freshair
Air Music and Media Group plc
Annual Report & Financial Statements
Year ended 31st March 2005
       01 Fresh Air
02 Air at a glance
03 Group overview
05 What we do within the industry supply chain
06 Fresh outlook – a strategy for growth
09 Chairman’s Statement
10 Fresh thinking – fully exploiting the synergies within our business
13 Chief Executive’s Report
14 Fresh fields – growing our market share in key territories
16 Board of Directors
18 Fresh ideas - broadening our product portfolio
20 Company Information
21 Report of the Directors
22 Directors’ Responsibilities and Report of the Auditors
23 Consolidated Profit and Loss Account
24 Consolidated Balance Sheet
25 Company Balance Sheet
26 Consolidated Cash Flow Statement
27 Notes to the Consolidated Cash Flow Statement
29 Notes to the Consolidated Financial Statements
43 Form of Proxy
45 Notice of Meeting
Highlights
Turnover £49.8m (2004 £15.80m up 216%)
EBITDA £5.04m (2004 £2.13m up 136%)
Profit Before Tax* £4.30m (2004 £1.90m up 126%)
Earnings Per Share** 0.90p (2004 0.68p up 32%)
*    profit before tax, interest, goodwill amortisation and exceptionals
**   normalised EPS calculated on the basis of profit after tax, adding
back goodwill amortisation and exceptional item, using basic
weighted average number of shares Fresh Air
Air Music and Media have a fresh approach to
growing a global entertainment business. 
We produce and distribute entertainment products
that people love at affordable prices. Our growth
is targeted to continue through our:
Fresh outlook 
A clear growth strategy
Fresh thinking 
Fully exploiting the synergies within our business
Fresh fields
Growing our market share in key territories
Fresh ideas 
Broadening our product portfolio  Turnover Analysis
Music Box Leisure 60%
Going for a Song 11%
ESD Wholesale 11%
Legacy 9%
New Sound 4.5%
Hollywood DVD 4.5%
Geographical Analysis
UK 80%
US 12%
Europe 6%
Other 2%
Product Analysis
DVD 51%
CD 41%
Software 5%
Video 2%
Other 1%
Customer Analysis
Supermarkets 55%
Other retailers 21%
Wholesalers 13%
Discount retailers 11%
Air at a glance 3
Distribution Divisions
Music Box Leisure
MBL has trading relationships with all the principal
studios and music labels and offers a unique one stop
opportunity to non traditional blue chip retailers
throughout the UK. We create product mixes designed
to maximize the additional sales opportunity within the
individual stores. The product range includes audio,
visual and software titles. Each range is supported by
bespoke packages incorporating display units,
merchandising, EDI links and further customer service
attributes that may be required. 
ESD Wholesale
ESD is a wholesaler of CDs and DVDs with a primary
customer base of independent, specialist retailers.
Publishing Divisions
Going for a Song
The Going For A Song label was established in January
1997. There are now in excess of 1000 albums on offer
in a variety of packaging formats and tailored to every
genre of music. The multi-lingual sales team cover
territories across the UK and worldwide. 
Legacy Entertainment
Based in Toronto, Legacy offers a range of audio and
visual titles to the vast North and South American
market. It utilizes group owned music and film
copyrights as well as creating its own products
specifically created to target this region. 
New Sound
New Sound operates on a similar basis to 
Going For A Song offering low priced, high quality, 
well designed single CDs and CD box sets to the
mainly European market. 
Hollywood DVD
The Group acquired this DVD division in 2002.
Specializing in low cost DVD titles across a range of
film genres, kids titles, music ranges and even Karaoke,
it utilizes different packaging formats to expand sales.
The range now covers in excess of 300 titles.
Group overview 4 Movie / Music Makers
Copyright Owners
Producers / Brand Labels
Manufacturing
Wholesalers & Distributors
Retailers
Consumer
We acquire the copyrights to established material by artists 
with a ready market. We don’t face the risks of marketing 
untested copyrights.
Our group companies use our audio and music assets to 
create innovative new products, developed to meet the needs 
of specific customers. Our products are marketed through a 
range of brand labels which are recognised in their markets.
In 2004 we acquired Music Box Leisure and ESD Wholesale 
providing the business with a 100,000 sq ft distribution centre in 
Leyland and direct access to a broad range of retail customers.
What we do within the industry supply chain
We have focused our involvement in the
industry supply chain where we see the
minimum risk, and the maximum
potential for exploiting our core assets
and skills. 
5 fresh
A solid core business
Our Key Acquisitions
2001 Legacy Entertainment
2002 Hollywood DVD 
2003 New Sound 
2004 Music Box Leisure and ESD Wholesale outlook
With expansion through acquisition
A STRATEGY FOR GROWTH
We have focused on a ‘buy and build’ strategy to create a diverse product range
covering a wide spectrum of music and film genres. We continue to grow organically
through the smart utilisation of our core assets; namely our catalogue of audio and
DVD material and through tactical acquisitions which have given us the opportunity to
grow market share and profitability.
Core to this strategy is the minimisation of risk. Our growth is not based on chart
success and does not require substantial finance to promote new artists. We focus on
established names with broad appeal and package them in a compelling way.
We will continue to grow the group by:
• Expanding its catalogue and diversity of product range
• Structured growth of the groups subsidiaries
• Acquisition of companies with a similar product portfolio and distribution channels
• Seeking products that complement our existing customer base and logistics
7 8 9
Chairman’s Statement
Introduction 
This financial year has seen a significant change in the Group structure
as expressed in the results for the financial year to March 2005. 
The major element of change is primarily a result of the acquisition of
Redworth in October 2004 and in particular the impact of its principal
trading subsidiary Music Box Leisure.
The consideration for the acquisition comprised an initial payment of
£1 7.15m in cash and loan notes with the balance satisfied by the issue
of 100,000,000 ordinary shares. Further consideration has been made
on a performance related basis satisfied by the issue of 130,276,185
ordinary shares. 
In trading terms Music Box Leisure made a significant impact on the
Group’s trading during the last six months of the financial year. I am
also pleased to report that we have also seen a strong performance
from Legacy, our North American operation, which has continued to
show consistent growth. 
Financials 
Results for the 12 months ending 31st March 2005, include a 
six-month contribution from Redworth and its subsidiaries. This period
includes the strongest trading months in a seasonal business. 
The Group’s activities have generated a 216% increase in turnover to
£49.8m (2004: £15.8m) with a 126% increase in profit before tax,
interest, goodwill amortisation and exceptional items to £4.3m (2004:
£1.9m). Acquisitions contributed £35.4m to turnover and £4.1m to
profit before tax, interest and goodwill amortisation. Normalized
earnings per share are 0.90p (2004: 0.68p). In view of this
performance the Board is recommending a maiden dividend of 0.012
pence per share for the second half-year trading period. 
The rapidly maturing DVD market in the UK has resulted in a number
of changes to market influences and pricing that affected our budget
priced DVD offering, originally acquired with Hollywood DVD. This had
a significant impact on the second half results and has caused the
Directors to consider the ongoing value of the existing budget DVD
business. The Directors have concluded that a provision for the
goodwill impairment of £2.1m is required against the carrying value of
goodwill which arose from the acquisition of Hollywood DVD. The
Group is actively seeking alternative DVD product opportunities to
strengthen its DVD portfolio. 
As part of its commitment to driving distribution synergies across the
enlarged Group, the Board has completed a strategic review and
restructuring. As a result, an exercise is underway to move all UK
distribution through the Group’s distribution centre in Lancashire and
the Board expects to see benefits from this in the second half of 
this year. 
The Board
I am pleased to report that the team of Non Executive Directors was
strengthened during the course of the year with the appointment of
Nick Fisher on the 1st December 2004. Nick is joint Chief Executive of
International Greetings plc, a leading AIM listed company and brings
with him a wealth of experience in both corporate and related industry
sectors. His experience is complementary to that of Roger Putnam,
Chairman of Ford of Britain.
The Board would like to thank all employees for their contribution
during the last twelve months in assisting the management to achieve
these results.
Summary 
The Group has begun the new financial year actively looking at
opportunities to enhance performance further following the
completion of the acquisition of Redworth, and its trading subsidiary
Music Box Leisure Limited. A strategic review has identified 
operational savings in several areas and opportunities that exist
through the increased exploitation of product and the expansion of 
the customer base. 
While the retail sector in general terms is experiencing some
difficulties, the Directors believe the sector in which the 
Group operates can continue to provide growth opportunities for
existing products.
The current policy is to address aggressively areas identified in the
strategic review as a prime objective. The Group will, however,
continue to examine any acquisition opportunities that could further
enhance the development of the Group.
John French
Chairman, July 2005 fresh
1000’s of square feet of new 
distribution facilities
Expanded Warehouse Facilities
Over 100,000 square feet of warehouse
space in the UK and North America. thinking
Opening the door to millions 
of new customers
FULLY EXPLOITING THE SYNERGIES WITHIN OUR BUSINESS
We are constantly seeking new ways to exploit the wealth of our catalogue and to
innovate in areas of packaging and presentation.
Music Box Leisure operates from a 100,000 square feet distribution centre. They
supply CD, DVD and software to customers. 
Music Box Leisure has a large established UK customer base which can now benefit
from the full Air Music & Media product catalogue. 
There are also great opportunities to develop the Music Box Leisure offering in our
international markets. 
We are pro-actively looking to develop new product ranges to suit the enlarged
customer base and to leverage the complementary strengths of our combined
businesses to make all our resources work harder.
11 12 13
Chief Executive’s Report
Introduction 
The year to 31st March 05 has been the most important year in the
Group’s history. The acquisition of Redworth in October with its trading
subsidiaries, principally Music Box Leisure, represents a step change in
the Group’s business, both in terms of size and scale and in the scope
of its operations. The acquisition, which underlines the policy of buy
and build, gives the Group a more vertically integrated operation, which
allows our publishing operations to work with the distribution
operations, in effect managing products from concept to retail store.
Trading Operation
The Group’s trading operations can now broadly be divided into
publishing and distribution. In the publishing division, the principal
trading companies have been Going For A Song and New Sound,
whose product ranges are audio based, Hollywood DVD, video
product based and Legacy Entertainment in Canada, whose
predominant product offering is audio. Each of these operations
currently only sells proprietary published goods and in the majority of
cases these are sold to distributors rather than to retailers. The
distribution operations, principally Music Box Leisure, specialise in
sales direct to retail and their current product offering, which is audio
and visual products, are largely sourced from third parties. 
I am pleased to report that the Music Box Leisure business has
performed well and whilst the contribution to Group in this financial
year has been six months, Music Box Leisure has shown growth in
that period. Throughout the year we have also seen satisfactory
growth in the audio publishing operations, with North America being
particularly strong. The Group’s DVD publishing business however,
has experienced a difficult year. The DVD market in the UK has
matured rapidly, resulting in reduced retail prices of premium and
mid-priced products which are published by the major companies.
This has put pressure on the Group’s budget film offering. As
reported by the Chairman, the Board has taken the view that the
goodwill value carried in respect of the Hollywood acquisition should
be reviewed and this has resulted in a provision for impairment. The
DVD publishing operation is now seeking alternative product
offerings, which will include licensed products from major companies
and more niche offerings including music, special interest subjects
and children’s products. In each of these areas the company is
actively considering opportunities. 
Strategy
The Redworth acquisition raised a number of challenges. I am pleased
to report that management have risen to these and programs which
include integration of systems, sales, distribution and other related
areas are well underway. In terms of management, the principle
directors of Redworth have joined the PLC board.
The completion of the buyout periods on each of the Group’s previous
acquisitions; Hollywood, New Sound and Redworth, has raised the
opportunity for further integration. During the first quarter of the new
financial year, the Group has reorganised the UK publishing
subsidiaries into two principle companies. Air Music & Media Sales will
be responsible for the sales of all group proprietary goods. The
integrated sales force will offer all of the company’s own label goods,
including Going For A Song, New Sound, Hollywood DVD and the Air
label. Air Music & Media Copyrights will be responsible for all Group
copyright activities; both exploitation of the Group’s own material and
licences from third parties. The principal activities of the copyright
company will be the creation and provision of new products for each
of the group’s audio and visual labels and most importantly, the
provision of goods for the Music Box Leisure retail customer base. On
this latter point, copyrights will seek to acquire a far broader range of
licensed rights than previously published by the Group and whilst
remaining firmly risk averse, will nonetheless result in a significantly
broader portfolio of proprietary goods with secured distribution
through Music Box Leisure.
Mark Frey
Chief Executive, 
July 2005 fresh
We sell in 55 countries
US Expansion
Our Toronto based subsidiary continues to
grow maximizing opportunities within the
North American market. fields
But there’s still another 138 countries
out there 
GROWING OUR MARKET SHARE IN KEY TERRITORIES
Our UK based international sales team deal in eight languages and sell to more than
55 countries. The growing product range and new categories such as 
DVD’s offer great opportunities for sales growth.
We sell ranges of products to distributors and profile the right range for the right
demographic. We can move quickly to capitalise on our extensive catalogue creating
compilation, tributes or bundled offers.
We are working to offer greater choice to our international customers with innovations
such as the conversion of DVD titles into foreign languages. 
15 John French
Non-Executive Chairman
Mark Frey
Chief Executive
Michael Infante
Commercial & Marketing Director
Nick Fisher
Non-Executive Director
Trevor Allan
Managing Director
Jan Beer
Executive Director
Roger Putnam
Non-Executive Director
Ruth Salsbury
Finance Director
Alex Sorrell
Executive Director
16 17
Board of Directors
John French
Non-executive Chairman
John French has been Non-Executive Chairman since flotation in 2001.
His other current directorships are: chairman of Croma Group plc, an
AIM listed company which originates and markets surveillance
equipment and systems with civil and military applications; chairman
of the Claims People Group plc, an AIM listed company which
provides loss adjustment services; and non-executive director of
Avanti Screenmedia Group plc, an AIM listed company which provides
in-store television services and Sexual Health Group PLC an Ofex listed
company operating in the National Health and Primary Health care
market place.
Mark Frey 
Chief Executive
Mark co-founded the Group in 1995 and has been its Chief Executive
since formation. In addition to being responsible for the overall
management of the business, he also has specific responsibility for
driving Air Media’s buy and build strategy and the identification of
potential acquisition opportunities and their subsequent integration
within the Group.
Mark boasts a wealth of experience and expertise in the production,
trading and exploitation of music copyrights and has over 19 years’
experience in this industry including managing a fully listed company
in the same sector.
Trevor Allan 
Managing Director
Trevor joined the Board of Air Music & Media in October 2004
following the Group's acquisition of Redworth, the business he
founded in 1996.
He founded the Redworth group and developed the profitable
acquisition from inception to a company with turnover in excess of
£50 million. Trevor was Managing Director of Redworth. He has been
in the audio/visual industry all his life from a family retailing
background to a sales career commencing in 1984. 
Michael Infante 
Commercial and Marketing Director
Michael co-founded the Group with Mark Frey in 1995.
He is responsible for the acquisition and licensing of music catalogues
and the Group’s marketing activities. He has over fifteen years’
experience of the production, trading and exploitation of music
copyrights. He headed up the recording project for the Royal
Philharmonic Orchestra collection and was responsible for 110
classical albums; the worlds largest recording series with one
orchestra. Prior to this he was sales and marketing director of a
subsidiary of Hazlewood Foods plc.
Ruth Salsbury
Finance Director
Ruth joined the Group as Finance Director in 1999. She qualified as a
chartered certified accountant in 1992 with Casson Beckman. From
1995 to 1999, she was chief accountant of NVC Arts Limited, a
subsidiary of Warner Music International Services Limited.
Alex Sorrell 
Executive Director
Alex, a chartered accountant, joined the Board in October 2004
following the Group’s acquisition of Redworth where he has been
finance director since 2002. Alex is responsible for the financial
management and reporting of the distribution businesses and has
Board responsibility for IT matters. Prior to joining Redworth, Alex
spent 13 years with PricewaterhouseCoopers in the UK and USA
auditing and advising entertainment and media businesses.
Jan Beer 
Executive Director
Jan was the sales director of Redworth until its acquisition by Air Music
& Media in October 2004 when she joined the Group Board.
She started her career in merchandising in 1986. She was employed
by a number of companies in sales and distribution roles before
joining Lifetime Entertainment (now Handleman U.K. Limited), a UK
supplier and merchandiser of home entertainment products, as a
national account manager in 1992. She became the new business
development manager at Lifetime Entertainment before joining as sales
director of Music Box Leisure Limited in 1997.
Roger Putnam 
Non Executive Director
Roger was appointed to the Board in 2003 as a non executive director.
Roger is currently Chairman of Ford of Britain. He began his career 
at Lotus Cars in 1966 before moving to JCL Marine Limited as a
director of sales and marketing. Roger returned to Lotus as a director
of sales and marketing in 1976. Later that year, he joined Jaguar Cars
as a director of marketing and UK sales operations before being
appointed to its board in 1986 as director of sales and marketing.
Roger is Chairman of the Jaguar Daimler Heritage Trust, a member of
the CBI Presidents Committee and a director of the Society of 
Motor Manufacturers. He is also non-executive Chairman of Halcyon
Days Limited.
Nick Fisher
Non Executive Director
Nick was appointed to the Board as a non executive director in
October 2004.
Nick has over 20 years experience in the development and marketing
of consumer goods businesses. He is Joint Chief Executive of
International Greetings PLC which is enjoying its tenth year as an AIM
listed company with a market capitalisation of circa £200m. fresh
100’s of hot hits of the 50’s
A wealth of repertoire
Access to over 80,000 tracks of
music spanning 80 years ideas
1,000’s of ways to make them 
cool in 2005!
BROADENING OUR PRODUCT PORTFOLIO
We are an ideas business. Our success is derived from being able to utilise our vast
library of music and film and find new and innovative ways to repackage it. Whether
producing a tribute to a famous artist or combining artists to produce something 
for a special event or occasion we are able to deliver popular material in new and
interesting ways.
We strive to innovate through packaging design and our artwork and sleeve design are
always a major factor in our retail success. Bundling CDs and DVDs into genre multi-
packs enhances affordability and appeal for customers and encourages them to broaden
their collections. We are always looking to exploit new ways to market our products; a
notable success in the last year has been with newspaper cover mounts and DVD box
sets. A recent film biopic has enhanced Ray Charles’ appeal across the generations, the
Rat Pack have enjoyed a phenomenal renaissance following the reworking of their music
by modern artists and Cuban/Latin music is now rising out of the alternative into the
mainstream. These are just three examples of how Air Group products can be utilised to
maximise opportunities within current trends.
19 Company no. 04198290
Directors
John French – Non Executive Chairman
Mark Frey – Chief Executive
Trevor Allan – Managing Director
Ruth Salsbury – Finance Director
Michael Infante – Executive Director
Jan Beer – Executive Director
Alex Sorrell – Executive Director
Nick Fisher – Non Executive Director
Roger Putnam – Non Executive Director
Secretary – Ruth Salsbury
Registered Office
Devonshire House
60 Goswell Road
London
EC1M 7AD
Bankers
Barclays Bank Plc
27 Soho Square
London 
W1D 3QR
Auditors
Kingston Smith
Devonshire House
60 Goswell Road
London 
EC1M 7AD
Nominated adviser and Brokers
Seymour Pierce Limited
Bucklersbury House
3 Queen Victoria Street
London
EC4N 8EL
Solicitors
Kirkpatrick & Lockhart Nicholson Graham LLP
110 Cannon Street
London
EC4N 6AR
Registrars
Neville Registrars
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
20
Company Information 21
The directors have pleasure in presenting their report and ﬁnancial statements for the year ended 31 March 2005.
Principal activities and business review
The principal activities of the group throughout the year were the licensing and distribution of audio, visual and other media products. The results
for the year and the ﬁnancial position at the year end were considered satisfactory by the directors who expect continued growth in the
foreseeable future.
In October 2004, the Company acquired 100% of the share capital of Redworth Limited. The consideration and basis for accounting for this
acquisition are explained in the notes to the ﬁnancial statements.
Results and dividend
The results of the group for the year are set out on page 23, and those of the company in note 10 to the ﬁnancial statements. The directors
recommend payment of an ordinary dividend amounting to £44,389.
Post balance sheet events
On the 1 June 2005 the trades of the subsidiary companies Hollywood DVD Limited and New Sound Limited were transferred into Air Music &
Media Sales Limited (formerly Going For A Song Limited), a fellow subsidiary.
Directors and their interests
The directors who served the company during the year together with their beneﬁcial interests (including family interests) in the shares of the
company, at the beginning and end of the year, were as follows:
Ordinary Shares of 2.5p each
Air Music & Media Group Plc
At 31 March At 1 April
2005 2004
F.J. French 42,121 30,000
M.D. Frey 74,480,000 74,480,000
T.S. Allan Appointed 7 October 2004 58,891,013 –
R.E. Salsbury – –
J.D. Beer Appointed 7 October 2004 7,648,184 –
A.F. Sorrell Appointed 7 October 2004 4,780,115 –
I. Taylor Resigned 7 October 2004 5,100,000 5,100,000
M.A. Infante 31,840,000 31,840,000
R.G. Putnam – –
N. Fisher Appointed 1 December 2004 500,000 –
At 31 March 2005 R.E. Salsbury had options over 2,000,000 shares (31 March 2004: 2,000,000) exercisable between 1 7 September 2004 and
1 7 September 2011 at 5p per share.
At 31 March 2005 A.F. Sorrell (and his interests) held loan notes totalling £819,790, J.D. Beer held loan notes totalling £754,207 (Note 19).
Substantial shareholdings
Other than those disclosed above, the only other substantial shareholdings in the company at the end of the year were as follows:
Chase Nominees Limited 44,290,222 (12.0%)
Pershing Keen Nominees Limited 16,880,500 (4.6%)
Ms T. Allan 19,120,459 (5.2%)
Creditor payment terms
The group agrees payment terms with each supplier as part of the terms of the transaction, and then settles sums due to creditors in accordance
with the terms agreed. At 31 March 2005, the group had an average of 93 (2004 : 101) days’ purchases outstanding with suppliers.
Report of the Directors Statement of Directors’ Responsibilities
Company law requires the directors to prepare ﬁnancial statements for
each ﬁnancial year which give a true and fair view of the state of affairs
of the company and the group and of the proﬁt or loss of the group
for that period.
In preparing those ﬁnancial statements, the directors are required to
select suitable accounting policies and then apply them consistently;
state whether applicable accounting standards are followed; make
judgements and estimates that are reasonable and prudent; and
prepare the ﬁnancial statements on a going concern basis unless it is
inappropriate to assume that the company will continue in business.
The directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the ﬁnancial
position of the company and the group, and enable them to ensure
that the ﬁnancial statements comply with the Companies Act 1985.
They are also responsible for safeguarding the assets of the company
and the group, and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Independent Auditors’ Report to the Shareholders of Air Music &
Media Group Plc
We have audited the ﬁnancial statements of Air Music & Media Group
Plc for the year ended 31 March 2005 which comprise the Proﬁt and
Loss Account, the Balance Sheets, Cash Flow Statement and related
notes. These ﬁnancial statements have been prepared under the
historical cost convention and the accounting policies set out therein.
This report is made solely to the company’s members, as a body, in
accordance with section 235 of the Companies Act 1985. Our audit
work has been undertaken for no purpose other than to draw to the
attention of the company’s members those matters which we are
required to include in an auditors’ report addressed to them. To the
fullest extent permitted by law, we do not accept or assume
responsibility to any party other than the company and the company’s
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of the directors and auditors
As described in the Statement of Directors’ Responsibilities, the
company’s directors are responsible for the preparation of the ﬁnancial
statements in accordance with applicable law and United Kingdom
Accounting Standards.
Our responsibility is to audit the ﬁnancial statements in accordance
with relevant legal and regulatory requirements and United Kingdom
Auditing Standards.
We report to you our opinion as to whether the ﬁnancial statements
give a true and fair view and are properly prepared in accordance with
the Companies Act 1985. We also report to you if, in our opinion, the
Directors’ Report is not consistent with the ﬁnancial statements, if the
company has not kept proper accounting records, if we have not
received all the information and explanations we require for our audit,
or if information speciﬁed by law regarding the directors’ remuneration
and transactions with the company is not disclosed.
We read the Directors’ Report and consider the implications for our
report if we become aware of any apparent misstatements within it.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued
by the Auditing Practices Board. An audit includes examination, on a
test basis, of evidence relevant to the amounts and disclosures in the
ﬁnancial statements. It also includes an assessment of the signiﬁcant
estimates and judgements made by the directors in the preparation of
the ﬁnancial statements, and of whether the accounting policies are
appropriate to the company’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in order
to provide us with sufﬁcient evidence to give reasonable assurance
that the ﬁnancial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of the presentation of
information in the ﬁnancial statements.
Opinion
In our opinion the ﬁnancial statements give a true and fair view of the
state of affairs of the company and of the group as at 31 March 2005
and of the loss of the group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
Kingston Smith
Chartered Accountants and Registered Auditors
Devonshire House
60 Goswell Road
London
EC1M 7AD
Dated: 24 August 2005
Directors’ Responsibilities and Report of the Auditors
22
Charitable donations
During the year, the group made charitable donations amounting to
£1,162 (2004 : £2,500).
Auditors
Kingston Smith have indicated their willingness to continue in ofﬁce
and in accordance with the provisions of the Companies Act it is
proposed that they be re-appointed auditors to the company for the
ensuing period.
By Order of the Board
R. Salsbury
Secretary
Devonshire House
60 Goswell Road
London
EC1M 7AD
Dated: 24 August 2005
Report of the Directors continued 23
Existing Activities Acquisition
Note 2005 2005 Total 2005 Total 2004
£ £ £ £
Group turnover 2 14,396,391 35,430,409 49,826,800 15,760,074
Cost of sales (10,21 7,110) (28,895,413) (39,112,523) (10,561,278)
Gross proﬁt 4,1 79,281 6,534,996 10,714,277 5,198,796
Distribution costs (644,255) (504,291) (1,148,546) (870,972)
Administrative expenses – recurring (3,527,716) (2,677,525) (6,205,241) (2,612,856)
Administrative expenses – exceptional item 11 (2,129,949) – (2,129,949) –
Administrative expenses – total (5,657,665) (2,677,525) (8,335,190) (2,612,856)
Group operating proﬁt 3 (2,122,639) 3,353,180 1,230,541 1,714,968
Interest receivable and similar income 4 65,654 8,812
Interest payable and similar charges 5 (495,234) (107,103)
Proﬁt on ordinary activities before taxation 800,961 1,616,677
Taxation 7 (1,327,770) (569,601)
(Loss)/proﬁt on ordinary activities after taxation (526,809) 1,047,076
Dividends 8 (44,389) –
Retained (loss)/proﬁt for the ﬁnancial year 21(a) (571,198) 1,047,076
Basic earnings per share 9 (0.19)p 0.58p
Diluted earnings per share 9 (0.15)p 0.56p
Normalised earnings per share 9 0.90p 0.68p
The proﬁt and loss account has been prepared on the basis that all operations are continuing operations.
There are no recognised gains or losses in the year other than the loss for the year.
Consolidated Proﬁt and Loss Account
For the year ended 31 March 2005 24
2005 2004
Notes £ £ £ £
Fixed Assets
Intangible assets 11 36,204,161 8,331,736
Tangible assets 12 608,314 156,579
36,812,475 8,488,315
Current Assets
Stocks 14 7,983,122 1,550,234
Debtors 15 11,283,096 5,723,712
Cash at bank and in hand 3,584,405 2,223,399
22,850,623 9,497,345
Creditors : Amounts falling due within one year 16 (22,626,298) (7,582,226)
Net Current Assets 224,325 1,915,119
Total Assets Less Current Liabilities 37,036,800 10,403,434
Creditors : Amounts falling due after more than one year 1 7 (4,136,530) (2,769,445)
Net Assets 32,900,270 7,633,989
Capital and Reserves
Called up share capital – equity interests 21(a) 9,247,642 4,931,658
Shares to be issued 21(a) 10,000,000 –
Share premium 21(a) 14,343,376 2,824,689
Proﬁt and loss account 21(a) 2,109,048 2,677,438
Merger reserve 21(a) (2,799,796) (2,799,796)
Shareholders’ Funds 21(a) 32,900,270 7,633,989
Approved by the Board on 24 August 2005
M Frey Director
R Salsbury Director
Consolidated Balance Sheet at 31 March 2005 25
2005 2004
Notes £ £ £ £
Fixed Assets
Investments 13 43,940,815 9,020,694
Current Assets
Debtors 15 8,152,702 2,297,116
Cash at bank and in hand 1,020 721,661
8,153,722 3,018,777
Creditors : Amounts falling due within one year 16 (14,416,282) (1,974,432)
Net Current (Liabilities)/Assets (6,262,560) 1,044,345
Total Assets Less Current Liabilities 37,678,255 10,065,039
Creditors : Amounts falling due after more than one year 1 7 (4,087,234) (2,706,791)
Net Assets 33,591,021 7,358,248
Capital and Reserves
Called up share capital – equity interests 21(b) 9,247,642 4,931,658
Shares to be issued 21(b) 10,000,000 –
Share premium 21(b) 14,343,376 2,824,689
Proﬁt and loss account 21(b) 3 (398,099)
Shareholders’ Funds 21(b) 33,591,021 7,358,248
Approved by the Board on 24 August 2005
M Frey Director
R Salsbury Director
Company Balance Sheet at 31 March 2005 26
2005 2004
Notes £ £ £ £
Net cash inﬂow from operating activities (Note 1) 4,292,758 1,384,703
Returns on investments and servicing of ﬁnance
Interest received 65,654 8,812
Interest paid (413,328) (95,711)
Net cash outﬂow from returns on investments and servicing of ﬁnance (347,674) (86,899)
Taxation
Corporation tax paid (770,825) (556,731)
Tax paid (770,825) (556,731)
Capital expenditure and ﬁnancial investment
Payments to acquire tangible ﬁxed assets (260,575) (75,058)
Receipts from sale of tangible ﬁxed assets 3,000 13,406
Payments to acquire intangible ﬁxed assets (303,435) (693,973)
Receipts from sale of intangible ﬁxed assets 3,494 73,979
Net cash outﬂow from capital expenditure and ﬁnancial investment (557,516) (681,646)
Acquisitions and disposals
Purchase of subsidiary undertakings (16,686,687) (419,627)
Net cash acquired with subsidiary undertakings 3,272,764 –
Deferred consideration paid for subsidiary undertakings (371,901) (81,250)
Net cash outﬂow from acquisitions and disposals (13,785,824) (500,877)
Cash outﬂow before ﬁnancing (11,169,081) (441,450)
Financing
Issue of ordinary share capital 5,126,000 1,975,000
Expenses paid in connection with share issue – (67,1 75)
Repayments of short term debt – (651,145)
Repayments of long term debt (739,322) (295,577)
Hire purchase repayments (14,703) (1 7,465)
New secured loan 5,475,326 –
New short-term borrowings 3,000,000 –
12,847,301 943,638
Increase in cash in the year 1,678,220 502,188
Consolidated Cash Flow Statement
For the year ended 31 March 2005 27
1. Reconciliation of operating proﬁt to net cash inﬂow from operating activities
2005 2004
£ £
Operating proﬁt 1,230,541 1,714,968
Depreciation charges 208,589 64,754
Amortisation of intangible assets 1,475,031 530,149
Exceptional item 2,129,949 –
(Proﬁt) on disposal of tangible assets (1,841) (2,969)
(Increase)/Decrease in stock (50,787) 260,768
Decrease/(Increase) in debtors 852,579 (2,754,713)
(Decrease)/Increase in creditors within one year (1,554,694) 1,575,560
Net effect of foreign exchange differences 3,391 (3,814)
Net cash inﬂow from operating activities 4,292,758 1,384,703
2. Analysis of net debt
Cash Other
At 1.4.2004 Movements Movements At 31.3.2005
£ £ £ £
Cash in hand, at bank 2,223,399 1,361,006 – 3,584,405
Overdraft (948,304) 31 7,214 – (631,090)
1,275,095 1,678,220 – 2,953,315
Debt due within one year (256,577) (4,683,875) (1,573,997) (4,940,452)
Debt due after one year (1,035,205) (4,626,026) – (5,661,231)
Obligations under hire purchase agreements (75,383) 14,703 (3,779) (64,459)
(1,367,165) (9,295,198) (1,577,776) (12,240,139)
Total (92,070) (7,616,978) (1,577,776) (9,286,824)
3. Reconciliation of cash ﬂow to movement in net debt
2005 2004
£ £
Increase in cash in the year 1,678,220 502,188
Change in net debt resulting from cashﬂows (9,295,198) 964,187
Change in net debt resulting from other changes (1,577,776) (92,848)
Net (debt) at beginning of the year (92,070) (1,465,597)
Net (debt) at the end of the year (9,286,824) (92,070)
Notes to the Consolidated Cash Flow Statement
For the year ended 31 March 2005 28
4. Purchase of subsidiary undertakings
2005 2004
£ £
Net assets acquired:
Intangible assets – 82,595
Tangible assets 401,200 13,408
Stock 6,382,101 120,277
Debtors 6,223,343 100
Cash at bank 3,272,764 –
Creditors: Amounts falling due within one year (9,827,814) (216,280)
6,451,594 100
Goodwill 31,809,090 2,030,725
38,260,684 2,030,825
Satisﬁed by:
Shares allotted 10,000,000 375,000
Cash (including expenses) 16,686,687 419,627
Loan notes 1,573,997 –
Deferred consideration 10,000,000 1,236,198
38,260,684 2,030,825
The subsidiary undertaking acquired during the year contributed £3,859,215 to the group’s net operating cash ﬂow, and utilised £64,816 for
capital expenditure. The deferred consideration is to be paid via the issue of shares.
Further details relating to the company acquired are given in note 13 to the ﬁnancial statements.
Notes to the Consolidated Cash Flow Statement continued
For the year ended 31 March 2005 29
1. Principal Accounting Policies
a) Accounting basis and standards
The ﬁnancial statements have been prepared under the historical cost
convention, and in accordance with applicable accounting standards.
The accounting policies are unchanged from the previous year except
as disclosed in Note 1m.
b) Basis of consolidation
The Group accounts consolidate the accounts of Air Music & Media
Group Plc and all its subsidiary undertakings up to the balance sheet
date, as detailed in Note 13. The purchase of Redworth Limited has
been accounted for in accordance with acquisition accounting
principles and hence the ﬁnancial statements include the results since
acquisition on 7 October 2004.
c) Turnover
Turnover represents the invoiced value of goods sold and services
provided net of value added tax.
d) Depreciation
Depreciation on tangible ﬁxed assets is provided at rates estimated to
write off the cost, less estimated residual value of each asset, over its
expected useful life, as follows:-
Land and buildings leasehold
– Over the lease term
Fixtures, ﬁttings and equipment
– 10%/25%/33.3%/50% straight line
Motor vehicles
– 25%/33.3% straight line
e) Intangible ﬁxed assets and amortisation
Music and ﬁlm production catalogues and rights, associated artwork
and masters are capitalised as intangible ﬁxed assets in the Group
Balance Sheet and are amortised by equal annual amounts over
periods between 3 and 20 years, as appropriate.
f) Goodwill
Goodwill arising on acquisitions is capitalised and amortised over the
directors’ estimate of their expected useful life after provision made for
any identiﬁed impairment, restricted to 20 years, in accordance with
FRS10.
g) Stocks
Stocks are stated at the lower of cost and net realisable value. Cost
includes all direct costs incurred in bringing the stocks to their present
location and condition.
h) Deferred taxation
Deferred tax assets and liabilities arising from timing differences
between the recognition of gains and losses in the ﬁnancial statements
and their recognition in the tax computation have been recognised in
full, calculated at a rate at which it is estimated that tax will be payable
in accordance with FRS19. Deferred taxation has not been discounted.
i) Leased assets
Assets held under ﬁnance leases and hire purchase contracts are
capitalised in the Balance Sheet and depreciated over their expected
useful lives. The interest element of the rental obligations is charged to
the Proﬁt and Loss Account over the period of the lease on a straight
line basis.
Rentals paid under operating leases are charged to income on a
straight line basis over the lease term.
j) Royalties
Royalties are calculated and accounted for on the basis of sales made.
k) Foreign currencies
Transactions denominated in foreign currencies are translated into
Sterling at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities in foreign currencies are translated into
Sterling at the rates of exchange ruling at the end of the ﬁnancial year.
All exchange differences are dealt with in the proﬁt and loss account.
l) Comparative ﬁgures
It is the view of the directors that it better reﬂects the performance of
the group for distribution costs to be disclosed separately in the proﬁt
and loss account and have amended the comparatives accordingly.
The effect has been to reduce the prior year cost of sales by
£466,848, prior year administrative expenses by £404,124 and
disclose distribution costs of £870,972 on the face of the proﬁt and
loss account in the ﬁnancial statements for this year.
m) DVD licence fees
Certain ﬁlm rights held were previously included in current assets
within prepayments and written off as a royalty charge over the
economic life of the right held. In order to more correctly reﬂect the
nature of the assets held these have been transferred to intangible
assets and are being amortised over their economic life. There has
been no effect on proﬁt resulting from this change.
n) Company basis of accounting
The holding company itself is reliant upon continued ﬁnancial support
from its subsidiary undertakings, which, in the opinion of the directors,
will be forthcoming for the foreseeable future. Accordingly the
ﬁnancial statements of the company have been prepared on a going
concern basis.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2005 30
2. Turnover
2005 2004
£ £
Principal activities:
Licensing and distribution of audio, visual and other media products 49,826,800 15,760,074
The geographical analysis of turnover is as follows:
2005 2004
£ £
United Kingdom 39,813,564 9,692,131
Europe 2,788,210 1,408,280
North America 5,950,142 3,579,654
Africa 278,297 228,719
Asia 106,022 –
Rest of the World 890,565 851,290
49,826,800 15,760,074
In the opinion of the directors, a geographical analysis of proﬁts and net assets would be seriously prejudicial to the commercial interests of the
Group and therefore is not presented.
3. Operating Proﬁt
2005 2004
£ £
The operating proﬁt is stated after charging:
Auditors’ remuneration 45,600 26,000
Auditors’ remuneration – non audit services 90,476 96,464
Depreciation – owned tangible ﬁxed assets 185,029 57,504
Depreciation – assets held under hire purchase agreements 23,560 7,250
Amortisation – goodwill 925,094 189,003
Amortisation – intangible assets 549,937 341,146
Loss on foreign exchange 140,278 70,032
Operating lease rentals
– Plant and machinery 65,813 –
– Other assets 274,638 150,904
Exceptional item (see Note 11) 2,129,949 –
and after crediting:
Proﬁt on disposal of tangible assets (1,841) (2,969)
Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2005 31
4. Interest Receivable and Similar Income
2005 2004
£ £
Bank interest received 65,654 8,749
Interest received on tax refund – 63
65,654 8,812
5. Interest Payable and Similar Charges
2005 2004
£ £
Bank overdraft and loan interest 403,392 89,731
Interest on overdue taxation 86,453 14,337
Hire purchase interest 5,389 3,035
495,234 107,103
6. Directors and Employees
2005 2004
£ £
Emoluments for qualifying services 542,086 448,641
Company pension contributions to money purchase scheme 40,300 –
582,386 448,641
The average number of persons employed by the group (including directors) during the year was:
2005 2004
No. No.
Selling and distribution 91 1 7
Administration 43 19
134 36
Their total remuneration was:
2005 2004
£ £
Wages and salaries 3,402,500 1,156,405
Social security costs 473,997 105,201
Company pension contributions to money purchase scheme 81,273 –
3,957,770 1,261,606 32
6. Directors and Employees continued
The number of directors for whom retirement beneﬁts are accruing under money purchase pension schemes amounted to 3 (2004 – none).
Emoluments disclosed above include the following amounts paid to the highest paid director:
2005 2004
£ £
Emoluments for qualifying services 131,483 127,167
7. Taxation
2005 2004
£ £
(a) Analysis of charge in year
Current tax:
UK corporation tax on proﬁts of the year 1,169,458 561,962
Foreign tax 134,916 –
Adjustment in respect of prior year 45,650 13,657
Total current tax (Note 7(b)) 1,350,024 575,619
Deferred tax:
Current year (credit) (19,489) (1,518)
Adjustment re prior years (2,765) (4,500)
Tax on proﬁt on ordinary activities 1,327,770 569,601
(b) Factors affecting tax charge for the year
Proﬁt on ordinary activities before tax 800,961 1,616,677
Proﬁt on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2004 : 30%) 240,288 485,003
Effects of:
Expenses not deductible for tax purposes 1,052,327 70,005
Depreciation for year in excess of capital allowances 26,798 5,997
Effect of small company relief (5,500) (6,502)
Adjustments to tax in respect of previous years 45,650 13,657
Other tax differences (9,539) 7,459
Current tax charge for the year (Note 7(a)) 1,350,024 575,619
8. Dividends
2005 2004
£ £
Ordinary ﬁnal proposed: 0.012p per 2.5p share 44,389 –
Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2005 33
9. Earnings Per Share
The basic earnings per share is based on the loss after tax of £526,809 (2004: £1,047,076 proﬁt) and the weighted average number of ordinary
shares in issue during the year of 281,672,968 2.5p shares (2004: 180,996,181 2.5p shares).
The earnings per share has been fully diluted to take into account the potential shares issuable as deferred consideration on the purchase of
Hollywood DVD Limited and The Original Record Company Limited, and the actual shares issuable as deferred consideration on the purchase of
Redworth Limited and also potentially dilutive shares held under the option agreement. This increased the weighted average number of shares used
in the basic EPS calculation from 281,672,968 to 353,845,319 used in the fully diluted EPS calculation.
Nomalised earnings per share is calculated using the (loss)/proﬁt after tax for the ﬁnancial year, having added back exceptional items and goodwill
amortisation charge over the basic weighted average shares in issue during the year.
10. Loss for the Financial Year
As permitted by section 230 of the Companies Act 1985, the proﬁt and loss account of the company is not presented as part of these ﬁnancial
statements. The group retained loss for the ﬁnancial year of £571,198 (2004 : £1,047,076 proﬁt) includes a proﬁt of £398,102 (2004: £243,748)
which is dealt with in the ﬁnancial statements of the company.
11. Intangible Assets
Catalogue
Rights,
Licences,
Masters and
Goodwill Artwork Total Group
£ £ £
Cost
At 1 April 2004 5,631,898 4,450,530 10,082,428
Additions due to acquisition of Redworth Limited (Consolidated Cash Flow note 4) 31,809,090 – 31,809,090
Additions – 303,435 303,435
Disposals – (3,494) (3,494)
Adjustment to original estimate of deferred consideration (631,626) – (631,626)
At 31 March 2005 36,809,362 4,750,471 41,559,833
Amortisation
At 1 April 2004 337,893 1,412,799 1,750,692
Charge for the year 939,661 549,937 1,489,598
Provision for impairment 2,129,949 – 2,129,949
Adjustment to original estimate of deferred consideration (14,567) – (14,567)
At 31 March 2005 3,392,936 1,962,736 5,355,672
Net book value
At 31 March 2005 33,416,426 2,787,735 36,204,161
At 31 March 2004 5,294,005 3,037,731 8,331,736
On 31 March 2005 a provision for impairment of £2,129,949 was charged to the proﬁt and loss account against the carrying value of the
goodwill in one of the subsidiary companies, Hollywood DVD Limited. The impairment provision was made as a result of the losses incurred by
that company for the year and the directors’ expectations of future performance. 34
12. Tangible Fixed Assets
Land and Fixtures,
buildings ﬁttings and Motor
leasehold equipment vehicles Group Total
£ £ £ £
Cost
At 1 April 2004 – 228,427 87,000 315,427
Exchange difference – (341) – (341)
Additions due to acquisition of Redworth Limited (Consolidated Cash Flow note 4) 249,608 671,636 61,753 982,997
Additions 11,999 248,576 – 260,575
Disposals – (9,386) – (9,386)
At 31 March 2005 261,607 1,138,912 148,753 1,549,272
Depreciation
At 1 April 2004 – 151,599 7,249 158,848
Exchange difference – (49) – (49)
Additions due to acquisition of Redworth Limited (Consolidated Cash Flow note 4) 131,142 410,994 39,661 581,797
Charge for the year 81,272 92,589 34,728 208,589
Disposals – (8,227) – (8,227)
At 31 March 2005 212,414 646,906 81,638 940,958
Net book value
At 31 March 2005 49,193 492,006 67,115 608,314
At 31 March 2004 – 76,828 79,751 156,579
Included above are assets held under ﬁnance leases or hire purchase contracts as follows:
Fixtures,
ﬁttings and Motor
equipment vehicles Group Total
£ £ £
Net book values
At 31 March 2005 732 62,697 63,429
At 31 March 2004 – 79,751 79,751
Depreciation charge for the year
At 31 March 2005 244 23,316 23,560
At 31 March 2004 – 7,250 7,250
The holding company itself held no tangible ﬁxed assets in the current and preceding year.
Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2005 35
13. Investments – Company
Cost and Net Cost and Net
Book Value at Provision for Adjustments Book Value at
01.04.2004 Additions impairment to cost 31.03.2005
Shares in group undertakings:
Air Music & Media Copyright Limited
(formerly Air Music & Media Limited) 2,800,000 – – – 2,800,000
Legacy Entertainment Inc. 1,043,410 – – – 1,043,410
1276353 Ontario Limited 22 – – – 22
Clifford Asset Management Limited 100 – – – 100
London Media Securities Limited 2 – – – 2
Hollywood DVD Limited 3,146,335 – (2,708,937) (437,398) –
The Original Record Company Limited 2,030,825 – – (194,228) 1,836,597
Redworth Limited – 38,260,684 – – 38,260,684
9,020,694 38,260,684 (2,708,937) (631,626) 43,940,815
All investments are shown at cost less provision for diminution in value. The directors believe the market value of these investments is not lower
than cost less diminution in value.
On 31 March 2005, as disclosed in Note 11, the carrying value of the goodwill in the subsidiary, Hollywood DVD, was reviewed for impairment
and was subsequently fully provided for. As a result of this review an impairment of £2,708,937 has been charged in the company’s results for
this year, in respect of the investment in this subsidiary.
The company holds more than 20% of the share capital of the following principal subsidiary undertakings:
Country of Class Proportion Nature of
Incorporation of share held business
Name
Air Music & Media Copyright Limited
(formerly Air Music & Media Limited) England Ordinary 100% Licensing
Air Music & Media Sales Limited (formerly Going For A Song Limited) England Ordinary 99.98% Music & media
ESD Wholesale Limited England Ordinary 100% Music & media
Hollywood DVD Limited England Ordinary 100% Music & media
Music Box Leisure Limited England Ordinary 100% Music & media
New Sound Limited England Ordinary 100% Music & media
Redworth Limited England Ordinary 100% Holding company
Legacy Entertainment Inc. Canada Ordinary 100% Music & media
1276353 Ontario Limited Canada Ordinary 100% Holding company
All shares in the company’s subsidiaries carry one voting right each. Voting rights are therefore identical to the proportion of shares held.
The companies Air Music & Media Sales Limited (formerly Going For A Song Ltd) and New Sound Limited are held by Air Music & Media
Copyright Limited (formerly Air Music & Media Limited) which is itself a 100% subsidiary of the company.
Legacy Entertainment Inc. is held 50% by the company directly, and 50% through 1276353 Ontario Limited.
Music Box Leisure Limited and ESD Wholesale Limited are held by Redworth Limited which is itself a 100% subsidiary of the company.
All other subsidiaries are held directly by the company. 36
13. Investments – Company continued
Substantial acquisition
The Company purchased 100% of the share capital of Redworth Limited on 7 October 2004.
The initial consideration for the acquisition was £28,260,684 including expenses, satisﬁed by £16,686,687 cash, £1,573,997 of loan notes and
£10,000,000 as an issue of 100,000,000 shares to the vendors at a premium of £0.075.
In addition, deferred consideration of £10,000,000 is payable in shares. A summary of the assets and liabilities of Redworth Limited is shown in
note 4 to the Consolidated Cash Flow Statement. No fair value adjustments were considered necessary.
Goodwill of £31,890,090 has arisen on this purchase taking account of the deferred consideration.
The pre-acquisition results for the period from 1 April 2004 to 7 October 2004 and the preceding ﬁnancial period are set out below:
1 April 2004 Year ended
to 7 October 31 March
2004 2004
£ £
Turnover 22,027,211 37,081,182
Operating proﬁt 1,119,424 3,683,773
Proﬁt before tax 1,1 79,719 3,640,630
Taxation 377,510 1,263,143
Retained proﬁt for the ﬁnancial period 802,209 2,377,487
14. Stocks
Group Company Group Company
2005 2005 2004 2004
£ £ £ £
Work in progress 38,078 – 12,755 –
Finished goods 7,945,044 – 1,537,479 –
7,983,122 – 1,550,234 –
Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2005 37
15. Debtors
Group Company Group Company
2005 2005 2004 2004
£ £ £ £
Trade debtors 10,134,301 – 4,895,988 –
Amounts owed from group undertakings – 8,131,032 – 2,280,743
Other debtors 585,562 – 1 72,256 4,332
Prepayments and accrued income 563,233 21,670 655,468 12,041
11,283,096 8,152,702 5,723,712 2,297,116
Included within group other debtors is a deferred tax asset of £45,619 which can be reconciled as follows:
Deferred tax provision brought forward 3,790
Addition on acquisition of Redworth Limited 19,575
Movement in the year (note 7) 22,254
Deferred tax asset carried forward 45,619
All potential deferred taxation amounts have been provided for.
Included within trade debtors is an amount of £6,809,880 (2004: £1,516,41 7) relating to factored debts.
16. Creditors: Amounts Falling Due Within One Year
Group Company Group Company
2005 2005 2004 2004
£ £ £ £
Debenture loans 1,573,997 1,573,997 – –
Bank loans and overdrafts 5,571,542 5,622,145 1,204,881 256,577
Trade creditors 9,560,111 39,257 3,119,409 46,963
Amounts owed to group undertakings – 6,211,901 – 709,287
Corporation tax 1,867,952 – 654,061 –
Social security and other taxes 809,037 – 421,369 –
Other creditors 133,300 – 7,221 –
Other creditors – deferred consideration 897,493 897,493 938,105 938,105
Net obligations under hire purchase contracts 15,163 – 12,729 –
Accruals and deferred income 2,153,314 27,100 1,224,451 23,500
Proposed dividend 44,389 44,389 – –
22,626,298 14,416,282 7,582,226 1,974,432
During the previous year, personal guarantees were given by M.A. Infante (£230,000) and M.D. Frey (£630,000) in respect of the group
overdraft facility and long term borrowings. These were cancelled during the year.
The companies in the group have given unlimited cross guarantees as part of a collective net overdraft facility to secure the bank liabilities of each other.
The maximum potential liability for the company at the balance sheet date was £1,215,207 (2004 : £290,123).
The group companies party to the charges and the guarantees are:
Air Music & Media Group Plc, Air Music & Media Copyright Limited (formerly Air Music & Media Limited), New Sound Limited,
Air Music & Media Sales Limited (formerly Going For A Song Limited), Redworth Limited, Music Box Leisure Limited, ESD Wholesale Limited 38
1 7. Creditors: Amounts Falling Due After More Than One Year
Group Company Group Company
2005 2005 2004 2004
£ £ £ £
Bank loans and overdrafts 4,087,234 4,087,234 1,035,205 1,035,205
Other creditors – deferred consideration – – 1,671,586 1,671,586
Obligations under hire purchase contracts 49,296 – 62,654 –
4,136,530 4,087,234 2,769,445 2,706,791
Amounts repayable by instalments:
In less than one year 8,492,574 7,196,142 1,207,411 1,194,682
In more than one year but not more than two years 1,989,748 1,940,452 1,937,620 1,915,165
In more than two years but not more than ﬁve years 2,146,782 2,146,782 770,931 730,732
In more than ﬁve years – – 60,894 60,894
18. Controlling Party
There is no one controlling party.
19. Transactions With Directors
As part of the acquisition of Redworth Limited loan notes totalling £1,573,997 were issued. £819,790 of loan notes were issued to A. Sorrell (and
his interests), a director of the company during the year. £754,207 of loan notes were issued to J. Beer, a director of the company during the
year. All loan notes pay interest at LIBOR and are repayable on the receipt of no less than 30 days notice and no later than 30 September 2007.
20. Future Financial Commitments
(a) Operating leases
At the year end the company did not have any operating lease commitments.
At 31 March 2005 the group had annual commitments under operating leases as set out below.
Group Group
2005 2004
Land and 2005 Land and 2004
Buildings Other Buildings Other
£ £ £ £
Operating leases which expire:
Within one year 10,800 29,564 10,800 8,543
In second to ﬁfth years 194,286 146,675 – 27,31 7
After ﬁve years 27,356 33,712 27,356 –
Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2005 39
21. (a) Shareholders’ Funds
Proﬁt and Shares to Share Share Merger
Loss Account be issued Capital Premium reserve Total
£ £ £ £ £ £
2005 Group
At 1 April 2004 2,677,438 – 4,931,658 2,824,689 (2,799,796) 7,633,989
Exchange difference 2,808 – – – – 2,808
Shares to be issued as deferred consideration
for the acquisition of Redworth Limited – 10,000,000 – – – 10,000,000
Shares issued during the year – – 4,315,984 11,518,687 – 15,834,671
Retained loss for the year (571,198) – – – – (571,198)
At 31 March 2005 2,109,048 10,000,000 9,247,642 14,343,376 (2,799,796) 32,900,270
The group operates an Enterprise Management Incentive Scheme for both directors and employees.
Details of ordinary shares, which are subject to options under this scheme and are outstanding at 31 March 2005, are set out below:
Number of Number Number Number Number Original
options at of options of options of options of options at subscription Exercise
Date granted 31 March 2004 granted in year exercised in year lapsed in year 31 March 2005 price period
16/07/03 2,800,000 – – – 2,800,000 5p 1 7 July 2004 to
1 7 September 2011
16/07/03 460,000 – – (100,000) 360,000 5p 15 May 2006 to
15 May 2013
26/05/04 – 250,000 – – 250,000 5.25p 7 October 2006 to
15 May 2013
16/09/04 – 150,000 – (150,000) – 8p 1 June 2006 to
15 May 2013
16/09/04 – 150,000 – – 150,000 8p 16 September 2004 to
15 May 2013
16/09/04 – 1,180,000 – (60,000) 1,120,000 8p 16 September 2007 to
15 May 2013
Shareholders’ Funds – Group
Proﬁt and Loss Share Share Merger
Account Capital Premium Reserve Total
£ £ £ £ £
2004 Group
At 1 April 2003 1,633,233 4,124,543 1,267,733 (2,799,796) 4,225,713
Exchange difference (2,871) – – – (2,871)
Shares issued during the year – 807,115 1,556,956 – 2,364,071
Retained proﬁt for the year 1,047,076 – – – 1,047,076
31 March 2004 2,677,438 4,931,658 2,824,689 (2,799,796) 7,633,989 40
21. (b) Shareholders’ Funds
Proﬁt and Loss Shares to Share Share
Account be issued Capital Premium Total
£ £ £ £ £
2005 Company
At 1 April 2004 (398,099) – 4,931,658 2,824,689 7,358,248
Shares issued in the year – – 4,315,984 11,518,687 15,834,671
Shares to be issued as deferred consideration
for the acquisition of Redworth Limited – 10,000,000 – – 10,000,000
Proﬁt for the year 398,102 – – – 398,102
At 31 March 2005 3 10,000,000 9,247,642 14,343,376 33,591,021
2005 2004
£ £
The share capital comprises:
Authorised:
800,000,000 (2004: 400,000,000) Ordinary shares of 2.5p each 20,000,000 10,000,000
Called up, allotted and fully paid:
369,905,747 (2004 : 197,266,385) Ordinary shares of 2.5p each 9,247,642 4,931,658
During the year, the Company issued 1 72,639,362 2.5p ordinary shares at the following prices:
Shares Issued Issue Price Purpose of issue
5,347,655 7.7p Hollywood DVD Limited deferred consideration
3,216,707 9.23p The Original Record Company Limited deferred consideration
64,075,000 8p Cash
100,000,000 10p Redworth Limited consideration
The cash issue raised funds of £5,126,000, which were used as part of the consideration for the acquisition of Redworth Limited.
In addition, 130,276,185 shares are issuable as the £10,000,000 deferred consideration for the acquisition of Redworth Limited. In accordance
with FRS 7 this has been disclosed as part of shareholders’ funds.
Shareholders’ Funds – Company
Proﬁt and Share Share
Loss Account Capital Premium Total
£ £ £ £
2004 Company
At 1 April 2003 (154,351) 4,124,543 1,267,733 5,237,925
Shares issued in the year – 807,115 1,556,956 2,364,071
Loss for the year (243,748) – – (243,748)
(398,099) 4,931,658 2,824,689 7,358,248
Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2005 41
22. Provisions for Liabilities and Charges – Group and Company
Deferred taxation
Provision for deferred taxation has been made in these ﬁnancial statements in accordance with the accounting policy described in note 1.
Included within other debtors is a deferred tax asset of £45,619 (2004: £3,790), arising from depreciation in excess of Capital Allowances taken
by the group. The group have recognised this as the directors believe sufﬁcient future proﬁts will be made to recover this asset.
Company
At the year end, the company did not have any deferred tax assets or liabilities.
23. Capital Commitments
There are no capital commitments at the year end.
24. Financial Instruments
The group’s ﬁnancial instruments comprise borrowings, some cash and liquid resources and various items such as trade debtors and trade
creditors that arise directly from its operations. The main purpose of these ﬁnancial instruments is to provide the working capital for the group’s
operations. It is, and has been throughout the period under review, the group’s policy that no trading in ﬁnancial instruments shall be undertaken.
The main risks arising from the group’s ﬁnancial instruments are interest risk, liquidity risk and foreign currency risk. The Board reviews and
agrees policies for managing each of these risks and they are summarised below. These policies are reviewed and amended on a regular basis as
the risks to the group change, in particular upon acquisitions into the group.
Interest rate risk
The group ﬁnances its operations through a mixture of retained proﬁts and bank borrowings. The group borrows in the desired currencies at both
ﬁxed 3 months in advance and ﬂoating rates of interest. The group’s policy is to review the interest rate exposure on a quarterly basis.
Liquidity risk
As regards liquidity, the group’s policy has, throughout the year, been to ensure continuity of funding by a regular review of projected maximum
available facility against projected utilisation. Short term ﬂexibility is achieved by invoice ﬁnancing facilities.
Foreign currency risk
The group has one signiﬁcant overseas subsidiary – Legacy Entertainment Inc, which operates in Canada and North America and whose revenues
and expenses are denominated in Canadian and US dollars. About one seventh of the sales of the group’s business is to customers outside of the
UK. Those sales are predominantly priced and invoiced in sterling to mitigate the foreign exchange risk. Where sales are priced in local currency
the risk is regularly reviewed and managed by the holding of foreign currency. About one ﬁfth of the group’s purchases are from suppliers
outside of the UK and are not priced in sterling. Forward purchases are made to mitigate the foreign exchange risk.
Interest rate risk proﬁle of ﬁnancial assets and ﬁnancial liabilities
Financial Assets
The interest rate proﬁle of the group’s ﬁnancial assets (excluding short-term debtors) at 31 March 2005 was :-
Financial assets
Floating rate on which
ﬁnancial no interest
Total assets is received
£ £ £
Currency
Sterling 3,129,894 1,500,000 1,629,894
Euro 79,985 – 79,985
Canadian dollar 360,081 – 360,081
US dollar 11,493 – 11,493
Other 2,952 – 2,952
Total 3,584,405 1,500,000 2,084,405 42
24. Financial Instruments continued
Financial liabilities
The interest rate proﬁle of the group’s ﬁnancial liabilities (excluding short-term creditors) at 31 March 2005 was:
27 Month
Floating rate 3 Month ﬁxed ﬁxed rate
ﬁnancial rate ﬁnancial ﬁnancial
Total liabilities liabilities liabilities
£ £ £ £
Currency
Sterling 11,232,743 631,060 10,533,816 67,867
The ﬂoating rate ﬁnancial liabilities bear interest at a weighted average rate of LIBOR + 1.25%.
The 3 month ﬁxed rate liabilities bear interest at a weighted average rate of LIBOR + 1.89%.
The 27 month ﬁxed rate ﬁnancial liabilities bear interest at 12.89%.
Maturity of ﬁnancial liabilities
The maturity proﬁle of the group’s ﬁnancial liabilities at 31 March 2005 was as follows:
2005 2004
£ £
In one year or less, or on demand 7,145,539 1,204,883
In more than one year but not more than two years 1,940,453 243,577
In more than two years but not more than ﬁve years 2,146,781 730,732
In more than ﬁve years – 60,894
11,232,773 2,240,086
Borrowing facilities
The group has no undrawn committed borrowing facilities.
Fair values of ﬁnancial assets and ﬁnancial liabilities
Book values and fair values of the group’s ﬁnancial assets and liabilities are not considered to be materially different from each other
as at 31 March 2005.
Book value
and fair value
£
Primary ﬁnancial instruments held or issued to ﬁnance the group’s operations
Short-term ﬁnancial liabilities and current portion of long-term borrowings (7,145,539)
Long-term borrowings (4,087,234)
Financial assets 3,584,405
Notice is hereby given that an Annual General Meeting of Air Music & Media Group plc (the “Company”) will be held at the ofﬁces of Nicholson
Graham & Jones at 110 Cannon Street London EC4N 6AR on Friday 23 September 2005 at 10 a.m for the purpose of considering and, if thought
ﬁt, passing the following resolutions, of which resolutions 1 to 6 will be proposed as ordinary resolutions, and resolutions x and y will be proposed
as special resolutions:
Ordinary Resolutions
Notice is hereby given that an Annual General Meeting of Air Music & Media Group plc (the “Company”) will be held at the ofﬁces of Kirkpatrick &
Notes to the Consolidated Financial Statements continued
For the year ended 31 March 2005 43
Form of Proxy
I am a member of the company, entitled to attend and vote at any general meeting of the company. I appoint the person named below, or failing
him/her the chairman of the meeting, as my proxy to vote on my behalf at the annual general meeting of the company to be held at the
following place and time, and at any adjournment:
Name of member:
Name of proxy:
Place of meeting: Kirkpatrick & Lockhart, Nicholson, Graham LLP, 110 Canon Street, London EC4N 6AR
Date of meeting: 23rd September 2005
The proxy will vote on the following resolutions, as indicated:
Ordinary Resolutions For Against
1. To receive and adopt the directors’ report and audited accounts for the ﬁnancial year
ended 31 March 2005.
2. To re-elect Janice Denise Beer, who is retiring by rotation, as a director of the Company.
3. To re-elect Alexander Frank Sorrell, who is retiring by rotation, as a director of the Company.
4. To reappoint Kingston Smith as auditors to the Company.
5. To authorise the directors to ﬁx the remuneration of the auditors
6. To approve the payment of a ﬁnal dividend of 0.012 pence per share in respect of the year ended
31 March 2005 for payment on 26 September 2005 and with a record date of 9 September 2005.
Please indicate with an X in the space provided how you wish your votes to be cast on the resolution. If you sign and return this form without
indicating how the proxy is to vote, he/she will have discretion to vote either way or to abstain.
Signature
Date: 2005
NOTES:
1. The form of proxy must be signed by the shareholder appointing the proxy or by his/her attorney authorised in writing. If the shareholder is a corporation, the form of proxy should be
sealed with its common seal or signed by an ofﬁcer or an attorney of the corporation or other person authorised to sign it.
2. The return of this form will not prevent a member from attending in person and voting at the meeting.
3. In the case of joint shareholders, the person whose name appears ﬁrst in the register of members has the right to attend and vote at general meetings to the exclusion of all others.
4. The form of proxy and the power of attorney or other authority, if any, under which it is signed, or a copy of such power or authority certiﬁed by a notary, must be left at the registered
ofﬁce of the company at least 48 hours before the date set for the meeting or adjourned meeting.
5. Pursuant to regulation 34 of The Uncertiﬁcated Securities Regulations 1995, members will be entitled to attend and vote at the meeting if they are registered on the Company’s register
of members 48 hours before the time appointed for the meeting or any adjourned meeting. 44
1st fold
2nd fold
3rd fold & tuck in
Air Music & Media
Chiltern House
184 High Street
Berkhamstead
Hertfordshire
HP4 3AP
please
afﬁx
stamp
here
please cut along this line Kirkpatrick & Lockhart Nicholson Graham LLP at 110 Cannon Street
London EC4N 6AR on Friday 23 September 2005 at 10 am for the
purpose of considering and, if thought ﬁt, passing the following
resolutions, of which resolutions 1 to 6 will be proposed as ordinary
resolutions.
ORDINARY RESOLUTIONS
1. To receive and adopt the directors’ report and audited accounts for
the ﬁnancial year ended 31 March 2005.
2. To re-elect Janice Denise Beer, who is retiring by rotation, as a
director of the Company.
3. To re-elect Alexander Frank Sorrell, who is retiring by rotation, as a
director of the Company.
4. To reappoint Kingston Smith as auditors to the Company.
5. To authorise the directors to ﬁx the remuneration of the auditors.
6. To approve the payment of a ﬁnal dividend of 0.012 pence per
share in respect of the year ended 31 March 2005 for payment on
26 September 2005 and with a record date of 9 September 2005.
By Order of the Board
Ruth Salsbury
Company Secretary
31 August 2005
Registered Ofﬁce: Devonshire House
60 Goswell Road
London
EC1M 7AD
Notes
I. A member entitled to attend and vote at this meeting is entitled to
appoint one or more proxies to attend and, on a poll, vote in his
stead. A proxy need not be a member of the Company.
II. A form of proxy is enclosed with the Circular of which this Notice
forms part. To be valid, a form of proxy and the power of attorney
or other authority (if any) under which it is signed, or a copy of such
authority certiﬁed notarially or in some other way approved by the
Board, must be lodged with the Company’s registrar, Neville
Registrars, 18 Laurel Lane, Halesowen, West Midlands, B63 3DA
not less than 48 hours before the time ﬁxed for the meeting.
Lodging a form of proxy will not preclude a member from attending
the meeting and voting in person.
III. In accordance with regulation 41 of the Uncertiﬁcated Securities
Regulations 2001, only those ordinary shareholders registered in
the register of members of the Company as at 10a.m. on 21
September 2005, or in the event that the meeting is adjourned, in
such register 48 hours before the time of any adjourned meeting,
shall be entitled to attend or vote at the meeting in respect of the
number of shares registered in their name at the relevant time.
Changes to entries in the relevant register of securities after 10
a.m. on 21 September 2005 or, in the event that the meeting is
adjourned, in such register less than 48 hours before the time of
any adjourned meeting, shall be disregarded in determining the
rights of any person to attend or vote at the meeting.
Notice of Annual General Meeting
design www.luminous.co.uk Air Music & Media Group plc
Chiltern House
184 High Street
Berkhamstead
Hertfordshire
HP4 3AP
Tel: +44 (0) 1442 860100
Fax: +44 (0) 1442 860109
Email: info@airmusicandmedia.com
www.airmusicandmedia.com