RNS Number:6277F
Capital Radio PLC
25 November 2004
Preliminary results for the year ended 30 September 2004
25th November 2004
Underlying Financial Highlights
* Group revenue up 4% to #119.9m (2003: #115.3m)
* Group profit before taxation up 4% to #23.7m (2003: #22.8m)
* Strong cash generation: 106% (2003: 110%) of operating profit converted
into cash
* Strong balance sheet: net debt only #27.0m (2003: #27.6m) with interest
cover of 15x (2003: 16x)
* Earnings per share up 4% to 20.1p (2003: 19.3p)
* Total dividend of 18.5p (2003: 18.5p)
Highlights
* Announced merger to create the UK's leading commercial radio group
* Commercial brand leadership held in London
* Johnny Vaughan number one despite fierce competition
* Successful acquisition of Choice FM
* Growth at Xfm and Choice FM positions both brands for further investment
* Significant successes outside London - record revenue and profit for
Century
Statutory Results
* Profit before tax #12.6m (2003: #13.3m)
* Basic earnings per share of 7.1p (2003: 7.7p)
* Net cash inflow from operating activities #25.5m (2003: #27.0m)
David Mansfield, Chief Executive, commented:
"In 2004, we delivered the Group's best year on year growth performance for four
years and retained commercial brand leadership in the important London market.
We continue to strengthen our brands and we will be stepping up our investment
in Xfm and Choice FM during 2005. Despite a tough advertising quarter, we remain
confident in the prospects for radio. We believe our proposed merger will bring
benefits to listeners, advertisers and shareholders and leave us well-positioned
to compete more effectively against the BBC."
Enquiries:
Capital Radio plc 020 7766 6119 / 6484
David Mansfield, Chief Executive
Peter Harris, Finance Director
Jane Wilson, Communications Director
Finsbury Group 020 7251 3801
Rupert Younger
Julius Duncan
'Underlying' results are presented to provide a better indication of overall
financial performance. The 'underlying' results exclude goodwill amortisation
and exceptional items. 'Underlying operating profit converted into cash'
represents underlying operating profit adjusted for movements in working
capital, non-operating cash items and capital expenditure net of depreciation
expressed as a percentage of underlying operating profit.
Preliminary results for the year ended 30 September 2004
25th November 2004
Strengthening our key marketplace and exploiting growth opportunities
Capital Radio plc today announces preliminary results for the year to 30
September 2004.
Introduction
In the 12 months to 30 September 2004, advertising market conditions began to
show some signs of improvement for the Group and the industry as a whole. Our
like for like revenues increased by 4%, the best performance in terms of year on
year growth for 4 years.
During this period, we continued our strategy of growing a portfolio of
complementary national brands with strong local appeal. This strategy has been
most apparent in the key London market where we completed the acquisition of
Choice FM. We also successfully launched the new 95.8 Capital FM Breakfast Show
with Johnny Vaughan and have seen encouraging results among women and younger
listeners. Across London, in an increasingly competitive marketplace, the Group
maintained its commercial leadership position, supported by encouraging
performances from Xfm and Choice FM.
Outside London, we have seen considerable success at our Century FM Network,
with 105.4 Century FM maintaining its position as the Northwest's leading
commercial radio station. We are also seeing early success from the national
growth of Xfm and Capital Gold with both stations attracting additional
listeners outside their analogue transmission areas. Xfm has been particularly
successful in monetising this new audience and is now sold to advertisers as a
national proposition.
This was a challenging year for commercial radio as a resurgent BBC achieved the
highest share of listening that it has ever enjoyed under RAJAR. We believe that
the BBC's programming should be complementary to commercial TV and radio and
thus create a more level playing field and greater consumer choice.
Consequently, we are working hard with the government to ensure that the BBC
charter renewal benefits the listener and the viewer and we are encouraging the
Department of Culture, Media & Sport (DCMS) and Ofcom to examine the BBC's
public service remit.
Merger with GWR Group plc
In September, we announced our ambition to take advantage of the new regulatory
environment with a proposed all-share merger with GWR Group plc to create the
UK's leading commercial radio group. With a more focused investment in talent
and resources, particularly in the digital future, we believe that this merger
will enable us to attract more listeners and compete more effectively against
the BBC. The Merger is conditional on regulatory approval and is currently being
examined by the OFT and Ofcom. Their views are likely to be published before the
end of the calendar year.
Current Trading and Prospects
The quarter from October to December is looking more challenging as the market
has seen some slow down in spend among key advertisers, particularly FMCG
clients. Revenue in October was down 7% against a relatively strong performance
during the same period last year and November looks likely to be down around 5%.
December is showing a slight improvement on this trend but is still likely to be
down marginally year on year.
We remain optimistic about the prospects for radio in general and believe that
it will continue to out-perform the display advertising market for the
foreseeable future.
Financial Review
The advertising environment improved slightly in 2004 despite increased
competition in our local markets. The Group's revenue was up 4% year on year at
#119.9 million.
The Capital FM Network saw a decline in revenue due to audience pressures at
95.8 Capital FM and BRMB. The Century FM network showed a very impressive
revenue performance with growth in revenue of over 35% compared with last year.
Xfm also performed well with its advertising revenues up over 20% year on year.
Choice FM, which we acquired in March 2004, is off to an encouraging start with
its like for like revenues up over 20% since acquisition. The Capital Gold
network suffered as audiences and advertisers increasingly became challenged
with the AM frequency. We believe that the advent of digital radio will greatly
improve the prospects for this brand.
Group operating profit before goodwill and exceptional items increased 8% to
#23.7 million and analogue radio profit was up 11% to #29.1 million. During the
year we increased marketing investment at 95.8 Capital FM around the launch of
the Johnny Vaughan breakfast show. However, the Group's overall marketing budget
remained the same year on year as we diverted resources from other group
stations. Costs were closely managed resulting in an increase in our underlying
operating margins.
Underlying Group profit before tax increased 4% year on year to #23.7 million.
The effective rate of tax on our underlying profits for the year was 29.0%
(2003: 30.5%) and our underlying earnings per share was 20.1p (2003: 19.3p).
The profit before tax was #12.6 million (2003: #13.3 million). Basic earnings
per share was 7.1p (2003: 7.7p).
Our associated companies contributed #1.6 million (2003: #2.1 million) to the
Group's profitability, before a tax, interest and goodwill amortisation charge
of #0.6 million (2003: #0.8 million).
We invested #5.4 million (2003: #4.2 million) in our wholly owned digital
operations, and our net investment in digital radio, including our associated
companies, was #4.9 million (2003: #3.6 million). As a major player in the
development of digital radio, it remains a key part of our strategy for growth.
In the coming financial year, as more of our radio brands are transmitted on
digital platforms, we plan to increase our investment in our wholly owned
digital operations by an additional #0.8 million to #6.2 million.
Xfm is now included in the national RAJAR survey, adding 107,000 listeners to
the station on digital platforms in addition to its analogue listener base. This
has created additional revenue opportunities for the Group and we anticipate
that the majority of our brands will be in the national RAJAR sample by the end
of next year. At our interim results in May, we reported ongoing annual savings
of #2 million from savings in sport commentary costs. We are planning to
re-invest #1.5 million of these savings behind Xfm and Choice this year, in
order to ensure we gain maximum commercial advantage in building our London
portfolio.
Our cash generation remained exceptionally strong with 106% of our underlying
operating profit being converted into trading cashflow. Net cash inflow from
operating activities was #25.5 million (2003: #27.0 million). After dividend
payments of #15.3 million (2003: #15.2 million) and tax payments of #6.2 million
(2003: #7.2 million), our net debt was reduced by #0.6 million to #27.0 million
(30 September 2003: #27.6 million).
Interest cover on our continuing radio business was 15x (2003: 16x), with a net
interest charge of #1.6 million (2003: #1.5 million).
Dividend
Our strong balance sheet and robust cash flow position allows us to maintain the
dividend level. Therefore, the Directors are recommending a final dividend of
12.5p per share to be paid on 28 January 2005 to shareholders on the register on
3 December 2004 (ex dividend date 1 December 2004). Including the interim
dividend of 6.0p, our total dividend for 2004 is unchanged year on year at 18.5p
per share.
Operating Review
Audiences
In the last published RAJAR figures for the quarter to September 2004, Capital
Radio remained the UK's most listened to local commercial radio group. We
attracted almost 7.8 million listeners, 54,000 more than the same period last
year and saw some notable successes across the Group.
In London, the Group (now including Choice FM) grew reach to 3.07 million
listeners while commercial market share also rose to 23.4%.
The Capital FM Network
In the past year, the Capital FM Network has continued to operate as a branded
radio network with two strengthened, management teams focused on the flagship
London station, 95.8 Capital FM, and the regional stations respectively.
At 95.8 Capital FM, the key challenges have been to build on early improvements
to the schedule, to succeed in an increasingly fragmented and competitive London
market and to successfully launch a new breakfast show after 17 years. In the
last RAJAR results, while increasing share of listening quarter on quarter, 95.8
Capital FM also increased reach, widening the gap on our nearest commercial
competitor. In its first full set of RAJAR results, the Breakfast Show with
Johnny Vaughan remained the number one commercial radio breakfast show in London
and is off to a good start. Importantly, the show is attracting a greater
proportion of females and target 15-34 year olds than the same period last year
and we remain extremely confident in the show's growth prospects.
Across the schedule, we have continued our revitalisation strategy with a
refreshed presenter line-up, new features and increased listener interactivity
through text, web, email and telephone services. Our future ambitions for 95.8
Capital FM are to continue to grow our leadership position both in reach and
share of commercial listening, to establish the Breakfast Show with Johnny
Vaughan and to be the first choice for active Londoners.
Throughout the rest of the Capital FM Network, we have seen a solid set of
audience figures across the year. Birmingham's BRMB and Beat 106 in central
Scotland, continue to be the key focus. In the last set of RAJAR figures, BRMB
increased share for the second consecutive quarter whilst Beat 106 attracted
30,000 more listeners than the previous quarter and increased share to 6.4%. In
South Wales, Red Dragon has also had a good year, matching its highest ever
listening figures during the period. Our future ambitions for the network are to
focus on growing our local listeners and maximising the revenue opportunities
they bring.
Xfm
2004 has been a year of UK wide audience growth for Xfm. With 679,000 listeners,
the last set of RAJAR results showed an increase of 7% year on year. Now
available on more platforms than ever (Sky, ntl, Telewest, Homechoice and 18 DAB
digital radio licences), it is being successfully sold to advertisers as a
national station. Off-air, we continued our brand extension activities. While we
made the decision not to continue with X-Ray magazine in its current format, we
took a number of other successful brand extension and marketing opportunities
forward. These included Xfm's song for Euro 2004 'Born in England' reaching the
top ten, The Xfm Show on Sky Television channel The Amp and the launch of
Import: Export, broadcast on Xfm and K-Rock NYC in New York. Our online
activities also continue to be successful with record unique users and page
impressions for Xfm online.
As guitar music increasingly feeds into the mainstream, our aim is to establish
Xfm as a national radio station across a number of formats, with increased
listening in London and nationally to achieve a national reach of 1 million
listeners.
Century FM Network
After a year of growth, Century FM continues to be the number one commercial
station in both the North West and East Midlands and in the latest set of RAJAR
figures, the network maintained overall reach of 18%. The Network is also
becoming increasingly attractive to advertisers as we continue to monetise
listener growth.
Off-air, we continued our successful CD series including the popular 'Hairbrush
Divas', 'Hairbrush Divas 2' and 'Never Forget the 90's' and increased listener
interaction through our online and texting services. In January 2005, the
Network's first national RAJAR results will be published, giving us the
opportunity to measure listening outside our analogue transmission areas.
Capital Gold Network
We continue to view the roll out of new radio platforms including DAB digital
radio as a significant growth opportunity for Capital Gold. In the past year the
Capital Gold Network outside of London maintained solid listener growth and
Capital Gold Manchester achieved record reach and share in the most recent RAJAR
audience figures. The Network's most challenging market is in London, where we
face greater competition than at any time before. As such, our focus is on
improving listening figures for Capital Gold London and particularly the London
breakfast show.
Despite intense competition, the Capital Gold network continues to attract a
national audience of over 1 million listeners and our aim is to revitalise the
Capital Gold brand and re-establish it as a growth business within the digital
future.
Capital Gold's compilation CDs including the 'Legends' and 'Classics' series
continue to sell well. This year saw our first release on a new strand called
'Just Great Songs' with Universal.
Choice FM
Fully acquired in March 2004, Choice FM is the Group's most recent acquisition
and we are delighted with the station's progress to date. In the latest set of
RAJAR results, Choice FM recorded its second consecutive increase with 383,000
listeners and celebrated its highest ever share with 3.2% share of listening.
A key challenge during the year has been to manage the transition of ownership
while maintaining Choice's credibility with its loyal listeners and the local
community. Earlier this year, we received permission from Ofcom to unify the
output of Choice FM's two London licences into one consistent schedule and we
believe that this, along with increased investment in the brand, will enable us
to realise its potential and build Choice into the major urban music station for
London. Our ambition is to attract new listeners by raising awareness and
becoming more accessible whilst maintaining our relevance to the community we
serve. Longer term, our aim is to grow nationally through new platforms to
become the UK's leading urban music brand.
Digital only brands
Our digital only brands are Life and Capital Disney. While listening to Life is
not yet measured by RAJAR, Capital Disney has seen a promising start. The
station bolstered the Group's digital listening by growing its reach among the
4+ age group to 248,000 listeners in the most recent RAJAR figures.
Revenue
Over the last year, as the advertising environment improved slightly, our
ongoing focus on a 'brand-led' sell has been strengthened by our growing
portfolio. This year we have started trading two new brands, Choice FM and
Capital Disney, while expanding Xfm's traditional London base into a national
advertising opportunity.
This year the number of national advertisers buying across all of our brands
increased by 26% and national advertising now represents 78% of advertising
sales across the Group. The Century FM Network and Xfm have both increased their
total brand count and whilst there has been some re-adjustment to the Choice FM
local market, the national brand count has grown substantially by 37%. Across
all three of these networks, Century FM, Choice FM and Xfm, the average spend
per advertiser has increased year on year by 33%, 7% and 33% respectively.
The success of our Sponsorship and Promotions team highlights the continued
development of advertiser-supported programming across the Group. Key partners
include Kellogg's Corn Flakes and O2, while British Airways extended its
presence across three of our networks.
The arrival of Johnny Vaughan to the 95.8 Capital FM Breakfast Show has created
a fresh interest in promotional activity on the station. Our increased
flexibility and collaboration with programming teams has allowed for the quick
turn around of tactical promotional activity, such as Property Week with HSBC
Bank Mortgages.
Our online presence provides a great opportunity for driving non-airtime revenue
for the Group and this year alone we have developed 5 new online advertising
formats. In addition, we have doubled revenue from our development revenue
streams.
We have seen the following performance in revenues from our top 15 advertiser
categories:
Category Year on Year Rev change % of airtime revenue
Retail -2% 16.5
Motors 15% 13.9
Business & Industrial 26% 11.9
Entertainment & Media -19% 10.5
Gov/Social/Political 13% 10.1
Travel & Transport 0% 6.8
Food 74% 6.1
Household Equipment -7% 5.5
Entertainment -19% 5.1
Computers 16% 3.8
Finance 3% 2.7
Household Supplies -33% 1.4
Drink 7% 1.2
Cosmetics & Toiletries -27% 1.2
Pharmaceutical -51% 0.7
We aim to continue to challenge and expand advertisers' views on radio as an
advertising medium, provide our clients with innovative solutions to suit their
needs and offer a level of customer service unmatched anywhere else in the
industry.
Implementing our strategy for long term growth
The radio industry has become more competitive in recent years. Increasing
digital convergence has brought radio into closer competition with a range of
different media from iPods to mobile phones to broadband internet.
A key driver of the evolution of the radio industry is the advent of digital
radio, which has led to a sharp increase in the number of services available to
the listener and brought new opportunities and challenges for broadcasters and
advertisers.
Radio is now accessible to listeners through a variety of platforms, including
Digital Audio Broadcasting (DAB), digital television, internet and mobile
phones. The sale of DAB radios has risen dramatically over the last year, with
1.2 million sets forecast to be sold by Christmas 2004 and 13 million by 2008.
In addition, there has been an increase in the number of participating
manufacturers including UK players such as Roberts and international
manufacturers such as Sony, Panasonic and Hutchison.
We are committed to the development of digital radio and believe that it
presents new opportunities for growth by increasing our audiences, by delivering
new revenue streams through data services and by allowing us to have direct and
interactive dialogue with our listeners. In addition to DAB, we broadcast our
stations on the Sky and ntl platforms, reaching 8.2 million potential listeners.
We are also extending the reach of our brands as well as broadening our revenue
opportunities beyond traditional advertising. The initial target areas for brand
extension have been CD compilations, live music events, ring tones and the sale
of audio content.
As we strive to build our business in this dynamic environment, our core
strategy is to achieve the greatest share of our listeners' time and loyalty
through strong brands that connect with and enhance their lives. This in turn
will create the greatest value for shareholders.
The financial information referred to herein does not constitute the company's
statutory accounts for the year ended 30 September 2004 or 2003 but is derived
from those accounts. Statutory accounts for 2003 have been delivered to the
registrar of companies, and those for 2004 will be delivered following the
company's Annual General Meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain statements under section 237
(2) or (3) of the Companies Act 1985.
Group Profit and Loss Account
For the year ended 30 September 2004 Note 2004 2003
#000 #000
Turnover 2 119,898 115,328
-------- -------
Operating profit
Before goodwill and exceptional operating costs 2 23,677 21,982
Exceptional operating costs 2, 4 (782) -
Amortisation of goodwill 2 (10,273) (9,372)
-------- -------
Operating profit 3 12,622 12,610
Share of operating profit of associated companies 2 1,572 2,113
-------- -------
Profit on ordinary activities before interest and
taxation 2 14,194 14,723
Net interest payable and similar items 6 (1,638) (1,465)
-------------------------------- ----- -------- -------
Underlying profit before taxation 4 23,680 22,795
Goodwill and exceptional items 4 (11,124) (9,537)
-------------------------------- ----- -------- -------
Profit on ordinary activities before taxation 12,556 13,258
Taxation on profit on ordinary activities 7 (6,641) (6,939)
-------- -------
Profit for the financial year 5,915 6,319
Dividends 9 (15,642) (15,191)
-------- -------
Retained loss for the financial year 19 (9,727) (8,872)
-------- -------
Basic earnings per share 10 7.1p 7.7p
Loss per share on goodwill and exceptional items
after taxation 13.0p 11.6p
-------- -------
Underlying basic earnings per share 10 20.1p 19.3p
-------- -------
Diluted earnings per share 10 7.1p 7.7p
-------- -------
All results related to continuing operations.
Group Balance Sheet
30 September 2004
Note 2004 2003
Restated
#000 #000
Fixed assets
Intangible assets - goodwill 11 159,818 152,076
Tangible fixed assets 12 17,520 16,858
Investments 13 2,619 5,492
------- -------
179,957 174,426
Current assets
Debtors 15 21,575 20,958
Cash 400 -
------- -------
21,975 20,958
Creditors: amounts falling due within one year 16 (45,913) (63,323)
------- -------
Net current liabilities (23,938) (42,365)
------- -------
Total assets less current liabilities 156,019 132,061
Creditors: amounts falling due after more than one
year 16 (20,000) -
------- -------
Net assets 136,019 132,061
------- -------
Capital and reserves
Called up share capital 18 2,136 2,075
Share premium account 19 78,965 78,965
Shares to be issued 19 400 -
Merger reserve 19 36,695 23,767
Profit and loss account 19 17,823 27,254
------- -------
Equity shareholders' funds 136,019 132,061
------- -------
Group Cash Flow Statement
For the year ended 30 September 2004 2004 2003 2003
2004
Note #000 #000 #000 #000
Net cash inflow from operating 20 25,473 26,962
activities
Dividends from associated 1,045 1,684
undertakings ------- -------
26,518 28,646
Returns on investments and
servicing of finance
Interest received and similar 220 35
income
Interest paid (1,764) (1,661)
------ -------
Net cash outflow from returns on
investments
and servicing of finance (1,544) (1,626)
Taxation paid (6,225) (7,117)
Capital expenditure
Proceeds from sale of tangible 52 76
fixed assets
Purchase of tangible fixed assets (1,604) (3,541)
------ -------
Cash outflow on capital expenditure (1,552) (3,465)
Acquisitions and disposals 21 (1,260) 145
Cash outflow from equity dividends (15,335) (15,180)
paid ------- -------
Cash inflow before use of liquid resources
and financing 602 1,403
Management of liquid resources (400) -
Cash outflow from financing 22 (167) (2,686)
------- -------
Increase/(decrease) in cash in the 35 (1,283)
period ------- -------
Reconciliation of Net Cash Flow to Movement in Net Debt (note 23)
Increase/(decrease) in cash in the period 35 (1,283)
Cash flow from increase in bank loans and
overdrafts - (1,500)
Monies transferred into deposit account 19 400 -
Repayment of finance leases - 31
Repayment of loan notes 167 4,186
-------- -------
Movement in net debt in the period 602 1,434
Net debt at 1 October (27,565) (28,999)
-------- -------
Net debt at 30 September 23 (26,963) (27,565)
-------- -------
Reconciliation of Movements in Shareholders' Funds
For the year ended 30 September 2004 2004 2003
Restated
GROUP #000 #000
Profit for the financial year 5,915 6,319
Dividends (15,642) (15,191)
------- --------
Retained loss for the financial year (9,727) (8,872)
New share capital issued 61 31
Merger reserve arising on acquisition 12,928 -
Movement on shares to be issued 400 -
Movement on LTIP 200 222
Movement on Quest 96 183
------- --------
Net increase/(decrease) in shareholders' funds 3,958 (8,436)
Shareholders' funds at beginning of year (2003:
originally #140,883,000 before deducting prior year
adjustment of #386,000) 132,061 140,497
------- --------
Shareholders' funds at end of year 136,019 132,061
------- --------
For the year ended 30 September 2004 2004 2003
Restated
COMPANY #000 #000
Profit for the financial year (note 8) 47,346 6,770
Dividends (15,642) (15,191)
------- --------
Retained profit/(loss) for the financial year 31,704 (8,421)
New share capital issued 61 31
Merger reserve arising on acquisition 12,928 -
Movement on shares to be issued 400 -
Movement on LTIP 200 222
Movement on Quest 96 183
------- --------
Net increase/(decrease) in shareholders' funds 45,389 (7,985)
Shareholders' funds at beginning of year (2003:
originally #174,747,000 before deducting prior year
adjustment of #386,000) 166,376 174,361
------- --------
Shareholders' funds at end of year 211,765 166,376
------- --------
Statement of Group Total Recognised Gains and Losses
For the year ended 30 September 2004 2004 2003
GROUP #000 #000
Profit for the financial year:
Group 4,820 4,888
Share of associates 1,095 1,431
------ -------
Total gains and losses recognised for the financial year 5,915 6,319
------ -------
Company Balance Sheet
30 September 2004
Note 2004 2003
#000 #000
Fixed assets Restated
Tangible fixed assets 12 9,615 10,346
Investments 13 260,561 245,499
-------- --------
270,176 255,845
Current assets
Debtors 15 41,800 52,895
Cash 400 -
-------- --------
42,200 52,895
Creditors: amounts falling due within one year 16 (80,358) (142,341)
-------- --------
Net current liabilities (38,158) (89,446)
-------- --------
Total assets less current liabilities 232,018 166,399
Creditors: amounts falling due after more than
one year 16 (20,000) -
Provisions for liabilities and charges 17 (253) (23)
-------- --------
Net assets 211,765 166,376
-------- --------
Capital and reserves
Called up share capital 18 2,136 2,075
Share premium account 19 78,965 78,965
Revaluation reserve 19 429 429
Shares to be issued 19 400 -
Merger reserve 19 50,170 37,242
Profit and loss account 19 79,665 47,665
-------- --------
Equity shareholders' funds 211,765 166,376
-------- --------
Notes Forming Part of the Accounts
1. Accounting Policies
A summary of the principal Group accounting policies, all of which have been
applied consistently throughout the year, is set out below.
a. Basis of accounting
The accounts have been prepared under the historical cost accounting rules,
modified to include the revaluation of certain fixed assets, and in accordance
with applicable accounting standards, including for the first time UITF abstract
38 Accounting for ESOP Trusts.
Prior to becoming a subsidiary undertaking, Tainside Limited (trading as Choice
FM) was accounted for as an associated undertaking. In accordance with FRS2, and
in order to give a true and fair view, purchased goodwill has been calculated as
the sum of the goodwill arising on each purchase of shares in Tainside Limited,
being the difference at the date of each purchase between the fair value of the
consideration given and the fair value of the identifiable assets and
liabilities attributable to the interest purchased. This represents a departure
from the statutory method, under which goodwill is calculated as the difference
between cost and fair value on the date that Tainside Limited became a
subsidiary undertaking. The statutory method would not give a true and fair view
because it would result in the group's share of Tainside Limited's retained
reserves, during the period that it was an associated undertaking, being
recharacterised as goodwill. The effect of this departure is to decrease
retained profits and decrease purchased goodwill by #637,000.
b. Basis of consolidation
(i) The consolidated accounts include the accounts of the Company
and its subsidiary undertakings made up to 30 September 2004.
Unless otherwise stated, the acquisition method of accounting has been adopted.
Under this method, the results of subsidiary undertakings acquired or disposed
of in the year are included in the consolidated profit and loss account from the
date of acquisition or up to the date of disposal.
An associate is an undertaking in which the Group has a long term interest,
usually from 20% to 50% of the equity voting rights, and over which it exercises
significant influence. The Group's share of the profits less losses of
associates is included in the consolidated profit and loss account and its
interest in their net assets is included in the consolidated balance sheet.
Other fixed asset investments in the Group accounts, and all fixed assets in the
accounts of the Company, are stated at cost less amounts written off in respect
of any impairment in value.
(ii) Purchased goodwill (both positive and negative) arising on
consolidation in respect of acquisitions before 1 October 1997, when Financial
Reporting Standard 10, Goodwill and intangible assets, was adopted, was written
off to reserves in the year of acquisition. When a subsequent disposal occurs
any related goodwill previously written off to reserves is written back through
the profit and loss account as part of the profit or loss on disposal.
Purchased goodwill (representing the excess of the fair value of the
consideration given and any related costs over the fair value of the separable
net assets acquired) arising on consolidation in respect of acquisitions since 1
October 1997 is capitalised. Positive goodwill is amortised to #nil by equal
annual instalments over its estimated useful life, being deemed to be 20 years.
On the subsequent disposal or termination of a business acquired since 1 October
1997, the profit or loss on disposal or termination is calculated after charging
/(crediting) the unamortised amount of any related goodwill/(negative goodwill).
(iii) Under section 230(4) of the Companies Act 1985 the Company is exempt from
the requirement to present its own profit and loss account. The profit for the
financial year dealt with in the financial statements of the holding company was
#47,346,000 (2003: #6,770,000).
c. Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation is provided to write off the cost (less estimated residual value)
of each asset on a straight line basis over its expected useful life, as
follows:
Freehold buildings 2%-4% per annum
Long leasehold premises 4%-6% per annum
Short leasehold premises over the term of the lease, or where the lease is
renewable, 5%
Office and studio equipment 10%-20% per annum
Digital equipment over the term of the contract
Computer equipment 33% per annum
Motor vehicles 25% per annum
Freehold land is not depreciated.
d. Investments
In the Company's accounts investments in subsidiary companies are stated at cost
less provisions where, in the opinion of the Directors, there has been an
impairment in the value of the investment. Dividends receivable from subsidiary
companies are credited to the Company's profit and loss account. Fixed asset
investments are stated at cost less provisions where, in the opinion of the
Directors, there has been an impairment in the value of the investment.
e. Taxation
The charge for taxation is based on the profit for the year and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes.
Deferred tax is recognised, without discounting, in respect of all timing
differences between the treatment of certain items for taxation and accounting
purposes which have arisen but not reversed by the balance sheet date, except as
otherwise required by FRS 19.
f. Operating leases
Rentals payable under operating leases are charged to the profit and loss
account on a straight line basis.
g. Finance leases
Assets held under finance lease agreements are included in tangible fixed assets
and are depreciated in accordance with the depreciation policy. Obligations
under such agreements are included in creditors net of finance charges allocated
to future periods. Finance charges are taken to the profit and loss account so
that the annual rate of charge on the outstanding obligation at the end of each
accounting period is approximately constant.
h. Turnover
Turnover comprises income from the sale of advertising airtime, sponsorship and
promotions (net of agencies' commissions) and income from advertising on the
Internet. Turnover is stated excluding VAT, trade discounts, and intra group
transactions and derives from goods and services provided in the normal course
of business.
Airtime revenue is recognised on the date of broadcast. Sponsorship revenue and
internet advertising are recognised over the life of the contract.
i. Licences
Expenditure incurred on the purchase of, application and re-applications for,
licences is written off to the profit and loss account as it is incurred.
j. Pensions
The Group provides for and funds pension liabilities on a going concern basis,
on the advice of external actuaries. The amount charged to the profit and loss
account is calculated to produce a level percentage of the current and future
pensionable payroll. The group has adopted the transitional arrangements under
Financial Reporting Standard 17, Retirement Benefits, and these disclosures can
be found in note 24.
k. Own shares held under trust
Shares in the Company issued to cover SAYE schemes are held in a qualifying
Share Ownership Trust (QUEST). Shares in the Company issued to cover the long
term incentive plan (Capital Radio Restricted Share Plan) are held in the
Capital Radio Employee Trust.
UITF abstract 38 - Accounting for ESOP trusts changes the presentation of an
entity's own shares held in an employee share scheme from requiring them to be
recognised as assets to requiring them to be deducted in arriving at
shareholders' funds. It also has consequential changes to UITF17 requiring that
the expense to the profit and loss account should be the difference between the
fair value of shares at the date of award and the amount that an employee is
required to pay for the shares (i.e. the 'intrinsic value' of the award).
The reclassification of the shares acquired by the share trust (own shares) from
fixed asset investments to equity has reduced shareholders' funds by #386,000 at
1 October 2002.
l. Employee share schemes
The cost of awards to employees that take the form of shares or rights to shares
are recognised in the profit and loss account over the period of the employee's
related performance. Where there are no performance criteria, the cost is
recognised when the employee becomes unconditionally entitled to the shares. No
cost is recognised in respect of SAYE schemes that are offered on similar terms
to all or substantially all employees.
m. Development expenditure
Development expenditure is written off to the profit and loss account in the
year in which it is incurred.
n. Restatement of prior year
The prior year has been restated to reflect the adoption of UITF abstract 38
(see note k).
2. Segmental Turnover Profit before Net Assets
Information
Interest and Taxation
2004 2003 2004 2003 2004 2003
#000 #000 #000 #000 #000 #000
Restated
Commercial Radio, all
from UK:
Analogue 118,962 114,637 29,120 26,216
Digital 936 691 (5,443) (4,234)
------- ------- ------- -------
Total 119,898 115,328 23,677 21,982 174,575 168,504
Exceptional operating - - (782) - - -
costs
Amortisation of - - (10,273) (9,372) - -
goodwill ------- ------- ------- ------- ------- -------
119,898 115,328 12,622 12,610 174,575 168,504
Share of associated - - 1,572 2,113 2,602 5,475
companies
Cash, overdrafts, - - - - (26,946) (27,548)
loans and other
investments
Liabilities for - - - - (3,639) (4,104)
corporation tax
Proposed dividend - - - - (10,573) (10,266)
------- ------- ------- ------- ------- -------
119,898 115,328 14,194 14,723 136,019 132,061
------- ------- ------- ------- ------- -------
Amortisation of goodwill relates to analogue commercial radio activities. All
exceptional costs relate to analogue
commercial radio activities. Net assets cannot be split between
analogue and digital.
During the year the Group entered into Barter agreements worth #191,000 (2003:
#407,000). This is recognised at the
Company's airtime rates in
accordance with UITF 26.
3 Operating Profit 2004 2003
#000 #000
Turnover 119,898 115,328
Direct costs (14,618) (14,406)
-------- ---------
Gross profit 105,280 100,922
Staff costs (30,739) (27,827)
-------- ---------
Other operating charges (48,075) (48,078)
Exceptional operating costs (782) -
-------- ---------
(48,857) (48,078)
Depreciation and amortisation (13,062) (12,407)
-------- ---------
Total operating costs (92,658) (88,312)
-------- ---------
Operating profit 12,622 12,610
-------- ---------
Exceptional costs consist of #560,000 of staff redundancy costs and #222,000 of
exceptional operating charges.
Profit on ordinary activities before taxation is stated after
charging/(crediting) the following items: 2004 2003
#000 #000
Hire of plant or machinery 715 869
Other operating lease charges 2,103 2,062
Auditors' remuneration:
Audit services 110 100
Further assurance services 22 24
Tax services 4 54
Other services 3 3
Loss/(profit) on disposal of fixed assets 1 (41)
Profit on disposal of investment - (20)
------------------------------------- -------- ---------
Fees paid to the auditor for the audit of the Company amounted to #25,000 (2003:
#25,000). Auditors' fees have been reviewed by the Audit Committee. Within
prepayments and accruals is #218,000 in respect of costs invoiced to Capital
Radio plc for other services provided by the auditors in relation to the
proposed merger.
4. Underlying Profit before Taxation from Continuing
Operations
Underlying profit before taxation from continuing 2004 2003
operations has been calculated as follows:
#000 #000
Profit on ordinary activities before taxation 12,556 13,258
------- -------
Exceptional costs 782 -
Amortisation of goodwill - radio 10,273 9,372
Amortisation of goodwill - associates 69 165
------- -------
Net excluded items 11,124 9,537
------- -------
Underlying profit before taxation from continuing 23,680 22,795
operations ------- -------
Exceptional costs in the period relate to management and post Choice acquisition
restructuring costs and the provision for redundancies following the
discontinuing of sports commentaries.
5. Staff 2004 2003
#000 #000
The aggregate payroll costs of the persons employed by the
Group during the year were as follows:
Wages and salaries 26,236 23,441
Social security costs 3,033 2,589
Other pension costs (see note 24) 1,470 1,317
------- -------
30,739 27,347
Redundancy costs (included in exceptional costs this year) 560 480
------- -------
31,299 27,827
------------------------------------- ------- -------
The above analysis includes the costs relating to Directors. The figures exclude
radio presenters engaged under short-term and part-time contracts. The total
cost of these persons amounted to #9,219,000 (2003: #8,937,000).
2004 2003
No. No.
The average number of persons employed by the Group (including
Directors) during the year was as follows:
Radio: Management and administration 142 125
Sales 323 315
Programming 161 168
Engineering and IT 51 54
------- -------
677 662
------------------------------------- ------- -------
The breakdown of staff numbers has been reclassified to reflect current
operational structures.
6. Net Interest Payable and Similar Items 2004 2003
#000 #000
Interest receivable and similar income:
Bank interest 211 40
Bank interest attributable to associated undertakings 37 60
------- -------
248 100
Interest payable and similar charges:
Bank loan and overdrafts, wholly repayable within 5 (1,825) (1,444)
years
Interest on Capital Radio plc loan notes (60) (114)
Hire purchase, finance leases and other interest - (1)
Bank interest attributable to associated undertakings (1) (6)
------- -------
(1,886) (1,565)
------- -------
(1,638) (1,465)
------------------------------------- ------- -------
7 Taxation 2004 2004 2003 2003
#000 #000 #000 #000
Corporation tax at 30% 6,407 6,215
Share of associated companies' taxation 513 736
Adjustment relating to prior years (647) (130)
------- -------
Total current tax 6,273 6,821
Deferred tax (see note 17)
Origination/reversal of timing 245 250
differences
Adjustment in respect of prior years 123 (132)
------- -------
368 118
------- -------
Tax on profit on ordinary activities 6,641 6,939
------- -------
Factors affecting the tax charge for the
year
The current tax charge for the year is higher (2003: higher) than the
standard rate of corporation tax in the UK of 30%. The differences are
explained below.
2004 2003
#000 #000
Current tax reconciliation
Profit on ordinary activities before tax 12,556 13,258
------- -------
Current tax at 30% (2003 : 30%) 3,767 3,977
Effects of:
Expenses not deductible for tax purposes:
Goodwill amortisation (including that in respect of 3,103 2,861
associated undertakings)
Other 120 99
Depreciation for period in excess of capital allowances 46 14
Utilisation of tax losses (116) -
Adjustments to tax charge in respect of previous periods (647) (130)
------- -------
Total current tax charge (see above) 6,273 6,821
------- -------
8. Profit for the Financial Year
The profit for the financial year dealt with in the accounts of the Company
was #47,346,000 (2003: profit #6,770,000).
9. Dividends 2004 2003
#000 #000
Interim dividend of 6.0p (2003: 6.0p) per share, paid on 5,073 4,925
28 June 2004
Proposed final dividend of 12.5p (2003: 12.5p) per share, 10,569 10,266
to be paid on 28 January 2005 ------- -------
Total dividend of 18.5p per share (2003: 18.5p) 15,642 15,191
------- -------
Shares held in the Capital Radio Employee Trust, Capital Radio Restricted Share
Plan and QUEST have waived their right to receive dividends.
10. Earnings Per Share
The calculation of earnings per share is based on the profit after taxation
of #5,915,000 (2003: #6,319,000) and on the weighted average of 83,521,690
(2003: 82,070,658) Ordinary Shares in issue during the year. The underlying
earnings per share from operations is included to show the effect of
adjusting for the impact of goodwill and restructuring costs which results
in earnings increasing by #11,124,000 (2003: #9,537,000), (see note 4).
After the effect of a related tax credit of #227,000 (2003: #nil), this
results in earnings of #16,812,000 (2003: #15,856,000).
Dilution increases the weighted average number of shares to 83,562,055
(2003: 82,160,899). The dilution effect is caused by the inclusion of
40,365 share options (2003: 90,242). There is no change in profit after
taxation.
11. Intangible Assets - Goodwill
#000
GROUP
Book value
Beginning of year 192,136
Additions (see note 14) 18,015
-------
Beginning and end of year 210,151
-------
Amortisation
Beginning of year 40,060
Provided during the year 10,273
-------
End of year 50,333
-------
Net book value
Beginning of year 152,076
-------
End of year 159,818
-------
12. Tangible Fixed Land and
Assets Long Short Fixtures,
GROUP Freehold Leasehold Leasehold Fittings and Motor
Property Premises Premises Equipment Vehicles Total
#000 #000 #000 #000 #000 #000
Cost
Beginning of 1,847 3,310 8,600 25,783 337 39,877
year
On acquisition 1,900 - - - - 1,900
of
subsidiary
Transfer - (171) - 171 - -
Additions - - 14 1,590 - 1,604
Disposals - - - (4) (104) (108)
------- ------- ------- ------- ------- ------
End of year 3,747 3,139 8,614 27,540 233 43,273
------- ------- ------- ------- ------- ------
Depreciation
Beginning of 423 767 2,034 19,577 218 23,019
year
Charged in 38 127 408 2,180 36 2,789
year
Disposals - - - (2) (53) (55)
------- ------- ------- ------- ------- ------
End of year 461 894 2,442 21,755 201 25,753
------- ------- ------- ------- ------- ------
Net book
value
Beginning of 1,424 2,543 6,566 6,206 119 16,858
year ------- ------- ------- ------- ------- ------
End of year 3,286 2,245 6,172 5,785 32 17,520
------- ------- ------- ------- ------- ------
The net book value of assets held under finance leases by the Group amounted to
#nil (2003: #nil). The depreciation charge in respect of these assets amounted
to #nil (2003: #61,000). The gross book value of freehold property includes
#1,488,000 (2003: #1,488,000) of depreciable assets.
Short Fixtures,
COMPANY Leasehold Fittings and Motor
Premises Equipment Vehicles Total
#000 #000 #000 #000
Cost
Beginning of year 8,087 20,130 279 28,496
Additions - 894 - 894
Disposals - (2) (72) (74)
-------- -------- ------- ------
End of year 8,087 21,022 207 29,316
-------- -------- ------- ------
Depreciation
Beginning of year 1,685 16,270 195 18,150
Charged in year 348 1,205 21 1,574
Disposals - (2) (21) (23)
-------- -------- ------- ------
End of year 2,033 17,473 195 19,701
-------- -------- ------- ------
Net book value
Beginning of year 6,402 3,860 84 10,346
-------- -------- ------- ------
End of year 6,054 3,549 12 9,615
-------- -------- ------- ------
13. Fixed Asset Investments
Associated Other
GROUP Companies Investments Total
#000 #000 #000
Book value
Beginning of year (restated) 5,805 592 6,397
Additions 4 - 4
Transfer to subsidary (3,304) - (3,304)
Share of retained profits 97 - 97
-------- -------- -------
End of year 2,602 592 3,194
-------- -------- -------
Provisions
Beginning of year (restated) 330 575 905
Provided during the year - -
Amortisation of goodwill 69 - 69
Transfer to subsidary (399) - (399)
-------- -------- -------
End of year - 575 575
-------- -------- -------
Net book value
Beginning of year (restated) 5,475 17 5,492
-------- -------- -------
End of year 2,602 17 2,619
-------- -------- -------
All fixed asset investments in the Group were unlisted at 30 September 2004 and
2003.
Subsidiary Associated Other
Companies Companies Investments Total
#000 #000 #000 #000
COMPANY
Book value
Beginning of year (restated) 293,577 4,762 584 298,923
Additions 15,058 4 - 15,062
Moved to subsidiary 3,565 (3,565) - -
-------- -------- -------- --------
End of year 312,200 1,201 584 313,985
-------- -------- -------- --------
Provisions
-------- -------- -------- --------
Beginning and end of year
(restated) 52,437 415 572 53,424
-------- -------- -------- --------
Net book value
Beginning of year (restated) 241,140 4,347 12 245,499
-------- -------- -------- --------
End of year 259,763 786 12 260,561
-------- -------- -------- --------
All fixed asset investments in the Group were unlisted at 30 September 2004 and
2003.
14. Acquisition of Tainside Limited
On 1 March 2004 Capital Radio plc completed the acquisition of Tainside Limited
(trading as Choice FM) in accordance with the original agreement signed on 25
October 2001. Consideration amounted to #18,623,000 resulting in purchased
goodwill of #18,015,000 (see note 1). Fair value adjustments totalling #650,000
have been included in these figures in respect of revaluations and accounting
policies. The Group has used acquisition accounting to account for this
purchase.
Book Fair value adjustments: Fair value
Values Accounting Revaluations of assets
Policies acquired
#000 #000 #000 #000
------------------------- ------- -------- ---- --------- ---- -------
Tangible fixed assets 1,199 (44) a 745 b 1,900
------- -------- ---- --------- ---- -------
Total fixed assets 1,199 (44) 745 1,900
------- -------- ---- --------- ---- -------
Debtors 262 - - 262
------- -------- ---- --------- ---- -------
Current assets 262 - - 262
Overdraft (431) - - (431)
Creditors due within
one year (1,709) - (51) c (1,760)
------- -------- ---- --------- ---- -------
Net current liabilities (2,140) - (51) (2,191)
------- -------- ---- --------- ---- -------
Current assets less net
liabilities (1,878) - (51) (1,929)
------- -------- ---- --------- ---- -------
------- -------- ---- --------- ---- -------
Total net liabilities (679) (44) 694 (29)
------------------------- ------- -------- ---- --------- ---- -------
Consideration:
Cash 286
Shares issued 16,553
Deferred shares 400
Deferred contingent
consideration 900
Costs of acquisition 484
Adjustment relating to
Choice being an
associate (637)
-------
Goodwill arising (18,015)
------------------------- ------- -------- ---- --------- ---- -------
The fair value adjustments relate mainly to the following:
a) Alignment of accounting policies for radio licences
b) Revaluation of fixed assets
c) Reflection of previously unrecognised liabilities
The results of directly prior to Year to 30 5 months to 7 months to 30
and post acquisition: September 2003 February 2004 September 2004
#000 #000 #000
Turnover 1,929 818 1,296
Operating loss
--------- -------- --------
Operating
(loss)/profit
from analogue (479) (265) 105
Operating loss
from Digital (508) (208) (319)
Exceptional
items - - (158)
--------- -------- --------
Total
operating loss (987) (473) (372)
Interest
payable (8) (4) (33)
--------- -------- --------
Loss on
ordinary
activities
before
taxation (995) (477) (405)
Taxation - - 243
--------- -------- --------
Loss on
ordinary
activities
after taxation (995) (477) (162)
--------- -------- --------
15. Debtors Group Company
2004 2003 2004 2003
#000 #000 #000 #000
Amounts falling due within one year:
Trade debtors 14,453 14,032 14,453 14,032
Amounts due from subsidiary - - 20,159 34,348
undertakings
Corporation tax - - 1,898 -
Deferred tax asset (see note 17) 32 400 - -
Other debtors 1,148 1,133 953 878
Prepayments and accrued income 4,959 4,426 3,354 2,670
-------- ------ ------ ------
20,592 19,991 40,817 51,928
-------- ------ ------ ------
Amounts falling after more than one
year:
Prepayments and accrued income 983 967 983 967
-------- ------ ------ ------
983 967 983 967
-------- ------ ------ ------
-------- ------ ------ ------
Total 21,575 20,958 41,800 52,895
-------- ------ ------ ------
16. Creditors:
Group Company
2004 2003 2004 2003
Amounts falling due within one year:
#000 #000 #000 #000
Bank loans and overdrafts 5,736 25,771 5,169 25,785
Loan notes (see note below) 1,627 1,794 1,627 1,794
Trade creditors 9,449 10,921 8,483 10,139
Other creditors 3,473 1,966 2,156 1,590
Amounts due to subsidiary - - 43,698 86,176
undertakings
Corporation tax payable 3,639 4,104 - 243
Proposed dividend 10,573 10,266 10,573 10,266
Other taxation and social security 3,250 2,890 3,250 2,890
Accruals and deferred income 8,166 5,611 5,402 3,458
------ ------- ------ -------
45,913 63,323 80,358 142,341
------ ------- ------ -------
Amounts falling due after more than
one year:
Bank loans 20,000 - 20,000 -
------ ------- ------ -------
The floating rate bank loans carry interest at 0.8% over LIBOR and are repayable
by 31 March 2006. Bank overdrafts carry interest at 1% over bank base rate and
are repayable on demand
16. Creditors (continued)
Capital Radio plc loan notes
Capital Radio plc loan notes amounting to #1,493,000 (2003: #1,660,000) were
issued in June 2000 and have a five year term. Interest is paid six monthly in
arrears at 1% below London Inter-Bank Offered Rates. The loan notes may be
redeemed at the holder's option on interest dates until 2005, or by the Company
on 31 March 2005.
Capital Radio plc loan notes amounting to #134,000 (2003: #134,000) were issued
in August 2000 and have a five year term. Interest is paid six monthly in
arrears at 1% below London Inter-Bank Offered Rates. The loan notes may be
redeemed at the holder's option on interest dates until 2005, or by the Company
on 31 March 2005.
17. Provisions for Liabilities and
Charges
Group Group Company Company
2004 2003 2004 2003
#000 #000 #000 #000
Deferred tax liability at 1 October - - 23 -
Charge to the profit and loss for the
year
Additional amounts provided - - 230 23
-------- -------- ------- -------
Deferred tax liability at 30 - - 253 23
September -------- -------- ------- -------
The elements of deferred taxation are as follows:
Group Group Company Company
2004 2003 2004 2003
#000 #000 #000 #000
Accelerated capital allowances (94) (85) (456) (360)
Other timing differences 103 369 203 337
Tax losses 23 116 - -
-------- ------- ------- -------
Deferred tax asset (see note 15) 32 400 - -
-------- ------- ------- -------
Deferred tax liability - - (253) (23)
-------- ------- ------- -------
No account has been taken of UK tax losses which are not expected to be utilised
in the foreseeable future. The total amount unprovided in respect of these
losses is #1,719,000 (2003: #1,300,000).
Share Capital 2004 2003
#000 #000
18.
Authorised 100,000,000 (2003: 100,000,000) Ordinary 2,500 2,500
Shares of 2.5p each
Allotted, called-up and fully paid 85,425,040 (2003: 2,136 2,075
82,990,505) Ordinary shares of 2.5p each --------- ---------
The increase in the issued share capital was due to: Number Number
Ordinary Shares of 2.5p each issued fully paid during
the year:
- on acquisitions 2,434,535 -
- on issue of own shares to LTIP - 516,129
- on issue to Quest (not exercised) - 250,000
- on exercise of option rights - 13,046
--------- ---------
2,434,535 779,175
--------- ---------
The Group issued 2,434,535 ordinary shares at #5.335 for the acquisition of
Tainside Limited.
18. Share Capital (continued)
At 30th September 2004, the Company had options outstanding to subscribe for
4,119,865 (2003: 3,796,534) ordinary shares. Details of the outstanding options
are as follows:
Option Number of Exercise Exercisable
Shares Price Not
Grant Date Under Option (pence) Earlier Than
------------------- -------- ---------- -----------
Capital Radio 1986 Senior Executive Share Option Scheme
December 1994 24,100 332 December 1997
December 1996 24,300 540 December 1999
Capital Radio Savings Related Share Option Scheme
December 1999 9,909 897 February 2005
December 2000 3,968 1054 February 2006
December 2001 28,787 614 February 2007
December 2002 135,098 428 February 2008
December 2003 263,734 358 February 2009
Capital Radio 1998 Share Option Scheme
March 1998 141,910 633 March 2001
November 1998 210,756 541 November 2001
June 1999 30,035 865 May 2002
November 1999 163,654 1224.5 November 2002
May 2000 31,269 1262.5 May 2003
November 2000 214,345 1172.5 November 2003
February 2001 61,317 1080 February 2004
May 2001 101,043 765 May 2004
November 2001 344,519 815 November 2004
January 2002 109,059 705 January 2005
May 2002 96,452 772.5 May 2005
June 2002 54,264 645 June 2005
July 2002 79,734 667.5 July 2005
November 2002 538,128 502.5 November 2005
May 2003 539,966 427.5 May 2006
November 2003 279,433 458.5 November 2006
May 2004 458,168 455 May 2007
Capital Radio Presenters Share Option Scheme
December 2000 40,358 1115 December 2003
November 2002 64,676 502.5 November 2005
November 2003 70,883 458.5 November 2006
During the year, options over 21,229 Ordinary Shares of 2.5p each were
exercised, of which 21,229 were issued through the "Quest", for a total
consideration of #96,000. Options over 767,037 shares lapsed during the year.
The number of shares held in the "Quest" as at 30 September 2004 was 263,136 and
their market value was #1,081,000. Share options under the Capital Radio 1986
Senior Executive Share Option Scheme and the Capital Radio 1998 Share Option
Scheme and the Capital Radio Presenters Share Option Scheme expire ten years
after the date of grant. Options under the Capital Radio Savings Related Share
Option Scheme expire six months after the date on which they can first be
exercised.
19. Reserves Profit
Share Revaluation Shares to Merger and Loss
Premium Reserve be issued Reserve Account
#000 #000 #000 #000 #000
The movement on reserves
during the year
was as follows:
Group
Beginning of year 78,965 - - 23,767 27,254
Retained loss for the - - - - (9,727)
year
Movement on Quest - - - 96
Premium arising on issue - - - - -
of shares
Movement on LTIP - - - - 200
Reserves arising on 400 12,928 -
acquisition ------- -------- ------- ------- -------
End of year 78,965 - 400 36,695 17,823
------- -------- ------- ------- -------
Company
Beginning of year 78,965 429 - 37,242 47,665
Retained profit for the - - - - 31,704
year
Movement on Quest - - - - 96
Movement on LTIP - - - - 200
Reserves arising on - - 400 12,928 -
acquisition ------- -------- ------- ------- -------
End of year 78,965 429 400 50,170 79,665
------- -------- ------- ------- -------
The #400,000 included within shares to be issued represents monies held in a
deposit account relating to conditional issue of shares as part of the purchase
of Tainside Limited.
The merger reserve arises on the acquisition of Tainside under s131 relief.
The cumulative total of goodwill written off against the Group profit and loss
account reserve in respect of acquisitions prior to 1 October 1997, when
Financial Reporting Standard 10: Goodwill and Intangible Assets was adopted,
amounts to #45,941,000 (2003: #45,941,000).
20. Reconciliation of Operating Profit to Net Cash
Inflow from Operating Activities 2004 2003
#000 #000
Operating profit 12,622 12,610
Depreciation 2,789 3,035
Amortisation of goodwill 10,273 9,372
Loss/(profit) on disposal of tangible fixed assets 1 (41)
Increase in debtors (522) (694)
Increase in creditors 110 2,478
Profit on disposal of investment - (20)
Change in provisions against investments in own shares 200 222
------- -------
Net cash inflow from operating activities 25,473 26,962
------- -------
Exceptional costs of #782,000 are included within operating profit (see note 4).
21. Cash flows from acquisitions and disposals 2004 2003
#000 #000
Acquisition of subsidiary (770) -
Net proceeds from sale of other investments - 50
Overdraft acquired with subsidiary (431) -
Purchase of fixed asset investments (59) (16)
Repayment of associate set-up costs - 111
------ ------
Net cash (outflow)/inflow from acquisitions and (1,260) 145
disposals ------ ------
The subsidiary undertaking acquired during the year contributed #220,000 to the
Group's net operating cashflows, paid #33,000 in respect of interest, #nil in
respect of taxation and utilised #337,000 for capital expenditure.
22. Cash Flows from Financing 2004 2003
#000 #000
Proceeds from issue of shares - 31
Bank loans - 20,000
Repayment of bank loans - (18,500)
Repayment of loan notes (167) (4,186)
Capital element of finance leases - (31)
------ ------
Net cash outflow from financing (167) (2,686)
------ ------
23. Analysis of Net Debt Net Debt at Cash Other Non- Net Debt at
1 October Flow Cash Changes 30 September
2003 2004
#000 #000 #000 #000
Bank overdraft (5,771) 35 (5,736)
Bank loans
Amounts falling due in (20,000) - 20,000 -
less than one year
Amounts falling due in - - (20,000) (20,000)
more than one year
Loan notes (1,794) 167 - (1,627)
Monies held in deposit - 400 - 400
account --------- ------ -------- --------
(27,565) 602 - (26,963)
--------- ------ -------- --------
24. Pension Funds
The Group operates four pension schemes on behalf of its employees. The Capital
Radio Plc Pension and Assurance Scheme (CRPPAS) and the Midlands Radio Group
Pension Scheme (MRGPS) are contributory defined benefit schemes. Both schemes
were closed to new employees from 31 March 1995. At 30 September 2004, 17
employees of Capital Radio plc and 5 employees of Birmingham Broadcasting
Limited respectively were active members of these schemes. The Border Television
Radio Companies Group Pension Plan (BTRCGPP) is a defined contribution scheme
which is now closed to new members but at 30 September 2004 had 13 active
members. All other employees in the Radio Group, and in particular new
employees, are eligible to join the Capital Radio Group Personal Pension Plan,
which was established on 1 April 1995. This scheme is a contributory defined
contribution arrangement and as at 30 September 2004, 218 employees were active
members of this scheme. The Group makes age related contributions to the scheme.
For both defined benefits schemes, the assets are held separately from those of
the Group, being invested with insurance companies. Independent actuarial
valuations are obtained every third year. Contributions to the pension schemes
are made in accordance with advice given by independent qualified actuaries.
Details of the most recent actuarial valuations of the defined benefit pension
schemes, insofar as they relate to the Group, are as follows:
MRGPS CRPPAS
Date of last 30 September 2002 1 April 2002
valuation
Method used Minimum Funding Requirement Minimum Funding Requirement
(MFR) (MFR)
Assumptions:
Annual salary
increase 4.5% 4.5%
Annual
investment
return before
retirement 9% 6%
Annual
investment
return after
retirement 8% 5%
Market value
of scheme
assets #2,735,000 #9,422,000
Percentage of
liabilities 86% 76%
Under the MFR method of valuation, the current service cost of members will
increase as members approach retirement.
The contribution to the CRPPAS made by the Company in the year was #748,000. The
Company has agreed to redress the deficit over five years at the funding rate of
21% (plus the cost of insured death in service benefits) plus #31,500 per month
as recommended by the actuary.
The contribution to the MRGPS made by the Company in the year was #138,000. The
Company has agreed to redress the deficit over five years at the funding rate of
16.2% of pensionable salaries plus #5,800 per month for three years as
recommended by the actuary.
Additional disclosures in accordance with FRS17
An actuarial estimate performed by independent qualified actuaries, based on the
last full valuations as above, has been undertaken to provide the information
required for FRS 17 as at 30 September 2004:
The major assumptions used by the actuary were:
MRGPS and MRGPS and MRGPS and
CRPPAS CRPPAS CRPPAS
30 September 30 September 30 September
2004 2003 2002
Rate of increase
in salaries 4.50% 4.25% 4.00%
Rate of increase
in pensions in
payment 3.25% 3.25% 3.00%
Discount rate 5.50% 5.30% 5.40%
Inflation
assumption 2.75% 2.50% 2.25%
24. Pension Funds (continued)
The assets in the MRGPS and the expected rates of return were:
Assets in the Scheme Long term rate of return Value at 30
expected at 30 September September
2004 2003 2002 2004 2003 2002
#000 #000 #000
Equities 7.0% 7.0% 7.0% 2,708 2,367 1,756
Gilts 4.75% 4.5% 4.5% 878 847 723
Cash/other 4.75% 4.0% 4.0% 173 30 248
-------- -------- --------
3,759 3,244 2,727
-------- -------- --------
The assets in the CRPPAS and the expected rates of return were:
Assets in the Scheme Long term rate of return Value at 30
expected at 30 September September
2004 2003 2002 2004 2003 2002
#000 #000 #000
Equities 6.5% 6.0% 6.5% 3,953 3,515 3,156
Gilts 6.5% 6.0% 6.5% 3,953 3,515 3,156
Cash/other 4.75% 6.0% 5.4% 2,714 2,540 2,191
-------- -------- --------
10,620 9,570 8,503
-------- -------- --------
The following amounts at 30 September 2004 and 30 September 2003 were measured
in accordance with the requirements of FRS 17:
MRGPS
2004 2003 2002
#000 #000 #000
Total market value of assets 3,759 3,244 2,727
Present value of Scheme liabilities (5,961) (5,923) (5,255)
-------- -------- --------
Deficit in Scheme (2,202) (2,679) (2,528)
Related deferred tax asset 661 804 758
-------- -------- --------
Net pension deficit (1,541) (1,875) (1,770)
-------- -------- --------
CRPPAS
2004 2003 2002
#000 #000 #000
Total market value of assets 10,620 9,570 8,503
Present value of Scheme liabilities (13,437) (12,784) (12,042)
-------- -------- --------
Deficit in Scheme (2,817) (3,214) (3,539)
Related deferred tax asset 845 964 1,062
-------- -------- --------
Net pension deficit (1,972) (2,250) (2,477)
-------- -------- --------
If the above amounts had been recognised in the financial statements, the
Group's net assets and profit and loss reserve at 30 September 2004 and 30
September 2003 would be as follows:
2004 2003 2002
#000 #000 #000
Restated Restated
Net assets excluding pension deficit 136,019 132,061 140,497
Pension deficit - MRGPS (1,541) (1,875) (1,770)
Pension deficit - CRPPAS (1,972) (2,250) (2,477)
--------- -------- --------
Net assets including pension deficit 132,506 127,936 136,250
--------- -------- --------
Profit and loss reserve excluding pension
deficit 17,823 27,254 39,159
Pension reserve - MRGPS (1,541) (1,875) (1,770)
Pension reserve - CRPPAS (1,972) (2,250) (2,477)
-------- -------- --------
Profit and loss reserve 14,310 23,129 34,912
-------- -------- --------
The Company participates in a multi-employer pension scheme and is unable to
identify its share of the underlying assets and liabilities of the scheme on a
consistent and reasonable basis and therefore, as required by FRS17 'Retirement
benefits', accounts for the scheme as if it were a defined contribution scheme.
As a result, the amount charged to the profit and loss account represents the
contributions payable to the scheme in respect of the accounting period.
24. Pension Funds (continued)
The following amounts would have been recognised in the performance statements
in the year to 30 September 2004 under the requirements of FRS 17:
2004 2003
#000 #000
Operating profit MRGPS CRPPAS MRGPS CRPPAS
Current service cost (54) (161) (51) (141)
Past service cost - - - -
Loss on settlements/curtailments - (38) - (35)
-------- -------- -------- --------
Total operating charge (54) (199) (51) (176)
-------- -------- -------- --------
Other finance income:
Expected return on pension scheme assets 208 607 174 531
Interest on pension scheme liabilities (314) (673) (285) (647)
-------- -------- -------- --------
Net return (106) (66) (111) (116)
-------- -------- -------- --------
Statement of total recognised gains and MRGPS CRPPAS MRGPS CRPPAS
losses
Actual return less expected return on
pension scheme assets 198 (169) 47 327
Experience gains and losses on pension
scheme liabilities 188 (18) (115) 489
Change in assumptions underlying pension
scheme liabilities 113 101 (268) (544)
-------- -------- -------- --------
Actuarial gains and losses in STRGL 499 (86) (336) 272
-------- -------- -------- --------
2004 2003
#000 #000
Movement in deficit during the year MRGPS CRPPAS MRGPS CRPPAS
Deficit in Scheme at beginning of year (2,679) (3,214) (2,528) (3,539)
Movement in year:
Current service cost (54) (161) (51) (141)
Contributions 138 748 347 345
Past service costs - - -
Other finance income (106) (66) (111) (116)
Loss on settlements/curtailments - (38) - (35)
Actuarial gain 499 (86) (336) 272
-------- -------- -------- --------
Deficit in Scheme at end of year (2,202) (2,817) (2,679) (3,214)
-------- -------- -------- --------
Details of experience gains/losses for MRGPS
year to 30 September
2004 2003 2002
#000 #000 #000
Difference between actual and expected
return on assets
Amount 198 47 (341)
Percentage of Scheme assets 5.3% 1.4% (12.5%)
Experience gains and losses on Scheme
liabilities
Amount 188 (115) (242)
Percentage of the present value of the
Scheme liabilities 3.2% (1.9%) (4.6%)
Total amount recognised in statement of
total recognised gains and losses:
Amount 499 (336) (1,095)
Percentage of the present value of the
Scheme liabilities 8.4% (5.7%) (20.8%)
24. Pension Funds (continued)
Details of experience gains/losses for year to 30 CRPPAS
September
2004 2003 2002
#000 #000 #000
Difference between actual and expected return on
assets
Amount (169) 327 (329)
Percentage of Scheme assets 1.6% 3.4% (3.9%)
Experience gains and losses on Scheme liabilities
Amount (18) 489 (35)
Percentage of the present value of the Scheme
liabilities 0.1% 3.8% (0.0%)
Total amount recognised in statement of total
recognised gains and losses:
Amount (86) 272 (1,860)
Percentage of the present value of the Scheme
liabilities (0.6)% 2.1% (21.9%)
In accordance with the transitional arrangements of FRS 17, the deficits on the
above schemes have not been recognised in the accounts.
The total pension payments for the period were #1,741,000 (2003: #1,172,000).
Pension costs for the two defined benefit schemes are charged to the profit and
loss account so as to spread the cost of pensions over employees' working lives
with the Group. The pensions charge for the other schemes represents the
contributions paid. The outstanding creditor to pensions schemes at 30 September
2004 was #101,000 (2003: #103,000).
25. Financial Commitments
Annual operating lease commitments as at 30 September 2004 analysed by
expiry date are as follows:
Land and Land and
Buildings Other Buildings Other
2004 2004 2003 2003
GROUP #000 #000 #000 #000
Less than one year - 97 - 437
Within one to two years - 93 - 208
Within three to five years - 424 - 149
In more than five years 2,109 - 2,094 -
------- ------ ------- -------
2,109 614 2,094 794
------- ------ ------- -------
COMPANY
Less than one year - 76 - 54
Within one to two years - 70 - 49
Within three to five years - 292 - 35
In more than five years 1,472 - 1,472 -
------- ------ ------- -------
1,472 438 1,472 138
------- ------ ------- -------
Contracted capital expenditure at 30 September 2004 not provided for in
the accounts amounts to:
2004 2003
#000 #000
Group 143 -
Company - -
26. Related Parties
The Group has trading relationships with Independent Radio News Limited ("IRN"),
the Radio Advertising Bureau Limited ("RAB"), Hit 40 UK Limited and CE Digital
Limited. The Group holds significant shareholdings in all of these companies and
has representatives on their boards of directors, and is therefore in a position
to exercise significant influence over these companies. All transactions were
conducted at normal commercial rates.
IRN supplies the UK radio industry with a news service in return for airtime
adjacent to news bulletins. This airtime is sold as the "Newslink" national
advertising product by Capital Radio's Commercial Division, as agent for IRN. An
element of the profits of IRN are repaid to participating stations as a payment
for airtime given. The Group also supplies accounting services to IRN. During
the year the Group received #1,835,000 (2003: #1,757,000) of income from IRN,
representing Capital Radio's Commercial Division's commission income, airtime
rebate, payment for accounting services and non-executive director fees. The
value of airtime transferred to IRN during the year was #1,899,000 (2003:
#1,697,000). At 30 September 2004 there was an outstanding creditor to IRN of
#1,423,000 (2003: #1,717,000).
The RAB is a trade body promoting commercial radio with advertisers. The RAB is
funded by levies paid by the commercial radio industry in the UK based on
volumes of advertising. During the year the Group paid #823,000 (2003: #817,000)
in levies to the RAB and at 30 September 2004 had an outstanding debtor of
#6,000 (2003: debtor #16,000).
Hit 40 UK operates a chart show which is broadcast over various radio networks.
The related airtime is sold by Capital Radio's Commercial Division, as agent for
Hit 40 UK. During the year the Group received #426,000 (2003: #243,000) of
income from Hit 40 UK representing commercial commission, share of revenue and
certain management services. At 30 September 2003 there was an outstanding
creditor to Hit 40 UK of #911,000 (2003: #844,000).
CE Digital operates three local digital radio multiplexes. During the year the
Group paid #1,241,000 (2003: #1,056,000) to CE Digital in respect of radio
broadcasts and received #145,000 (2003: #145,000) from CE Digital in respect of
legal expertise and engineering time. At 30 September 2004 there was an
outstanding creditor of #nil (2003: #129,000).
Wildstar Records Limited is a record label. At 30 September 2004 there were no
outstanding debtors or creditors with the Group. During the year the Group
received #nil (2003: #400,000) for management services.
Holiday FM operates commercial radio stations in Spain. During the year the
Group received #60,000 (2003: #50,000) which related to an advance on future
revenues. At 30 September 2004 there was a debtor to the Group of #6,000 (2003:
#13,000).
27. Derivatives and other financial instruments
Short term debtors and creditors that meet the definition of a financial asset
or liability under Financial Reporting Standard 13 have been excluded from the
disclosures as permitted by the Standard.
Interest rate profile of financial assets and financial liabilities:
Financial assets
The interest rate risk profile of the financial assets of the Group as at 30
September 2004 was as follows:
2004 2003
#000 #000
Cash at floating interest rate 400 -
Debtors due after more than one year 983 967
Unlisted investments 17 17
-------- -------
1,400 984
-------- -------
Financial liabilities
The Group's floating rate financial liabilities which had a weighted average
interest rate at the year end of 3.24%, consist of:
2004 2003
#000 #000
Bank overdraft 5,736 5,771
Bank loans 20,000 20,000
Loan notes 1,627 1,794
-------- -------
27,363 27,565
-------- -------
The floating rate bank loans carry interest at 0.8% over LIBOR and are repayable
by 31 March 2006. Bank overdrafts carry interest at 1% over bank base rate and
are repayable on demand.
The loan notes carry interest at 1% below LIBOR and are redeemable by the
holders on interest dates or by the Company on the 31 March 2005.
The maturity profile of the Group's financial liabilities at 30 September 2004
was as follows:
2004 2003
#000 #000
In one year or less, or on demand 7,363 27,565
In more than one year but not more than two years 20,000 -
In more than two years but not more than five years - -
-------- -------
27,363 27,565
-------- -------
Borrowing facilities
The Group has various undrawn committed borrowing facilities. The undrawn
facilities available at 30 September 2004 in respect of which all conditions
precedent have been met were as follows:
2004 2003
#000 #000
Expiring in one year or less 33,564 33,729
-------- -------
Fair value financial assets and financial liabilities
There are no material differences between the carrying values and the fair
values of the financial assets and financial liabilities disclosed above.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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