TIDMCHS
RNS Number : 0563Y
Chrysalis PLC
16 December 2010
CHRYSALIS PLC
Preliminary results for the year ended 30 September 2010
2010 2009
============================== ======== ========
GBP'm GBP'm
------------------------------ -------- --------
Revenue 69.8 62.9
============================== ======== ========
Consolidated NPS 16.7 13.4
============================== ======== ========
Normalised operating profit 5.3 3.3
============================== ======== ========
Normalised profit before tax 1.6 0.5
============================== ======== ========
Operating profit 0.3 2.2
============================== ======== ========
Loss before tax (3.7) (3.8)
============================== ======== ========
Basic loss per share(pence) (6.04)p (5.74)p
============================== ======== ========
Net debt 20.4 15.8
------------------------------ -------- --------
Results Highlights
-- Chrysalis PLCcontinues to deliver on the strategy set out in
2008: growing NPS, controlling overheads and increasing normalised
profits for the second year in succession
-- Chrysalis PLC revenues, normalised operating profit and NPS
are all ahead of Board's expectations
-- Consolidated NPS increased by 24.6% to GBP16.7m (2009:
GBP13.4m) and by 23.9% to GBP16.6m on a constant currency4
basis
-- Lasgo Chrysalisoutperformed the Board's expectations despite
the 15% fall in operating profit to reach GBP1.7m (2009: GBP2.0m)
in an exceptionally difficult market
-- Successful integration of Chrysalis One acquired in April
2010
-- Property issues resolved with the sale of the freehold
property and exit from a long-term lease agreement
-- Hedging instruments restructured to lower future interest
costs
-- Securitisation loan facility amended to allow two further
drawdowns against the available GBP22.4m, including a deferral of
capital repayments to March 2012
-- High profile new signings include Rumer, Beach House,Jai
Paul, Jamie Woon, the Bees, Matt Morris (US) and The Sword (US)
-- Encouraging release schedule in current financial year -
including Rumer, Cee-Lo Green, Bon Iver and strong writer
representation on albums by Kanye West, Adele, Josh Groban, Justin
Timberlake and Clare Maguire
-- Current trading in line with the Board's expectations
-- Recommendation to shareholders to approve recent cash offer
for Group to be distributed shortly
1. Net Publisher's Share (NPS) is the revenue received by a
music publisher, less any royalties that have to be paid to
writers, performers and others receiving a share of royalties.
2. Normalised measures are stated before separately disclosed
items. See notes 2 and 3 to the attached financial information for
further details. The Group believes that the normalised measures
provide additional guidance to the statutory measures of the
performance of the business during the period. These measures are
not defined under Adopted IFRS and therefore may not be directly
comparable with other companies adjusted profit measures. It is not
intended to be a substitute for or superior to Adopted IFRS
measurements of profit.
3. The loss before tax is operating profit after charging net
finance costs of GBP4.0m (2009: GBP6.1m), which includes a GBP0.2m
(2009: GBP3.2m) charge in respect of the fair value movements in
derivative financial instruments.
4. Constant currency results are calculated by restating current
period local currency results using prior period exchange
rates.
Commenting on the results, Chris Wright, Chairman, said:
"Since the announcement on 26 November that Chrysalis is to be
acquired by BMG, I have been filled with conflicting emotions. But,
above all, it is with great excitement that Chrysalis will form
part of BMG's vision to create a new and exciting music rights
business, and that the name and heritage of the company will live
on. Over the past four decades, we have succeeded in creating a
vibrant business, with a leading position within the independent
music publishing industry. I am immensely proud of what we have
achieved and I am confident that BMG's offer of 160p a share for
the Group fairly recognises our unique proposition: an enviable
back catalogue and a sought after roster of current artists, as
well as excellent management teams and talented staff throughout
our UK and international operations."
Commenting on the results, Jeremy Lascelles, Chief Executive,
said:
"This is a moment of very mixed emotions for me, but I take
enormous satisfaction and pride in being able to hand over
ownership with the business in such rude health. 2010 has already
been a very successful year for us, and the current chart success
of albums by Rumer and Cee-Lo Green will soon be followed by a host
of other releases that make our prospects for 2011 very exciting
indeed. I would like to take this opportunity to pay tribute to all
of our staff and artists whose skills and talents are the
fundamental reasons behind the success of the Group."
Enquiries:
Chrysalis PLC
Jeremy Lascelles, Group Chief Executive 020 7465 6170 or 07767
436 300
Andy Mollett, Group Finance Director 020 7465 6195 or 07825 781
785
Brunswick
Dania Saidam/Max McGahan 020 7404 5959
ABOUT CHRYSALIS PLC
Chrysalis PLC is an independent music company. The Group's
principal areas of business comprise: Chrysalis Publishing which
includes the Group's international network of music publishing
companies, under the banner of Chrysalis Music and Chrysalis One,
whose purpose it is to exploit and grow Chrysalis's rich catalogue
of music copyrights; Chrysalis Non-Publishing, which is made up of
The Echo Label, a copyright exploitation company; Chrysalis
Copyrights, the owner of certain Master recordings and Flatiron
Management, an artist management company. Chrysalis PLC also owns
Lasgo Chrysalis, a UK-based wholesale entertainment product
distribution business which serves both domestic and overseas
wholesale, retail and entertainment markets with CD, DVD and book
products.
Chief Executive's Review
Chrysalis once again delivered a very solid set of results
across all business areas and performed ahead of the Board's
expectations. Group revenue improved to GBP69.8m (2009: GBP62.9)
and normalised operating profit rose by 60.6% to reach GBP5.3m
(2009: GBP3.3m). Consolidated NPS, a key metric for the group,
increased by 24.6% in the year to GBP16.7m (2009: GBP13.4m).
Underlying consolidated NPS also showed a year-on-year improvement,
up 11.9% from GBP13.4m in 2009 to GBP15.0m in 2010. Underlying NPS
excludes the impact of the Chrysalis One acquisition in April 2010
and a one-off impact of GBP0.4m relating to the acceleration of
Performance income reporting in the UK and US. This underlying
growth was due to improved NPS performance from our music
publishing operations and the full year inclusion of the Richard
Marx catalogue. The consolidated NPS figure also includes the
excellent result from Chrysalis Copyrights following the release of
the digitally re-mastered Beatles albums in the autumn of 2009.
We were particularly pleased with the performance of our music
publishing activities in the past financial year. In the first half
of the year, the publishing division had exceptional chart and
airplay success with consecutive US number one hits co-written and
produced by our writers Fraser T Smith ('Break my Heart' by Taio
Cruz) and Pendulum's Rob Swire ('Rude Boy' by Rihanna). In the UK,
Robbie Williams also had chart success with 'You Know Me' and
'Morning Sun', co-written by our writers Soul Mekanik. In the
second half, Pendulum's album 'Immersion' became a UK number one
album and two of our writers - Nerina Pallot and Fraser T Smith -
featured on a number of tracks on Kylie Minogue's number one album
'Aphrodite'. In addition to this chart success, our back catalogue
artists also had an excellent year: songs from Chrysalis Music's
songwriters such as Blondie, David Bowie and Billy Idol all
generated good performance and synchronisation income,
demonstrating the enduring appeal of their iconic songs.
Lasgo Chrysalis, our entertainment product distribution business
again defied the downturn in the sales of CD, DVD and book product
and produced financial results well ahead of the Board's
expectations. This was very encouraging given the ongoing
difficulties in this market place and the tough year-on-year
comparables.
2010, however, was not just a year of focusing on our financial
and commercial performance. We also made significant progress in
addressing some of the key strategic priorities, which were
identified to strengthen and simplify our business, improve our
profitability and pave the way for future growth:
- The acquisition of First State Media Group in April 2010 for
GBP10.9m (US$16.5m) illustrated our commitment to making
significant catalogue acquisitions. Following the acquisition,
Chrysalis now manages an additional 45,000 copyrights on behalf of
FS Media Works Fund 1 ("the Fund"), a partnership of international
institutional investors and pension funds. The acquired asset,
subsequently named 'Chrysalis One', was substantially restructured
and fully integrated into the Chrysalis music publishing network
during the second half of the year.
- The Richard Marx catalogue, acquired in June 2009, is now
fully integrated and delivered NPS of GBP0.4m in 2010 (2009:
GBP0.1m).
- All property issues were resolved during the year, with the
sale of the freehold property at Bramley Road for GBP6.8m, and we
exited an onerous lease obligation for our Freston Road property at
a gain of GBP0.1m.
- We completed the restructuring of our hedging arrangements to
manage future cash interest costs through the unwinding of our cap
and collar financial instrument in March 2010.
- Further progress was made in reducing our normalised corporate
overhead costs, which fell to GBP1.59m in the year from GBP1.65m in
2009.
Following the year end, on 26 November 2010, the Board of
Chrysalis announced the recommended cash offer, from BMG Luxco, a
joint venture between Bertelsmann and Kholberg Kravis Roberts &
Co., for the entire issued and to be issued share capital of the
Company. Under the terms of the transaction, Chrysalis shareholders
will receive 160p per Chrysalis share and this values the issued
ordinary share capital of Chrysalis at approximately GBP107.4m. The
purchase price represents a 55.7% premium to the average Chrysalis
share price in the three months prior to the announcement that the
Company was in offer discussions.
Whilst the sale of Chrysalis marks the end of forty years as a
leading independent in the music industry, the Board feels sure
that this is the right step for the Company going forward.
It remains for me to thank the staff across all of our
businesses and our songwriters and artists from across the globe.
Our achievements are merely a testament to your skills, talent and
endeavour. I thank you all for your commitment and your
professionalism in the recent months.
Jeremy Lascelles
Chief Executive Officer
15 December 2010
Business Review
Chrysalis Publishing
Chrysalis Music
2010 2009
GBP'm GBP'm
----------------------------- ------ ------
Revenue 38.4 35.9
Normalised operating profit 2.6 2.2
Profit before tax 1.7 1.9
(i) Normalised measures are stated before separately disclosed
items. See notes 2 and 3 for further details.
Performance in 2010
Chrysalis Music increased revenues from GBP35.9m in 2009 to
GBP38.4m for the year ended 30 September 2010. The NPS from
Chrysalis Music's publishing operations grew by 9.8% to GBP13.5m
(2009: GBP12.3m) and was up by 8.9% on a constant currency basis.
Normalised operating profit rose by 18.2% from GBP2.2m in the prior
year to GBP2.6m in 2010. This underlying growth in NPS was,
primarily, due to improved NPS performance from our music
publishing operations, the full year performance of the Richard
Marx catalogue, and the impact of an incremental one-off GBP0.4m
relating to an acceleration of Performance income reporting in the
UK and US.
Once again, there was an encouraging mix of income generated
from both our back catalogue and more recent signings. Our top
earners in 2010 were Blondie, Paul Anka, Richard Marx, David Bowie
and Johnta Austin. 2010 saw a number of our writers contributing to
high profile hits on both sides of the Atlantic, which included a
UK number one album, 'Immersion' from Pendulum, two of our writers
- Nerina Pallot and Fraser T Smith - featuring on a number of
tracks on Kylie Minogues' UK number one album, while other writers
had chart success through their contributions to albums by Tom
Jones and Robbie Williams. In the US we had consecutive number one
hits from two Chrysalis writers - Fraser T Smith and Rob Swire -
and singer-songwriter Ray LaMontagne achieved a top ten chart
position with his album 'God Willin and the Creek don't Rise'. We
have been pleased with the performance of the Richard Marx
catalogue in the year, which had particular success in generating
performance income from classic hits such as 'Right here Waiting'
and 'Dance with my Father'. The Richard Marx catalogue was bought
in June 2009 for $8.0m, and generated GBP0.4m of NPS in 2010 (2009
contribution for 3 months GBP0.1m).
Whilst not directly contributing to the financial performance of
the Group, a number of Chrysalis songwriters were nominated for
prestigious industry awards. In May, Bat for Lashes won the Ivor
Novello Award for Best Contemporary Song for 'Daniel' and Johnny
Marr, won the acclaimed Ivor Inspiration Award. More recently, both
Laura Marling's 'I Speak Because I Can' and I am Kloot's 'Northern
Skies' were nominated for Album of the Year at the Mercury Prize
Awards.
As previously stated, the key to maintaining organic NPS growth
is signing new songwriters to our roster. Whilst competition for
new songwriters remains high, we were delighted that this year we
signed Beach House, The Bees, Jamie Woon, Jai Paul and Rumer in the
UK. In the US, new signings include Matt Morris, The Sword, The
Walkmen, Tom Meredith and Ben Allen.
Chrysalis One
2010 2009
GBP'm GBP'm
----------------------------- ------ ------
Revenue 5.3 -
Normalised operating profit 0.7 -
Loss before tax (2.0) -
(i) Normalised measures are stated before separately disclosed
items. See notes 2 and 3 for further details.
Performance in 2010
In April 2010, in line with the Board's stated strategy of
acquiring suitable new catalogues, Chrysalis bought First State
Media Group, an international music publishing business, for
GBP10.9m. The deal gave Chrysalis access to an additional 45,000
music copyrights to be managed on behalf of a partnership of
international institutional investors and pension funds. The
acquisition, subsequently renamed Chrysalis One, comprises a number
of well known copyrights including those of the former "Dreamworks"
catalogue (including 'Leaving on a Jetplane' and 'Take me Home
Country Roads' (John Denver), 'Disco Inferno' (The Trammps),
'Somebody to Love' (Jefferson Airplane)); the catalogue of Sheryl
Crow (including 'If it Makes You Happy', 'All I Wanna Do' and
'Everyday is a Winding Road') and the "Wind-Up" catalogue
(including 'Bring Me To Life' (Evanescence) and 'Paralyzer' (Finger
Eleven)).
In its first six months as part of Chrysalis Group, Chrysalis
One generated revenue of GBP5.3m and normalised operating profit of
GBP0.7m, which were both broadly in line with the Board's
expectations. The period of restructuring and integration is now
substantially complete. The reduction in overheads and amalgamation
of the new copyrights into the existing Chrysalis international
infrastructure should improve operating cash flows, gross income
and NPS from Chrysalis One in future years.
Chrysalis Non-publishing
2010 2009
GBP'm GBP'm
----------------------------- ------ ------
Revenue 4.1 3.2
Normalised operating profit 1.8 0.8
Profit before tax 1.8 0.8
(i) Normalised measures are stated before separately disclosed
items. See notes 2 and 3 for further details.
The Echo Label
Revenue for The Echo Label was GBP1.0m in 2010 (2009: GBP1.1m),
and normalised operating profits were GBP0.5m (2009: GBP0.4m), both
in line with the Board's expectations. The Echo Label also produced
NPS for the year of GBP0.6m (2009: GBP0.6m).
The steady improvement in profitability from The Echo Label's
exploitation of its master recording copyrights underpins the
decision to move away from the recorded music model to a pure
copyright exploitation business. The Echo Label represents the
master recording rights of artists including Nerina Pallot, Moloko,
Morcheeba, Feeder, Bat for Lashes, Brendon Benson and Black Rebel
Motorcycle Club. Both Nerina Pallot andBrendan Benson had new
releases in 2010 ('The Graduate' and 'My Old Familiar Friend',
respectively).
Chrysalis Copyrights
Chrysalis Copyrights performed ahead of the Board's expectations
delivering revenues of GBP2.5m, (2009: GBP1.5m) and normalised
operating profit of GBP1.1m (2009: GBP0.2m). The NPS contribution
from Chrysalis Copyrights jumped from GBP0.6m in 2009 to GBP1.3m in
2010.
This exceptional performance was due to the high level of sales
from the digitally re-mastered Beatles studio albums which were
released in October 2009. Chrysalis Copyrights owns George Martin's
producer royalties for The Beatles catalogue. These copyrights
alone contributed in the region of GBP0.9m in incremental NPS in
the 2010 financial year. In November 2010, The Beatles catalogue
was made available online for the first time at the Apple iTunes
store. In addition to The Beatles producer royalties, Chrysalis
Copyrights also owns rights in master recordings by Tom Jones and
Engelbert Humperdinck.
Flatiron Management
Revenue for Flatiron Management was GBP0.6m in 2010 (2009:
GBP0.6m). Normalised operating profit was flat at GBP0.2m (2009:
GBP0.2m).
Flatiron Management represents My Morning Jacket and Flight of
the Conchords. Both acts toured extensively in 2010 and Flight of
the Conchords toured the UK for the first time, selling 23,000
tickets for 4 evenings held at the Hammersmith Apollo and Wembley
Arena.
Net Publisher's Share analysis
Following the reclassification of the gross profit from The Echo
Label and Chrysalis Copyrights as NPS in 2009, we report both a
'consolidated NPS' figure for Chrysalis Music and the underlying
NPS figures for both the Publishing and Non Publishing
activities.
2010 2009
Constant currency Reported rates Reported rates
GBP'm GBP'm GBP'm
------------------------ ------------------ --------------- ---------------
Publishing
- Chrysalis
Music 13.4 13.5 12.3
- Chrysalis
One 1.3 1.3 -
Non Publishing 1.9 1.9 1.1
------------------------ ------------------ --------------- ---------------
Consolidated NPS 16.6 16.7 13.4
Chrysalis Music - NPS by income stream
Mechanical Performance Synchronisation
% % %
----- ----------- ------------ ----------------
2010 30.4 44.6 25.0
2009 32.6 38.8 28.6
2008 32.8 40.2 27.0
2007 38.5 37.4 24.1
2006 41.3 34.6 24.1
2005 43.0 36.5 20.5
As previously noted, the mix for our music publishing activities
continued to move away from mechanical income (sale of physical
product) towards the slightly higher margin areas of performance
(public broadcast, live performance) and synchronisation (the use
of music in TV/Film or advertising).
Performance income at Chrysalis was particularly strong in 2010,
accounting for 44.6% of income up from 38.8% in 2009. This was due
to a number of factors which included: the ongoing surge in the
popularity of live performance ; an excellent first time
contribution from the Richard Marx acquisition ( the catalogue has
a number of well-known, classic hits which are popular radio
airplay songs such as 'Right here Waiting' and 'Dance with my
Father'); and there was also a one-off boost to performance income
from our Michael Jackson copyrights, given the huge amount of
airplay his music received following his death in June 2009.
Chrysalis publishes some of his best known hit songs including
'Thriller', 'Rock with You' and Off the Wall' through our writer
Rod Temperton.
Synchronisation income was slightly lower in 2010, in the main
due to a weaker than hoped for performance from our US activities.
However, our songs were used in a number of high profile
synchronisations world-wide, which included 'Rapture' by Blondie in
the film "Sex and The City II", 'Gold Lion' by the Yeah Yeah Yeahs
in an Apple i-Pad commercial, 'It Must be Love' by Labi Siffre
(Madness) for a You Gov advertisement and Eminem's iconic song 'My
Name Is....' by Labbi Siffre for a DJ HERO product in the US.
Whilst mechanical income continued to decline, it should be
noted that digital revenues, which are captured within the
mechanical income stream accounted for approximately 12% of our
music publishing NPS, up from 9.6% in 2009. Broadly, digital
comprises the income generated by downloading via stores such as
iTunes, streaming sites such as Spotify and YouTube, and a host of
other digital applications.
Lasgo Chrysalis
Once again, Lasgo Chrysalis performed ahead of the Board's
expectations in 2010. Revenues held up at GBP21.9m and normalised
operating profits were GBP1.7m. Although these results are
marginally behind the prior year, they should be viewed in the
context of the exceptional market environment which prevailed in
2009 when, following the collapse of a number of competitors, Lasgo
Chrysalis was able to purchase competitively priced stock from
their Administrators. This provided a boost to revenues and profits
in the 2009 year.
2010 2009
============================= =============== ===============
GBP'm GBP'm
----------------------------- --------------- ---------------
Revenue 21.9 23.7
============================= =============== ===============
Normalised operating profit 1.7 2.0
============================= =============== ===============
Normalised profit before
tax 1.7 2.0
============================= =============== ===============
(i) Normalised measures are stated before separately disclosed
items. See notes 2 and 3 for further details.
The entertainment product market remained challenging in 2010.
The ongoing problems of migration to digital media and price
deflation continued to threaten the physical distribution business
model. Given this background, the performance of Lasgo Chrysalis in
2010 is all the more impressive. All three core business genres at
Lasgo Chrysalis had their own individual challenges. Within the DVD
distribution sector, which represented 19.8% of sales in 2010
(22.7% in 2009), the product bore witness to continued price
erosion and the hoped for take up of Blu-Ray has not yet occurred.
The Book distribution business suffered during 2010 due to a buying
'freeze' from a major customer over the summer, which has since
been lifted. As a result, Book distribution accounted for 12.7% of
sales in 2010, down from 18.1% in 2009. Audio distribution,
however, performed extremely well in the year, with sales
increasing by 5.47% in the year (Audio accounted for 67.5% of sales
in 2010 up from 59.2% in 2009). Whilst digital music continues to
damage the audio distribution business, it should be noted that,
overall, demand for CDs remains robust, with 75% of global albums
still being sold in physical format (Source: Enders Analysis, June
2010).
The customer base continues to be made up of a balanced mix of
online and traditional retailers from across the UK, Europe and
Japan. In order to keep up with the increasingly complex demands
for rapid order fulfilment, particularly from online customers, the
business has invested in improving its IT systems during the
year.
The financial management at Lasgo Chrysalis remained strong and
this led to a small improvement in gross margin during the year.
Additionally, stock management continued to be prudent, with
year-end stock levels standing at less than GBP2.0m. During the
year, the lease on the company head office and warehouse in
Willesden were renegotiated for five years, with a tenant-only
mid-term break clause. Post the year-end, a new management
structure was put in place, with the appointment of Glenn Baker as
Operations Director and Franco Passaniti as Commercial Director
both of whom have served with Lasgo Chrysalis for over 15 years.
They are ably supported in their roles by Stephen Digby, the
incumbent finance controller, who has been with the company for
over 20 years.
Financial review
2010 2009
=============================== ======== ========
GBP'm GBP'm
------------------------------- -------- --------
Revenue 69.8 62.9
=============================== ======== ========
Consolidated NPS 16.7 13.4
=============================== ======== ========
Normalised operating profit 5.3 3.3
=============================== ======== ========
Normalised profit before tax 1.6 0.5
=============================== ======== ========
Operating profit 0.3 2.2
=============================== ======== ========
Loss before tax (3.7) (3.8)
=============================== ======== ========
Basic loss per share(pence) (6.04)p (5.74)p
=============================== ======== ========
Normalised earnings per share 1.75p 0.74p
=============================== ======== ========
Income statement
Revenue increased by 11.0% from GBP62.9m to GBP69.8m. This was
mainly due to the acquisition of Chrysalis One during the year,
which generated revenue of GBP5.3m, an increase in the Chrysalis
Music revenue of 6.8% to GBP38.4m, and a 27.9% increase in
Non-publishing revenue to GBP4.1m, mainly due to The Beatles. Lasgo
Chrysalis' revenue fell to GBP22.0m (2009: GBP23.7m).
The Group operating profit of GBP0.3m (2009: GBP2.2m) includes
GBP5.0m (2009: GBP1.1m) of separately disclosed items relating to
the:
- Amortisation of intangible assets, GBP1.5m;
- Profit on disposal of freehold land and vacant properties,
GBP0.2m credit;
- Costs incurred in acquiring First State Media Group Ireland
Ltd, GBP2.4m;
- Restructuring of German operations, GBP0.5m;
- Costs relating to a potential transaction, GBP0.2m;
- Costs relating to vacant properties, GBP0.4m; and
- Costs relating to write-down of certain assets relating to
minority holdings, GBP0.2m.
The normalised operating profit before these separately
disclosed items was GBP5.3m (2009: GBP3.3m). Chrysalis Music
normalised operating profit increased by GBP0.4m to reach GBP2.6m
(2009: GBP2.2m), Chrysalis One contributed GBP0.7m of normalised
operating profit, Non-publishing normalised operating profit
improved to GBP1.8m from a normalised operating profit of GBP0.8m
in 2009, and Lasgo Chrysalis saw normalised operating profit fall
to GBP1.7m (2009: GBP2.0m). Normalised corporate overheads fell to
GBP1.6m from GBP1.7m in 2009, as the corporate functions continued
to be streamlined and simplified.
Interest
The Group net finance cost was GBP4.0m (2009: GBP6.1m). The net
financing cost is stated after including a charge of GBP0.2m in
respect of ineffective fair value movements on derivative financial
instruments (2009: GBP3.2m loss). During the year we unwound the
interest rate cap and collar and this will result in a reduced
future interest charge, comprising a cash interest saving and a
reduction in the volatility of the overall charge caused by the
fair value movements.
Profit/(loss) before tax
The normalised profit before tax for the Group for the year was
GBP1.5m (2009: GBP0.5m). This excludes GBP1.5m (2009: GBP0.3m) of
amortisation of intangible assets, and the other separately
disclosed items of GBP3.7m (GBP4.1m). Taking these into account,
the Group's loss before tax was GBP3.7m (2009: loss of
GBP3.8m).
Tax
The tax charge of GBP0.3m for the year principally comprises
GBP0.2m in relation to irrecoverable withholding taxes and foreign
taxes (2009: tax credit of GBP0.1m). The normalised effective tax
rate is 20.2% (2009: n/a).
Earnings per Share
The basic loss per share, which includes the separately
disclosed items, is 6.04p (2009: 5.74p loss). Normalised earnings
per share, calculated excluding the impact of the separately
disclosed items, is 1.75p (2009: 0.74p).
Dividend
It is not proposed to pay a dividend for the year ended 30
September 2010. Future dividend policy will be determined by the
Board, in relation to the Group's ongoing earnings.
Balance sheet
The Group's net liabilities have increased over the year from
GBP4.6m to GBP10.7m. This principally reflects the impact of the
separately disclosed items and the net cost of the First State
Media Group acquisition.
Goodwill and intangible assets
Goodwill is consistent with the prior year. Other intangible
assets have increased by GBP10.7m, primarily due to the acquisition
of the First State Media Group half way through the year.
Working capital
Inventories have increased by GBP0.1m due to higher stocks at
Lasgo Chrysalis. Receivables and prepayments show an increase of
GBP2.8m, reflecting the increase in other receivables, which
includes a GBP1.9m fee receivable from the Fund for fees based on
the assets under management by Chrysalis One for the six months
ended 30 September 2010. The asset held for sale last year was the
Freehold at Bramley Road which was disposed of in March 2010 for
GBP6.8m. Cash and cash equivalents is GBP5.4m higher primarily due
to the proceeds from this sale, offset by the GBP3.0m we paid out
to unwind our unfavourable interest rate cap and collar.
Current liabilities of GBP44.1m are GBP5.7m higher than last
year, with the current interest-bearing loans down to GBP1.8m from
GBP4.8m, as the first capital repayment against our securitisation
facility is now only due in March 2012 following our renegotiation
of the agreement in September 2010. The liability position of our
derivative financial instruments has decreased to GBP5.0m from
GBP5.8m, reflecting the settlement of the interest rate cap and
collar and a reduced number of outstanding foreign exchange
contracts.
The Group has no short-term financing requirements. Long term
liabilities of GBP45.7m comprise our securitisation borrowing of
GBP45.0m (stated net of unamortised issuance costs of GBP1.5m),
(2009: GBP33.9m) deferred consideration for the Richard Marx
catalogue of GBP0.3m (2009: GBP0.3m) and the vacant property
provision of GBP0.4m in respect of certain vacant properties in the
United Kingdom (2009: GBP0.9m). We can draw down on the undrawn
facility of GBP22.4m at any time up until September 2011.
The Group's funded pension scheme, the Chrysalis Group
Retirement Benefits Scheme, was terminated on 31 January 2008 and
the process of winding-up the scheme started on that date. Although
the winding-up process has not yet been legally completed, it is in
its final stages and at 30 September 2010 the Group had settled its
liability to secure members' benefits under the scheme. We do not
expect any further charges in respect of the winding-up. The Group
has established a new stakeholder plan which all eligible employees
can join.
Net cash flow
The net cash generated by operating activities for the year was
GBP2.8m, an improvement of GBP3.6m over GBP0.8m utilised by
operations in 2009. In addition, our net interest payments were
GBP3.4m (2009: GBP2.3m). We invested GBP0.4m in property, plant and
equipment during the year (2009: GBP0.3m). There was one
substantial acquisition, the First State Media Group, for GBP10.9m.
In 2009, the Richard Marx catalogue was acquired for a cash
consideration of GBP4.6m, with a further GBP0.3m deferred for five
years. Other catalogue acquisitions were completed for GBP0.2m
(2009: GBP0.3m).
Overall, our cash and cash equivalents amounted to GBP24.6m at
30 September 2010, an increase of GBP5.4m on the corresponding
figure for 2009 of GBP19.2m.
Our gross borrowings at 30 September 2010 amounted to GBP46.6m
(2009: GBP38.7m) and included the music publishing securitised loan
of GBP45.0m (stated net of unamortised issuance costs amounting to
GBP1.5m).
Our net debt at 30 September 2010 amounted to GBP20.4m (2009:
net debt of GBP15.8m).
Going Concern
The group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Key Risks and Uncertainties on page 11 to 12.
The financial position of the group, its cash flows, liquidity
position and borrowing facilities are described within this
section. In addition note 25 to the financial statements includes
the group's objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures to
credit risk and liquidity risk.
The Group has significant undrawn credit facilities and adequate
working capital.
On the basis of current financial projections, undrawn
facilities and level of working capital, the directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis
in preparing the annual report and accounts.
Key Risks and Uncertainties
Significant further downturn in the economy
The Group operates worldwide and, as with all international
companies, is susceptible to further downturns and current weakness
in the global economy. Whilst this is an external factor, and thus
beyond the Group's control, the Board regularly reviews its
progress against forecasts, in order that it is able to
appropriately adjust its business to any change in the economic
backdrop. Overall, Chrysalis is well diversified internationally,
with 47.7% of its revenue now derived from overseas territories up
from 43.6% last year. Lasgo Chrysalis's income is partially derived
from the UK retail market, which is particularly susceptible to a
downturn in the UK economy. In order to manage this risk Lasgo
Chrysalis has successfully broadened its customer base. Failure to
adjust to changes in the global economy as such could have a
material adverse effect on the Group's business, finances and
continuing operations.
Further decline in the sales of physical music/DVD product
Both Chrysalis Music and Lasgo Chrysalis are exposed to further
declines in the sales of physical music and DVD product.
The music industry continues to face the challenge of the
changing means by which consumers choose to access music, including
digital downloads, illegal downloading and pirated product, all of
which are contributing to a fall in the sale of physical product.
The industry still does not expect the downturn to be offset by new
digital and internet based revenue streams. Although as a music
publisher Chrysalis is, to a certain extent, protected from price
deflation in the physical recorded music market, owing to the
predominantly fixed nature of mechanical royalties, any decline in
the volume of sales of physical music product impacts the
mechanical royalty rates received by the Group and could have a
material adverse effect on the Group's business, financial
condition and/or results of operations.
80% of the revenue of Lasgo Chrysalis is generated by the sales
of physical music and DVD product. At a consumer level, there
continues to be a reduction in the average selling price of both of
these formats which could result in reduced revenue for the Group.
This risk is mitigated by sustained product diversification and
active stock controls. Lasgo Chrysalis will only purchase stock if
the price is right and the demand for the product is high. Lasgo
Chrysalis' stock holding is reviewed on a daily basis and should
slow moving lines be identified, then immediate action is taken to
remedy this.
Failure to fully exploit new growth areas
There are substantial new areas within the music industry to be
developed and exploited for financial benefit. These areas include
digital downloading, the use of music on social networking sites
and the use of music on mobile phones. In order to ensure that
industry participants can fully benefit from these new potential
areas of income, many industry participants, including the Group,
belong to a variety of international publishing societies, such as
the MCPS/PRS Alliance. These societies represent the music
publishing industry with respect to the negotiation of the payment
of royalties to publishers and songwriters by new media players, as
we do not have sufficient scale to carry out these negotiations
ourselves. Understanding and monetising the opportunities for the
Group's music publishing business in this new media environment are
an important part of the Group's growth strategy. Failure by the
Group to fully exploit the use of music in fast growing areas of
music consumption, such as social networking sites and digital
downloads, could have a material adverse effect on the Group's
business, financial condition and/or results of operations.
Failure to successfully integrate acquisitions
The Group regularly reviews potential acquisitions and uses
third party advisors, where necessary, to assist it in detailed
financial modelling of any potential acquisition to ensure such
potential acquisition meets the Group's growth strategy.
Acquisitions typically entail risks and could result in
difficulties in integrating the operations and personnel of
acquired businesses, so the Group has used third party consultants
to help in the integration process of acquisitions this year. If
the Group was not able to integrate acquisitions successfully,
there is a risk that an acquisition may fail to meet the necessary
financial targets or other anticipated advantages which could have
a material adverse effect on the Group's business.
Exchange rate risk
The non-UK entities within the Group transact and account in
their local currency. As the reporting currency of the Group is
sterling, these results are translated into sterling at the
applicable exchange rate. Adverse exchange rates could also impact
on the Group's import and export business. Therefore, any
significant foreign currency exchange rate fluctuations may have a
material adverse effect on the Group's business, consolidated
results of operations and/or financial condition. The Group
undertakes forward purchasing and sales of foreign currencies and
has hedging instruments in place within Chrysalis Music to mitigate
foreign exchange risk. In addition, fluctuations in exchange rates
could also significantly impact the comparability of the Group's
results of operations between financial years.
Interest rate fluctuations
The Group's borrowings are subject to floating interest rates
and it is therefore exposed to movements in interest rates. The
Group has entered into interest rate swaps to achieve a suitable
mix of fixed and floating interest exposure.
Loss of key individuals
There are a small number of Directors and key employees, whose
departure could, in the short term, adversely affect the Group. It
is the policy of the Group to provide competitive remuneration
packages to enable it to attract, retain and motivate executives of
the calibre and experience required, whilst cost-effectively
incentivising executives to deliver long-term Shareholder value.
Whilst the Group has ongoing service agreements with each of its
key personnel, their retention cannot be guaranteed. Any loss of
key individuals may have a material adverse effect on the Group's
business, financial condition and/or results of operations.
Consolidated income statement
For the year ended 30 September 2010
2010 2009
Note GBP'000 GBP'000
----------------------------------------------- ----- --------- ---------
Revenue 2 69,753 62,876
----------------------------------------------- ----- --------- ---------
Operating expenses (69,448) (60,655)
----------------------------------------------- ----- --------- ---------
Profit from operations 305 2,221
----------------------------------------------- ----- --------- ---------
Analysed as:
Operating profit before separately disclosed
items 5,312 3,344
Separately disclosed items 3 (5,007) (1,123)
----------------------------------------------- ----- --------- ---------
Finance income 170 374
Financing costs (4,126) (6,465)
Net financing cost 4 (3,956) (6,091)
----------------------------------------------- ----- --------- ---------
Share of (losses)/profits of equity accounted
investments (net of tax) (11) 28
----------------------------------------------- ----- --------- ---------
Loss before tax (3,662) (3,842)
Taxation (charge)/credit 5 (316) 116
----------------------------------------------- ----- --------- ---------
Loss for the year (3,978) (3,726)
----------------------------------------------- ----- --------- ---------
Attributable to:
Equity holders of parent (4,053) (3,856)
Minority interests 75 130
Loss for the year (3,978) (3,726)
----------------------------------------------- ----- --------- ---------
Loss per share (pence per share)
Basic and diluted loss per share 6 (6.04) (5.74)
Consolidated statement of comprehensive income
For the year ended 30 September 2010
2010 2009
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Loss for the year (3,978) (3,726)
Other comprehensive income
Exchange differences on translation of foreign operations 192 (313)
Movement in fair value of cash flow hedges (2,642) (2,328)
Amount recycled in respect of cash flow hedges 619 141
-------- --------
Total other comprehensive income (1,831) (2,500)
Total comprehensive income for the year (net of tax) (5,809) (6,226)
---------------------------------------------------------- -------- --------
Attributable to:
Equity holders of parent (5,872) (6,436)
Minority interests (equity interests) 63 210
---------------------------------------------------------- -------- --------
Total comprehensive income for the year (net of tax) (5,809) (6,226)
---------------------------------------------------------- -------- --------
Consolidated balance sheet
As at 30 September 2010
2010 2009
Notes GBP'000 GBP'000
------------------------------------------------ ------ --------- ---------
Assets
Goodwill 1,061 1,061
Other intangible assets 19,849 9,174
Property, plant and equipment 725 848
Total non-current assets 21,635 11,083
------------------------------------------------ ------ --------- ---------
Inventories 1,879 1,742
Trade and other receivables 29,429 26,607
Assets held for sale - 6,500
Cash and cash equivalents 9 26,429 22,947
------------------------------------------------ ------ --------- ---------
Total current assets 57,737 57,796
------------------------------------------------ ------ --------- ---------
Total assets 79,372 68,879
------------------------------------------------ ------ --------- ---------
Liabilities
Interest-bearing loans and borrowings (45,037) (33,876)
Deferred consideration (317) (313)
Provisions (339) (898)
------------------------------------------------ ------ --------- ---------
Total non-current liabilities (45,693) (35,087)
------------------------------------------------ ------ --------- ---------
Interest-bearing loans and borrowings (1,835) (4,826)
Trade and other payables (37,149) (27,839)
Provisions (73) -
Derivative financial instruments (5,049) (5,761)
------------------------------------------------ ------ --------- ---------
Total current liabilities (44,106) (38,426)
------------------------------------------------ ------ --------- ---------
Total liabilities (89,799) (73,513)
------------------------------------------------ ------ --------- ---------
Net current assets 13,631 19,370
------------------------------------------------ ------ --------- ---------
Net liabilities (10,427) (4,634)
------------------------------------------------ ------ --------- ---------
Equity attributable to equity holders of parent
Issued capital 1,343 1,343
Share premium 4 4
Merger reserve 1,343 1,343
Foreign exchange reserve (717) (921)
Hedging reserve (2,719) (696)
Other reserve 741 741
Retained deficit (10,714) (6,634)
------------------------------------------------ ------ --------- ---------
(10,719) (4,820)
Minority interests 292 186
------------------------------------------------ ------ --------- ---------
Total equity (10,427) (4,634)
------------------------------------------------ ------ --------- ---------
Consolidated statement of changes in equity
For the year ended 30 September 2010
Foreign
Share Share Merger exchange Hedging Other Retained Minority Total
capital premium reserve reserve reserve reserve earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- --------- -------- -------- --------- --------- --------- ---------
Balance at 1
October 2008 1,343 4 1,343 (529) 1,491 741 (2,778) 1,615 396 2,011
Loss for the
year - - - - - - (3,856) (3,856) 130 (3,726)
Other
comprehensive
income - - - (392) (2,187) - - (2,579) 79 (2,500)
Deemed
distribution - - - - - - - - (419) (419)
--------------- -------- -------- -------- --------- -------- -------- --------- --------- --------- ---------
Balance at 30
September
2009 1,343 4 1,343 (921) (696) 741 (6,634) (4,820) 186 (4,634)
Loss for the
year - - - - - - (4,053) (4,053) 75 (3,978)
Other
comprehensive
Income - - - 204 (2,023) - - (1,819) (12) (1,831)
Acquisition of
minority
shareholding - - - - - - 391 391 (125) 266
Adjustment to
carrying
value of
minority
interest - - - - - - (418) (418) 168 (250)
--------------- -------- -------- -------- --------- -------- -------- --------- --------- --------- ---------
Balance at 30
September
2010 1,343 4 1,343 (717) (2,719) 741 (10,714) (10,719) 292 (10,427)
--------------- -------- -------- -------- --------- -------- -------- --------- --------- --------- ---------
Consolidated cash flow statement
For the year ended 30 September 2010
2010 2009
Note GBP'000 GBP'000
-------------------------------------------------- ----- -------- ---------
Cash flows from operating activities
Loss for the year (3,978) (3,726)
-------------------------------------------------- ----- -------- ---------
Adjustments for:
Depreciation 317 475
Finance income (170) (374)
Financing costs 4,126 3,233
Share of profits of equity accounted investments 11 (28)
Separately disclosed items 3 2,549 5,006
Gain on sale of property, plant and equipment 201 -
Income tax (charge)/credit 316 (528)
Restructuring costs of acquired business 2,474 -
Non-cash items (56) (195)
-------------------------------------------------- ----- -------- ---------
5,790 3,863
Decrease/(increase) in trade and other
receivables 221 (3,257)
(Increase)/decrease in inventories (137) 485
(Decrease)/increase in trade and other
payables 1,188 672
Decrease in provisions (516) (313)
-------------------------------------------------- ----- -------- ---------
6,546 1,450
-------------------------------------------------- ----- -------- ---------
Interest received 170 374
Interest paid (3,566) (2,718)
Income tax paid (392) 59
-------------------------------------------------- ----- -------- ---------
(3,788) (2,285)
-------------------------------------------------- ----- -------- ---------
Net cash generated by/(used in) operating
activities 2,758 (835)
-------------------------------------------------- ----- -------- ---------
Cash flows from investing activities
Acquisition of subsidiary undertakings,
net of cash and cash equivalents (6,712) -
Acquisition of intangible assets (225) (4,904)
Acquisition of property, plant and equipment (414) (295)
Receipt/(payment) in respect of pension
scheme buyout - 1,495
Proceeds from the sale of property, plant
and equipment 48 -
Loans repaid by/(advanced to) equity accounted
investments 31 48
-------------------------------------------------- ----- -------- ---------
Net cash from investing activities (7,272) (3,656)
-------------------------------------------------- ----- -------- ---------
Cash flows from financing activities
Repayment of borrowings - (12,700)
New borrowings 10,000 15,500
-------------------------------------------------- ----- -------- ---------
Net cash (used in)/from financing activities 10,000 2,800
-------------------------------------------------- ----- -------- ---------
Net increase in cash and cash equivalents
in continuing operations 5,486 (1,691)
Cash and cash equivalents at beginning
of the year 19,188 20,406
Effects of exchange rate changes on cash
and cash equivalents (80) 473
-------------------------------------------------- ----- -------- ---------
Cash and cash equivalents at end of the
year 24,594 19,188
-------------------------------------------------- ----- -------- ---------
Notes to the consolidated accounts
1. Accounting Policies
Basis of preparation
The Group financial statements consolidate those of Chrysalis
PLC and its subsidiaries (together referred to as the "Group") and
the Group's interest in jointly controlled entities. Except for as
described below, the financial statements have been prepared on the
basis of the accounting policies set out on pages 52 to 58 of the
Chrysalis PLC Annual Report and Accounts for 2009.
As required by EU law (IAS Regulation EC 1606/2002) the Group's
accounts have been prepared in accordance with International
Financial Reporting Standards adopted by the International
Accounting Standard Board (IASB), as adopted by the EU ("Adopted
IFRS").
The accounts are principally prepared on the historical cost
basis except for derivative financial instruments which are stated
at their fair value. Assets held for sale are stated at the lower
of previous carrying amount and fair value less costs to sell.
Except as noted below these accounting policies have been applied
consistently in presenting the consolidated financial
information.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 30 September 2010
and 30 September 2009. The financial information for 2009 is
derived from the statutory accounts for 2009 which have been
delivered to the registrar of companies, and those for 2010 will be
delivered in due course. The auditors have reported those accounts.
Their reports were (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 498 (2) or (3) of the Companies
Act 2006, in respect of the accounts for 2009 and 2010.
Standards affecting presentation and disclosure
- IAS 1 (revised 2007) Presentation of Financial Statements
requires the presentation of a statement of changes in equity as a
primary statement, separate from the income statement and statement
of comprehensive income. A consolidated statement of changes in
equity has been included in the primary statements, showing changes
in each component of equity for each year presented.
- IFRS 8 Operating segments requires operating segments to be
identified on the basis of internal reports about components of the
Group that are regularly reviewed by the Group's chief operating
decision-maker, which in the case of Chrysalis PLC is its senior
executive team, to allocate resources to the segments and to assess
their performance. Internal reports include GAAP and non-GAAP
measures, including revenue, operating profit and NPS. As NPS is
considered to be a key measure of the performance of the Group and
industry, this is now included in our segment information in Note
2. This standard has not resulted in any change to the Group's
reportable segments.
These standards only affect the presentation and disclosures
required in financial statements and accordingly have no impact on
the results of the Group. Comparative amounts have been represented
in conformity with the transitional requirements of these
standards.
1. Accounting Policies (continued)
Standards affecting the reported results and financial
position
IFRS 3 (revised 2008) Business Combinations and IAS 27 (revised
2008) applies to all acquisitions by the Group completed after 1
October 2009. For any such business combinations:
- All acquisition-related costs must be expensed as they are
incurred.
- Contingent consideration must be measured at fair value at the
acquisition date and form part of the total consideration.
Subsequent changes in fair value must be recognised in profit or
loss as they arise.
- Where step acquisitions occur, the equity holding at the date
on which control is achieved must be re-measured to its fair value
at that date, with the difference between carrying value and fair
value recognised in profit or loss.
- Transactions between equity holders, including increases or
decreases in ownership that do not result in a change of control,
are reported within equity with no impact on profit or loss.
This standard applies prospectively and therefore has no impact
on acquisitions completed by the Group prior to 1 October 2009.
Use of non-GAAP profit and loss measures
The Group believes that along with operating profit/ (loss), the
following measures:
- normalised operating profit;
- normalised profit before interest, tax and amortisation;
- normalised profit before tax; and
- net publishers' share
Provide additional guidance to the statutory measures of the
performance of the business during the financial year.
Normalised measures are stated before separately disclosed
items. These items comprise individually significant items, by size
or nature, which the Group believes should be separately disclosed
to assist in the understanding of the business.
Net publisher's share ("NPS") is the revenue received by a music
publisher, less any royalties that have to be paid to writers,
performers and others receiving a share of royalties. Further
details are included in Note 2.
None of the these non-GAAP profit and loss measures set out
above are Adopted IFRS and therefore may not be directly comparable
with other companies' adjusted profit measures. They are not
intended to be a substitute for or superior to Adopted IFRS
measurements of profit.
2. Segmental reporting
(a) Business analysis (primary segment)
Revenue 2010 2009
GBP'000 GBP'000
------------------------------ -------- --------
Publishing
- Chrysalis Music 38,368 35,931
- Chrysalis One 5,279 -
Non-publishing 4,135 3,233
Lasgo Chrysalis 21,971 23,712
------------------------------ -------- --------
69,753 62,876
------------------------------ -------- --------
2010 2009
---------------------------------- ----------------------------------
Separately Separately
disclosed disclosed
items items
Normalised (Note 4) Total Normalised (Note 4) Total
Segment result GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ----------- ----------- -------- ----------- ----------- --------
Publishing
-
Chrysalis
Music 2,633 (1,127) 1,506 2,203 (274) 1,929
-
Chrysalis
One 693 (2,742) (2,049) - - -
Non-publishing 1,824 - 1,824 756 - 756
Lasgo Chrysalis 1,750 - 1,750 2,036 - 2,036
Corporate (1,588) (1,138) (2,726) (1,651) (849) (2,500)
---------------------- ----------- ----------- -------- ----------- ----------- --------
Operating profit 5,312 (5,007) 305 3,344 (1,123) 2,221
Net finance costs (3,734) (222) (3,956) (2,859) (3,232) (6,091)
Share of
(loss)/profits of
equity accounted
investments (11) - (11) 28 - 28
---------------------- ----------- ----------- -------- ----------- ----------- --------
Profit/(loss) before
tax 1,567 (5,229) (3,662) 513 (4,355) (3,842)
Tax (charge)/credit (316) - (316) 116 - 116
---------------------- ----------- ----------- -------- ----------- ----------- --------
Profit/(loss) for
the year 1,251 (5,229) (3,978) 629 (4,355) (3,726)
---------------------- ----------- ----------- -------- ----------- ----------- --------
2010 2009
------------------------------------- -------------------------------------
Net Other Normalised Net Other Normalised
publisher's operating operating publisher's operating operating
share expenses profit share expenses profit
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------------ ---------- ----------- ------------ ---------- -----------
Publishing
-
Chrysalis
Music 13,453 (10,820) 2,633 12,271 (10,068) 2,203
-
Chrysalis
One 1,320 (627) 693 - - -
Non-publishing 1,942 (118) 1,824 1,140 (384) 756
---------------------- ------------ ---------- ----------- ------------ ---------- -----------
Consolidated net
publisher's share 16,715 (11,565) 5,150 13,411 (10,452) 2,959
---------------------- ------------ ---------- ----------- ------------ ---------- -----------
3. Separately disclosed items
Separately disclosed items impact operating profit/(loss) and
net finance (cost)/income as follows:
2010 2009
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Amortisation of intangible assets (1,490) (274)
Profit on disposal of freehold land and buildings (a) 91 -
Profit on surrender of vacant properties (b) 75 -
Acquisition of subsidiary (c) (2,433) -
Reorganisation of Chrysalis Germany (d) (459) -
Costs relating to a potential transaction (e) (191) -
Costs relating to vacant properties (f) (432) -
Costs relating to minority holdings (g) (168) -
Lease surrender premium (h) - 740
Redundancy costs (i) - (89)
Impairment of land and buildings (j) - (1,500)
--------------------------------------------------- ----- -------- --------
Operating loss (5,007) (1,123)
Net finance cost (k) (222) (3,232)
--------------------------------------------------- ----- -------- --------
Total separately disclosed items (5,229) (4,355)
---------------------------------------------------------- -------- --------
30 September 2010
(a) This relates to the net profit on the disposal of the
Group's freehold property at Bramley Road. The Group entered into a
fixed term operating lease over certain floors and its UK
operations continue to be based there.
(b) This relates to the net profit on the surrender of the
operating lease over vacant office space, resulting from the
disposal of Chrysalis Radio in 2007, including the release of the
balance of the vacant property provision.
(c) This relates to costs incurred in completing the acquisition
and integration of First State Media Group into the Group's
existing operations. The costs incurred relate primarily to
redundancy costs (GBP1.5m), vacant property costs (GBP0.2m) and
other professional fees (GBP0.7m).
(d) Following the acquisition of the First State Media
operations in Berlin (now known as Chrysalis One Germany), a
decision was taken to reorganise our overall German operations.
This involved the relocation of the Chrysalis Music German
operation from Munich to Berlin. The cost relates principally to
redundancy and relocation costs. The relocation is expected to be
complete by 31 December 2010.
(e) This relates to the legal and other professional fees
incurred in anticipation of a potential transaction which was
ultimately terminated.
(f) This relates to the vacant property costs in the United
Kingdom.
(g) This relates to the write-down of certain balances in
respect of a partially owned subsidiary.
(k) This relates to the ineffective portion of the fair value
movements of derivative financial instruments.
30 September 2009
(h) This relates to a lease surrender premium received from
Global Radio following its early termination of operating leases
over office space.
(i) This comprises redundancy payments and associated costs of
reorganising the corporate function.
(j) This relates to an impairment loss recognised against land
and buildings held for sale to reflect the current fair value.
4. Net financing (costs)/income
2010 2009
GBP'000 GBP'000
------------------------------------------ -------- --------
Bank loans and overdrafts (3,607) (2,694)
Amortisation of issuance costs
on securitisation loan (228) (227)
Loss on derivative financial instruments
on remeasurement to fair value (222) (3,232)
Loss on settlement of derivative
financial instruments - (141)
Unwinding of discount (30) (39)
Other (39) (132)
------------------------------------------ -------- --------
(4,126) (6,465)
Bank interest receivable 170 374
------------------------------------------ -------- --------
(3,956) (6,091)
------------------------------------------ -------- --------
5. Taxation (charge)/credit
2010 2009
GBP'000 GBP'000
---------------------------------------------- -------- --------
UK Corporation tax
Current tax credit on income for the year at
28% (2009: 28%) 6 488
Refund in respect of previous years 68 -
Overseas tax
Current tax charge on income for the year at
28% (2009: 28%) (196) (267)
Withholding taxes (194) (105)
---------------------------------------------- -------- --------
(316) 116
---------------------------------------------- -------- --------
Reconciliation of notional tax (charge)/credit at UK standard
rate to the actual charge
2010 2009
GBP'000 GBP'000
------------------------------------------------- -------- --------
Loss before tax 3,662 3,842
Notional tax credit at UK standard rate of 28%
(2009: 28%) 1,025 1,076
Utilisation of tax losses 511 377
Non-deductible expenses (47) (470)
Non utilisation of tax losses (1,919) (848)
Depreciation in excess of capital allowances (33) (113)
Hedging losses/profits not taxable (62) (905)
Withholding tax written off (194) (105)
Adjustment to prior year provisions/assessments (68) 410
Other timing differences 471 694
------------------------------------------------- -------- --------
(316) 116
------------------------------------------------- -------- --------
The difference between the tax credit and the standard rate of
corporation tax of 28% is mainly due to the availability of
losses.
6. Loss per share
2010 2009
GBP'000 GBP'000
-------------------------------------------- -------- --------
Loss attributable to equity holders of
parent (4,053) (3,856)
Separately disclosed items 5,229 4,355
-------------------------------------------- -------- --------
Normalised loss after tax 1,176 499
-------------------------------------------- -------- --------
Weighted average number of shares in issue
('000)
Basic and diluted 67,143 67,143
-------------------------------------------- -------- --------
Loss per share
Basic and diluted (6.04)p (5.74)p
-------------------------------------------- -------- --------
Normalised earnings per share
Basic and diluted 1.75p 0.74p
-------------------------------------------- -------- --------
7. Acquisition of subsidiary
On 1 April 2010, the Group acquired 100% of the issued share
capital of Chrysalis One Music Publishing Group Ireland Limited
(formerly know as First State Media Group Ireland Limited) for a
cash consideration of GBP10.9m. This acquisition is in line with
the Board's stated strategy of acquiring suitable new
catalogues.
Provision details of the net assets acquired and fair value
adjustments are set out below. The analysis is provisional and
amendments may be made to these figures in the 12 months following
the date of the acquisition, with a corresponding adjustment to
goodwill.
Fair value
Book value adjustments Fair value
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ------------- -----------
Intangible assets 568 11,305 11,873
Property, plant and equipment 41 - 41
Trade and other receivables 2,952 - 2,952
Cash and cash equivalents 4,234 - 4,234
Trade and other payables (8,154) - (8,154)
------------------------------------- ----------- ------------- -----------
Net assets acquired (359) 11,305 10,946
Total consideration satisfied in
cash 10,946
------------------------------------- ----------- ------------- -----------
Fair value adjustments of GBP0.6m were made to write-off owned
music catalogues. The intangible asset of GBP11.9m represents the
value placed on the Fund agreement to administer the copyright
assets on behalf of FS Media Works Fund 1 and is being amortised
over the life of the contract, six years.
Chrysalis One Music Publishing Group Ireland Limited contributed
GBP5.3m to revenue and a loss of GBP2.0m to loss before tax for the
period between the date of acquisition and the balance sheet
date.
If the acquisition of Chrysalis One Music Publishing Group
Ireland Limited had been completed on the first day of the
financial year, its contribution to Group revenues for the year
would have been GBP11.2m and its contribution to Group profit
attributable to equity holders of the parent would have been a loss
of GBP1.8m.
8. Cash and cash equivalents
2010 2009
GBP'000 GBP'000
-------------------------------------------- -------- --------
Cash and cash equivalents per balance
sheet 26,429 22,947
Bank overdrafts (1,835) (3,759)
-------------------------------------------- -------- --------
Cash and cash equivalents in the statement
of cash flows 24,594 19,188
-------------------------------------------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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