Pinewood Shepperton plc

Interim Results for the Six Months Ended 30 June 2008

Pinewood Shepperton, the leading European provider of studio and related services to the film and television industry, announces its interim results for the six months to 30 June 2008.

Highlights

• Revenue of £21.7m (2007: £18.3m)

• Operating profit of £4.8m (2007: £3.6m)

• Profit before tax of £3.8m (2007: £2.9m)

• Diluted earnings per share 7.4p (2007: 5.9p)

• Diluted earnings per share, adjusted for the effects of indexation on deferred tax, 5.9p (2007: 4.9p)

• Interim dividend up 5% to 1.05p (2007: 1.00p)

• New five year banking facilities of £70m arranged in August 2008 

• Media Park development strategy progressing: 

• • Construction of 42,000 sq ft Technicolor building on schedule and on budget at Pinewood studios

  • Panalux takes occupation of a redeveloped 16,500 sq ft building at Pinewood studios

  • 60,000 sq ft Gainsborough building at Shepperton studios completed and two thirds occupied in May 2008

• Preparation of planning application for Project Pinewood progressing well

Commenting on today's results, Ivan Dunleavy, Chief Executive of Pinewood Shepperton plc, said:

"The past six months have continued to demonstrate Pinewood Shepperton's ability to diversify and deliver consistent revenue streams even in times of wider economic uncertainty."

Enquiries

A presentation of the results of the Group will be available on Pinewood Shepperton's website: www.pinewoodgroup.com from 12pm today. 

Operating review

Film

Pinewood Shepperton's Film revenues for the first six months of 2008 highlight its ability to deliver consistent revenues in times of wider economic uncertainty.

Film revenues for the six months ended 30 June 2008 of £13.0m (2007: £10.8m) benefitted from the continuation of production of a number of major films carried over from 2007. The largest production based at the studios during the period was the latest 'Bond' film, 'Quantum of Solace' (Sony/Eon). Other major productions included 'The Boat That Rocked' (Working Title) and 'The Wolfman' (Universal). 

Sterling, relative to other international currencies, has gradually improved for our US based customers, which together with the new UK film tax regime, continues to make film production in the UK a relatively attractive option for US studios in comparison to other international locations. 

At the end of the first half of 2008, the Screen Actors Guild of America (SAG) began negotiations with the major US studios that currently remain unresolved.  A new Executive Board for SAG is due to be appointed in September 2008 and US studios anticipate that a resolution to the dispute will be reached thereafter. The Board continues to monitor the situation which, if not resolved, may impact Film revenues in 2009. 

Television 

Television revenues for the first half of 2008 were £5.8m (2007: £4.7m). Over the past six months the Group has continued to provide the following television facilities and services: dedicated studios, channel hosting, post-production, filmed production and television commercials, demonstrating the versatility of its facilities. 

During the first half of 2008, the Group welcomed major television productions including Gladiators, The Lily Allen Show, New Tricks, Little Dorrit and King Lear and has seen repeat business from longstanding productions such as Dragons' Den, My Family and The Weakest Link. The Group is also successfully attracting commercials into the studios, whilst the channel hosting business at Teddington continues to make a significant contribution to Television revenues as these facilities expand to meet growing demand.  

The Group maintains its strategic aim of diversifying its revenues and developing desirable hubs for the wider creative industries in the UK. Television is a key component of the creative industries and the gradual upgrading of television studio facilities at Pinewood and Teddington continues to ensure that targeted investment in high definition technology meets the requirements of major customers.

Media Park 

Media Park income for the six months to 30 June 2008 was £2.9m (2007: £2.8m) after accounting for the Group's 50% interest in Shepperton Studios Property Partnership ('SSPP'). Over 290 businesses now operate from the Group's studios offering a variety of services to the media industry.

Media Park has delivered a stable performance as the Group expands capacity and seeks to implement its master planning consents when pre-lets from major tenants are secured. Developments included the 16,500 sq ft facility for Panalux Limited (Panalux), completed and occupied in the first half of 2008, and Technicolor Limited's (Technicolor) 42,000 sq ft pre-let, which is on schedule and on budget for completion towards the end of 2008. 

Shepperton Studios Property Partnership

The joint venture partnership at Shepperton Studios delivered, on schedule and on budget, the 60,000 sq ft Gainsborough building which was opened in May 2008. The new building provides 40,000 sq ft of additional workshop and production facilities, which were immediately utilised by a film production customer. The remaining 20,000 sq ft is now being marketed by the Partnership. Further developments will be in accordance with the Partnership's defined pre-let strategy which requires commitment from a major tenant to occupy a significant proportion of a development.

Project Pinewood 

Project Pinewood is a long term scheme to create a living and working community for the creative industries. The Board expects that following public consultation, a planning application will be made during the fourth quarter of 2008. Development of the scheme will be commenced in collaboration with appropriate partners once planning consent is granted. Total costs incurred to 30 June 2008 were £1.3m, and it is anticipated that a total of £3.0m will be incurred progressing the application to submission by the year end. These costs are included in 'Property, plant and equipment' on the balance sheet. 

Current Trading and Outlook  

The Group's diversification and growth strategy is proving well founded. The Group is pleased to have concluded new financing arrangements that will support its growth strategy for the next five years. The level of visibility on prospective revenues reinforces the Board's confidence in the outlook for the year as a whole.

Ivan Dunleavy

Chief Executive

Financial Review

Revenue

Total revenues for the six months ended 30 June 2008 were £21.7m (2007: £18.3m). Film revenues were £13.0m (2007: £10.8m) generated from the demand for stages and facilities by several large productions. Television revenues of £5.8m (2007: £4.7m) benefited from increased utilisation of Teddington and Pinewood digital television studios. Media Park revenue grew modestly to £2.9m (2007: £2.8m), net of the joint venture partner's 50% interest in Shepperton Studios Property Partnership.

Profit performance 

Gross margin for the period was 42.1% (2007: 38.7%) with operating margin at 22.3% (2007: 19.9%). Reported EBITDA was £6.6m (2007: £5.1m). The improvement in margins and EBITDA is as a result of the impact of operational gearing in the business despite a hardening market for utility costs to which the Group is partially exposed. 

Profit before tax was £3.8m (2007: £2.9m), the increase, compared to 2007, being generated from the improved performance in Film and Television revenues.

Earnings per share 

Basic earnings per share for the period were 7.5p (2007: 5.9p). Basic earnings per share for the period, after adjusting for the effects of indexation on the deferred tax charge, were 6.1p (2007: 4.9p). Diluted earnings per share for the period were 7.4p (2007: 5.9p). Diluted earnings per share, after adjusting for the effects of indexation on the deferred tax charge, were 5.9p (2007: 4.9p). The increases in basic and diluted earnings per share, before and after adjustments, are predominantly due to improved trading.

Diluted and weighted average number of shares in issue in the six months to 30 June 2008 was 46,971,000 (2007: 45,886,000), including the awards granted under the Long Term Incentive Plan during the period.

Dividend

The Board has declared an interim dividend for 2008 of 1.05p per share (2007: 1.00p per share), an increase of 5% reflecting the Board's confidence in the business. The dividend is to be paid on 7 November 2008 to shareholders on the register on 10 October 2008 (ex dividend date 8 October 2008). 

Cash flow and net debt 

Net cash flow from operating activities generated during the six months to 30 June 2008 was £4.2m (2007: £2.5m), the increase resulted from improved trading.

During the period £9.4m (2007: £7.0m) was spent on capital expenditure, the major items being: 

• Pre-let developments at Pinewood for Technicolor and Panalux of £3.6m

• Lifecycle and infrastructure investment of £2.8m

• The Group's share in the Gainsborough development at Shepperton of £2.3m

• Project Pinewood costs of £0.7m

The Group's net debt at 30 June 2008 was £36.4m (30 June 2007: £21.5m), which included £11.4m (30 June 2007: £10.0m) relating to the Group's 50% share of the non-recourse Aviva loans to the Shepperton Studios Property Partnership. 

At 31 December 2007 net debt was £30.1m. The increase since that date reflects the ongoing investment commenced in 2007 on key capital projects. These include the pre-let developments for Technicolor and Panalux at Pinewood and also the Group's share of the investment in the Gainsborough building at Shepperton.

In anticipation of the expiry in May 2009 of the banking facilities negotiated at the time of the Initial Public Offering in 2004, the Group completed new five year financing facilities in August 2008.  The new banking arrangements support continuing growth in the Group's core film, television, and pre-let development strategies.

The new £70.0m banking facilities comprise a £35.0m revolving credit facility, a £30.0m pre-let development facility and a £5.0m overdraft facility secured by a floating charge over the Group's directly owned assets. The pricing of these facilities reflects current market conditions - margins are variable and will fall in a range of 175 to 225 basis points over LIBOR. 

The new banking facilities are in addition to those which continue to be provided to Shepperton Studios Property Partnership by our joint venture partner which total £40.0m. To the extent these loans are drawn (£22.8m at 30 June 2008) they are 50% consolidated in the Group's balance sheet ( £11.4m at 30 June 2008).
 

Interest

Finance costs for the six months to 30 June 2008 were £1.0m (2007: £0.8m), reflecting the increased capital expenditure in the Group. Interest cover for the six months, based on operating profit, was a satisfactory 4.6 times compared to 4.8 times for the same period in 2007. 

Hedging

Pinewood Shepperton uses an interest rate derivative to manage its interest exposure. At 30 June 2008 £7.5m of the Group's drawn revolving credit facility, which amounts to £26.0m, was subject to an interest rate swap.  The Board intends to hedge up to 50% of drawings under the new banking facilities. The non-recourse facility within the joint venture is a floating rate facility with the margin geared to base rate.  

Taxation

The current corporation tax expense for the six months to 30 June 2008, based on profit before tax of £3.8m was £1.2m (2007: £0.9m), a current tax rate of 31% (2007: 32%). After adjusting for the effect indexation has on deferred tax liabilities the effective rate was 9% (2007: 5%).

Patrick Garner FCA

Finance Director

  Interim consolidated income statement

for the six months ended 30 June 2008

Interim consolidated balance sheet 

at 30 June 2008

The financial statements were approved by the Board of Directors on 27 August 2008 and are signed on its behalf by:

Patrick Garner FCA

Finance Director

Interim consolidated cash flow statement

for the six months ended 30 June 2008