equivalents (3,466) (12,710)
Net debt 125,252 107,946
9. Reconciliation of movements in capital and reserves
Share Capital Share Premium Merger Reserve Hedging Reserve Translation Reserve Retained Earnings
Total
�'000 �'000 �'000 �'000 �'000 �'000
�'000
As at 1 January 2008 36,627 105,506 16,470 (4,341) (3,093) (1,210)
149,959
Share option charge - - - - - 662
662
Exercise of share options 38 13 - - - -
51
Deferred tax on share options - - - - - (39)
(39)
Movement on cash flow hedges - - - (801) - -
(801)
Foreign exchange on net - - - - (5,557) -
(5,557)
investment hedge
Foreign exchange on - - - - 8,625 -
8,625
translation of foreign
operation
Loss for the period - - - - - (104,270)
(104,270)
As at 31 August 2008 36,665 105,519 16,470 (5,142) (25) (104,857)
48,630
Merger reserve
In 1999, following the acquisition of Dot Films Limited, Seer Magic Limited, Boom Boom Limited and Carrington Productions International
Limited, the excess of the consideration over the nominal value of shares was credited to the merger reserve in accordance with s131 of the
Companies Act 1985.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign
operations as well as from the translation of liabilities that hedge Company's net investment in a foreign subsidiary.
10. Earnings per ordinary share
The calculation of basic earnings per ordinary share is based on the consolidated loss after tax for the period of �104,270k (June 2007:
�4,195k loss, December 2007: �3,535k profit) and on the weighted average number of ordinary shares in issue during the period of 732,562,309
(June 2007: 712,448,393, December 2007: 722,571,589).
Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:
8 months to 31 6 months to 30 June 2007 Year to 31 December 2007
August 2008
�'000 �'000 �'000
(Loss) / profit after taxation (104,270) (4,195) 3,535
Basic earnings per ordinary
share
Earnings available to ordinary (104,270) (4,195) 3,535
shareholders
Weighted average number of 732,562,309 712,448,393 722,571,589
shares in issue
Basic earnings per share (14.23p) (0.59p) 0.49p
(pence)
Diluted earnings per ordinary
share
Earnings available to ordinary (104,270) (4,195) 3,535
shareholders
Weighted average number of 732,562,309 712,448,393 722,571,589
shares in issue
Effect of dilutive securities - - 23,327,382
- options
Diluted earnings per share (14.23p) (0.59p) 0.47p
(pence)
Underlying earnings per share
Earnings available to ordinary (104,270) (4,195) 3,535
shareholders
Share options charge 662 308 688
Fair value of derivatives - (1,497) (1,028)
Integration and restructuring 805 2,230 2,480
costs
Offer related costs 188 - -
Impairment loss on goodwill 59,672 - -
Impairment loss on investment 23,353 - -
in programmes
One-off rebranding costs - - 755
Operations disposed of - - 118
(19,590) (3,154) 6,548
Weighted average number of 732,562,309 712,448,393 722,571,589
shares in issue
Underlying earnings per share (2.67p) (0.44p) 0.91p
(pence)
11. Related party transactions
Related party Charge / (Revenue) in the period Outstanding
� �
Auerbach Hope 12,480 6,850
qubo (152,527) -
Professional services were rendered by Auerbach Hope during the year. These are related party transactions by virtue of the fact that I.
Fishman, who was a Non-Executive Director during the period, is an executive in this practice.
The Group made a sale of �157k to its joint venture, qubo.
The key management personnel of the Group are the Directors.
12. Capital commitments
8 months to 31 August 6 months to 30 June 2007 Year to 31 December 2007
2008
�'000 �'000 �'001
Contracted but not provided 5,645 5,698 8,246
for
The committed amounts at 31 August 2008 related to investment in programmes and are expected to be settled within two years.
13. Contingent liabilities
The Group has no bank guarantees outstanding at 31 August 2008 (2007: nil).
14. Accounting estimates and judgements
As stated in note 5, the carrying value of CGUs (for all intangible assets) is based on discounted future cash flow estimates and
historical profits. The assumptions used in the calculation include estimated growth rates and forecast sales plans.
The joint venture in qubo was fully provided against as at 31 December 2007, based on the assessment that the joint venture does not
represent any future economic benefit to the Group.
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted.
The estimate of the fair value of the services received is measured based on a binomial model, the assumptions for which remain the same as
those disclosed in the consolidated financial statements for the year ended 31 December 2007.
There have been some assumptions made about the company's ability to prepare its accounts on a going concern basis. These are detailed
in note 1.
15. Post-balance sheet events
Entertainment Rights and Universal Pictures International Entertainment Limited ("Universal") are pleased to confirm that they have
reached a commercial resolution, without any admission of liability by either party, of their dispute regarding operational difficulties
encountered at the end of 2007. ER and Universal are continuing their good working relationship for the benefit of both businesses. ER and
Universal have agreed a 12 month extension to their current UK home video sales and distribution arrangement, and Universal has agreed to
pay ER an amount of �500,000, �250,000 of which is being paid immediately. These receipts have not formed part of the results for the eight
months ended 31 August 2008.
Statement of Directors* responsibilities
The interim management report is the responsibility of, and has been approved by, the Directors of Entertainment Rights Plc.
Accordingly, the Directors confirm that to the best of their knowledge:
* the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by
the EU;
* the interim management report includes a fair review of the information required by:
o DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
o DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months
of the current financial year and that have materially affected the financial position or performance of the entity during that period; and
any changes in the related party transactions described in the last annual report that could do so.
The Directors of Entertainment Rights Plc are listed in the Entertainment Rights Plc Annual Report for 31 December 2007, with the
exception of the following changes:
* Mike Heap resigned on 17 March 2008
* Elizabeth Gaines resigned on 15 August 2008
* Nick Phillips appointed on 17 March 2008
* Sir Robin Miller appointed on 21 July 2008
* Richard Brooke appointed on 21 July 2008
* Irvin Fishman resigned on 31 October 2008
* Julian Paul resigned on 31 October 2008
* Edward Knighton appointed on 31 October 2008
A list of current Directors is maintained on the Entertainment Rights Plc corporate website:
www.entertainmentrights.com/corporate.
By order of the Board
Nick Phillips
Chief Executive Officer
31 October 2008
Directors
Rod Bransgrove (Non-Executive Chairman)
Sir Robin Miller (Deputy Chairman)
Nick Phillips (Chief Executive Officer)
Edward Knighton (Chief Financial Officer)
Jane Smith (Chief Commercial & Creative Director)
Richard Brooke (Non-Executive Director)
Craig Hemmings (Non-Executive Director)
Secretary and Registered Office
Irvin Fishman FCA
58-60 Berners Street
London W1T 3JS
Stockbrokers
Collins Stewart Europe Limited
88 Wood Street
London EC2V 7QR
Auditors
KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB
Bankers
Bank of Scotland plc
PO Box No 5
The Mound
Edinburgh EH1 1YZ
Solicitors
Lawrence Graham LLP
4 More London Riverside
London SE1 2AU
Registrars
Computershare Services plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
0870 703 6271
Company registration number 2402919
Corporate website: www.entertainmentrights.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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