Entertainment Rights Plc Annual Report & Accounts 2006
Entertainment Rights Plc. Colet Court, 100 Hammersmith Road, London W6 7JP
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ENTERTAINMENT RIGHTS PLC
ANNUAL REPORT & ACCOUNTS
2006
An Entertainment Rights group company An Entertainment Rights group company An Entertainment Rights group company Operational highlights
• Acquisition of US based Classic Media Holdings Inc (“Classic Media”)
announced in December 2006 and completed in January 2007, creating a
leading global force in the children’s and family entertainment market.
This acquisition presents us with tremendous opportunities for the future
• Worldwide publishing phenomenon, Where’s Wally?
®
acquired in January 2007
• Four signature shows aired on premier broadcast television channels, the BBC,
Channel Five and ITV – Postman Pat
®
, Rupert Bear
®
– Follow the Magic, The
Basil Brush Show
®
, Jim Jam and Sunny™
• Postman Pat
®
to debut on US networkqubo in October 2007
• 3-2-1 Penguins!™ from recently acquired Classic Media commissioned by
qubo to air in Autumn 2007
Rod Bransgrove, Chairman
“The Board is delighted with the exceptional performance of the Group for
the full year,
We are particularly excited by the acquisition of Classic Media which
enhances our brand portfolio and strengthens our presence in the US, the
world’s largest media market. This acquisition presents us with tremendous
opportunities for the future.
Entertainment Rights Plc (“ER”) is firmly established as a global leader in
children’s and family media possessing one of the largest digital portfolios of
its kind with a library of 8,700 episodes of children’s and family
programming, characters and brands which we continue to exploit around
the world.
We are committed to continued expansion and anticipate significant
progress in the coming year. We look forward to 2007 with confidence.”
Entertainment Rights Plc
Annual Report & Accounts 2006
Operational highlights
Find your way around the Annual Report
Operating and Financial Review
01 Highlights
02 Chairman’s Statement
04 Chief Executive Officer’s Review
14 Chief Finance and Operations Director’s Review
16 Board of Directors
Directors’ Reports
17 Report of the Directors
19 Corporate Governance
22 Statement of Directors’ Responsibilities
23 Remuneration Report
Financial Statements
28 Report of the Independent Auditors
29 Consolidated Income Statement
29 Consolidated Statement of Recognised Income
and Expense
30 Consolidated Balance Sheet
31 Consolidated Cash Flow Statement
32 Notes to the Financial Statements - Group
46 Company Balance Sheet
47 Notes to the Financial Statements - Company
Appendices
53 Legal Notices
57 Directors and Advisers Financial highlights
• Operating profit increased by 36% to £10.2m (2005: £7.5m)
• Adjusted EBITDA* increased by 13% to £15.5m (2005: £13.7m)
• Gross profit margin increased to 57% (2005: 46%)
• Revenue decreased by 3% to £29.7m (2005: £30.7m)
• Profit before tax increased by 31% to £7.8m (2005: £6.0m)
• Adjusted** profit before tax increased by 35% to £8.7m (2005: £6.4m)
• Adjusted** EPS increased by 19% to 1.70p (2005: 1.42p)
• Basic EPS increased by 15% to 1.50p (2005: 1.30p)
Entertainment Rights Plc
Annual Report & Accounts 2006
01 Financial highlights
* Excluding share option charge (IFRS 2), aborted acquisition costs (2006) and
reorganisation costs (2005)
** Excluding share option charge (IFRS 2), aborted acquisition costs (2006), reorganisation
costs (2005) and the charge for changes in fair value of financial instruments. I am delighted to present an impressive set of results for the year
ended 31 December 2006. 2006 has been a transitional year for the
Company with growth generated by the Company’s wholly owned
brands following a period of investment in new programming.
Although the Group’s revenue declined marginally by 3% to £29.7
million (2005: £30.7 million), adjusted EBITDA
1
grew 13% to £15.5
million (2005: £13.7 million) and unadjusted EBITDA by 11% to
£14.8m (2005: £13.3m). Additionally, adjusted
1
earnings per share
increased by 19% to 1.70 pence per share (2005: 1.42 pence per
share) and earning per share increased by 15% to 1.50 pence per
share (2005: 1.30 pence per share). Importantly, there has been a
continued increase in the Company’s gross profit margin, an increase
from 46% in 2005 to 57% in 2006, as a result of a greater proportion
of the Group’s revenue being derived from wholly owned brands.
The quality of our portfolio and strategic decisions made on selective
acquisitions are reflected in our results for the full year.
Entertainment Rights Plc
Annual Report & Accounts 2006
02 Chairman’s Statement
Chairman’s Statement
Rod Bransgrove
Chairman
1
Adjusted reflects the exclusion of share option charge, aborted acquisition
costs (2006) and reorganisation costs (2005) Group Development
In December 2006, ER announced its intention to acquire Classic
Media with the resolution passed by shareholders in January 2007.
Classic Media complements and strengthens the Company’s existing
operations and importantly, this acquisition will have a transforming
impact on the financial status of the enlarged Group.
2006 saw ER capitalise further on its commercial relationships with
premier broadcast partners following the launch of two significant
new brands and a record level of new programming delivered. A new
series of Rupert Bear
®
– Follow the Magic launched on Channel Five
and Five Life and Jim Jam & Sunny™ made its debut on ITV1 and
CiTV. The BBC commissioned further episodes of Postman Pat
®
,
The Basil Brush Show™ and a brand new series, Guess with Jess
®
.
Dividend
We believe that shareholders will be best served by the business
continuing to focus resources on investment in the ongoing
development of ER. Therefore, we do not intend to propose a
dividend for 2006. We will continue to keep this policy under review.
Staff
I would like to thank ER staff for their tremendous contribution
throughout 2006.
Future Prospects
The prospects for the Company continue to be excellent and we are
confident of our ability to grow the business and deliver continued
shareholder value.
Rod Bransgrove
Chairman
26 March 2007
Entertainment Rights Plc
Annual Report & Accounts 2006
03 Chairman’s Statement
Achievements
The quality of our portfolio and strategic decisions
made on selective acquisitions are reflected in our
results for the full year. Entertainment Rights is a leading global media group specialising in
children’s and family programming, characters and brands. This year
has seen ER substantially strengthen its established partnerships
with key television broadcasters, toy manufacturers and new media
businesses worldwide, notably, in the significant US market.
ER’s extensive library of revenue generating intellectual property is
exploited on a global scale across television distribution, licensing
and merchandising, home entertainment and digital media markets.
Classic Media will significantly enhance ER’s existing strong portfolio
of high-quality content. We believe that this acquisition is a powerful
addition to our future growth and global recognition.
The rapid development in the number of distribution channels
competing for audiences worldwide has transformed the landscape
of the media industry. The growth in the number of specialist
television channels operating on a multi-platform basis available to
the children’s and family audience has, as a direct consequence,
increased the demand for variety in children’s and family
programming. This in turn has fuelled a global increase in character
licensing and the DVD market. We believe that ongoing technology
developments offer content owners many opportunities to generate
additional revenues as new platforms and formats deliver routes to
new and expanding consumer audiences. Furthermore, the advent of
digitisation and increased broadband penetration in the home as well
as mobile technology will increase the revenue earning potential of ER.
The US remains the largest entertainment and media market in the
world, projected to reach US$660 billion by 2008. American children
aged between three and eleven had a combined purchasing power
of US$18 billion in 2005 and this is projected to rise to US$21.4
billion by 2010. ER’s strong position in the lucrative US market
underpins the Company’s long term strategy.
In January 2007, the Company acquired worldwide publishing
phenomenon, Where’s Wally?
®
. This is a unique brand that presents
significant opportunities for exploitation as a multi-media property
and offers substantial potential for launch onto new digital media
platforms. The Company will create new animated and live action
content with multi-platform application that is anticipated to launch
worldwide in 2008/2009.
Entertainment Rights Plc
Annual Report & Accounts 2006
04 Chief Executive Officer’s Review
Chief Executive Officer’s Review
Michael V. Heap
Chief Executive Officer Operational Highlights:
2006 saw the commissioning and delivery of a record level of
new programming to leading broadcasters. In January 2006, ER
reported Channel Five’s commission of 52 x 10 minute episodes of
Rupert Bear
®
– Follow the Magic which followed the acquisition from
Express Newspapers of a majority stake in the Rupert Bear
®
brand.
Rupert Bear
®
– Follow the Magic was delivered on schedule to
Channel Five for their pre-school block, Milkshake! in November
2006. Rupert Bear
®
- Follow the Magic is now ranked as the top
pre-school show for kids aged between four and six on terrestrial
channels in the UK.
New episodes of The Basil Brush Show™ and Postman Pat
®
were
delivered to the BBC in September 2006. In November 2006, ER
commenced delivery of ITV’s biggest ever pre-school commission of
260 x 11 minute episodes of Jim Jam & Sunny™.
The delivery of the new programming, the concentration of which
accentuated the second half weighting of the Group’s financial
performance in 2006, has enabled ER to recognise the associated
revenue in accordance with its accounting policies. Traditionally,
fourth quarter Christmas trading has been an important factor in
the overall performance of the Group’s home entertainment and
consumer products business and the Board expects a similar trading
pattern this year.
Other highlights include the acquisition of the worldwide distribution
rights, (excluding certain territories) of 78 x 11 minute episodes of
Finley the Fire Engine™. In September 2006, ER announced a multi-
picture, multi-year distribution agreement with Mattel for the long
term distribution rights to the entire Barbie
®
film franchise in the
UK/Eire and television rights on a multi-territory basis. ER also signed
an agreement with BT for supply of content, including Basil Brush
®
,
to their next-generation TV-via-broadband service, BT Vision.
Classic Media:
In January 2007, the acquisition of Classic Media transformed ER
into a leading force in the global children’s and family entertainment
market. This acquisition further diversifies our portfolio of world
famous characters and our library now stands at approximately
3,500 hours of content. In uniting the characters and brands of ER
and Classic Media, we have created one of the strongest portfolios
of contemporary classic and new children’s brands in the world
where Postman Pat
®
, Basil Brush
®
, Rupert Bear
®
, He-Man
®
,
She-Ra
®
and Where’s Wally?
®
now stand alongside iconic US brands
such as Lassie
©
, The Lone Ranger
®
, Casper the Friendly Ghost
©
and
leading values based children’s and family brand, VeggieTales
©
.
The Directors regard the acquisition of Classic Media as a highly
complementary addition to the Group’s business activities and
believe that it further consolidates ER’s position as one of the leading
independent owners of intellectual property in the children’s and
family entertainment sector. This acquisition is a significant step
forward in the long-term development and profitability of ER and is in
line with our continued commitment to enhance shareholder value.
Entertainment Rights Plc
Annual Report & Accounts 2006
05 Chief Executive Officer’s Review
Strategic partnerships
This year has seen ER substantially strengthen its
established partnerships with key television broadcasters,
toy manufacturers and new media businesses worldwide,
notably in the significant US market. Chief Executive Officer’s Review
Commercial Highlights:
Distribution
ER’s in-house TV distribution team sells programmes to
broadcasters around the world. ER is the largest UK based
specialist supplier of children’s and family programming
to global broadcasters by distribution turnover. ER’s
programming is licensed to more than 170 territories around
the world including the US, Japan, France, Germany and Italy
as well as emerging markets such as China, India and Russia.
In a landmark deal, Postman Pat
®
will launch in China in 2007 for the
first time ever following ER’s recent agreement with China’s leading
broadcaster, CCTV, which has licensed all 80 x 15 minute episodes
for their children’s block CCTV-kids.
This broadcast deal offers ER significant opportunities in China’s
lucrative toy market with the industry currently estimated to be worth
up to US$1.3bn with growth predicted to increase by 40% annually
and the market estimated to be worth approximately US$12.5bn by
2010. Postman Pat
®
has a presence in over 100 countries around
the globe including the key territories of the US, UK, Japan, France,
Germany and Italy. In particular, the agreement withqubo will enable
Postman Pat
®
to extend the brand’s reach on US television,
increasing its profile in the lucrative US children’s and family
entertainment market.
ER has also secured a raft of international television programming
and home entertainment agreements in key territories across
the globe for our new Rupert Bear
®
pre-school television series,
Rupert Bear
®
– Follow the Magic.
Entertainment Rights Plc
Annual Report & Accounts 2006
06 Chief Executive Officer’s Review Rupert Bear
®
– Follow the Magic has now sold to over 65 territories
after premiering internationally at MIPCOM 2006. Leading partners
in key territories have acquired the property including France 5,
Super RTL in Germany and Kidz Entertainment for Scandinavia.
Other television sales of Rupert Bear
®
include Republic of
Ireland (RTE), Portugal (RTP), Slovenia (Pop TV), Afghanistan
(Telecom Development), Iceland (Icelandic National), Greece
(Modern Times SA), Hong Kong (Asia TV Ltd), Thailand (Cineplex),
Singapore (Mediacorp TV12), Poland (Canal and Cyfrowy), India
(Turner Entertainment), Taiwan (Astar Media Production), Indonesia
(Indosiar Visual), and Middle East Group (Mbc FZ LLC).
Other recent agreements include a deal with Selecta Vision to
distribute Jim Jam & Sunny™ in Spain and Portugal. Basil Brush
®
has been licensed to Rai Sat in Italy and TVE in Spain and all 8 series
of Postman Pat
®
plus 4 x 30 minute Specials have been licensed to
RTP2 in Portugal. Postman Pat
®
’s international success is further
highlighted by the licensing of series 7 and 8 to Super RTL to air in
Germany, Switzerland and Austria, SF Norge have also acquired the
new series to air in Norway, Finland, Sweden, Denmark and Iceland.
Postman Pat
®
series 7 and 8 have also been licensed to DRTV in
Denmark, CITEL in France and French speaking territories as well
as NRK Norway and TV4 Sweden. These recent renewals follow
Postman Pat
®
’s ratings success in these key territories.
3-2-1 Penguins! is a successful animated series onqubo and is
the number one rated programme on this branded children’s block.
A new series of 3-2-1 Penguins! comprising 20 x 30 minute episodes
will debut onqubo in Autumn 2007.
ER continues to partner with leading toy companies Hasbro and
Mattel, representing television programming for their global brands
including Barbie
®
and Transformers
®
which ER distributes to
broadcasters around the world.
ER will be showcasing its enlarged portfolio at international
television market, MIPTV in April 2007, with ER’s distribution
team representing product from its wholly owned subsidiaries
Classic Media and Big Idea for the first time ever following the
acquisition of Classic Media Holdings, Inc earlier this year.
Entertainment Rights Plc
Annual Report & Accounts 2006
07 Chief Executive Officer’s Review
International distribution
ER has also secured a raft of international television
programming and home entertainment agreements in
key territories across the globe for our new Rupert Bear
®
pre-school television series, Rupert Bear
®
– Follow the
Magic.
number 1
The number 1 pre-school
show on CBeebies
350
products
Over 350 Postman Pat
products are available globally
BAFTA
BAFTA nominated in
“Best Pre-School Animation
Category” Shelf space for pre-school products remains extremely competitive.
However, ER’s strong relationships with key retailers including Asda,
Early Learning Centre, Marks & Spencer, Mothercare, Tesco,
Toys R Us and Woolworths ensure that the Company’s brands
continue to be widely represented on the UK High Street.
Postman Pat
®
has a strong presence at retail in the UK with over 300
products on shelf and 60 licensees appointed.
The Postman Pat
®
consumer products roll-out will commence in the
key territory of Germany in 2007 following Pat’s debut on leading
German broadcaster, Super RTL in 2006. Home entertainment
releases and an audio CD launch in Germany in April will be followed
by a publishing launch in July, and toys in autumn 2007.
Licensing and Merchandising
ER owns the licensing and merchandising rights to its wholly
owned or controlled characters and brands such as Postman Pat
®
,
Rupert Bear
®
, Jess the Cat™, Basil Brush
®
and Jim Jam & Sunny™.
This ensures that ER is able to fully coordinate its marketing and
strategic sales efforts across all exploitation platforms to strengthen
and grow its market presence. In addition to this, the Company is
well placed to improve on consumer awareness that will in turn,
improve the sales potential of ER brands.
Entertainment Rights Plc
Annual Report & Accounts 2006
08 Chief Executive Officer’s Review
Chief Executive Officer’s Review
sparkling
UK ratings success on Five’s
pre-school slot, Milkshake!,
Rupert Bear ranked first among
pre-school series for kids aged 4-6
116 million
Marketing launch campaign
reached a total audience of
over 116,000,000!
65+
Rupert Bear
®
– Follow the
Magic has now sold
to in excess of 65
territories 2007 will see the UK consumer products roll-out of Rupert Bear
®
.
ER has secured strong retail support and the first products to launch
include DVD and a music album followed by a full cross-category
launch from autumn 2007 including publishing and toys.
Internationally, licensing opportunities for our brands continue to
increase with licensed product available in 39 territories around the
world including the US, UK, Germany, Australia and India.
Following the acquisition of Classic Media, ER will be securing
opportunities for Classic brands in the UK and internationally,
capitalising on ER’s strong relationships with licensees,
toy partners and retailers. ER’s brands will benefit
from the Company’s increased presence in the
US and from Classic’s established relationships
with leading broadcast and retail partners in
this key territory.
Entertainment Rights Plc
Annual Report & Accounts 2006
09 Chief Executive Officer’s Review
Global reach
Internationally, licensing opportunities for our brands
continue to increase with licensed product around the
world including the US, UK, Germany, Australia and India. Live Events
Live events continue to be an important element in promoting ER’s
brands. 2006 was exceptionally busy for our characters as they
toured the country entertaining children and families.
The highlight of the year was the appearance of Postman Pat
®
,
Rupert Bear
®
and Basil Brush
®
at the ‘Children’s Party at the Palace’
in June, a unique event which celebrated children’s literature and the
Queen’s 80th Birthday. Postman Pat
®
dominated press coverage
surrounding the event, appearing across national print media and in
national news bulletins on the BBC. Postman Pat
®
also has a
permanent Greendale village at leading UK tourist attraction,
Longleat, and children and families can watch his daily stage show
throughout the year. To celebrate Postman Pat
®
’s 25th Anniversary,
Pat embarked on a nationwide mall tour in association with
Debenhams and visited key shopping centres throughout the UK.
2006 also saw Pat join the CBeebies Live tour for the second
consecutive year which ran over the Christmas holiday period.
No 1
number 1 pre-school show on
ITV1 Channel
25%
25% of all housewives with
kids aged 0-3 in the UK have
watched Jim Jam & Sunny™
Home Entertainment
ER’s in-house home entertainment label, Right Entertainment (“RE”)
actively exploits video and DVD rights to ER’s owned and controlled
programming in the UK. In 2006, RE released 19 titles in the UK
giving ER the 4th largest share of the UK pre-school children’s home
entertainment market. To date, this activity has sold in excess of
5 million home entertainment units across its key brands including
Postman Pat
®
, Barbie
®
, Tracy Beaker and Little Red Tractor™.
Home entertainment highlights during 2006 include the multi-picture,
multi-year distribution agreement with Mattel for the long term UK
distribution rights to the entire Barbie
®
film franchise. The extension
of the agreement between ER and Mattel underlines the successful
partnership between ER and one of the world’s leading toy
companies. Combined UK and international DVD and VHS sales
through Right Entertainment have exceeded 12m units across the
10 Barbie
®
titles released to date.
ER’s agreement with Genius Products for home video distribution of
a number of ER’s key brands in North America was also a significant
agreement in 2006. Many of ER’s titles will be available on DVD in
the US for the first time, including Postman Pat
®
, Rupert Bear
®
and
Jim Jam & Sunny™. Titles from Classic Media and the Filmation
library of classic contemporary programming including Fat Albert™
and The Archies™, will also be available through Genius Products.
ER’s home entertainment business will greatly benefit with the release
of under-exploited content from Classic Media’s library both in the
UK and internationally with much of Classic’s portfolio available for
release on DVD for the first time ever. Similarly, content from Big
Idea’s library of values based programming for children and families,
including the hugely successful VeggieTales
©
and 3-2-1 Penguins!
©
,
will be available on DVD in many international territories for the
first time.
Entertainment Rights Plc
Annual Report & Accounts 2006
10 Chief Executive Officer’s Review
Chief Executive Officer’s Review
6.6 million
6.6 million viewers have tuned
in to watch the show to date Basil Brush
®
continues to entertain children and families appearing in
pantomime and in his own theatre show, “The Fox Factor”, which
toured the UK throughout 2006. Basil Brush
®
regularly appears as a
celebrity guest on prime time television shows including The Weakest
Link and recently starred in a number of Comic Relief activities
including Fame Academy.
In a recent exciting development, Rupert Bear
®
will be appearing at
popular family destination Center Parcs UK throughout 2007. The
exclusive agreement will see Rupert appearing at all Center Parcs
nationwide with high profile Rupert Bear
®
branding across all sites
and Rupert Bear
®
themed activities for children. Rupert Bear
®
will
also appear in his own stage show at Center Parcs throughout
September and October 2007.
ER has also secured an agreement with Children’s Showtime
Productions for a Rupert Bear
®
theatre tour to commence in
2008. “Follow the Magic with Rupert Bear
®
and Friends”
will visit 50 UK theatres nationwide during the 8 month
tour. We are delighted to report Rupert Bear
®
’s high live
event profile following so soon after the launch of the new
Rupert Bear
®
- Follow the Magic television series which
made its debut on Five’s Milkshake! in November 2006.
Entertainment Rights Plc
Annual Report & Accounts 2006
11 Chief Executive Officer’s Review
Realising potential
ER’s home entertainment business will greatly benefit
with the release of under-exploited content from Classic
Media’s library both in the UK and internationally with
much of Classic’s portfolio available for release on DVD
for the first time ever. Entertainment Rights Plc
Annual Report & Accounts 2006
12 Chief Executive Officer’s Review
Chief Executive Officer’s Review
Digital Media and Music
ER is strategically pursuing opportunities across digital platforms
increasing both brand exposure and revenue through new
distribution streams. Children are exposed to advanced technologies
and digital platforms such as computers, the web, video games and
mobile devices at an ever increasing rate and their appetite for
engaging with their favourite characters on different media platforms
opens up significant opportunites for ER. As the owner of sought
after brands, ER is able to create content and develop programming
which is compatible with the target audience. ER is experiencing
increased demand for long and particularly short form programming
which is suitable for digital devices and downloads. In addition to the
recent agreement with BT for specific ER characters to appear on its
next generation TV-via-broadband service, BT Vision, ER has also
secured deals with leaders in the digital category including MobiTV,
Google, AOL/In2TV, YouTube, Lycos, Virgin Media and Player X.
As part of the recent agreement with US based Genius Products, ER
has licensed interactive rights across a number of brands including
She-Ra
®
who will feature in interactive games to be released from
2007 onwards.
In 2006, ER secured an agreement with Sony BMG who featured
Postman Pat
®
, Basil Brush
®
and Little Red Tractor™ on their
CD/DVD compilation album release, Playtime which charted in the
top ten of the UK compilation album chart. ER has also secured
an agreement with Demon Music Group who will be releasing
Rupert Bear
®
and Jim Jam & Sunny™ albums in Spring 2007. live
Basil reached more than
40,000 fans in his live events
programme 2006 (theatre
shows, panto etc)
20%
Circa 20% of all British kids
watched The Basil Brush Show
on BBC, aired on CBBC daily
Summary:
ER’s balanced business model of generating revenue from television
distribution, licensing and merchandising, home entertainment and
digital media ensures that ER is in a strong position to fully capitalise
on the global demand for content.
The opportunity for ER to exploit its brands and characters across a
diverse group of distribution channels including television, retail,
broadband and PC’s has never been more prevalent. Our focus
going forward is to continue to seek out and exploit opportunities
created by the increasing number of new media platforms as well as
continuing to maximise traditional platforms to the benefit of
Entertainment Rights and its shareholders.
I would like to join the Chairman in extending my thanks to our team
of dedicated staff.
ER operates in a dynamic and expanding marketplace and we look
forward to capitalising on the opportunities arising from the evolving
media landscape.
We look forward to a successful 2007.
Michael V. Heap
Chief Executive Officer
26 March 2007
Entertainment Rights Plc
Annual Report & Accounts 2006
13 Chief Executive Officer’s Review
Digital opportunities
ER is strategically pursuing opportunities across digital
platforms increasing both brand exposure and revenue
through new distribution streams.
5.3 million
Fully interactive website launched
2006 ‘BasilBrush.com’ which
generates 5.3 million
hits per month Basis of Preparation
The consolidated financial statements include all of the Group’s
activities for the year ended 31 December 2006. The statements
which are set out in pages 29 to 52 are prepared in accordance with
International Financial Reporting Standards (IFRS).
Key Performance Indicators (KPIs)
The following table sets out the key performance measures (KPIs)
monitored by the Board in order to evaluate the Group’s financial
performance against the business strategy:
2006 2005 Increase
Gross profit margin (a) 57% 46%
Adjusted* EBITDA (b) £15.5m £13.7m 13%
Adjusted** PBT (c) £8.7m £6.4m 35%
Adjusted** Basic EPS (d) 1.70p 1.42p 19%
a) Gross profit margin is considered important as it indicates the
proportion of revenue generated by the high margin owned brands.
b) Adjusted EBITDA is considered important as it reflects both the
gross profit performance as well as the management of
administration costs.
c) Adjusted PBT is considered important as it monitors finance costs.
d) Adjusted EPS reflects the overall return to shareholders after tax
and taking into account shares in issue.
Adjusted items are used to indicate the underlying trading of the
business and so exclude the impact of share option charge, the
charge for re-measurement of financial instruments to fair value and
any non-recurring items.
*Adjusted EBITDA
2006 2005
EBITDA £14.8m £13.3m
Share option charge (IFRS 2) £0.5m £0.2m
Reorganisation costs – £0.2m
Aborted acquisition costs £0.2m –
£15.5m £13.7m
** Adjusted PBT
2006 2005
PBT £7.8m £5.9m
Share option charge (IFRS 2) £0.5m £0.2m
Interest rate swap – £0.1m
Currency option £0.2m –
Reorganisation costs – £0.2m
Aborted acquisition costs £0.2m –
£8.7m £6.4m
Adjustments for Adjusted EPS are the same as PBT, but tax effected.
Financial Performance
Income statement
2006 2005 Inc / (Dec)
Revenue £29.7m £30.7m -3%
Adjusted* EBITDA £15.5m £13.7m 13%
Operating Profit £10.2m £7.5m 36%
PBT £7.8m £6.0m 31%
Adjusted** EPS 1.70p 1.42p 19%
The full year results demonstrate that, despite revenue being lower
than the prior year by 3%, the significant increase in gross margin
from 46% to 57% has resulted in an increase in all other measures of
profitability. During the year, the proportion of revenue derived from UK
activities decreased from 59% to 42% offset by a significant increase
in revenue derived from the key US market which increased from 8%
to 36%. This reflects the ongoing success of the Filmation library of
programming as evidenced by the agreement with Genius Products,
LLC for US home entertainment rights. The strong performance of the
Group’s high margin owned programming combined with tight cost
control has resulted in growth in Adjusted EBITDA of 13% to £15.5
million, in line with consensus market estimates.
Entertainment Rights Plc
Annual Report & Accounts 2006
14 Chief Finance and Operations Director’s Review
Chief Finance and Operations
Director’s Review
Elizabeth Gaines
Chief Finance and Operations Director A charge is made to write down the cost of programmes on a
straight line basis over their useful life of up to 20 years, or on a
revenue forecast method where greater. The average life in 2006 was
17.3 years (2005: 10.0 years). The increase in average life from 2005
reflects the recurring nature of revenue from traditional and digital
media generated from the catalogue of programming as well as the
longevity of the major brands.
An impairment charge to goodwill and intangibles was incurred of
£0.1m (2005: £0.7m).
The Group’s net financing costs increased in 2006 to £2.4 million
(2005: £1.5 million). This increase was primarily a result of increased
borrowing levels to fund the growth and seasonality of the Group. The
result of this was an adjusted PBT of £8.7 million (2005: £6.4 million).
In the year ended 31 December 2006, the tax charge was £1.6 million
representing an effective rate of 21 percent (2005: 10 percent). The
effective rate in 2006 and 2005 is lower than the standard rate of
UK corporation tax primarily as a result of the utilisation of brought
forward tax losses and Film Relief. The increase in the effective tax
rate in 2006 was anticipated. The effective rate of tax is likely to
increase in the future following the acquisition of Classic Media
Holdings, Inc (‘Classic Media’) in January 2007 due to the higher rate
of tax in the US.
Balance Sheet
2006 2005
Non-current assets £85.1m £75.6m
Current assets £31.2m £23.0m
Total assets £116.3m £98.6m
Current liabilities £(27.8)m £(20.4)m
Non-current liabilities £(22.8)m £(19.5)m
Total liabilities £(50.6)m £(39.9)m
Net assets £65.7m £58.7m
The increase in non-current assets as at December 2006 is
principally due to investment in new programming. ER entered 2006
with its most significant production slate of 400 episodes of new
high margin owned programming across four key brands, namely
Postman Pat
®
, Basil Brush
®
, Rupert Bear
®
– Follow the Magic and
Jim Jam & Sunny™.
The increase in current assets as at December 2006 of £8.2 million
reflects an increase in accrued revenue due to the timing of key deals
in the last quarter of 2006 following the key trade events of MIPCOM
(October) and Brand & Licensing Show (October) and the agreement
with Genius Products, LLC completed in December 2006.
Cash flow / Net Debt
2006 2005
Cash generated from operations £1.2m £10.0m
Income taxes paid – –
Net cash inflow from operating activities £1.2m £10.0m
Cash flow used in investing activities £(12.0)m £(10.0)m
Cash flow from / (used in) financing activities £2.9m £(0.3)m
Net (decrease) in cash and cash equivalents £(7.8)m £(0.2)m
Cash generated from operations is a function of the seasonality of
the business and in 2006 there was a more significant weighting to
the final quarter compared to the prior year. In 2006 the cash
generated from operating activities was £1.2 million, a decrease of
£8.8 million compared to 2005. This decrease is a reflection of the
timing of key deals that were finalised in the last quarter of 2006 with
the cash received in the first quarter of 2007. Adjusted EBITDA
increased by 13% to £15.5m during 2006.
Cash flows from investing activities include acquisitions and
disposals of fixed assets together with the acquisitions and disposals
of businesses. In 2006 ER invested £9.8 million in new programming
across its high margin owned brands including Postman Pat
®
,
Basil Brush
®
, Jim Jam & Sunny™ and Rupert Bear
®
. In addition,
the second instalment of the consideration for the acquisition of
Rupert Bear
®
of £2 million was paid to Express Newspapers.
The Group’s borrowing requirements tend to peak around
September as a result of investment in productions in the first three
quarters of the year which are typically delivered to broadcasters for
the Autumn schedule. Following September there tends to be a cash
inflow from advance orders for Christmas and then further cash
inflow in the first quarter of the following year from the remainder of
Christmas sales.
Net debt at 31 December 2006 increased by £12.8 million to
£33.7 million.
The Group has UK borrowing facilities on a fixed and floating rate
basis. These loans are secured on the freehold and leasehold
properties and other assets of the Group.
The Group’s borrowing facilities were restructured following the post
balance sheet acquisition of Classic Media.
Treasury Policy
Treasury activities are managed on a Group basis under policies and
procedures approved and monitored by the Board. These are
designed to reduce the financial risks faced by the Group which
primarily relate to movements in exchange and interest rates. Where
appropriate, the Group uses financial instruments and derivatives to
manage these risks. No speculative use of derivatives, currency or
other instruments is permitted.
Interest Rate Risk
The Group currently borrows at floating interest rates and uses
interest rate options (swaps) where cost effective and practicable to
manage its exposure to interest rates. Maximum offsets of overdrafts
and deposits are made to reduce the Group’s exposure to interest
rate fluctuations. Further details of the Group’s financial instruments
are disclosed in note 21.
Classic Media Acquisition
On 11 January 2007, the Company acquired the entire issued share
capital of Classic Media for a total consideration of US$210 million
(£106 million). Payment of the purchase price comprised the issue of
66,687,268 shares valued at £20.4 million and £86.5 million in cash.
The funding of the acquisition and recapitalisation of the enlarged
group was generated from both the placement of 249,033,056
shares on the London Stock Exchange at 28.5 pence per share and
the refinancing of the enlarged Group’s indebtedness with the Bank
of Scotland.
The revised bank facility drawn down on completion of the acquisition
was £110 million of term debt. The Group also has available a
revolving credit facility of £20 million for ongoing working capital and
investment purposes which is currently not utilised. Under the new
facility the Group is subject to ongoing covenant compliance which
includes interest cover, cashflow cover and debt cover.
Summary
We have, once again, demonstrated our ability to deliver earnings
growth. The weighting of the Group’s performance to the second half
was accentuated in 2006 and we expect this trading pattern to
continue following the acquisition of Classic Media.
The acquisition of Classic Media was completed in January 2007
and the Group’s Balance Sheet and debt facilities restructured
accordingly.
I am delighted to affirm that ER is strongly positioned to continue its
success in the dynamic market in which it operates.
Elizabeth Gaines
Chief Finance and Operations Director
26 March 2007
Entertainment Rights Plc
Annual Report & Accounts 2006
15 Chief Finance and Operations Director’s Review Entertainment Rights Plc
Annual Report & Accounts 2006
16
Board of Directors
Rod Bransgrove
Non-Executive Chairman
Rod Bransgrove is Non-Executive Chairman. His background
includes founding Imperial Pharmaceutical Services Ltd in 1986,
which merged with Shire Pharmaceuticals Group plc (“Shire”) in
September 1995. He remained a Non-Executive Director of Shire
until June 1998. He co-founded The Tidings Trading Co Limited in
1996, which merged with Entertainment Rights (then Sleepy Kids
plc) in December 1998 and has been Chairman of Entertainment
Rights since that date. Current directorships include Rose Bowl plc
and subsidiaries and Pep Tcell Ltd.
Mike Heap
Chief Executive Officer
Mike Heap is Chief Executive Officer and joined the Company in
January 1999. He has spent his entire career in the media industry.
Previous appointments include: Managing Director of MGM Home
Video (UK); Managing Director of Legend Records (Prestwich Group);
Managing Director of Video Form Music (Heron Group); Director
European Marketing of Warner Records Europe; and Managing
Director of Warner Records (UK) Limited. From 1989 he was
Managing Director of Warner Home Video (UK) Ltd. No other
directorships are currently held.
Elizabeth Gaines CA MappFin (Macq)
Chief Finance and Operations Director
Elizabeth Gaines is Chief Finance and Operations Director and joined
the Company in August 2002. Elizabeth was previously Executive
Finance Director and Chief Executive Officer of Heytesbury Pty Ltd.,
a private company wholly-owned by the Holmes à Court family.
Prior to this, Elizabeth held senior accounting, planning and investor
relations’ roles at Bankwest in Australia and Kleinwort Benson in the
UK. She qualified as a Chartered Accountant with Ernst & Young in
1987. Elizabeth holds a Master of Applied Finance degree from
Macquarie University.
Jane Smith
Chief Commercial and Creative Director
Jane Smith is Chief Commercial and Creative Director and joined the
Company in December 1999. Jane has spent her entire career in the
media sector. Her background in international TV sales includes the
Jim Henson organisation as Head of International Television Sales;
Executive Director of HIT Entertainment; Senior Vice President of
International Sales and Co-production at Sunbow Entertainment
(New York); and Vice President of Flextech Rights.
Irvin Fishman FCA
Non-Executive Director
Irvin Fishman is a Non-Executive Director and has been with the
Company since its formation in 1989. He qualified as a Chartered
Accountant in 1975 and has been a Partner in Auerbach Hope,
Chartered Accountants since 1978.
Craig Hemmings
Non-Executive Director
Craig Hemmings is a Non-Executive Director. He joined the
Company in December 1999 as an Executive Director and became a
Non-Executive Director in September 2004. He is currently an
Executive Director of a number of private companies in the leisure,
hotels, gaming and entertainment industries.
Julian Paul FCA
Non-Executive Director
Julian Paul is a Non-Executive Director and joined the Company in
March 1996. From 1991 until May 1997 he was Deputy Chairman of
Castle Communications plc before becoming Deputy Chairman of
Eagle Rock Entertainment Limited. Current directorships include
Eagle Rock Group Limited and subsidiaries, Pilat Media Global plc,
Stagecoach Theatre Arts plc, Ekay plc and Edge Performance VCT
plc. He is also Non-Executive Chairman of Cellcast plc and Senior
Non-Executive Director of Inspired Gaming Group plc.
Board of Directors Entertainment Rights Plc
Annual Report & Accounts 2006
Report of the Directors 17
Report of the Directors
The Directors present their Annual Report together with the audited
financial statements for the year ended 31 December 2006.
Business Review
Principal activities
Entertainment Rights Plc (‘the Company’) and its subsidiaries
(‘the Group’) controls or owns distribution and exploitation rights to
a broad catalogue of children’s and family programming.
The Group exploits its intellectual property rights across television
distribution, licensing and merchandising, home entertainment and
digital markets.
A detailed review of the Group’s activities is provided in the Chief
Executive Officer’s Review and the Chief Finance and Operations
Director’s Review on pages 4 to 15.
Key Performance Indicators
The Board uses a range of performance indicators to monitor and
manage the business and to ensure focus is maintained on the key
priorities of the Group. The relative focus on these will vary from
period to period.
The indicators which the Board considers to be the most important
are as follows:
• Gross profit margin
• Adjusted EBITDA* margin
• Adjusted PBT**
• Adjusted Basic EPS**
* Adjusted figures reflect the removal of share option charge
(IFRS 2), reorganisation costs (2005) and aborted acquisition
costs (2006), to give an underlying performance of the Group.
** Excluding share option charge (IFRS 2), aborted acquisition costs
(2006) and reorganisation costs (2005) and the charge for changes
in fair value of financial instruments.
Actual performance in respect of these KPIs is provided on page 14
of the Chief Finance and Operations Director’s Review. A reconciliation
of adjusted measures can also be found on page 14.
Risk management and internal controls
Disclosures can be found in the Governance and Responsibility
section on page 19, the Statement of Directors’ Responsibilities on
page 22, and note 21 to the financial statements.
Key risks impacting the Group include:
Interest rate fluctuations
The Group has increased its level of borrowings in order to fund part
of the Classic Media acquisition. This increase in borrowings has
increased the Group’s absolute exposure to interest rate fluctuations.
The Group manages this risk via the utilisation of financial
instruments such as interest rate swaps.
Exchange rate fluctuations
The Group currently operates in several countries and is, and will
continue to be, exposed to foreign currency rate fluctuations. The
Group uses external advice on currency dealings with its bank.
Where possible natural hedges are used and if appropriate
derivatives are considered.
Technological changes
The entertainment industry is continuing to undergo significant
changes, primarily due to technological developments. Due to the
rapid growth of technology, shifting consumer tastes and the
popularity and availability of other forms of entertainment, it is
impossible to predict the overall effect these factors will have on the
potential revenue from, and profitability of, television and home
entertainment programming. The Group ensures that its library is
digitised in order to be exploited across all media.
Dependence on retailers
The retail market for the Group’s licensed consumer products and
home entertainment products is dominated by a number of major
retailers. If a couple of these major retailers were to develop financial
instability, such instability could have an adverse effect on the
Group’s business, operating results or financial condition.
Additionally, these major retailers could exert influence on pricing
which could adversely affect the Group’s profits. The Group has
direct relationships with key retailers and monitors their performance.
Piracy and counterfeit goods
Piracy of media products, including digital and internet piracy and the
sale of counterfeit consumer products, may decrease revenue
received from the exploitation of the Group’s products. Entertainment
content piracy is extensive in many parts of the world and is made
easier by technological advances. Preventative measures and
technology are applied to products and goods and are monitored
with key retailers throughout the world.
Group’s intellectual property rights
A substantial element of the Group’s business relies on the use of
intellectual property. Whilst the Group relies on trademark, copyright
and other intellectual property laws to establish and protect its
proprietary rights, it cannot be certain that its proprietary rights will
not be challenged, limited, invalidated or circumvented. Despite
trademark and copyright protection and similar intellectual property
protection laws, third parties may be able to copy, infringe or
otherwise profit from its proprietary rights without the Group’s
authorisation. The risk is mitigated through rigorous due diligence,
trademark registration and protection, in addition to the activities of
the in-house legal department.
Integration of Classic Media
Whilst the Group has a good track record for integrating acquisitions,
it may encounter difficulties integrating Classic Media Group into its
business and in successfully realising the growth expected from the
acquisition, due to Classic Media’s relative size. To the extent that
problems are encountered in integrating Classic Media Group, the
enlarged Group’s financial performance and condition could be
adversely affected. A specific Steering Committee has been
established to manage this risk.
Results and dividends
The consolidated Income Statement on page 29 shows a profit for
the year after taxation of £6,203,000 (2005: £5,387,000).
The Directors do not recommend payment of a dividend (2005: £nil). Entertainment Rights Plc
Annual Report & Accounts 2006
Report of the Directors 18
Report of the Directors
continued
Directors
The names and brief biographies of Directors holding office at
31 December 2006 are provided on page 16.
Claire Derry resigned from the Board on 21 March 2006.
Under Article 102 of the Articles of Association of the Company, one-
third of the Board are required to offer themselves for re-election
each year at the AGM. Accordingly, Julian Paul and Mike Heap retire
by rotation at this year’s AGM and offer themselves for re-election.
Details of Directors' emoluments together with Directors' interests in
shares and share options are provided in the Remuneration Report
on pages 23 to 27. Other than as disclosed on page 26, no Director
had any other beneficial interest in either the Company or any of its
subsidiary undertakings at any time during the year.
Share capital
Allotted and fully paid share capital at 31 December 2006 was
415,055,094 Ordinary Shares of 5p each. Details of authorised and
allotted share capital are provided in note 22 to the Financial
Statements.
Substantial shareholdings
The Group was aware as at 23 March 2007 of the following interests
held directly or indirectly in 3 per cent or more of the Group’s issued
share capital.
Ordinary shares
of 5p each %
Ashby Manor Limited 105,486,665 14.43
SP Classic Holdings Plc 66,867,268 9.15
SVG Capital 39,875,270 5.46
UBS Global Asset Management 33,051,921 4.52
Legal & General Investment Management 31,546,424 4.32
Artemis Investment Management 29,501,514 4.04
INVESCO Asset Management 28,593,491 3.91
Taube Hudson Stonex Partners 23,410,099 3.20
Annual General Meeting
The notice of the Annual General Meeting is set out in a separate
circular to shareholders accompanying the report and financial
statements with an explanation of the resolutions to be proposed.
Employees
The quality and commitment of the Group’s staff are crucial to its
continued success. Staff policies and programmes are designed to
encourage staff to contribute significantly to the performance of the
Group, and to reward staff accordingly. The Group aims to keep staff
informed of developments in the Group by way of regular meetings,
publications and distribution of the Annual Report.
It is the Group’s policy not to discriminate between employees on
any grounds. Full and fair consideration is given to the recruitment,
training and promotion of disabled people and should staff become
disabled during the course of their employment, efforts would be
made to provide appropriate re-training.
Supplier payment policy
The Company and the Group does not have a standard or code that
deals specifically with payment of creditors. The Group seeks to
agree the terms of payment with suppliers and then pays in
accordance with the agreed terms. At year-end, 50 days of
purchases were outstanding (2005: 28 days) based on the ratio of
trade creditors at the end of the period to the amounts invoiced
during the period by trade creditors.
Charitable and political activities and donations
In conjunction with its characters and brands, the Group was
involved with various charities through sponsorship events and
product donations during the year.
The Group made cash charitable donations totalling £200 in the year
(2005: £6,200). No political donations were made (2005: nil).
Health and Safety
The Group recognises the importance of safeguarding the health,
safety and welfare of its employees and has a Health and Safety
Policy in place. Regular updates are communicated to employees
and periodic audits have been undertaken and recommendations
acted upon.
Environment policy
The Group recognises the importance of environmental responsibility
and, where practicable, has an environmental policy in place. This
includes the recycling of paper waste and computer hardware. The
Board believes the nature of its activities has a minimal effect on the
environment.
Corporate governance
The Group’s application of Principles of Corporate Governance is
separately disclosed on pages 19 to 21.
Disclosure of information to auditors
The Directors who held office at the date of approval of this
Directors’ report confirm that, so far as they are each aware, there is
no relevant audit information of which the Company’s auditors are
unaware; and each Director has taken all the steps that he / she
ought to have taken as a Director to make himself / herself aware of
any relevant audit information and to establish that the Company’s
auditors are aware of that information.
Auditors
In accordance with section 384 of the Company Act 1985, a
resolution to re-appoint KPMG Audit Plc as auditors is to be
proposed at the forthcoming Annual General Meeting.
Registered office:
58-60 Berners Street
London W1T 3JS
By order of the Board of Directors and signed on their behalf by
Irvin Fishman
Company Secretary
26 March 2007 Entertainment Rights Plc
Annual Report & Accounts 2006
Corporate Governance 19
Corporate Governance
Statement of application of the principles
in the Combined Code
The Board of Entertainment Rights Plc is accountable to the
Company’s shareholders for good corporate governance and in
doing so is committed to the principles outlined in the 2003 FRC
Combined Code on Corporate Governance.
The statement below describes how the principles of Corporate
Governance practised by the Company comply with the provisions
set out in Section 1 of the 2003 FRC Combined Code. The
Company has complied with the 2003 FRC Combined Code
throughout the financial year except for the fact that not all the
Non-Executive Directors meet all the requirements as set out in the
Code, and as noted below, there is no Senior Independent Director,
Nomination Committee and formal Annual Performance review.
Since the year end, the Company has formed a Nomination
Committee and approved its terms of reference.
The Board of Directors
As at 31 December 2006, the Board comprised 7 Directors:
3 Executive Directors and 4 Non-Executive Directors who bring a
diversity of skills and experience to the Board. The Board considers
the Non-Executive Directors to be independent of management and
free from any business or other relationships (except for I. Fishman in
his capacity as Company Secretary) which could materially interfere
with the exercise of their independent judgement.
The Board is accountable to shareholders for ensuring that the
Group is appropriately managed and achieves the strategic
objectives agreed by the Board. In accordance with the Combined
Code, the Board has established guidelines requiring specific matters
to be discussed by the full Board of Directors, such as:
• management structure and remuneration
• major acquisitions and disposals
• overall treasury, financing, budget and strategic planning
• corporate governance and associated risks and controls
The Board meets on average 10 times a year. The Directors receive
the Board papers in advance of each meeting. No individual or group
dominates the decisions made by the Board. The Directors have
access to the advice and services of the Company Secretary and
there is a written procedure for obtaining independent professional
advice at the Company’s expense.
A third of the Board are subject to re-election every year, as are new
Directors at the first AGM after their appointment.
Meetings Attended 2006
Board Remuneration Audit
Meetings Committee Committee
Total Number of Meetings 11 32
Rod Bransgrove 10 31
Claire Derry (1) 2– –
Elizabeth Gaines 11 ––
Mike Heap 11 ––
Craig Hemmings 11 ––
Irvin Fishman 10 32
Julian Paul 11 31
Jane Smith 11 ––
1) C Derry resigned on 21 March 2006.
Performance Evaluation
The Directors are constantly evaluated against their performance
and commitment to their roles and duties as Directors. The Chairman
addresses weakness and, where appropriate, proposes new
members to be appointed to, and seeks resignations of Directors
from the Board.
Board Committees
There are three committees: Audit Committee, Remuneration
Committee and Nomination Committee (established in February
2007), which are described in detail below. Each committee has
written terms of reference prescribed by the Board which are
reviewed annually.
Audit Committee
The Audit Committee, whose terms of reference cover matters
recommended by the Code, comprises R. Bransgrove, I. Fishman
and J. Paul, and is chaired by I. Fishman. The Committee meets at
least twice a year. The Committee is responsible for monitoring
internal control throughout the Group, approving the Group’s
accounting policies and reviewing the interim and final financial
statements before submission to the Board.
The Group believes that the internal controls established are strong
and therefore an additional internal audit function is not currently
required. The Committee periodically reviews that position.
These responsibilities are discharged in part through an annual risk
assessment, review of management accounts and financial
statements and meetings with external auditors. Further information
on internal controls is provided below.
In addition, the Audit Committee is responsible for ensuring the
independence and effectiveness of auditors, through comparison with
other comparable companies’ audit fees and for reviewing the scope
of the work undertaken. KPMG Audit Plc are required to give written
confirmation of their independence. In addition, non-audit services are
reviewed and the audit partner is rotated on a periodic basis.
The Audit Committee has reviewed arrangements for whistleblowing
and has put a policy in place ensuring that the appropriate
procedures are followed.
An analysis of fees earned by external auditors is provided in note 3
to the financial statements.
Remuneration Committee
The Remuneration Committee comprises R. Bransgrove, I. Fishman
and J. Paul and is chaired by J. Paul. The Committee is responsible
for determining the contract terms, remuneration, share options and
other benefits of Executive Directors. In addition, the Committee
agrees the parameters of remuneration for the staff.
The Group has received advice from time to time from external
independent advisers on both executive and non-executive
remuneration. A more detailed review of the policy is set out on
pages 23 to 27. Entertainment Rights Plc
Annual Report & Accounts 2006
Corporate Governance 20
Corporate Governance
continued
Nomination Committee
The Nomination Committee was established in February 2007 and is
responsible for reviewing the structure, size and composition of the
Board. The members are R. Bransgrove (Chairman), C. Hemmings
and M. Heap. The committee gives consideration to succession
planning and before appointments are made by the Board, ensures
that the roles and capabilities of candidates are defined and
identified.
The following table shows the Chairman and members of
each Committee.
Name Remuneration Audit Nomination
Committee Committee Committee
Rod Bransgrove  Chairman
Elizabeth Gaines
Mike Heap 
Craig Hemmings 
Irvin Fishman Chairman
Julian Paul Chairman 
Jane Smith
Compliance with Code provisions
The Company has complied throughout the year with the Code
provisions as set out in Section 1 of the Combined Code with the
following exceptions.
1. Independence of Board Members. I. Fishman joined the
Company in 1989 and has therefore been connected with the
Group for more than 15 years. Also I. Fishman is the Company
Secretary for the Group. Furthermore the Group has employed
C. Hemmings within the last 5 years. In addition, R. Bransgrove
has been granted a limited number of share options as disclosed
in the table on page 27 and is a significant shareholder in his own
right. The Board continues to monitor the composition of the
Board in line with the recommendations of the code. The Board
has considered the independence of these Directors with
particular care. All Directors contribute significantly through their
individual skills and their considerable knowledge of both the
Company and the industry, and they currently provide continuity
and an overall balance to the Board. In particular, they all continue
to demonstrate a strong independence of management in the
manner in which they discharge their responsibilities as Directors.
Accordingly, the Board considers that R. Bransgrove,
C. Hemmings and I. Fishman are independent Non-Executive
Directors (A.3.1).
2. Senior Independent Director. The Board believes that the
four Non-Executive Directors are sufficiently independent of the
Executives responsible for the running of the Company’s
day-to-day business. In addition the Group has a policy of
maintaining an active dialogue with institutional shareholders
through individual meetings with senior management, during
which their views are exchanged and then shared with the Board.
The Board is of the opinion that the appointment of a Senior
Independent Director would not assist further in dialogue with
shareholders. Any shareholder is free to meet with or discuss any
issues that may arise with any of the Directors or the Company
Secretary as they choose at any time. It is felt that an additional
single point of contact other than the Chairman would not be
helpful. The Board will keep this situation under review (A.2.1).
3. Annual Performance Review. Hitherto, there has been no
formal process covering performance evaluation of the Board.
However, this is a matter that has received the attention of the
Board and continues to be monitored (A.6).
4. Nomination Committee. During 2006 the Audit Committee
monitored the Group’s systems and controls, which included
ensuring the right composition of executive management, and
reporting any issues to the Board. In light of the Company’s
growth and recent acquisition it was felt appropriate to form
a Nomination Committee which was formed in February 2007.
(A.5.1).
Internal control
The Board is responsible for the Group’s system of internal control
and reviewing its effectiveness. Such a system is designed to
manage rather than eliminate the risk of failure to achieve business
objectives and can only provide reasonable and not absolute
assurance against material mis-statement or loss.
As at 31 December 2006, the Board has ensured that procedures
are in place to review the effectiveness of financial, operating
and compliance controls and risk management. The Board has
reviewed these procedures and continues to monitor them on an
ongoing basis.
Key elements of the Group’s system of internal control include:
• A comprehensive annual budgeting system that requires approval
by the Board. The budget is formulated through discussions and
reviews at all levels of operations within the Group in order to
identify and reflect future trends as closely as is possible.
• Monthly management accounts, including an analysis of
market conditions and benchmarking against sector competitors,
are produced in a timely manner and are reviewed by the Board
at meetings held regularly. Results for the month and the
year-to-date are compared to the annual budget, with all
material movements discussed and corrective action taken
where necessary.
• Ad-hoc reports are produced and reported to the Board where
this is deemed necessary by senior management.
• Detailed financial analysis and evaluation is undertaken for all
business opportunities.
• Procedures for the approval and monitoring of capital expenditure
within defined authority limits.
• Emphasis on the experience and training of personnel. Reliance
is placed on senior levels of management to ensure effective
control.
The Board has considered the need for an internal audit function
but believes that the size of the business does not, at present, justify
a full-time appointment. The Board continues to monitor this
requirement and will act accordingly. Entertainment Rights Plc
Annual Report & Accounts 2006
Corporate Governance 21
Going concern
The Directors have made enquiries and have reasonable
expectations that the Company and the Group have adequate
financial resources to continue normal operations for the foreseeable
future. Accordingly, they consider it appropriate to adopt the going
concern basis for the preparation of the financial statements.
Relations with shareholders
The Group values the views of its shareholders and recognises their
interest in the Group’s strategy and performance, Board membership
and quality of management. It therefore holds regular meetings with
its institutional shareholders to discuss objectives.
The Annual General Meeting is used to communicate with private
investors and they are encouraged to participate. The Chairmen of
the Audit, Remuneration and Nomination Committees are available to
answer questions.
Separate resolutions are proposed on each issue so that they can
be given proper consideration and there is a resolution to approve
the Annual Report and Accounts. The Company counts all proxy
votes and will indicate the level of proxies lodged on each resolution
after it has been dealt with by a show of hands.
Company information may also be viewed on the website,
www.entertainmentrights.com Entertainment Rights Plc
Annual Report & Accounts 2006
Statement of Directors‘ Responsibilities 22
Statement of Directors’ Responsibilities
in respect of the Directors’ Report and the Financial Statements
The Directors are responsible for preparing the Directors’ Report and
the Group and parent company financial statements, in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
company financial statements for each financial year. Under that law
they have elected to prepare the Group financial statements in
accordance with IFRSs as adopted by the EU and applicable law
and have elected to prepare the parent company financial
statements in accordance with UK Accounting Standards and
applicable law (UK Generally Accepted Accounting Practice).
The Group financial statements are required by law and IFRSs as
adopted by the EU to present fairly the financial position and the
performance of the Group; the Companies Act 1985 provides in
relation to such financial statements that references in the relevant
part of that Act to financial statements giving a true and fair view are
references to their achieving a fair presentation.
The parent company financial statements are required by law to give
a true and fair view of the state of affairs of the parent company.
In preparing each of the Group and parent company financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgments and estimates that are reasonable and prudent;
• for the Group financial statements, state whether they have been
prepared in accordance with IFRSs as adopted by the EU;
• for the parent company financial statements, state whether
applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the parent
company financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
parent company will continue in business.
The Directors are responsible for keeping proper accounting records
that disclose with reasonable accuracy at any time the financial
position of the parent company and enable them to ensure that its
financial statements comply with the Companies Act 1985. They
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Irvin Fishman
Company Secretary
26 March 2007 Entertainment Rights Plc
Annual Report & Accounts 2006
Remuneration Report 23
Remuneration Report
The following Remuneration Report is in compliance with the
Directors’ Remuneration Report Regulations 2002, for which the
numerical disclosures in relation to Directors’ individual remuneration,
Directors’ pensions and interests in share options have been audited.
Committee
The Remuneration Committee comprises J. Paul (Chairman),
R. Bransgrove and I. Fishman. The Group recognises that Directors’
remuneration is of legitimate concern to the shareholders and is
committed to following current best practice.
The Board is responsible for the Company’s remuneration policy. The
Committee decides, in close consultation with the Chief Executive,
the individual remuneration that applies to Executive Directors and
Senior Managers. In applying the policies, the Committee takes into
consideration a number of factors, in particular:
• The need to attract, retain and motivate Directors and Senior
Managers of the quality required by the Company whilst avoiding
paying in excess of that considered necessary for this purpose.
• The payment of competitive salaries and benefits to Directors and
Senior Managers with reference to other comparable companies
taking into account relative performance, ensuring the alignment
of the interests of Directors and Senior Management with
shareholders to produce keen incentives at the highest levels.
• Eligibility for share option schemes to provide long-term incentives
to senior individuals whilst ensuring that rewards potentially
available under such schemes are not excessive.
• The setting of challenging performance criteria reflecting the
Group’s objectives in respect of share options to ensure that a
real improvement in the underlying performance of the Group is
achieved before rewards are realised.
New Bridge Street Consultants have advised the Committee directly
on matters within the Committee’s terms of reference on which the
Committee chose to consult them.
Remuneration policy
The main elements of the remuneration package of Executive
Directors are as follows:
Base salary and benefits:
The base salary and benefits (which include car benefits, life,
disability and health insurance) of Executive Directors are reviewed
annually by the Committee, having regard to the overall financial and
business position of the Group.
Pensions:
The Executive Directors either participate in the Group’s defined
contribution personal pension scheme, or the Company contributes
to their personal pension plans.
Share options:
Executive Directors are included either in an Inland Revenue
approved scheme or unapproved schemes.
Consistent with the rules of the schemes, the vesting of options is
generally contingent on continued employment for a period of at
least three years and the achievement of performance targets based
on the growth of the Company’s earnings per share above RPI.
Further information is provided on page 26.
Annual bonus:
The level of annual bonus to each Executive Director is based on the
attainment of the annual budgeted performance of the Group and
individual performance as set out below.
Each of M. Heap, J. Smith, and E. Gaines are entitled to receive an
annual bonus in respect of each financial year of the Company
subject to the earnings before interest, tax, depreciation and
amortisation of the Company (“EBITDA”) equalling or exceeding a
target EBITDA figure for the relevant financial year set by the
Remuneration Committee within 3 months of the commencement of
such financial year. In the case of M. Heap, the amount of such
bonus is not less than 50 per cent of his normal basic salary, in the
case of J. Smith, the amount of such bonus is not less than 10 per
cent of her normal basic salary and, in the case of E. Gaines, the
amount of such bonus is not less than 40 per cent of her normal
basic salary. In addition, J. Smith is entitled to receive a bonus of not
less than 30 per cent of her normal basic salary subject to the
achievement of sales targets.
Chairman and Non-Executive Directors
The remuneration of the Chairman and other Non-Executive
Directors is determined by the Board and they do not participate in
determining their own remuneration. None of the Non-Executive
Directors receive any pension or other benefits from the Company.
Service contracts
Service contracts or consultancy agreements may be terminated
as follows:
Executive Directors:
E. Gaines entered into a service agreement effective 19 August
2002, terminable on 12 months’ notice by either party.
M. Heap entered into a service agreement effective 11 March 2002,
terminable on 12 months’ notice by either party.
J. Smith entered into a service agreement effective 1 January 2002,
terminable on 12 months’ notice by either party.
Non-Executive Directors:
I. Fishman (effective 1 July 1998), C. Hemmings (effective
13 September 2004) and J. Paul (effective 1 July 1998) have
engagement letters or consultancy agreements subject to
termination on 3 months’ notice by either party. R. Bransgrove
(effective 14 March 2002) has a consultancy deed subject to
termination on 12 months’ notice by either party.
The Company does not make any additional payments on early
termination of service contracts. Entertainment Rights Plc
Annual Report & Accounts 2006
Remuneration Report 24
Remuneration Report
continued
Directors’ individual remuneration (audited)
Details of individual Directors’ emoluments for the year ended 31 December 2006 and their comparatives for 2005 for those who served
during the year are set out as follows:
Salaries / Bonus Total Total
Fees 2006 Benefits 2006 2005
£££ £ £
Executive
M. Heap 242,000 121,000 44,561 407,561 414,615
J. Smith 186,500 74,600 20,005 281,105 288,833
E. Gaines 170,000 68,000 11,343 249,343 251,972
R. Lyons (1) ––– – 137,034
Non-Executive
R. Bransgrove 70,000 –– 70,000 60,000
C. Derry (2) 4,410 –– 4,410 20,000
I. Fishman (3) 24,000 –– 24,000 24,000
C. Hemmings (4) 20,000 –– 20,000 20,000
J. Paul (5) 24,000 –– 24,000 24,000
740,910 263,600 75,909 1,080,419 1,240,454
(1) R. Lyons resigned as a Director in July 2005.
(2) C.Derry resigned from the Board on 21 March 2006.
(3) Paid to Auerbach Hope, Chartered Accountants, for the provision of the services of I. Fishman.
(4) Paid to Hemway Limited, for the provision of the services of C. Hemmings.
(5) Paid to Julian Paul & Co Chartered Accountants for the provision of services of J. Paul.
The bonuses earned by the Executive Directors were the minimum bonuses payable.
Directors’ pensions (audited)
Details of individual Directors’ pension payments for the year ended 31 December 2006 and the comparatives for 2005 for those who served
during the year are set out as follows:
2006 2005
£ £
Executive
M. Heap 30,000 30,000
J. Smith 21,708 20,940
E. Gaines 17,000 16,500
R. Lyons – 1,803
68,708 69,243
No pension payments were made to the Non-Executives Directors. Entertainment Rights Plc
Annual Report & Accounts 2006
Remuneration Report 25
Interests in shares
The beneficial interests of the Directors in the shares of the Company at 31 December 2006 were:
Ordinary 5p shares
31 December 2006 1 January 2006
Executive:
M. Heap 1,086,958 1,086,958
C. Hemmings 138,339 138,339
J. Smith 13,944 13,944
E. Gaines 30,000 30,000
Non-Executive:
R. Bransgrove (1) 19,153,853 19,153,853
J. Paul (2) 1,023,714 1,023,714
I. Fishman (3) 367,744 367,853
C. Hemmings 138,339 138,339
Since 31 December 2006 the Directors’ interests in shares have changed as set out below.
Ordinary 5p shares
26 March 2007 31 December 2006
Executive:
M. Heap 1,739,132 1,086,958
C. Hemmings 221,342 138,339
J. Smith 22,310 13,944
E. Gaines 48,000 30,000
Non-Executive:
R. Bransgrove (1) 19,153,853 19,153,853
J. Paul (2) 1,637,942 1,023,714
I. Fishman (3) 558,565 367,744
C. Hemmings 221,342 138,339
(1) HSBC Global Custody Nom UK holds 12,933,186, NY Nominees holds 3,635,324 and Smith & Williamson Nominees holds 2,585,343.
(2) BNY (OCS) Nominees Limited holds all of the ordinary shares beneficially owned by J. Paul.
(3) The Berners Friendly Society holds all of the ordinary shares beneficially owned by I. Fishman. Entertainment Rights Plc
Annual Report & Accounts 2006
Remuneration Report 26
Remuneration Report
continued
Interests in share options (audited)
Directors’ options over ordinary shares of 5p each at 31 December 2006 were as follows:
Opening Closing Earliest
January Granted in December exercise Expiry Exercise
Scheme Notes 2006 year 2006 date date price
M. Heap
Deed 1 2,602,198 – 2,602,198 Dec-98 Nov-08 13.8p
Unapproved 1,000,000 – 1,000,000 Dec-04 Dec-11 17.5p
Approved 2 437,956 – 437,956 Apr-06 Apr-13 6.85p
Unapproved 2 562,044 – 562,044 Apr-06 Apr-13 6.85p
Unapproved 3 780,659 – 780,659 Jul-06 Jul-13 8.05p
Unapproved 4 2,500,000 – 2,500,000 Sept-07 Sept-14 10.75p
Unapproved 5 500,000 – 500,000 Apr-08 Apr-15 24.55p
Unapproved 4– 1,500,000 1,500,000 Apr-09 Mar-16 36.15p
8,382,857 1,500,000 9,882,857
J. Smith
Deed 1 600,00 – 600,00 Jan-00 Jan-10 25.0p
Unapproved 1,000,000 – 1,000,000 Dec-04 Dec-11 17.5p
Approved 2 437,956 – 437,956 Apr-06 Apr-13 6.85p
Unapproved 2 562,044 – 562,044 Apr-06 Apr-13 6.85p
Unapproved 3 1,040,000 – 1,040,000 Jul-06 Jul-13 8.05p
Unapproved 4 2,000,000 – 2,000,000 Sep-07 Sep-14 10.75p
Unapproved 5 500,000 – 500,000 Apr-08 Apr-15 24.55p
Unapproved 4– 1,250,000 1,250,000 Apr-09 Mar-16 36.15p
6,140,000 1,250,000 7,390,000
E. Gaines
Approved 250,000 – 250,000 Sep-05 Sep-12 10.5p
Approved 2 54,744 – 54,744 Apr-06 Apr-13 6.85p
Unapproved 2 695,256 – 695,256 Apr-06 Apr-13 6.85p
Unapproved 4 2,500,000 – 2,500,000 Sep-07 Sep-14 10.75p
Unapproved 5 500,000 – 500,000 Apr-08 Apr-15 24.55p
Unapproved 4– 1,000,000 1,000,000 Apr-09 Mar-16 36.15p
4,000,000 1,000,000 5,000,000
R. Bransgrove
Unapproved 500,000 – 500,000 Dec-04 Dec-11 17.5p
C. Hemmings
Deed 1 600,000 – 600,000 Dec-99 Dec-09 25.0p
Unapproved 500,000 – 500,000 Dec-04 Dec-11 17.5p
Approved 2 437,956 – 437,956 Apr-06 Apr-13 6.85p
Unapproved 2 62,044 – 62,044 Apr-06 Apr-13 6.85p
Unapproved 3 240,000 – 240,000 Jul-06 Jul-13 8.05p
1,840,000 – 1,840,000
1. Share Options where the exercise conditions have been satisfied and where the exercise right is therefore unconditional.
2. Share options may be exercised only if the Group’s EPS over a 3-year period is at least equal to the average increase in RPI plus 3%.
3. Share options may be exercised only if the average annual percentage increase in Group’s EPS over a 3-year period is greater than
i) average increase in RPI plus 3% for the first third of the options
ii) average increase in RPI plus 6% for the second third of the options
iii) average increase in RPI plus 9% for the final third of the options
4. Share options may be exercised only if the average annual percentage increase in the Group’s EPS over a 3-year period is greater than
i) average increase in RPI plus 5% for the first third of the options
ii) average increase in RPI plus 7.5% the second third of the options
iii) average increase in RPI plus 10% the final third of the options
5. Share options may be exercised only if the Group’s EPS over a 3-year period is greater than:
i) 1.23p for the first third of the options
ii) 2.45p for the second third of the options
iii) 3.68p for the final third of the options
In the event of any capitalisation issue or rights issue in relation to the share capital of the Company, the number of shares subject to the
Schemes and price per Scheme Share shall be adjusted by the Board. On 14 December 2006 the Company announced a 3 for 5 rights
issue at a share price of 28.5p. The market price of shares before this announcement was 30.25p. The theoretical ex-rights price has been
calculated at 29.59p. The number of shares to which each option holder is entitled will be increased by a factor of x1.022. The exercise price
of each option will be reduced by a factor of x0.978. Entertainment Rights Plc
Annual Report & Accounts 2006
Remuneration Report 27
Performance Graph
5 Year Share Price Analysis
% Change
Source: KPMG Business Data
The above graph shows the Total Shareholder Return (TSR) of the Group against FTSE small cap and Media and Photography sectors, which
is believed to be the most suitable TSR index.
The market price of the Company’s shares at 31 December 2006 was 30p and the range during the year was 28p to 43p. Apart from the
interests disclosed above, none of the Directors had any other interests in the share capital of the Company or other Group companies during
the year.
By order of The Board of Directors
and signed on their behalf by
Julian Paul
Chairman, Remuneration Committee
26 March 2007
2002 2003 2004 2005 2006
200%
150%
100%
50%
0%
-50%
-100%
Dec 02
Dec 03
Dec 04
Dec 05
Dec 06
Entertainment Rights
FTSE Small Cap
FTSE – Media UK Entertainment Rights Plc
Annual Report & Accounts 2006
Report of the Independent Auditors 28
Report of the Independent Auditors
to the members of Entertainment Rights Plc
We have audited the group and parent company financial statements
(the ‘‘financial statements’’) of Entertainment Rights Plc for the year
ended 31 December 2006 which comprise the group income
statement, the group and parent company balance sheets, the group
cash flow statement, the group statement of recognised income and
expense and the related notes. These financial statements have been
prepared under the accounting policies set out therein. We have also
audited the information in the Directors' Remuneration Report that is
described as having been audited.
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 so that we might state to the
company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company 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 Directors and auditors
The Directors’ responsibilities for preparing the Annual Report and
the group financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the EU, and for preparing the parent company financial statements
and the Directors' Remuneration Report in accordance with
applicable law and UK Accounting Standards (UK Generally
Accepted Accounting Practice) are set out in the Statement of
Directors’ Responsibilities on page 22.
Our responsibility is to audit the financial statements and the part of
the Directors' Remuneration Report in accordance with relevant legal
and regulatory requirements and International Standards on Auditing
(UK and Ireland).
We report to you our opinion as to whether the financial statements
give a true and fair view and whether the financial statements and the
part of the Directors' Remuneration Report to be audited have been
properly prepared in accordance with the Companies Act 1985 and
as regards the group financial statements, Article 4 of the IAS
Regulation. The information given in the Directors' Report includes
that specific information presented in the Chief Finance and
Operations Director’s Review that is cross referred from the Business
Review section of the Directors' Report.
In addition, we report to you if, in our opinion, 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 directors' remuneration and
other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the
company's compliance with the nine provisions of the 2003
Combined Code specified for our review by the Listing Rules of the
Financial Services Authority, and we report if it does not. We are not
required to consider whether the board's statements on internal
control cover all risks and controls, or form an opinion on the
effectiveness of the group's corporate governance procedures or its
risk and control procedures.
We read the other information contained in the Annual Report and
consider whether it is consistent with the audited financial
statements. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies
with the financial statements. Our responsibilities do not extend to
any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) 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 and the
part of the Directors' Remuneration Report to be audited. It also
includes an assessment of the significant estimates and judgments
made by the directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the
group’s and 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 and the part of the Directors'
Remuneration Report to be audited 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 and the part of
the Directors' Remuneration Report to be audited.
Opinion
In our opinion:
• the group financial statements give a true and fair view, in
accordance with IFRSs as adopted by the EU, of the state of the
group’s affairs as at 31 December 2006 and of its profit for the
year then ended;
• the group financial statements have been properly prepared in
accordance with the Companies Act 1985 and Article 4 of the
IAS Regulation;
• the parent company financial statements give a true and fair view, in
accordance with UK Generally Accepted Accounting Practice, of
the state of the parent company’s affairs as at 31 December 2006;
• the parent company financial statements and the part of the
Directors' Remuneration Report to be audited have been properly
prepared in accordance with the Companies Act 1985; and
• the information given in the Directors' Report is consistent with
the financial statements.
KPMG Audit Plc 26 March 2007
Chartered Accountants London
Registered Auditor Entertainment Rights Plc
Annual Report & Accounts 2006
Consolidated Income Statement 29
Consolidated Income Statement
for the year ended 31 December
Continuing
and Total Continuing Discontinued Total
Notes 2006 2005 2005 2005
£’000 £’000 £’000 £’000
Revenue 1, 2 29,747 30,644 91 30,735
Cost of sales (12,798) (16,235) (230) (16,465)
Gross profit 16,949 14,409 (139) 14,270
Administrative expenses (6,722) (6,586) (182) (6,768)
EBITDA 14,806 13,763 (491) 13,272
Depreciation and amortisation 3 (4,462) (5,251) (127) (5,378)
Impairment of goodwill and intangibles 3 (117) (692) – (692)
Profit on disposal of non-current
assets and sale of business 3 – 3 297 300
Operating profit 3 10,227 7,823 (321) 7,502
Financial income 6 127 313 1 314
Financial expense 6 (2,525) (1,858) (2) (1,860)
Net financing costs (2,398) (1,545) (1) (1,546)
Profit before tax 7,829 6,278 (322) 5,956
Taxation for the period 8 (1,626) (687) 118 (569)
Profit attributable to equity
holders of the parent 23 6,203 5,591 (204) 5,387
Basic earnings per share 24 1.50p 1.35p (0.05)p 1.30p
Diluted earnings per share 24 1.41p 1.31p (0.05)p 1.26p
Consolidated Statement of Recognised Income and Expense
2006 2005
£’000 £’000
Profit for the year 6,203 5,387
Total recognised income and expense attributable to equity holders of the parent 6,203 5,387
Effect of change in accounting policy:
Impact of fair value of interest rate swap (IAS 32 and IAS 39) – 172
6,203 5,559 Notes 2006 2005
£’000 £’000
Assets
Non-current assets
Goodwill 11 19,542 19,546
Investment in programmes 10 37,256 25,656
Programme development costs 10 1,034 1,508
Trademarks and copyrights 10 25,991 27,638
Property, plant and equipment 12 392 488
Deferred tax asset 9 901 777
Total non-current assets 85,116 75,613
Current assets
Other Financial assets 14 80 66
Trade and other receivables 15 31,149 22,819
Cash and cash equivalents 17 – 111
Total current assets 31,229 22,996
Total assets 116,345 98,609
Liabilities
Current liabilities
Interest bearing loans and borrowings 18 (6,369) (3,225)
Trade and other payables 16 (3,923) (2,255)
Accruals and deferred income (9,708) (14,898)
Provisions 20 (16) (16)
Bank overdraft 17 (7,827) –
Total current liabilities (27,843) (20,394)
Net current assets 3,386 2,602
Non-current liabilities
Interest bearing loans and borrowings 18 (19,462) (17,770)
Deferred tax liabilities 9 (3,350) (1,690)
Provisions 20 (30) (53)
Total non-current liabilities (22,842) (19,513)
Total liabilities (50,685) (39,907)
Net assets 65,660 58,702
Equity
Issued share capital 23 20,752 20,678
Share premium 23 33,388 33,244
Merger reserve 23 16,470 16,470
Retained earnings 23 (4,950) (11,690)
Equity attributable to shareholders of the parent 65,660 58,702
Total equity and liabilities 116,345 98,609
The financial statements on pages 29 to 45 were approved by the Board of Directors on 26 March 2007 and signed on its behalf by:
Michael V. Heap – Chief Executive Officer Elizabeth Gaines – Chief Finance and Operations Director
Entertainment Rights Plc
Annual Report & Accounts 2006
Consolidated Balance Sheet 30
Consolidated Balance Sheet
as at 31 December Entertainment Rights Plc
Annual Report & Accounts 2006
Consolidated Cash Flow Statement 31
Consolidated Cash Flow Statement
for the year ended 31 December
2006 2005
Total Total
£’000 £’000
Cash flow from operating activities
Profit before tax 7,829 5,956
Adjustments for:
Financial income and expense 2,398 1,546
Depreciation of tangible fixed assets 239 367
Amortisation of intangible assets 4,223 5,010
Impairment loss on goodwill and other intangibles 117 692
Profit on disposal of non-current assets and sale of business – (300)
Share based payment charges 526 345
Operating cash flows before movements in working capital 15,332 13,616
(Decrease) / Increase in payables (5,754) 3,805
Increase in receivables (8,344) (7,379)
Cash generated from operations 1,234 10,042
Income taxes paid – –
Net cash inflow from operating activities 1,234 10,042
Cash flows from investing activities
Payments to acquire intangible assets (11,847) (10,311)
Payments to acquire tangible fixed assets (117) (396)
Proceeds from sale of non-current assets and business – 755
Net cash generated from / (used in) investing activities (11,964) (9,952)
Cash flows from financing activities
Term loan draw down falling due within more than one year 6,396 3,604
Capital element of finance lease rental payments – (16)
Repayment of borrowings (1,522) (2,266)
Interest received 127 –
Interest paid (2,090) (1,643)
Net cash generated from / (used in) financing activities 2,911 (321)
Net decrease in cash and cash equivalent (7,819) (231)
Cash and cash equivalents at start of year 111 243
Net effect of foreign exchange (119) 99
Cash and cash equivalents at end of year (7,827) 111 Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 32
Notes to the Financial Statements – Group
1. Accounting policies
Entertainment Rights Plc (the “Company”) is a company incorporated
in the UK.
Statement of compliance
The Group financial statements consolidate the results and assets
and liabilities of the Company and its subsidiaries (together referred
to as the “Group”). The parent company financial statements present
information about the Company as a separate entity and not about
its group.
The Group financial statements have been prepared and approved
by the directors in accordance with International Financial Reporting
Standards as adopted by the EU (“Adopted IFRSs”). The Company
has elected to prepare its parent company financial statements in
accordance with UK GAAP; these are presented on pages 46 to 52.
The accounting policies set out below have, unless otherwise stated,
been applied consistently to all periods presented in these Group
financial statements.
Basis of preparation
These financial statements have been prepared on the historical cost
basis except that derivative financial instruments are stated at their
fair value.
Judgements made by the directors in the application of these
accounting policies that have significant effect on the financial
statements and estimates principally relate to impairment reviews
and the share option valuation and are discussed in note 29.
Going concern
The Group and the Company believe there are adequate financial
resources to continue normal operations for the foreseeable future.
Accordingly, a going concern basis for the preparation of the financial
statements has been adopted.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when
the Group has the power, directly or indirectly, to govern the financial
and operating policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that are
currently exercisable or convertible are taken into account. The
financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the
date that control ceases.
Revenue
Television Distribution & Production
Income recognised represents the value of licence fees including
withholding tax but excluding Value Added Tax. The Group’s policy is
to recognise the income and associated royalty payable when all of
the following criteria are met:
• A licence agreement has been signed by both parties;
• The licensee is able to freely exploit its rights;
• The licensor has no remaining performance obligations;
• The arrangement is fixed and determinable;
• Collection of the arrangement fee is reasonably assured; and
• Delivery to the broadcaster has occurred.
Any licence fees received in advance, which do not meet all of the
above criteria, are included in deferred income until the above criteria
are met.
Consumer Products: Licensing and Video
Revenue from licence and video sales are recognised on the date
that the licence revenue is contracted or royalties declared by
licensees. Up-front fixed fees are recognised as revenue on contract
signature if the following additional criteria are met:
• The contract is non-cancellable;
• The licensee is able to exploit its rights freely; and
• The Company has no significant remaining obligations to perform
under the contract.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and any provision for impairment in value.
Depreciation is charged to the income statement on all property,
plant and equipment in order to write off their cost on a straight-line
basis over their expected useful lives. The estimated useful lives are
as follows:
Short leasehold improvements Over period of lease
Office equipment 4-10 years
Fixtures and fittings 4 years
Motor vehicles 4 years
Intangible assets
a) Goodwill
All business combinations are accounted for by applying the
purchase method. In respect of business combinations that have
occurred since 31 March 2004, goodwill arising on the acquisition of
subsidiary undertakings represents the excess of the cost of the
acquisition over the fair value of the net identifiable assets, liabilities
and contingent liabilities acquired. Identifiable intangibles are those
which can be sold separately or which arise from legal rights
regardless of whether those rights are separable.
In respect of acquisitions prior to 31 March 2004, goodwill is
included at transition date on the basis of its deemed cost, which
represents the amount recorded under UK GAAP which was broadly
comparable save that only separable intangibles were recognised
and goodwill was amortised.
Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is allocated to cash-generating units and is not amortised,
but instead is tested annually for impairment. Any impairment losses
are recognised immediately in the income statement.
Negative Goodwill
Negative goodwill is credited to the income statement in the period in
which it arises.
Other intangible assets
Other intangible assets acquired by the Group are stated at cost less
accumulated amortisation except those acquired as part of a
business combination which are shown at fair value at the date of
acquisition less accumulated amortisation.
b) Trademarks and Copyrights
A charge is made to write down the cost of trademarks and
copyrights on a straight-line basis over their useful lives, of up to 20
years. The estimated useful lives for determining the amortisation
charge is reviewed annually and any further provision for permanent
impairment is charged against profit in the year concerned. Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 33
1. Accounting policies (continued)
Costs, incurred by the Group and associated with an acquired right,
title or trademark, are capitalised in accordance with IAS 38.
c) Investment in Programmes and programme
development costs
Investment in programmes, including acquired programme rights
and distribution advances, is stated at amortised cost less provision
for impairment.
Investments in programmes that are in development and for which
the realisation of expenditure can be reasonably determined, are
classified in accordance with IAS 38 as programme development
costs under non-current assets. On first exploitation of the property
the cost of investment is re-classified as investment in programmes.
Development costs, incurred by the Group and associated with a
specific property, are capitalised in accordance with IAS 38. Such
costs capitalised include third party costs and direct labour.
A charge is made to write down the cost of completed programmes
and acquired programme rights over their useful lives. A charge is
made to write down the cost of programmes on a straight line basis
over their useful life of up to 20 years, or on a revenue forecast
method where greater.
An assessment is made at each balance sheet date by the Directors
to determine whether a provision is required to reduce the carrying
value of investment in programmes to recoverable amount. Any
charge for writing down to recoverable amount during the period is
included in the income statement as part of cost of sales.
Any assets which subsequently do not meet the recognition criteria in
IAS 38 prior to transfer to investment in programmes are derecognised.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is
capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other
expenditure is expensed as incurred.
Impairment
For goodwill, assets which have an impairment indication and
intangible assets that are not yet available for use, the recoverable
amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of
an asset or its cash-generating unit exceeds its recoverable amount.
Impairment losses are recognised in the income statement.
Impairment losses recognised in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill allocated
to cash-generating units and then to reduce the carrying amount of
the other assets in the unit on a pro-rata basis. A cash-generating unit
is the smallest identifiable group of assets that generates cash inflows
that are largely independent of the cash inflows from other assets or
groups of assets.
Calculation of recoverable amount
The recoverable amount of assets is the greater of their fair value less
costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. For an asset that does not
generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
Reversals of impairment
An impairment loss in respect of goodwill is not reversed. In respect
of other assets, an impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances with a maturity
of less than three months from inception and the bank overdraft.
Bank overdrafts that are payable on demand and form an integral
part of the Group’s cash management are included as a component
of cash and cash equivalents.
Financial instruments
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain
or loss on re-measurement to fair value is recognised immediately in
the income statement.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity (i.e.
forming part of shareholders’ funds) only to the extent that they meet
the following two conditions:
(a) they include no contractual obligations upon the Company (or
Group as the case may be) to deliver cash or other financial
assets or to exchange financial assets or financial liabilities with
another party under conditions that are potentially unfavourable to
the Company (or Group); and
(b) where the instrument will or may be settled in the Company’s own
equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Company’s own
equity instruments or is a derivative that will be settled by the
Company exchanging a fixed amount of cash or other financial
assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are
classified as a financial liability. Where the instrument so classified
takes the legal form of the Company’s own shares, the amounts
presented in these financial statements for called up share capital
and share premium account exclude amounts in relation to those
shares.
Hedge accounting
The Group has not adopted hedge accounting.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are
translated into sterling at the rate of exchange ruling at the balance
sheet date. Transactions in foreign currencies are translated into
sterling and recorded at the rate ruling at the date of the
transactions. All exchange differences arising from the above are
included in the income statement.
Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the exchange
rate at the date of the transaction. Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 34
Notes to the Financial Statements – Group
continued
1. Accounting policies (continued)
Employee benefits
Defined Contribution plans
The Group operates a defined contribution personal pension scheme
for all employees. This covers all employees that can elect to
participate in the plan, providing they have served with the Group for
at least three months.
Obligations for contributions to defined contribution pension plans
are recognised as an expense in the income statement as incurred.
Share Based Payment Transactions
The share option programme allows Group employees to acquire
shares of the Company; these awards are granted by the Company.
The fair value of options granted is recognised as an employee
expense with a corresponding increase in equity. The fair value is
measured at grant date and spread over the period during which
the employees become unconditionally entitled to the options.
The fair value of the options granted is measured using the Binomial
model, taking into account the terms and conditions upon which
the options were granted. The amount recognised as an expense
is adjusted to reflect the actual number of share options that vest
except where forfeiture is due only to share prices not achieving
the threshold for vesting.
Provisions
A provision is recognised in the balance sheet when the Group has a
present legal or constructive obligation as a result of a past event,
and it is probable that an outflow of economic benefits will be
required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-
tax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability.
Taxation
The tax charge for the periods presented comprises current and
deferred tax. Taxation is recognised in the income statement except
to the extent that it relates to items recognised directly in equity, in
which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the
period and any adjustment to tax payable in respect of prior periods.
Film relief is accounted under IAS 12 as a deduction from current tax
and unused relief is recognised as a deferred tax asset subject to its
meeting the recognition criteria for deferred tax assets.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: initial recognition of
goodwill; initial recognition of assets or liabilities that affect neither
accounting nor taxable profit other than in a business combination,
and differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which the
asset can be utilised.
Finance and operating leases
Leases in which the Group assumes substantially all of the risks and
rewards of ownership are classified as finance leases and amounts
held under finance leases are capitalised in the balance sheet and
depreciated over their expected useful lives. The cost of interest
under the terms of the finance leases is charged to the profit and
loss account over the period of the leases to produce a constant rate
of charge on the balance of capital repayment outstanding. Rentals
paid under operating leases are charged to the profit and loss on a
straight-line basis over the period of the lease.
Financial income and expense
Net financing costs comprise interest payable, finance charges on
finance leases, interest receivable of funds invested, foreign
exchange gains and losses and gains and losses on hedging
instruments that are recognised in the income statement.
Accounting standards issued but not adopted
The following Adopted IFRSs were available for early application but
have not been applied by the Group in these financial statements:
• IFRS 7 ‘Financial instruments: Disclosure and Amendment to IAS 1
Presentation of Financial Statements – Capital Disclosures,
applicable for years commencing on or after 1 January 2007. The
application of IFRS 7 and amendment to IAS 1 would not have
affected the balance sheets or income statement as they are
concerned only with disclosure.
• IFRIC Interpretation 8 Scope of IFRS 2 (IFRIC 8) applicable for
years commencing on or after 1 May 2006. The adoption of this
interpretation would not have affected the balance sheets or
income statement since Entertainment Rights Plc does not have
transactions in which the entity cannot identify specifically some
or all of the goods or services received.
No standards or interpretations have been adopted early.
2. Segmental information
The Group’s activities are in one business segment, the
commercialisation of children’s characters and brands. There are no
other significant classes of business, either singularly or in aggregate.
There is no geographical split of revenues by source as the Group has
no operations outside the United Kingdom with more than 10% of
assets and revenues, however geographical split of revenues by
destination is provided as follows:
2006 2005
£’000 £’000
UK 12,724 18,006
Rest of Europe 4,392 7,862
North & South America 11,872 2,563
Rest of World 759 2,304
29,747 30,735
The location of all assets held is in the Head Office in the United
Kingdom. Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 35
3. Expenses
Included in the profit are the following:
2006 2005
£’000 £’000
Depreciation of owned property,
plant and equipment 239 367
Amortisation of investment in programmes 2,575 3,661
Amortisation of other intangibles
– Trademarks and copyrights 1,648 1,350
Impairment loss on goodwill and
other intangibles 117 692
Operating lease rentals – rent,
office equipment and motor vehicles 541 540
Profit on disposal of property,
plant and equipment – (300)
Aborted acquisition costs 119 –
Restructuring costs incurred as an expense – 181
Auditors’ remuneration
– audit of these financial statements 82 68
– audit of financial statements
of subsidiaries pursuant to legislation 25 23
– other services relating to taxation 83 77
– other services 17 54
Amounts paid to the Company’s auditor in respect of services to the
Company, other than the audit of the Company’s financial statements,
have not been disclosed as the information is required instead to be
disclosed on a consolidated basis.
£1,050,000 was paid to the auditors during the year in relation to
acquisition of Classic Media Holdings, Inc. These costs have been
included under prepayments and will be capitalised along with the
acquisition costs in 2007.
4. Directors’ emoluments
Detailed disclosure of Directors’ individual remuneration and share
options are given in the Remuneration report on pages 23 to 27.
2006 2005
£’000 £’000
Directors’ emoluments 1,012 1,172
Company contributions to pension schemes 69 69
Amounts paid to third parties
in respect of Directors’ services 68 68
1,149 1,309
Pension contributions are currently paid either to Directors’ personal
pension schemes, or to the Company scheme.
5. Staff Numbers and costs
The average number of employees (including Executive Directors)
employed by the Group during the year was:
2006 2005
Administration 45 45
Sales and consumer products 25 32
Production 16 21
86 98
The aggregate payroll costs of these persons were as follows:
2006 2005
£’000 £’000
Staff costs (including Executive Directors)
Wages and salaries 3,959 4,126
Social security costs 471 463
Pension costs 150 170
Share options charge 526 347
5,106 5,106
Of this total £736,000 (2005: £1,064,000) has been capitalised in
investment in programmes and programme development costs.
The Group operates a defined contribution personal pension scheme.
The charge for the year represents those contributions payable to this
scheme and other personal pension schemes.
6. Finance income and expense
2006 2005
£’000 £’000
Finance income
Bank interest receivable 127 215
Net foreign exchange gain – 99
127 314
2006 2005
£’000 £’000
Finance expense
Bank loans and overdrafts 2,039 1,663
Other loans – 90
Finance leases – 1
Net foreign exchange loss 265 –
Net loss on re-measurement of
foreign exchange option to fair value 216 –
Net loss on re-measurement of
interest rate swap to fair value 5 106
2,525 1,860
7. Discontinued Operations
Cashflows from discontinued operations were as follows:
2006 2005
Net cash (outflow) / inflow
from operating activities – (812)
Net cash generated from / (used in)
investing activities – 753
Net cash generated from / (used in)
financing activities – –
Net (decrease) / increase in cash
and cash equivalent – (59)
Cash and cash equivalents at start of year – 49
Cash and cash equivalents at end of year – (10) Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 36
Notes to the Financial Statements – Group
continued
8. Taxation for the period
(a) Income tax expense
2006 2005
£’000 £’000
Current tax expense:
UK corporation tax charge 79 162
Double tax relief (79) (162)
Foreign tax current year charge 79 162
Foreign tax prior year charge – 52
Total current tax 79 214
Deferred tax expense:
Origination and reversal of
temporary differences 1,547 99
Benefit of tax losses recognised – 256
Total deferred tax 1,547 355
Income tax expense in
income statement 1,626 569
(b) Reconciliation of effective tax rate
2006 2005
£’000 £’000
Profit before tax 7,829 5,956
Notional taxation charge at the UK
Corporation tax rate of 30% (2005: 30%) 2,349 1,787
Items not deductible for tax purposes 73 45
Tax on share options exercised (83) (40)
Deferred tax arising on share options (69) (108)
Utilisation of tax shield on acquisition of
Woodland Animations (32) (64)
Utilisation of unrecognised tax losses (30) (569)
Utilisation of unrecognised Film Relief – (516)
Adjustments in respect of prior periods (582) 34
Total tax in income statement 1,626 569
In the year ended 31 December 2006, the effective tax rate on profits
is 21% (2005: 10%). This is lower than the standard rate of UK
corporation tax primarily as a result of the utilisation of tax losses
brought forward and prior year utilisation of Film Relief.
(c) Factors that may affect future tax charges
The Group has £0.2 million (2005: £0.6 million) of unrecognised tax
losses that may be available for relief against future trading profits.
The corporation tax rate is likely to increase following the acquisition
of Classic Media Holdings Inc due to the higher level of corporation
tax in the US. On 23 March 2007 it was announced that the UK
corporation tax rate would reduce from 30% to 28%. This rate will
not be substantively enacted until the new rate has passed into law
through the enactment of the Finance Act.
9. Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets Liabilities
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Property, plant and
equipment 149 105 – –
Intangible assets – – (3,350) (1,690)
Employee benefits 752 672 – –
Tax assets / (liabilities) 901 777 (3,350) (1,690)
Movement in deferred tax during the year
1 January Recognised Recognised 31 December
2006 in income in equity 2006
£’000 £’000 £’000 £’000
Property,
plant and
equipment 105 44 – 149
Intangible
assets (1,690) (1,660) – (3,350)
Tax losses
recognised –– – –
Employee
benefits 672 69 11 752
(913) (1,547) 11 (2,449)
Movement in deferred tax during the prior year
1 January Recognised Recognised 31 December
2005 in income in equity 2005
£’000 £’000 £’000 £’000
Property,
plant and
equipment 61 44 – 105
Intangible
assets (1,439) (251) – (1,690)
Tax losses
recognised 256 (256) ––
Employee
benefits 66 108 498 672
(1,056) (355) 498 (913) Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 37
10. Intangible assets
Investment Programme Trademarks
in development and
programmes costs copyrights Total
£’000 £’000 £’000 £’000
Cost
At 1 January
2005 32,781 1,748 26,768 61,297
Additions 5,004 943 6,195 12,142
Reclassification 905 (905) – –
Derecognition – (278) – (278)
At 31 December
2005 38,690 1,508 32,963 73,161
At 1 January
2006 38,690 1,508 32,963 73,161
Additions 13,161 701 36 13,898
Reclassification 1,092 (1,092) – –
Derecognition – (83) – (83)
At 31 December
2006 52,943 1,034 32,999 86,976
Amortisation
At 1 January
2005 8,772 106 3,884 12,762
Charge for
the year 3,661 – 1,350 5,011
Impairment 601 – 91 692
Derecognition – (106) – (106)
At 31 December
2005 13,034 – 5,325 18,359
At 1 January
2006 13,034 – 5,325 18,359
Charge for
the year 2,575 – 1,648 4,223
Impairment 78 – 35 113
At 31 December
2006 15,687 – 7,008 22,695
Net book value
At 31 December
2006 37,256 1,034 25,991 64,281
At 31 December
2005 25,656 1,508 27,638 54,802
At 1 January
2005 24,009 1,642 22,884 48,535
Under IAS 36 the Group tests for impairment of goodwill and other
intangible assets annually. In addition the Group has tested other
assets where there is an indication of impairment. The Group has
classified each brand as an individual CGU. The recoverable amount
of each CGU is calculated from discounted cashflow projections of the
future performance of each property. The key assumptions are those
regarding forecast profit, discount rates and growth rates for each
CGU as follows:
• Forecast profit is initially derived from historical profit, taking into
account the most recent budget as appropriate.
• Yearly growth rates in the 5 years subsequent to these forecasts, of
between 5% and 20%, 3% for the next 5 years and a declining rate
of -10% thereafter
• Group pre-tax interest rate of 10% used as the discount factor
• Full allocation of overheads by property
Where a CGU was found to be impaired based on the assumptions
above, a charge was made to bring their carrying value in line with the
value calculated.
Amortisation and impairment charge
The amortisation and impairment charge are recognised in cost of sales.
During 2006 and 2005, based on recent performance and
managements revised expectations an impairment requirement was
identified and charged.
11. Goodwill
£’000
Cost
At 1 January 2005 28,970
Additions 20
At 31 December 2005 28,990
At 1 January 2006 28,990
Additions –
At 31 December 2006 28,990
Amortisation
At 1 January 2005 9,444
Impairment –
At 31 December 2005 9,444
At 1 January 2006 9,444
Impairment 4
At 31 December 2006 9,448
Net book value
At 31 December 2006 19,542
At 31 December 2005 19,546
At 1 January 2005 19,526
The Group has classified each property as an individual CGU. CGUs
which constitute a significant component of overall goodwill include
Basil Brush
®
£5.0m and Postman Pat
®
£10.4m. Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 38
Notes to the Financial Statements – Group
continued
12. Property, plant and equipment
Fixtures
Freehold Short fittings and
land and leasehold Motor office
building improvements vehicles equipment Total
£’000 £’000 £’000 £’000 £’000
Cost
At 1 January 2005 300 214 25 1,501 2,040
Additions –– 31 254 285
Disposals (300) (56) (56) (586) (998)
At 31 December 2005 – 158 – 1,169 1,327
At 1 January 2006 – 158 – 1,169 1,327
Additions ––– 143 143
At 31 December 2006 – 158 – 1,312 1,470
Depreciation
At 1 January 2005 9 45 8 1,075 1,137
Charge for the year 2 105 38 222 367
Disposals (11) (56) (46) (552) (665)
At 31 December 2005 – 94 – 745 839
At 1 January 2006 – 94 – 745 839
Charge for the year – 12 – 227 239
At 31 December 2006 – 106 – 972 1,078
Net book value
At 31 December 2006 – 52 – 340 392
At 31 December 2005 – 64 – 424 488
At 1 January 2005 291 169 17 426 903
At 31 December 2006 there were no assets held under finance leases (2005: nil).
Under the Group’s banking facility, the bank has a first legal charge over any property, assets and undertakings. Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 39
13. Investments in Subsidiaries
A list of all subsidiaries can be found in note 33.
Acquisitions
Business combinations are accounted for under the acquisition
method. There were no business combinations in 2006 and 2005.
14. Other Financial Assets
2006 2005
£’000 £’000
Interest rate swap classified as fair value
through income statement 61 66
Foreign exchange contracts 19 –
80 66
15. Trade and other receivables
2006 2005
£’000 £’000
Amounts falling due within one year:
Trade receivables 4,286 8,104
Other receivables 3,145 2,014
Prepayments 2,259 188
Accrued income 20,197 11,508
29,887 21,814
Amounts falling due after more
than one year:
Prepayments and accrued income 1,262 1,005
Total debtors 31,149 22,819
Trade receivables are shown net of provisions for bad and doubtful
debts amounting to £337,000 (2005: £98,000).
16. Trade and other payables
2006 2005
£’000 £’000
Trade payables 3,809 1,568
Non-trade payables and accrued expenses 114 687
3,923 2,255
17. Cash, cash equivalents and bank overdrafts
2006 2005
£’000 £’000
Cash 1,697 3,890
Overdraft (9,524) (3,779)
(7,827) 111
18. Other interest-bearing loans and borrowings
This note provides information about the contractual terms of the
Group’s interest-bearing loans and borrowings. For more information
about the Group’s exposure to interest rate and foreign currency risk,
see note 21.
2006 2005
£’000 £’000
Non-current liabilities
Secured bank loans 19,462 17,770
Current liabilities
Secured bank loans 6,369 3,225
As at 31 December 2006 issue costs of £185,000 were set off
against the term loan payable of £26,017,000. As at 31 December
2005 issue costs of £148,000 were set off against the term loan
payable of £21,143,000.
The Bank of Scotland has a fixed and floating charge over all the
Group’s assets as security for the term loan and working capital facility.
The expiry date of the unused borrowing facilities is as follows:
Working Working
Term Term capital capital
loan loan facility facility
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Within 1 year – – 673 6,500
Greater than 1
but not more
than 2 years – 6,396 – –
– 6,396 673 6,500 Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 40
Notes to the Financial Statements – Group
continued
19. Employee benefits
Defined contribution plans
The Group operates a number of defined contribution pension plans.
The total expense relating to these plans in the current year was £150,000 (2005: £170,000)
Share-based payments
At the balance sheet date, the Company operated two share option schemes, an Inland Revenue approved scheme and an unapproved
scheme. Directors and all the employees of the Group are eligible to participate in the approved and unapproved schemes. Details of the
ordinary shares, which are subject to Directors’ options, are disclosed in the Remuneration Report on pages 23 to 27.
Having served a minimum period of 6 months, all employees are entitled to participate in an Inland Revenue approved scheme up to a value
of £30,000 and thereafter unapproved schemes. Consistent with the rules of the schemes, the vesting of options is generally contingent on
continued employment for a period of at least three years, and the employee has a seven year period within which to exercise. Exercise price
is determined at market rate, being the average of the previous 5 days’ closing price.
The number and weighted average exercise prices of share options for employees are as follows:
Weighted Weighted
average Number average Number
exercise price of options exercise price of options
2006 2006 2005 2005
Outstanding at the beginning of the period 13.98 28,034,843 12.41 24,952,257
Forfeited during the period nil nil nil nil
Exercised during the period (14.72) (1,463,117) (13.39) (814,513)
Granted during the period 35.96 6,140,000 23.17 4,149,500
Lapsed during the period (16.55) (743,432) (12.11) (252,401)
Outstanding at the end of the period 18.10 31,968,294 13.98 28,034,843
Exercisable at the end of the period 13.28 14,186,294 16.76 8,763,104
The weighted average share price at the date of exercise of share options exercised during the period was 33.5p (2005: 29.6p).
The options outstanding at the year end have an exercise price in the range of 6.85p to 36.15p and a weighted average contractual life of
6.8 years remaining.
2006
Grant Date 30-Mar-06 30-Mar-06 25-Apr-06 27-Oct-06 27-Oct-06
Scheme Approved Unapproved Unapproved Approved Unapproved
Number of Options 822,642 1,437,358 3,750,000 100,000 30,000
Fair value at measurement date 19.75p 19.75p 18.48p 14.14p 14.14p
Weighted average share price 37.75p 37.75p 36.00p 31.00p 31.00p
Exercise price 36.05p 36.05p 36.15p 29.00p 29.00p
Expected volatility 48.1% 48.1% 47.2% 42.1% 42.1%
Risk-free interest rate 4.4% 4.4% 4.7% 4.9% 4.9%
2005
Grant Date 22-Mar-05 22-Mar-05 26-Apr-05 21-Oct-05 21-Oct-05
Scheme Approved Unapproved Unapproved Approved Unapproved
Number of Options 1,030,654 1,023,846 1,500,000 95,000 500,000
Fair value at measurement date 9.48p 10.28p 13.23p 14.23p 14.23p
Weighted average share price 21.00p 21.00p 24.25p 27.75p 27.75p
Exercise price 20.70p 20.70p 24.55p 28.20p 28.20p
Expected volatility 54.7% 54.7% 55.6% 49.9% 49.9%
Risk-free interest rate 4.8% 4.8% 4.8% 4.3% 4.3% Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 41
19. Employee benefits (continued)
The fair value of services received in return for share options granted
are measured by reference to the fair value of share options granted.
The estimate of the fair value of the services received is measured
based on a binomial model. Assumptions for which are based on
the following:
• The contractual life of the options is in accordance with the
scheme rules, which vest after 3 years and the maximum time is
10 years,
• The expected volatility is wholly based on the historic volatility
(calculated based on the weighted average remaining life of the
share options), adjusted for any expected changes to future
volatility due to publicly available information,
• Zero Dividend yield,
• Risk-free rate is based on the national government bonds,
• Vesting ratio is set at 2 times the exercise price,
• Employees’ exit rate prior to vesting is 10%, and 5% post vesting.
• Directors’ exit rate prior to vesting is assumed to be nil and 5%
post vesting.
• The estimate that the performance criteria will be achieved is 80%.
The total expenses recognised in administrative costs for the period
arising from share based payments are as follows:
2006 2005
£’000 £’000
Equity settled share based
payment expense 526 347
20. Provisions
Onerous
Lease
£’000
Balance at 1 January 2006 69
Provisions utilised during the year (23)
Balance at 31 December 2006 46
Current 16
Non – current 30
46
The onerous lease provision relates to a warehouse facility in
Coventry and is being unwound over a period of seven years from
the date of the acquisition of Tell Tale Productions Limited, being the
end of the current lease period.
21. Financial instruments
The Company’s circumstances and operations do not require the use
of complex financial instruments. Nevertheless, the Directors recognise
that the Group faces certain risks and these are discussed below.
Currency risk
The Group’s operations take place both within and outside the UK.
Sales are invoiced primarily in sterling and US dollars, but contracts
are also negotiated in other currencies. The level of foreign currency
sales outstanding at the year-end does not warrant the use of any
hedging instruments, although the Directors continue to monitor the
requirement to hedge.
On 14 December 2006 the Company entered into foreign currency
forward exchange contracts amounting to US$265,000,000 relating
to the acquisition of Classic Media Holdings, Inc. The contracts
expired in January 2007, when the purchase price was due to
be settled.
Other than noted above, there were no unrecognised gains or losses
in relation to the Group’s financial assets and liabilities at the year-end.
Credit risk
Exposure to financial counterparty credit risk is managed by the
Group credit control team by establishing and maintaining
relationships with customers. The Group is exposed to customers
ranging from government owned broadcasters to privately owned
licensees and the underlying local economic and sovereign risks vary
throughout the world. There are no significant concentrations of
credit risk. New customers are subjected to credit rating checks via
an external agency and internal sign off by senior management.
Where applicable the Group endeavours to minimise credit risk by
the use of up-front payments.
The maximum exposure to credit risk is represented by the carrying
amount of each debtor recorded on the balance sheet.
Interest rate risk
In 2003, the Group entered into an interest rate swap to
hedge its interest rate exposure on its term loan facility. The notional
principal amount of the swap was £9,000,000. Interest payable on
this swap is fixed at 3.99%. Interest receivable is floating. At
31 December 2006 the floating rate receivable was 5.32%. The
swap ends in June 2007.
There is no material difference between the fair value of these
assets and the value at which they are recorded in the balance sheet
at 31 December 2006, except for an interest rate swap, which has
a fair value at year-end 31 December 2006 of £61,437
(1 January 2006: £65,904). Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 42
Notes to the Financial Statements – Group
continued
21. Financial instruments (continued)
Effective interest rates and repricing analysis
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates
at the balance sheet date and the periods in which they mature or, if earlier, are repriced.
2006
Effective
interest Less than 1 to 2 to 5 years
rate Total 1 year 2 years 5 years and over
% £’000 £’000 £’000 £’000 £’000
Cash and cash equivalents* 6.89% 1,697 1,697 –– –
Secured bank loans:
GBP fixed rate loan* 5.74% (11,763) (6,369) (5,394) ––
GBP floating rate loan 7.07% (14,253) –– (9,503) (4,750)
Bank overdrafts* 6.89% (9,525) (9,525) –– –
Interest Rate swap 3.99% 61 61 –– –
2005
Effective
interest Less than 1 to 2 to 5 years
rate Total 1 year 2 years 5 years and over
% £’000 £’000 £’000 £’000 £’000
Cash and cash equivalents* 6.27% 3,889 3,889 –– -
Secured bank loans:
GBP fixed rate loan* 5.74% (9,000) (3,225) (5,518) (257) -
GBP floating rate loan 6.35% (12,143) –– ( 12,143) -
Bank overdrafts* 6.27% (3,779) (3,779) –– -
Interest Rate swap 3.99% 66 – 66 –-
* These assets / liabilities bear interest at a fixed rate.
The bank loans contain certain covenants and certain events of default which are customary in agreements of this type. These included
interest cover, debt cover, gearing and cash flow cover. At completion of the acquisition of Classic Media Holdings, Inc, on 11 January 2007,
the Group recapitalised the Company’s banking facilities introducing new covenants. As at year end the Group complied with its banking
requirements. Further information can be found in the Chief Finance and Operations Director’s Review on pages 14 to 15.
Sensitivity Analysis
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings.
Over the longer-term, however, permanent changes in foreign exchange and interest rates would have an impact on consolidated earnings.
At 31 December 2006, it is estimated that a general increase of one percentage point in interest rates would decrease the Group’s profit
before tax by approximately £0.3m (2005: £0.1m). Interest rate swaps have been included in this calculation.
It is estimated that a general increase of one percentage point in the value of the US dollar against other foreign currencies would have
increased the Group’s profit before tax by approximately £0.1m for the year ended 31 December 2006 (2005: £0.1m). Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 43
21. Financial instruments (continued)
Fair values
The fair values together with the carrying amounts shown in the balance sheet are as follows:
Carrying Fair Carrying Fair
amount value amount value
31 December 31 December 1 January 1 January
2006 2006 2006 2006
£’000 £’000 £’000 £’000
Interest rate swap 61 61 66 66
Foreign exchange contracts 19 19 ––
80 80 66 66
The fair value of the swap and the currency option is a direct market valuation obtained from the treasury service at the Group’s bank.
A charge of £5,000 (2005: £106,000) has been recognised in the income statement during the year for the change in fair value of the swap.
A charge of £216,000 has been recognised in the income statement for the fair value of the currency option. Other financial assets and
liabilities have a fair value equal to their carrying value.
22. Share capital
2006 2005
No. £ No. £
Authorised: ordinary shares of 5p each 550,000,000 27,500,000 550,000,000 27,500,000
Allotted, called up and fully paid ordinary shares of 5p each 415,055,094 20,752,755 413,568,795 20,678,440
23. Reconciliation of movements in capital and reserves
Share Share Merger Profit
Capital Premium Reserve and Loss Total
£’000 £’000 £’000 £’000 £’000
At 1 January 2005 20,637 33,176 16,470 (17,921) 52,362
Profit for the period –– – 5,387 5,387
Share option charge –– – 347 347
Exercise of share options 41 68 –– 109
Deferred tax on share options –– – 497 497
At 31 December 2005 20,678 33,244 16,470 (11,690) 58,702
At 1 January 2006 20,678 33,244 16,470 (11,690) 58,702
Profit for the period –– – 6,203 6,203
Share option charge –– – 526 526
Exercise of share options 74 144 –– 218
Deferred tax on share options –– – 11 11
At 31 December 2006 20,752 33,388 16,470 (4,950) 65,660
In 1999, following the acquisition of Dot Films Limited, Seer Magic Limited, Boom Boom Limited and Carrington Productions International
Limited, the excess of the consideration over the nominal value of shares was credited to the Merger Reserve in accordance with s131 of the
Companies Act 1985. Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 44
Notes to the Financial Statements – Group
continued
24. Earnings per ordinary share
The calculation of basic earnings per ordinary share is based on
the consolidated profit after tax for the period of £6,203,000
(2005: £5,387,000) and on 414,541,333 (2005: 413,075,282),
being the weighted average number of ordinary shares in issue
during the period.
Reconciliation of the earnings and weighted average number of
shares used in the calculations are set out below:
2006 2005
Total Total
£’000 £’000
Profit after taxation 6,203 5,387
Basic earnings per
ordinary share
Earnings available to
ordinary shareholders 6,203 5,387
Weighted average number
of shares in issue 414,541,333 413,075,282
Basic earnings
per share (pence) 1.50p 1.30p
Diluted earnings per
ordinary share
Earnings available to
ordinary shareholders 6,203 5,387
Weighted average number
of shares in issue 414,541,333 413,075,282
Effect of diluted securities – options 26,517,874 13,176,850
Diluted earnings
per share (pence) 1.41p 1.26p
Underlying earnings per share
Earnings available to
ordinary shareholders 6,203 5,387
Share options 526 236
Interest rate swap /
Currency options 223 106
Aborted acquisition costs 119 –
Adjustment for reorganisation costs – 149
7,071 5,878
Weighted average number
of shares in issue 414,541,333 413,075,282
Underlying earnings
per share (pence) 1.70p 1.42p
25. Operating Leases
As at 31 December 2006, the Group was committed to payments
under the following non-cancellable operating leases in respect of
rent, office equipment and motor vehicles:
Operating lease commitments:
2006 2005
£’000 £’000
Within 1 year 543 540
Between 2 and 5 years 2,029 2,005
Greater than 5 years 1,729 2,223
4,301 4,768
During the year £541,000 was recognised as an expense in the
income statement in respect of operating leases (2005: £540,000)
The Group and Company were not committed to any finance lease
obligations.
26. Related party transactions
Professional services were rendered by Auerbach Hope during the
year. These are related party transactions by virtue of the fact that
Non-Executive Director, I. Fishman is an Executive in this practice.
The amounts involved are as follows:
Director Practice Charge for Year Outstanding
I. Fishman Auerbach Hope £6,175 £4,414
The key management personnel of the Group are the Directors. Details
of Directors’ emoluments are disclosed in the Remuneration Report on
pages 23 to 27.
27. Capital commitments
2006 2005
£’000 £’000
Investment in programmes
Contracted but not provided for 4,063 15,000
The committed amounts at 31 December 2006 are expected to be
settled within two years.
28. Contingent liabilities
The Group has no bank guarantees outstanding at 31 December 2006
(2005: nil). Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Group 45
29. Accounting estimates and judgements
As stated in note 10 the carrying value of CGUs and amortisation of
investment in programming is based on discounted future cashflow
estimates and historical profits via an annual impairment test. The
assumptions used in the calculation include estimated growth rates
and forecast sales plans.
As stated in note 19, the fair value of services received in return for
share options granted are measured by reference to the fair value of
share options granted. The estimate of the fair value of the services
received is measured based on a binomial model, the assumptions
for which are disclosed in the note.
30. Post balance sheet date events
On 11 January 2007, Entertainment Rights Plc announced that the
Company completed the acquisition of the entire issued share capital
of Classic Media Holdings, Inc for a total consideration of
US$210,000,000 (£106,000,000) plus directly attributable expenses
of £4,900,000. Payment of the purchase price comprised the issue
of 66,867,268 Entertainment Rights shares valued at £20,361,083
being the average 5 day closing share price on 13 December 2006
and £85,638,917 in cash. In addition to the placement of
249,033,056 shares on the London Stock Exchange, the Company
refinanced the enlarged Group’s indebtedness with the Bank of
Scotland.
The revised bank facility drawn down on completion of the acquisition
was £110 million of term debt. The Group also has a fully available
revolving credit facility of £20 million for ongoing working capital and
investment purposes, which is currently not utilised. Under the new
facility the Group is subject to ongoing covenant compliance which
includes interest cover, cashflow cover and debt cover.
There is no intention to dispose of any operations as a result of the
acquisition.
As the acquisition completed on 11 January, the final balance sheet
and associated working capital adjustments are yet to be determined.
As such it is impractical to determine the Balance Sheet, identifying
each class of asset and liability and the corresponding goodwill
following completion. This will be disclosed in the June 2007 half
year results.
On 22 January 2007, Entertainment Rights Plc announced that the
Group completed the acquisition of worldwide audio visual, licensing
and merchandising, publishing (excluding traditional publishing), live
events and digital rights to Where’s Wally?
®
for £2,500,000. Entertainment Rights Plc
Annual Report & Accounts 2006
Company Balance Sheet 46
Company Balance Sheet
as at 31 December
Notes 2006 2005
£’000 £’000
Fixed assets
Tangible assets 32 392 485
Investments 33 22,829 34,833
23,221 35,318
Current assets
Other financial assets 34 80 66
Debtors – amounts falling due within one year 35 51,726 42,675
Cash at bank and in hand – 10
51,806 42,751
Creditors: amounts falling due within one year 36 (21,012) (11,219)
Net current assets 30,794 31,532
Total assets less current liabilities 54,015 66,850
Creditors: amounts falling due after more than one year 37 (19,462) (17,770)
Net assets 34,553 49,080
Capital and reserves
Called up share capital 39 20,752 20,678
Share premium account 39 33,388 33,244
Merger reserve 39 16,470 16,470
Profit and loss account 39 (36,057) (21,312)
Equity shareholders’ funds 34,553 49,080
The financial statements on pages 46 to 52 were approved by the Board of Directors on 26 March 2007 and signed on its behalf by:
Michael V. Heap – Chief Executive Officer Elizabeth Gaines – Chief Finance and Operations Director Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Company 47
Notes to the Financial Statements – Company
31. Accounting policies
Basis of accounting
These financial statements have been prepared under the historical
cost convention and in accordance with applicable United Kingdom
accounting standards. A summary of significant accounting policies
applied is set out below. These financial statements have been
prepared on the historical cost basis except that derivative financial
instruments are stated at their fair value.
Judgements made by the Directors, in the application of these
accounting policies that have significant effect on the financial
statements and estimates principally relate to impairment reviews and
the share option valuation and are discussed in note 29.
New Accounting Standards
The Company has not adopted FRS 29 Financial Instruments:
Disclosures. This new standard becomes mandatory for 2007 and
introduces extensive new disclosure requirements about the
significance of financial instruments for an entity’s financial position
and performance, and qualitative and quantitative disclosures on the
nature and the extent of risks. The Company is currently assessing the
impact this new standard will have on next year’s financial statements.
Tangible fixed assets
Tangible fixed assets are stated at cost less depreciation.
Depreciation is provided on all tangible fixed assets in order to write off
their cost on a straight-line basis over their expected useful lives. The
rates adopted are as follows:
Short leasehold improvements Over period of lease
Office equipment 4-10 years
Fixtures and fittings 4 years
Motor vehicles 4 years
Financial instruments
Under FRS 25, the Company is exempt from the requirement to
disclose financial instruments on the grounds that the results of the
Company are included in publicly available consolidated financial
statements which include disclosures that comply with this Standard.
Hedge accounting
The Company has not adopted hedge accounting.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are
translated into sterling at the rate of exchange ruling at the balance
sheet date. Transactions in foreign currencies are translated into
sterling and recorded at the rate ruling at the date of the transactions.
All exchange differences arising from the above are included in the
income statement.
Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the exchange
rate at the date of the transaction.
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 taxation is provided on all timing differences that have arisen
but not reversed by the balance sheet date, except as otherwise
required by FRS 19.
Operating leases
Rentals paid under operating leases are charged to the profit and loss
on a straight-line basis over the period of the lease.
Share Base Payments Transactions
The share option programme allows Company employees to acquire
shares of the Company; these awards are granted by the Company.
The fair value of options granted is recognised as an employee expense
with a corresponding increase in equity. The fair value is measured at
grant date and spread over the period during which the employees
become unconditionally entitled to the options. The fair value of the
options granted is measured using the binomial model, taking into
account the terms and conditions upon which the options were granted.
The amount recognised as an expense is adjusted to reflect the actual
number of share options that vest except where forfeiture is due only
to share prices not achieving the threshold for vesting.
Pension costs
The Company operates a defined contribution personal pension
scheme for all employees. This covers all full-time employees that can
elect to participate in the plan, providing they have served with the
Company for at least three months.
Investments in subsidiary undertakings
Investments in subsidiary undertakings are stated at cost and
reviewed for impairment if there are indications that the carrying value
may not be recoverable.
Cash flow statement
As the ultimate holding company publishes a consolidated cash flow
statement in which the Company’s cash flows are consolidated and,
all of the Company’s share capital is held within the Group, the
Company is exempt from the requirement to prepare a cash flow
statement, as permitted by FRS 1.
Related parties
Under FRS 8 – Related Party Disclosures, the Company is exempt
from the requirement to disclose transactions with other entities within
the Group headed by Entertainment Rights Plc.
32. Tangible Fixed Assets
Fixtures
Short fittings
leasehold Motor and office
improvements vehicles equipment Total
£’000 £’000 £’000 £’000
Cost
At 1 January 2006 154 – 1,054 1,218
Additions –– 142 142
At 31 December 2006 154 – 1,196 1,350
Depreciation
At 1 January 2006 103 – 620 723
Charge for the year 12 – 223 235
At 31 December 2006 115 – 843 958
Net book value
At 31 December 2006 39 – 353 392
At 31 December 2005 51 – 434 485
There are no assets held under finance leases at 31 December 2006
(2005: £nil) Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Company 48
Notes to the Financial Statements – Company
continued
33. Fixed asset investments
Shares in
subsidiary
undertakings
£’000
Cost
At 1 January 2006 and 31 December 2006 43,041
Provisions
At 1 January 2006 8,208
Impairment charge 12,004
At 31 December 2006 20,212
Net book value
At 31 December 2006 22,829
At 31 December 2005 34,833
At 31 December 2006 the Group directly held 100% allotted share
capital of the following companies:
Country of
Subsidiary incorporation
The Sleepy Kid Company Ltd Great Britain
Transylvania Pets Ltd Great Britain
Entertainment Rights Distribution Ltd Great Britain
The Richard Digance Card Company Ltd Great Britain
The Tidings Trading Company Ltd Great Britain
Musical Tunes Ltd Great Britain
Clipper Films Ltd Great Britain
Ridgeway Films Ltd Great Britain
Seer Magic Ltd Great Britain
Dot Films Ltd Great Britain
Carrington Productions International Ltd Great Britain
Lavender Castle Ltd Great Britain
Boom Boom Ltd Great Britain
Link Licensing Ltd Great Britain
Woodland Animations Ltd Great Britain
Entertainment Rights US Inc. USA
Siriol Scotland Ltd Great Britain
Primary Design Ltd Great Britain
Link Entertainment Ltd Great Britain
Entertainment Rights Licensing Ltd Great Britain
Tell-Tale Productions Ltd Great Britain
Boo TV Ltd Great Britain
Ella TV Ltd Great Britain
Fun Song Factory TV Ltd Great Britain
Sprogs TV Ltd Great Britain
Tell-Tale Films Ltd Great Britain
Tell-Tale Theatre Productions Ltd Great Britain
Tweenies Limited Great Britain
The Tidings Trading Company Limited, Clipper Films Limited and
Ridgeway Films Limited are owned subsidiaries of The Richard
Digance Company Limited. Lavender Castle is a subsidiary of
Carrington Productions International Limited. Siriol Scotland Limited
is a subsidiary of Musical Tunes Limited. Primary Design Limited, Link
Entertainment Limited and Entertainment Rights US Inc. are owned
subsidiaries of Link Licensing Limited. Boo TV Limited, Ella TV
Limited, Fun Song Factory TV Limited, Sprogs TV Limited, Tell-Tale
Films Limited and Tell-Tale Theatre Productions Limited are owned
subsidiaries of Tell-Tale Productions Limited. All other interests are
held directly by Entertainment Rights Plc.
34. Other Financial Assets
2006 2005
£’000 £’000
Interest rate swap classified as
fair value through income statement 61 66
Foreign exchange contracts 19 –
80 66
35. Debtors
2006 2005
£’000 £’000
Amounts falling due within one year:
Amounts owed by Group undertakings 48,751 42,206
Trade debtors 263 111
Deferred tax asset 149 105
Other debtors 267 –
Prepayments and accrued income 2,296 253
51,726 42,675
36. Creditors: amounts falling due within one year
2006 2005
£’000 £’000
Term loan 6,369 3,225
Bank overdraft 9,504 3,778
Trade creditors 3,809 1,485
Other taxation and social security – 738
Amounts owed to Group undertakings 1,096 1,096
Accruals and deferred income 234 897
21,012 11,219
As at 31 December 2006 issue costs of £185,000 were set off
against the term loan payable of £26,017,000.
As at 31 December 2005 issue costs of £148,000 were set off
against the term loan payable of £21,143,000.
The Bank of Scotland has a fixed and floating charge over all
the Group’s assets as security for the term loan and working capital
facility.
37. Creditors: amounts falling due after more than one year
2006 2005
£’000 £’000
Term loan 19,462 17,770 Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Company 49
38. Provision for deferred taxation
2006 2005
£’000 £’000
Accelerated capital allowances
– Tangible 149 105
149 105
Asset
£’000
Provision at 1 January 2006 105
Origination and reversal of timing differences 44
Provision at 31 December 2006 149
39. Reconciliation of movements in shareholders’ funds and reserves
Share Share Merger Profit Total Total
Capital Premium Reserve and Loss 2006 2005
£’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2006 20,678 33,244 16,470 (21,312) 49,080 49,353
Issue of share capital 74 144 –– 218 109
Share option charge ––– 526 526 347
Loss for the year ––– (15,271) (15,271) (729)
At 31 December 2006 20,752 33,388 16,470 (36,057) 34,553 49,080
40. Lease Commitments
As at 31 December, the Company was committed to annual payments under the following non-cancellable operating leases in respect of
rent, office equipment and motor vehicles:
Operating lease commitments:
2006 2005
£’000 £’000
Within 1 year 12 7
Between 2 and 5 years 35 39
Greater than 5 years 494 494
541 540
The Company was not committed to any finance lease obligations.
41. Capital Commitments
2006 2005
£’000 £’000
Investment in programmes
Contracted but not provided for – –
42. Directors’ emoluments
Detailed disclosure of Directors’ individual remuneration and share options are given in the Remuneration Report on pages 23 to 27.
2006 2005
£’000 £’000
Directors’ emoluments 1,080 1,147
Company contributions to pension schemes 69 69
Amounts paid to third parties in respect of directors’ services 68 128
1,217 1,344
Pension contributions are currently paid either to Directors’ personal pension schemes, or to the Company scheme. Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Company 50
Notes to the Financial Statements – Company
continued
43. Staff Numbers and Costs
The average number of employees (including Executive Directors) employed by the Company during the year was:
2006 2005
Administration 45 45
Sales and consumer products 22 32
Production 16 21
83 98
The aggregate payroll costs of these persons were as follows:
2006 2005
£’000 £’000
Staff costs (including Executive Directors)
Wages and salaries 3,732 4,126
Social security costs 471 463
Pension costs 144 170
Share options charge 526 347
4,873 5,106
A management charge is made to subsidiary companies, allocating the payroll costs across the Group.
The Company operates a defined contribution personal pension scheme. The charge for the year represents those contributions payable to
this scheme and other personal pension schemes.
Share-based payments
At the balance sheet date, the Company operated two share option schemes, an Inland Revenue approved scheme and an unapproved
scheme. Directors and all the employees of the Company are eligible to participate in the approved and unapproved schemes. Details of the
ordinary shares, which are subject to Directors’ options, are disclosed in the Remuneration Report on pages 23 to 27.
Having served a minimum period of 6 months, all employees are entitled to participate in an Inland Revenue approved scheme up to a value of
£30,000 and thereafter unapproved schemes. Consistent with the rules of the schemes, the vesting of options is generally contingent on
continued employment for a period of at least three years, and the employee has a seven year period within which to exercise. Exercise price
is determined at market rate, being the average of the previous 5 days closing price.
The number and weighted average exercise prices of share options for employees are as follows:
Weighted average Number of Weighted average Number of
exercise price options exercise price options
2006 2006 2005 2005
Outstanding at the beginning of the period 13.98 28,034,843 12.41 24,952,257
Forfeited during the period nil nil nil nil
Exercised during the period (14.72) (1,463,117) (13.39) (814,513)
Granted during the period 35.96 6,140,000 23.17 4,149,500
Lapsed during the period (16.55) (743,432) (12.11) (252,401)
Outstanding at the end of the period 18.10 31,968,294 13.98 28,034,843
Exercisable at the end of the period 13.28 14,186,294 16.76 8,763,104
The weighted average share price at the date of exercise of share options exercised during the period was 33.5p (2005: 29.6p).
The options outstanding at the year end have an exercise price in the range of 6.85p to 36.15p and a weighted average contractual life of
6.8 years remaining. Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Company 51
43. Staff Numbers and Costs (continued)
2006
Grant Date 30-Mar-06 30-Mar-06 25-Apr-06 27-Oct-06 27-Oct-06
Scheme Approved Unapproved Unapproved Approved Unapproved
Number of Options 822,642 1,437,358 3,750,000 100,000 30,000
Fair value at measurement date 19.75p 19.75p 18.48p 14.14p 14.14p
Weighted average share price 37.75p 37.75p 36.00p 31.00p 31.00p
Exercise price 36.05p 36.05p 36.15p 29.00p 29.00p
Expected volatility 48.1% 48.1% 47.2% 42.1% 42.1%
Risk-free interest rate 4.4% 4.4% 4.7% 4.9% 4.9%
2005
Grant Date 22-Mar-05 22-Mar-05 26-Apr-05 21-Oct-05 21-Oct-05
Scheme Approved Unapproved Unapproved Approved Unapproved
Number of Options 1,030,654 1,023,846 1,500,000 95,000 500,000
Fair value at measurement date 9.48p 10.28p 13.23p 14.23p 14.23p
Weighted average share price 21.00p 21.00p 24.25p 27.75p 27.75p
Exercise price 20.70p 20.70p 24.55p 28.20p 28.20p
Expected volatility 54.7% 54.7% 55.6% 49.9% 49.9%
Risk-free interest rate 4.8% 4.8% 4.8% 4.3% 4.3%
The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The
estimate of the fair value of the services received is measured based on a binomial model. Assumptions for which are based on the following:
• The contractual life of the options is in accordance with the scheme rules, which vest after 3 years and the maximum time is 10 years,
• The expected volatility is wholly based on the historic volatility (calculated based on the weighted average remaining life of the share
options), adjusted for any expected changes to future volatility due to publicly available information,
• Zero Dividend yield,
• Risk-free rate is based on the national government bonds,
• Vesting ratio is set at 2 times the exercise price,
• Employees’ exit rate prior to vesting is 10%, and 5% post vesting.
• Directors’ exit rate prior to vesting is assumed to be nil and 5% post vesting.
• The estimate that the performance criteria will be achieved is 80%.
The total expenses recognised for the period arising from share based payments are as follows:
2006 2005
£’000 £’000
Equity settled share based payment expense 526 347
44. Share capital
2006 2005
No. £ No. £
Authorised: ordinary shares of 5p each 550,000,000 27,500,000 550,000,000 27,500,000
Allotted, called up and fully paid ordinary shares of 5p each 415,055,094 20,752,755 413,568,795 20,678,440 Entertainment Rights Plc
Annual Report & Accounts 2006
Notes to the Financial Statements – Company 52
Notes to the Financial Statements – Company
continued
45. Loss on ordinary activities after taxation
As permitted by section 230 of the Companies Act 1985, the parent
company’s profit and loss account has not been included in these
financial statements. The Company’s loss on ordinary activities after
tax for the year ended 31 December 2006 amounted to £15,271,000
(2005: £729,000 loss).
46. Related party transactions
Professional services rendered by Auerbach Hope during the year.
These are related-party transactions by virtue of the fact that
Non-Executive Director I. Fishman is an executive in this practice.
The amounts involved (excluding amounts disclosed as Directors’
emoluments in the Remuneration Report on pages 23 to 27) are
as follows:
Director Practice Charge for Year Outstanding
I. Fishman Auerbach Hope £6,175 £4,414
The key management personnel of the Company are the Directors.
Details of Directors’ emoluments are disclosed in the Remuneration
Report on pages 23 to 27.
47. Post balance sheet date events
On 11 January 2007, Entertainment Rights Plc announced that
the Company completed the acquisition of the entire issued share
capital of Classic Media Holdings, Inc for a total consideration of
US$210,000,000 (£106,000,000) plus directly attributable expenses
of £4,900,000. Payment of the purchase price comprised the issue of
66,867,268 Entertainment Rights shares valued at £20,361,083 being
the average 5 day closing share price on 13 December 2006 and
£85,638,917 in cash. In addition to the placement of 249,033,056
shares on the London Stock Exchange, the Company refinanced the
enlarged Group’s indebtedness with the Bank of Scotland.
The revised bank facility drawn down on completion of the acquisition
was £110 million of term debt. The Group also has a fully available
revolving credit facility of £20 million for ongoing working capital and
investment purposes, which is currently not utilised. Under the new
facility the Group is subject to ongoing covenant compliance which
includes interest cover, cashflow cover and debt cover.
There is no intention to dispose of any operations as a result of
the acquisition.
As the acquisition completed on 11 January, the final balance sheet
and associated working capital adjustments are yet to be determined.
As such it is impractical to determine the Balance Sheet, identifying
each class of asset and liability and the corresponding goodwill
following completion. This will be disclosed as part of the June 2007
half year results.
On 22 January 2007, Entertainment Rights Plc announced that the
Group completed the acquisition of worldwide audio visual, licensing
and merchandising, publishing (excluding traditional publishing), live
events and digital rights to Where’s Wally?
®
for £2,500,000. Entertainment Rights Plc
Annual Report & Accounts 2006
53
Legal Notices
Archie™: © 1968 Archie Comic Publications, Inc. Archie and
Sabrina and all names and likenesses are trademarks of Archie
Comic Publications, Inc. in the United States and around the world
and are used under license by Entertainment Rights plc. All Rights
Reserved. The ARCHIE characters were created by John L.
Goldwater. The likenesses of the original Archie characters were
created by Bob Montana. Visit ARCHIE, JUGHEAD, BETTY and
VERONICA on-line at www.archiecomics.com
Archie and his New Pals (Special): © 1969 Archie Comic
Publications, Inc. Archie and Sabrina and all names and likenesses
are trademarks of Archie Comic Publications, Inc. in the United
States and around the world and are used under license by
Entertainment Rights plc. All Rights Reserved. The ARCHIE
characters were created by John L. Goldwater. The likenesses of
the original Archie characters were created by Bob Montana.
Visit ARCHIE, JUGHEAD, BETTY and VERONICA on-line at
www.archiecomics.com
Archie’s Funhouse: © 1976 Archie Comic Publications, Inc.
Archie and Sabrina and all names and likenesses are trademarks of
Archie Comic Publications, Inc. in the United States and around the
world and are used under license by Entertainment Rights plc. All
Rights Reserved. The ARCHIE characters were created by John L.
Goldwater. The likenesses of the original Archie characters were
created by Bob Montana. Visit ARCHIE, JUGHEAD, BETTY and
VERONICA on-line at www.archiecomics.com
Archie’s TV Funnies: © 1971 Archie Comic Publications, Inc.
Archie and Sabrina and all names and likenesses are trademarks of
Archie Comic Publications, Inc. in the United States and around the
world and are used under license by Entertainment Rights plc. All
Rights Reserved. The ARCHIE characters were created by John L.
Goldwater. The likenesses of the original Archie characters were
created by Bob Montana. Visit ARCHIE, JUGHEAD, BETTY and
VERONICA on-line at www.archiecomics.com
Archie & Sabrina Surprise Package: © 1986 Archie Comic
Publications, Inc. Archie and Sabrina and all names and likenesses
are trademarks of Archie Comic Publications, Inc. in the United
States and around the world and are used under license by
Entertainment Rights plc. All Rights Reserved. The ARCHIE
characters were created by John L. Goldwater. The likenesses of
the original Archie characters were created by Bob Montana.
Visit ARCHIE, JUGHEAD, BETTY and VERONICA on-line at
www.archiecomics.com
U.S. of Archie: © 1974 Archie Comic Publications Inc. Archie and
Sabrina are trademarks of Archie Comic Publications, Inc. in the
United States and around the world and are used under license by
Entertainment Rights plc. All Rights Reserved. The ARCHIE
characters were created by John L. Goldwater. The likenesses of
the original Archie characters were created by Bob Montana.
Visit ARCHIE, JUGHEAD, BETTY and VERONICA on-line at
www.archiecomics.com
Barbie in The Nutcracker®: © 2001 Mattel, Inc. All Rights
Reserved.
Barbie Diaries®, The: © 2005 Mattel, Inc. All Rights Reserved.
Barbie as Rapunzel®: © 2002 Mattel, Inc. All Rights Reserved.
Barbie® in Swan Lake: © 2003 Mattel, Inc. All Rights Reserved.
Barbie as the Princess and the Pauper®: © 2004 Mattel, Inc.
All Rights Reserved.
Barbie Fairytopia®: © 2004 Mattel, Inc. All Rights Reserved.
Barbie Fairytopia Mermaidia®: © 2005 Mattel, Inc. All Rights
Reserved.
Barbie and the Magic of Pegasus®: © 2005 Mattel, Inc.
All Rights Reserved.
Barbie in the 12 Dancing Princesses®: © 2006 Mattel, Inc.
All Rights Reserved.
Barbie My Scene Goes Hollywood®: © 2005 Mattel, Inc.
All Rights Reserved.
Basil Brush®: © 2003 Ivan Owen’s Estate and Peter Firmin under
exclusive licence to Entertainment Rights Plc. All Rights reserved.
Casper The Friendly Ghost: © 1997Harvey Entertainment, Inc.
CASPER™ and associated characters, its logos, names and related
indicia are trademarks of and copyrighted by Harvey Entertainment,
Inc. an Entertainment Rights group company. All rights reserved.
Casper’s Scare School: “Casper’s Scare School™” © 2006
Classic Media, Inc. CASPER and associated character names,
images and related indicia are trademarks of and copyrighted by
Harvey Entertainment, Inc. an Entertainment Rights group company.
All rights reserved.
Fat Albert and the Cosby kids™: Series I/II © 1972/1984 William
H. Cosby, Jr. Under exclusive License to Entertainment Rights plc.
All Rights Reserved. Fat Albert and the Cosby kids and all character
names and likenesses are trademarks of William H. Cosby, Jr.
The Fat Albert Christmas Special: © 1978 William H. Cosby, Jr.
Under exclusive License to Entertainment Rights plc. All Rights
Reserved. Fat Albert and the Cosby kids and all character names
and likenesses are trademarks of William H. Cosby, Jr.
The Fat Albert Easter Special: © 1978 William H. Cosby, Jr.
Under exclusive License to Entertainment Rights plc. All Rights
Reserved. Fat Albert and the Cosby kids and all character names
and likenesses are trademarks of William H. Cosby, Jr.
The Fat Albert Halloween Special: © 1978 William H. Cosby, Jr.
Under exclusive License to Entertainment Rights plc. All Rights
Reserved. Fat Albert and the Cosby kids and all character names
and likenesses are trademarks of William H. Cosby, Jr.
George of the Jungle: © Bullwinkle Studios, LLC GEORGE OF
THE JUNGLE™ and associated character names, images and other
indicia are trademarks of and copyrighted by Ward Productions, Inc.
an Entertainment Rights group company. Used by permission. All
rights reserved.
Guess with Jess®: © 2006 Woodland Animations Limited, a
division of Entertainment Rights plc. All Rights Reserved.
He-Man® and the Masters of the Universe®: Series I/II ©
1983/1984 Entertainment Rights plc; Characters © 1983/1984
Mattel Inc.; All Rights Reserved. He-Man and the Masters of the
Universe and other character names are trademarks of Mattel, Inc.
Used with Permission. Entertainment Rights Plc
Annual Report & Accounts 2006
54
Legal Notices
continued
He-Man® and She-Ra® A Christmas Special: © 1985
Entertainment Rights plc; Characters © 1983/1984 Mattel Inc.; All
Rights Reserved. He-Man and the Masters of the Universe and other
character names are trademarks of Mattel, Inc. Used with
Permission.
Jim Jam and Sunny™: © 2006 Entertainment Rights plc. All Rights
Reserved.
Lassie: © 1954 Classic Media, Inc. LASSIE® and associated
names and indicia are trademarks of and copyrighted by Classic
Media, Inc. an Entertainment Rights group company. All rights
reserved.
Lassie (2006 Movie): © Lassie Films, Ltd./Element Films (Lassie)
Limited/Davis Films Productions. All rights reserved. The trademark
“Lassie” is registered to Classic Media, Inc. an Entertainment Rights
group company. In the United States Patent and Trademark office
and in other countries.
Lassie’s Rescue Rangers: © 1973 Entertainment Rights plc /
Classic Media Inc. All Rights Reserved.
Little Red Tractor®: © 2003 Little Entertainment Company
Limited/Entertainment Rights Plc. All Rights Reserved.
Lone Ranger®, The: © 1980 Entertainment Rights plc / Classic
Media Inc. All Rights Reserved. THE LONE RANGER and associated
character names, images and other indicia are trademarks of and
copyrighted by Classic Media, Inc. an Entertainment Rights group
company. All rights reserved.
Postman Pat®: © 2003 Woodland Animations Ltd, a division of
Entertainment Rights Plc. All Rights Reserved
Rupert Bear®: © 2006 Entertainment Rights plc / Express
Newspapers. All Rights Reserved.
She-Ra®, Princess of Power: ® Series I/II © 1985/1987
Entertainment Rights plc; Characters © 1985/1987 Mattel Inc.; All
Rights Reserved. She-Ra, Princess of Power and other character
names are trademarks of Mattel, Inc. Used with Permission.
Story of Tracy Beaker® The: Series 1: © 2001, Series 2: © 2002,
© 2003 BBC. Distributed by Entertainment Rights under licence
from the BBC
Underdog: © 1964 Classic Media, Inc. UNDERDOG™ and
associated character names and images are registered trademarks
of Classic Media, Inc. an Entertainment Rights group company. All
rights reserved.
Underdog Show, The: © Golden Books Publishing Company, Inc.
UNDERDOG and associated names and images are Trademarks of
Golden Books Publishing Company, Inc.
Veggie Tales: © 2006 Big Idea, Inc. VEGGIETALES®, character
names, likenesses, and other indicia are trademarks of Big Idea, Inc.
an Entertainment Rights group company. All rights reserved.
Where’s Wally?: © 2007 Entertainment Rights plc. All rights
reserved. Entertainment Rights Plc
Annual Report & Accounts 2006
55 Entertainment Rights Plc
Annual Report & Accounts 2006
56 Entertainment Rights Plc
Annual Report & Accounts 2006
57 Directors and Advisers
Directors
Roderick Bransgrove (Non-Executive Chairman)
Michael Heap (Chief Executive Officer)
Elizabeth Gaines CA (Chief Finance and Operations Director)
Jane Smith (Chief Commercial and Creative Director)
Irvin Fishman FCA (Non-Executive Director)
Craig Hemmings (Non-Executive Director)
Julian Paul FCA (Non-Executive Director)
Secretary and registered office
Irvin Fishman, FCA
58-60 Berners Street
London WIT 3JS
Stockbrokers
Collins Stewart Europe Ltd
88 Wood Street
London EC2V 7QR
Altium Securities
30 St James’s Square
London SW1Y 4AL
Auditors
KPMG Audit Plc
8 Salisbury Square
London EC4Y 8BB
Bankers
Bank of Scotland
P O Box No 5
The Mound
Edinburgh EH1 1YZ
Solicitors
Lawrence Graham LLP
190 Strand
London WC2R 1JN
Registrars
Computershare Services plc
P O Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Company registration number 2402919
Corporate website: www.entertainmentrights.com
Directors and Advisers
Designed and produced by Carr Kamasa Design Printed by Spin Offset
The paper is manufactured from elemental chlorine free pulp and produced from fully sustainable sources. Entertainment Rights Plc Annual Report & Accounts 2006
Entertainment Rights Plc. Colet Court, 100 Hammersmith Road, London W6 7JP
Tel: +44(0)20 8762 6200  Fax: +44(0)20 8762 6299 www.entertainmentrights.com
ENTERTAINMENT RIGHTS PLC
ANNUAL REPORT & ACCOUNTS
2006
An Entertainment Rights group company An Entertainment Rights group company An Entertainment Rights group company