REG - Zinc Media Group PLC - Final Results and Notice of AGM
22/04/2022 07:00
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RNS Number : 9716I Zinc Media Group PLC 22 April 2022
22 April 2022
Zinc Media Group plc
("Zinc", "Zinc Media", the "Company" or the "Group")
Results for the year ended 31 December 2021
and
Notice of Annual General Meeting
Zinc Media Group plc today announces its audited results for the year ended 31
December 2021.
Headlines
The Group is pleased to report significant progress in 2021, including the
following highlights:
· Revenues for the year to 31 December 2021 ("FY21") of £17.5m (18
months ended 31 December 2020: £30.6m), with H2 2021 revenues increasing by
50% to £10.5m (H1 2021: £7.0m).
· Adjusted EBITDA(1) loss for the year of £0.6m (18 months ended
31 December 2020: £0.8m loss), with H2 2021 Adjusted EBITDA 1 profit of
£0.5m (H1 2021 : £1.1m loss).
· The Group generated Free Cash Flow 2 of £0.5m in H2 2021.
· The balance sheet has remained strong with cash of £5.6m at the
end of the year, and £4.2m as of 14 April 2022. There was a net cash outflow
of £1.2m during the year (18 months ended 31 December 2020: net inflow of
£3.6m).
· As of 14 April the Group has booked £13m of revenue which is
expected to deliver in 2022, an increase of £4m since February.
· The Group has a healthy pipeline of potential new business for
2022 totalling £35m which could deliver in 2022, of which £8m is at a highly
advanced stage. Within the highly advanced opportunities is a potential
multi-million pound commission for a global streamer for which the Group has
already received £0.4m of funding.
· TV production gross margins increased by a further 7.6% to 37.2%
in the 12 months to December 2021. This is 12.5% higher than when the
current management joined the Group in FY19 and equates to a £2m improvement
in profitability based on pre-Covid-19 revenues.
· The Group delivered a number of significant programme successes
during the year, which included:
o a multi-million pound 52-episode returning series with Channel 5
o the Group's first major new series for the Discovery Group
o the Group's first Advertiser funded TV series
o the Group's first Advertiser funded podcast series
o the Group's first audio commission from Amazon Audible
o the Group's first funded development for one of the world's biggest SVoD
(subscription video on demand) platforms; and
o the launch of new TV label Supercollider which won new business from Red
Bull and Lego
· The Group has continued to diversify its revenue base. Five new
businesses have been launched during 2020 and 2021 to propel the Group into
new content creation areas which collectively have generated £5m, or 29%, of
Group revenue in the year.
· Zinc Communicate accounted for 17% of Group revenue in the year,
almost double the proportion in FY20.
· The biggest TV division, in London and Manchester, made a profit
at the Adjusted EBITDA level for the first time since 2017.
Mark Browning, CEO of Zinc Media Group, said:
"We are very encouraged by the Group's performance this year which positions
it well for sustained growth and profitability in the years ahead. Revenue is
growing again, our margin performance is outstanding, we are diversifying into
new content markets, the business was cash generative in H2 2021 and our
pipeline shows the largest amount of advanced business in the last three
years. Our balance sheet is strong, which will allow us to make further
investments for long term growth. Our teams throughout the UK have worked
exceptionally hard to achieve these results and we can look forward to future
years with confidence and ambition."
Copies of the annual report and accounts
The annual report and accounts is available on the company's website at
www.zincmedia.com (http://www.zincmedia.com) and a hard copy will be posted to
those shareholders registered to receive one.
Notice of annual general meeting
Accompanying the accounts is notice of the Company's 2022 annual general
meeting (the "AGM"), which will take place at 10.00am on 26 May 2022 at Singer
Capital Markets' offices at 1 Bartholomew Lane, London, EC2N 2AX.
For those shareholders intending to attend the AGM please be mindful of any UK
Government Covid-19 guidance in place prior to the meeting. If circumstances
should change materially before the date of the meeting, the Company may adapt
the proposed arrangements, working in accordance with UK Government guidelines
and mindful of public health concerns. If there are material changes, the
Company will provide updates as early as possible before the date of the
meeting through a Regulatory Information Service and the Company's website at
www.zincmedia.com/investors (http://WWW.ZINCMEDIA.COM/INVESTORS) .
Shareholders are advised to check the Company's website regularly for updates.
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation.
For further information, please contact:
Zinc Media Group plc +44 (0) 20 7878 2311
Mark Browning, CEO / Will Sawyer, CFO
www.zincmedia.com (http://www.zincmedia.com)
Singer Capital Markets (Nominated Advisers and Broker) +44 (0) 20 7496 3000
Mark Taylor / George Tzimas
IFC Advisory Ltd (Financial PR) +44 (0) 20 3934 6630
Graham Herring / Zach Cohen
About Zinc Media Group
Zinc Media Group plc is a leading television and content creation group.
The award-winning and critically acclaimed television labels comprise
Blakeway, Brook Lapping, Films of Record, Red Sauce, Supercollider, Rex and
Tern Television and produce programmes across a wide range of factual genres
for UK and international channels.
Zinc Communicate specialises in developing cross-platform content for brands,
businesses and partners. For further information on Zinc Media please visit
www.zincmedia.com (http://www.zincmedia.com/)
CHAIRMAN'S STATEMENT
2021 was a tale of two halves. The first half saw the country in lockdown
between January and April, with the consequential negative impact on TV
production businesses heavily reliant on accessing people to film. As a
result, the Group's H1 performance reflects these difficult trading
conditions. However, in contrast to the first lockdown period in 2020 the
Group continued to invest in business development and new hires in H1 2021,
trusting that this would deliver growth and profitability in H2 2021 and 2022.
This decision has been vindicated in the Group's H2 results which delivered
Adjusted EBITDA of £0.5m and Free Cash Flow of £0.5m, demonstrating the
excellent progress made under the new management team.
Margin improvement has been a critical driver of success, with TV production
gross margins now up 12.5% from FY19 levels, exemplifying the transformation
plan executed during the Covid-19 pandemic over the last two years. Revenue
diversification has continued with the success of new businesses launched in
the last 18 months, which collectively delivered £5m of revenue from new
markets and buyers. This includes the live action and events production
business Supercollider and the branded entertainment and corporate video
businesses in the new commercial content division Zinc Communicate.
There were many notable breakthroughs in 2021 as the Group moved into
podcasting, brand funded entertainment, live action television and video
marketing. The Group also won its largest ever television commission and
secured new TV clients including Sky and Dave, and in audio Amazon Audible.
The Group starts 2022 in a strong position with £13m booked for delivery in
the year and a strong pipeline.
The Board would like to thank the management team, the employees and
freelancers for their professional and dedicated work, as well as our
shareholders for their support in what has been a year of progress amid
difficult conditions.
CEO'S REPORT
Performance and strategy
In the second half of 2021 the Group delivered a healthy Adjusted EBITDA
profit of £0.5m (H1 2021: £1.1m loss) and was cash generative. The
continuing focus on improving gross margins over the last 18 months was a
significant driver of this strong performance and demonstrates the
profitability and cash generation which the Group can achieve once revenues
start to accelerate and the Group scales further.
At the start of 2021, the Group updated its strategic plan focusing on five
strategic priorities:
· Revenue growth and diversification;
· Gross margin growth;
· Cash generation and cash management;
· Performance culture; and
· Shareholder engagement
Strong progress has been made on each of these areas during the year.
Revenue growth and diversification
Despite being heavily impacted by Covid-19 in 2021 the television businesses,
which are based in London, Manchester, Glasgow, Aberdeen and Belfast,
delivered revenues of £14.6m, representing 83% of the Group's turnover.
Returning series are the bedrock of successful television businesses and the
Group had 13 returning series in 2021 which accounted for £5.5m of television
turnover in 2021. The Group starts 2022 with 9 returning series.
Zinc Communicate demonstrated good growth in 2021 and has the potential to
grow substantially in 2022 and beyond. This business is the Group's
commercial content production division and currently operates in four areas:
branded entertainment, corporate video, digital publishing and audio and
podcasting. Revenues from Zinc Communicate were £2.9m in 2021, up 59% on
2020 on an annualised basis. Three of these four business were launched in
2021 and all have the potential for rapid acceleration in the years ahead.
Gross margins in Zinc Communicate are typically double those in television.
Revenue diversification is progressing well across the Group.
Diversification within television saw the Group break into the UK
multi-channel networks for the first time in 2021, with new business coming
from Dave (part of UKTV), Sky Arts and Discovery. Prior to the
implementation of the transformation plan in 2020 this was largely untapped by
Zinc. The Group launched several new businesses in 2021 which included Red
Sauce and Supercollider within the Television division, and branded
entertainment, corporate video and podcasting in Zinc Communicate.
Collectively these new businesses accounted for £5m of revenue in 2021,
accounting for 29% of the Group's turnover. These all represent new markets
for Zinc, and have the potential for accelerated growth in 2022 and beyond.
Gross margin growth
London & Manchester television production gross margins grew strongly in
the year, seeing an increase of 7.6% to 37.2% (FY20: 29.6%, FY19: 24.7%).
Improvement has been driven by investments in post-production technology,
re-organisation of staff resource, enhancing financial controls in production
management and the alignment of incentivisation schemes. Gross margin is now
at the higher end of industry norms, and the target remains 33%-35% on an
on-going basis.
Cash generation and cash management
Progress in cash management was also made during the year, with the Group
becoming cash generative in H2. Despite a net cash outflow of £1.2m over the
year (18 months ended 31 December 2020: net inflow of £3.6m), the balance
sheet has remained strong: cash balances have remained buoyant throughout the
year, ending 31 December 2021 at £5.6m (2020: £6.8m), providing the platform
for the Group to invest and enable growth in 2022 and beyond.
Performance culture
The performance culture continues to drive success within the Group. All
employees are set clear personal objectives and provided with regular feedback
on performance. All business winning roles and business delivery roles are
rewarded on delivery of agreed gross margins, and members of the Senior
Management Team ("SMT") are incentivised on the EBITDA performance of their
respective divisions. A culture of high performance is supported by employee
initiatives which invest in personal development, training, and learning and
development. Zinc Care was launched in 2021 which implemented wellbeing
seminars and coaching events to provide personal and professional development.
Shareholder engagement
The Group invested further in improving shareholder engagement during the
year. Alongside regular trading updates, the CEO and CFO present to all
shareholders and interested parties at least twice a year using the Investor
Meets Company platform. In addition, the Group held a capital markets day in
July 2021 and has recently held another in February 2022. These are held at
Zinc headquarters in London, providing a chance for investors to meet the
executive team and Chairman along with members of the SMT, and they provide
market insights and showcase the creative work from around the Group. The
Group appointed Investor Focus Communications (IFC) as its investor relations
and financial PR advisor in December 2021. They will be leading the Group's
investor engagement strategy during the coming year. Other shareholder
conversations take place throughout the year and news is regularly posted on
the Group's website and on the Group's social media feeds. Links to these
can be found at www.zincmedia.com (http://www.zincmedia.com) .
Programme highlights
2021 was packed with programme and editorial highlights including many
'firsts' for the Group.
In television, the PSBs (Public Service Broadcasters) - the BBC, ITV, Channel
4 and Channel 5 - represent the largest market for Zinc and the Group produces
for all these channels.
Ian Wright: Home Truths for BBC One attracted very high levels of press and
discussion, and is another world-class piece of reputational television. Blitz
Spirit with Lucy Worsley, a follow-up to the BAFTA Award winning Suffragettes
with Lucy Worsley, transmitted on BBC One in February 2021. The Hunt for
Gaddafi's Billions, a feature-length documentary for BBC, VPRO, ZDF/Arte and
other broadcasters transmitted on BBC FOUR and was nominated in the category
of best current affairs at the International Emmy Awards. Norma Percy's
series Trump Takes on the World was a three-part series for the BBC, Arte
France and other international broadcasters which transmitted on BBC One to
great acclaim.
On ITV 9/11: Life Under Attack anchored ITV's coverage of the 20(th)
anniversary of the Twin Towers attack and has been nominated for an RTS
award. The Group produced several series for Channel 4 including the
returning series Emergency Helicopter Medics from Tern TV for More4, and 50
Years of Mr Men with Matt Lucas for Channel 4. Excellent progress was made
with Channel 5 during 2021, with Tern TV producing Thatcher vs The Miners and
Red Sauce winning the Group's largest ever series commission for Bargain
Loving Brits in the Sun.
Productions made outside London ("MoL") are important for the PSBs and Zinc is
well placed to address this need, with substantive long term production
centres in Manchester, Glasgow, Belfast and Aberdeen. Zinc's proportion of
MoL TV production revenues in 2021 was 71%, up from 58% in 2020, driven by the
success of Red Sauce in Manchester and Tern TV in Scotland and Northern
Ireland.
The Group made good progress moving into new markets in the UK multichannel
networks. Zinc won its first major new series for the Discovery Group:
Spooked: Scotland, a 10-part series from Tern TV. Red Sauce picked up a new
'blue light' series for Dave titled Special Ops: Crime Squad UK which is a
potential returning series, and Zinc Communicate won the Group's first
Advertiser Funded Programme (AFP), a series broadcast on Sky Arts, funded by
Adobe, titled My Greatest Shot and produced by Tern TV in Scotland.
Additionally, the Group made significant progress in diversifying into content
for brands and agencies. The Group's newest TV label Supercollider won its
first production, Human Pinball for Red Bull, a stunt action film with YouTube
freerunning star Pasha. This premium television production was released on
social media and Red Bull's own channels. Supercollider followed this up by
producing social media content for The Lego Group to launch their Lego Stuntz
range of toys.
Zinc Communicate launched into the potentially lucrative market of podcasting,
which builds organically from Zinc's heritage in radio production. The audio
and podcasting business won its first commission for Amazon Audible, as well
as its first commercial podcasts.
Market and outlook
The content market is improving from the Covid-19 inflicted decline. Prior
to the pandemic, the television production market in the UK was worth £4.7bn,
with Factual television, Zinc's core competence, accounting for £1bn 3
(#_ftn3) . The television commissioning market can broadly be split in to
four buyers: UK PSBs including Nations and Regions, UK multi-channel
networks (e.g. UKTV, Sky), international channels and SVoD (Subscription Video
on Demand e.g. Netflix).
The PSBs remain the single largest buyers of original UK production and Zinc
consistently wins commissions from all the UK PSBs. Given the size of this
market there is a significant opportunity for Zinc to grow its share, with
even modest growth in market share expected to translate into significant
improvements in profitability. As a result of the many new hires made during
the last 12 months the Group anticipates steady growth from the UK PSBs in the
years ahead, with a particular focus on winning new commissions from the BBC,
Channel 4 and Channel 5.
Zinc has broken into new TV markets in 2021. This includes the growing market
occupied by the UK multi-channel networks with new clients including Dave and
Sky. The international commissioning market has been impacted by Covid-19 for
longer than the UK. Prior to Covid-19 Zinc was able to generate
approximately 30% of its television revenues from this market, and as the
world comes out of the pandemic the Group is optimistic it will see revenues
from this market recover.
The final market for original unscripted production is the SVoD market.
While the number of hours commissioned from UK indies remains small by
comparison with the UK PSBs this is a growing market and Zinc is making good
progress winning client funded developments from potential new customers.
In addition to broadcast television production the Group's commercial content
production division Zinc Communicate is successfully diversifying revenues
into new content rich markets. These include branded entertainment, audio
and podcasting and corporate video. The Group has successfully launched new
businesses in these markets and anticipates accelerated growth from these
businesses in 2022 and beyond.
As at 14 April the pipeline for the Group is over £35m of potential new
business which could deliver in 2022, of which £8m is highly advanced with
buyers. Strong pipeline conversion has been a challenge during the pandemic
with buyers hesitant to commit significant spend while crews and partners have
themselves been impacted by Covid-19 delays. However, the Group has every
expectation of accelerating the conversion of this strong pipeline as
confidence returns to the market, and fully expects to see a faster conversion
of new business in the year ahead.
The size of the opportunity for the Group is significant. H2's results
provide evidence that the Group can generate healthy EBITDA and cash as it
scales. Growth will come from pursuing organic and acquisitive
opportunities. We believe the management, board, shareholders and employees
are aligned on this approach, and we are optimistic that growth will
accelerate in 2022 and beyond.
CFO'S REPORT
Income statement
During FY20, the Group's accounting reference date was changed from 30 June to
31 December and as a result the prior period figures for FY20 in this report
relate to an eighteen-month period.
Once the worst impacts of Covid-19 were behind us the Group saw a significant
upturn: revenues in the second half of the year versus the first half
increased by 50% to £10.5m, and the Group generated Adjusted EBITDA 4
(#_ftn4) of £0.5m (H1 2021: £1.1m loss).
Revenue from continuing operations for the year was £17.5m (FY20 18 month
period: £30.6m). Adjusted EBITDA from continuing operations was a £0.6m
loss in the year (FY20 18 month period: £0.8m loss).
Five new businesses were launched in the last 18 months, which collectively
generated £5m, or 29%, of Group revenue in the year. The new businesses
within Zinc Communicate helped propel its revenues to 17% of Group revenue in
the year, almost double the proportion in FY20. This is in line with the
strategy to continue to build the television businesses whilst diversifying
revenue.
Tern TV continued to perform well in the year with revenues of £6.7m. London
& Manchester TV generated £7.9m of revenue and made a profit at Adjusted
EBITDA level for the first time since 2017. This is particularly encouraging
given the investment made in new roles during the year as this division felt
the impact of the pandemic more acutely than other parts of the business owing
to its dependence on more expensive and international programmes.
Total gross margin increased during the period from 30.1% to 38.5%. The
increase in margin was driven primarily by London and Manchester TV where
production gross margins increased from 29.6% to 37.2% due to the previous
year's investment in post-production equipment, changes in production
management and improvements in financial management.
Earnings per share
Basic and diluted loss per share from continuing operations in the period was
15.80p (18 months ended 31 December 2020: loss per share of 66.38p). These
measures were calculated on the losses for the period from continuing
operations attributable to Zinc Media Group shareholders of £2.5m (18 months
ended 31 December 2020: loss of £4.3m) divided by the weighted average number
of shares in issue during the period being 16,095,991 (18 months ended 31
December 2020: 6,507,620).
The Board does not recommend the payment of a final dividend (18 months ended
31 December 2020: £nil).
Statement of Financial Position
Assets
Cash at the end of December 2021 was £5.6m, having decreased by £1.2m during
the period as a result of a combination of outflows from operating activities,
capital expenditure, property leases and the servicing of the long-term
debt.
Equity and Liabilities
Equity has reduced from £6.0m to £3.7m principally driven by the loss in the
year.
Total liabilities have remained static. The Group had an outstanding balance
on long-term debt of £3.4m at the year end (2020: £3.4m). The Directors
believe the Group has strong shareholder support, evidenced by shareholders
investing £7.5m in new equity in recent years and the long-term debt holders,
who are also major shareholders with 44% of the Group's shares, extending the
repayment date of the Group's long-term debt from December 2022 to December
2024.
Cash Flows
The Group is pleased to report that free cash flow of £0.5m was generated
from operations in the second half of the year (H1 2021: £1.1m outflow).
Across the full year the Group experienced a modest cash outflow from
operating activities of £0.2m (FY20 18 month period: £0.7m outflow) due to
an increase in working capital of £0.4m offsetting a cash outflow of £0.6m.
Working capital has been closely managed, and together with much reduced
capital expenditure of £0.3m - following the previous period's £1.0m capital
expenditure, mostly comprising investment in production equipment to drive
increased gross margins in TV - the cash position of the Group has remained
buoyant and the Group ended the year with £5.6m (2020: £6.8m).
Post Balance Sheet Events
Post year-end, the long-term debt holders agreed to extend the term of the
debt by two years, such that the repayment of the debt is now due on 31
December 2024.
Key Performance Indicators (KPIs)
In monitoring the performance of the business, the executive management team
uses the following KPIs:
· TV production gross margins
· Revenue growth
· Revenue diversification
· Pipeline and order book growth
· Adjusted EBITDA
· Cash generation
· Audience and market response to programming content (viewing
ratings, industry awards etc.)
These KPIs have been reported within the CEO's Report and CFO's Report.
Consolidated income statement for the year ended 31 December 2021
12 months ended 18 months ended
31 December 31 December
2021 2020
Notes £'000 £'000
Continuing operations
Revenue 4 17,491 30,552
Cost of sales 5 (10,759) (21,359)
Gross profit 6,732 9,193
Operating expenses 5 (9,097) (12,865)
Operating loss (2,365) (3,672)
Depreciation & amortisation 5 1,486 2,246
Share based payment charge 7 122 22
Loss on disposal of fixed assets 4 22
Exceptional items 8 141 589
Adjusted EBITDA (612) (793)
Finance costs 9 (241) (460)
Finance income 9 - 2
Loss before tax (2,606) (4,130)
Taxation credit/(charge) 10 86 (157)
Loss for the period from continuing operations (2,520) (4,287)
Loss from discontinued operations 11 - (624)
Loss for the period (2,520) (4,911)
Attributable to:
Equity holders (2,544) (4,944)
Non-controlling interest 24 33
Retained loss for the period (2,520) (4,911)
Earnings per share
From continuing operations:
Basic 12 (15.80)p (66.38)p
Diluted 12 (15.80)p (66.38)p
From discontinued operations:
Basic 12 (0.00)p (9.59)p
Diluted 12 (0.00)p (9.59)p
Adjusted EBITDA is defined as EBITDA before share based payment charge, loss
on disposal of fixed assets and exceptional items. The loss for the period
attributable to equity holders from continuing operations is £2,544k (18
months ended 31 December 2020: £4,320k) and the loss to equity holders from
discontinued operations is £nil (18 months ended 31 December 2020: £624k).
The accompanying principal accounting policies and notes form part of these
consolidated financial statements.
Consolidated statement of comprehensive income for the year ended 31 December
2021
12 months ended 18 months ended
31 December 31 December
2021 2020
£'000 £'000
Loss for the year and total comprehensive income for the period (2,520) (4,911)
Attributable to:
Equity holders (2,544) (4,944)
Non-controlling interest 24 33
(2,520) (4,911)
Consolidated statement of financial position as at 31 December 2021
2021 2020
Note £'000 £'000
Assets
Non-current
Goodwill and intangible assets 13 3,800 4,505
Property, plant and equipment 14 904 934
Right-of-use assets 19 1,159 1,277
5,863 6,716
Current assets
Inventories 15 226 184
Trade and other receivables 16 3,887 4,279
Cash and cash equivalents 17 5,608 6,805
9,721 11,268
Total assets 15,584 17,984
Equity
Called up share capital 24 20 20
Share premium account 24 4,785 4,654
Share based payment reserve 277 155
Merger reserve 24 27 27
Retained earnings 24 (1,386) 1,158
Total equity attributable to equity holders of the parent 3,723 6,014
Non-controlling interests 24 12
Total equity 3,747 6,026
Liabilities
Non-current
Borrowings 20 - 3,426
Lease liabilities 19 735 1,066
Deferred tax 22 190 277
Provisions 23 250 75
1,175 4,844
Current
Trade and other payables 18 6,799 6,771
Current tax liabilities 4 6
Borrowings 20 3,428 -
Lease liabilities 19 431 337
10,662 7,114
Total equity and liabilities 15,584 17,984
The consolidated financial statements were authorised for issue and approved
by the Board on 21 April 2022 and are signed on its behalf by Will Sawyer.
The above consolidated statement of financial position should be read in
conjunction with the accompanying notes.
Company registration number: SC075133
Consolidated statement of cash flows for the year ended 31 December 2021
12 months ended 18 months ended
31 December 31 December
2021 2020
Note £'000 £'000
Cash flows from operating activities
Loss for the year before tax from continuing operations (2,606) (4,130)
Loss for the year before tax from discontinued operations - (624)
(2,606) (4,754)
Adjustments for:
Depreciation 5 782 1,278
Amortisation and impairment of intangibles 5 704 1,039
Finance costs 9 241 460
Finance income 9 - (2)
Share based payment charge 7 122 22
Loss on remeasurement of deferred contingent consideration 8 - 41
Contingent consideration deemed remuneration 8 - 160
Consideration paid in shares 131 -
Loss on disposal of assets 4 22
(623) (1,734)
(Increase) / decrease in inventories (42) 52
(Increase) / decrease in trade and other receivables 392 2,579
Increase / (decrease) in trade and other payables 28 (1,565)
Cash (used in) / generated in operations (245) (668)
Finance costs paid - (69)
Finance income - 2
Interest on lease - (89)
Tax paid - -
Net cash flows (used in) / generated in operating activities (245) (824)
Investing activities
Payment of contingent consideration on acquisition of subsidiary - (750)
Purchase of property, plant and equipment 14 (273) (988)
Purchase of intangible assets - (108)
Net cash flows used in investing activities (273) (1,846)
Financing activities
Issue of ordinary share capital (net of issue costs) - 7,094
Principal elements of lease payments (432) (698)
Interest paid (241) (172)
Net cash flows generated from / (used in) from financing activities (673) 6,224
Net (decrease) / increase in cash and cash equivalents (1,191) 3,554
Translation differences (6) 38
Cash and cash equivalents at beginning of year/period 17 6,805 3,213
Cash and cash equivalents at year/period end 5,608 6,805
17
Consolidated statement of changes in equity for the year ended 31 December
2021
Share Share Share based payment Merger Preference Retained Total equity attributable to equity holders of Non-controlling Total
capital premium reserve reserve shares earnings the parent interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2019 5,928 30,509 133 875 839 (35,625) 2,659 8 2,667
Loss and total comprehensive income for the period - - - - - (4,944) (4,944) 33 (4,911)
Equity-settled share-based payments - - 22 - - - 22 - 22
Shares issued in placing 13 7,487 - - - - 7,500 - 7,500
Consideration paid in shares 1 489 - 65 - 60 615 - 615
Shares issued in lieu of fees - 48 - - - - 48 - 48
Shares issued in debt conversion 1 427 - - - - 428 - 428
Conversion of preference shares 8 923 - - (839) - 92 - 92
Expenses of issue of shares - (406) - - - - (406) - (406)
Capital reduction (5,931) (34,823) - (913) - 41,667 - - -
Dividends paid - - - - - - - (29) (29)
Total transactions with owners of the Company (5,908) (25,855) 22 (848) (839) 36,783 3,355 4 3,359
Balance at 31 December 2020 20 4,654 155 27 - 1,158 6,014 12 6,026
Balance at 1 January 2021 20 4,654 155 27 - 1,158 6,014 12 6,026
Loss and total comprehensive income for the period - - - - - (2,544) (2,544) 24 (2,520)
Equity-settled share-based payments - - 122 - - - 122 - 122
Consideration paid in shares - 131 - - - - 131 - 131
Dividends paid - - - - - - - (12) (12)
Total transactions with owners of the Company - 131 122 - - (2,544) (2,291) 12 (2,279)
Balance at 31 December 2021 20 4,785 277 27 - (1,386) 3,723 24 3,747
Notes to the preliminary financial information
1. GENERAL INFORMATION
Zinc Media Group plc and its subsidiaries (the Group) produce high quality
television and cross-platform content.
Zinc Media Group plc is the Group's ultimate parent and is a public listed
company incorporated in Scotland. The address of its registered office is
4(th) Floor, Saltire Court, 20 Castle Terrace, Edinburgh EH1 2EN. Its shares
are traded on the AIM Market of the London Stock Exchange plc (LSE:ZIN).
The financial statements are presented in Sterling (£), rounded to the
nearest thousand.
2. BASIS OF PREPARATION
This preliminary financial information does not constitute statutory accounts
within the meaning of S434 of the Companies Act 2006 for the financial year
ended 31 December 2021 or the 18 month period ending 31 December 2020.
The financial statements of the Group for the financial year ended 31 December
2021 have been prepared in accordance with UK-adopted-International Accounting
Standards. The financial statements have been prepared primarily under the
historical cost convention, with the exception of contingent consideration
measured at fair value. Areas where other bases are applied are identified in
the accounting policies below.
The Group's accounting policies have been applied consistently throughout the
Group to all the periods presented, unless otherwise stated.
The preliminary financial information for the periods ended 31 December 2021
and 2020 has been extracted from the audited statutory accounts for the year
ended 31 December 2021 and prepared on the same basis as the accounting
policies adopted in those accounts. The statutory accounts for the year ended
31 December 2021 have yet to be delivered to the Registrar of Companies and
have been prepared in accordance with UK-adopted-International Accounting
Standards.
Statutory accounts for the year ended 31 December 2021 will be delivered to
the Registrar of Companies and sent to Shareholders shortly.
The audit report on the statutory financial statements for the year ended 31
December 2021 is unqualified and does not include reference to any matters to
which the auditor drew attention by way of emphasis without qualifying the
report and does not contain any statement under Section 498(2) or (3) of the
Companies Act 2006.
Statutory accounts for the year ended 31 December 2020 been filed with the
Registrar of Companies. The auditor's report on those accounts was
unqualified and did not include reference to any matters to which the auditor
drew attention by way of emphasis without qualifying the report and did not
contain a statement under section 498(2) and (3) of the Companies Act 2006.
2.1) Going concern
The financial statements have been prepared on a going concern basis, which
assumes that the Group will be able to meet its liabilities as they fall due
for a period of at least 12 months from the date of signing of the financial
statements. The Group is dependent for its working capital requirements on
cash generated from operations, cash holdings, long-term debt and from equity
markets.
The Directors believe the Group has sufficient cash resources. As at 31
December 2021 the cash holdings of the Group were £5.6m and net cash was
£2.2m. The Group also has an overdraft facility of £0.6m available.
The Directors believe the Group has strong shareholder support, evidenced by
shareholders investing £7.5m in new equity in recent years and the long-term
debt holders, who are also major shareholders with 44% of the Group's shares,
post year end having agreed to extending the repayment date of the Group's
long-term debt from December 2022 to December 2024.
Management have prepared forecasts and scenarios under which cashflows may
vary and believe there are sufficient mitigating actions that can be employed
to enable the Group to operate within its current level of financing for a
period of at least 12 months from the date of signing of the financial
statements.
There are several factors which could materially affect the Group's cashflows,
including the impact of any further Covid-19 related restrictions, the
underlying performance of the business and uncertainty regarding the timing of
receipts from customers. The Directors have prepared scenario plans. The
main variable is the run rate of new business, particularly in relation to
commissions of television programmes. Whilst the sales pipeline is healthy the
timing of new sales is hard to predict and the scenarios include revenues
being 25% down on pre-Covid levels of 2019. The Directors have reviewed
management's forecasts and scenarios under which cashflows may vary and remain
confident that the Group will have sufficient cash resources for a period of
at least 12 months from issuing the financial statements in these scenarios.
In light of the forecasts, the support provided by the loan providers who are
also significant shareholders, along with mitigating measures available to be
used if needed, the Directors believe that the going concern basis upon which
the financial statements have been prepared is reasonable.
2.2) Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Group and its subsidiaries as at 31 December 2021. Control is achieved when
the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its
power over the investee. Generally, there is a presumption that a majority of
voting rights results in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of an investee,
the Group considers all relevant facts and circumstances in assessing whether
it has power over an investee.
Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets,
liabilities, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated financial statements from the
date the Group gains control until the date the Group ceases to control the
subsidiary.
All intra-group assets and liabilities, equity, income, expenses and cash
flows relating to transactions between members of the Group are eliminated in
full on consolidation.
Non-controlling interests (NCI) represents the share of non-wholly owned
subsidiaries' net assets that are not directly attributable to the
shareholders of the Group.
2.3) Adoption of new and revised standards
New standards, interpretations and amendments effective from 1 January 2021
In the current period, the following standards and interpretations have been
adopted which were effective for
periods commencing on or after 1 January 2021:
- Amendment to IFRS 16 Leases Covid-19 - Related Rent Concessions (effective
30 June 2020)
- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate
Benchmark Reform
(effective 1 January 2021)
- Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9 (effective 1
January 2021)
The adoption of these amendments has not had a material impact on the
financial statements.
New standards and interpretations that have not been early adopted
None of the new standards, amendments and interpretations, which are effective
for periods beginning after 1 January 2022 and which have not been adopted
early, are expected to have a significant effect on the consolidated financial
statements of the Group.
3) ACCOUNTING POLICIES
3.1) Revenue
The Group recognises revenue to depict the transfer of promised goods or
services to customers at an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services.
Specifically, the Group follow these steps:
1. Identify the contract with the customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the
contract
5. Recognise revenue when (or as) the entity satisfies a performance
obligation
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for services provided in the
normal course of business, net of discounts and sales related taxes.
Revenue is recognised when the amount of revenue can be measured reliably, it
is probable that the economic benefits associated with the transaction will
flow to the entity, the costs incurred or to be incurred can be measured
reliably, and when the criteria for each of the Group's different activities
has been met.
Where productions are in progress at the year end and where the revenue
amounts invoiced exceed the value of work done the excess is shown as contract
liabilities; where the revenue recognised exceed revenue invoiced the amounts
are classified as contract assets. The contract asset is transferred to
receivables when the entitlement to payment becomes unconditional. Where it is
anticipated that a production will make a loss, the anticipated loss is
provided for in full.
The accounting policies specific to the Group's key operating revenue
categories are outlined below:
TV - production revenue
Production revenue from contracts with broadcasters comprises work carried out
to produce and deliver television programmes and broadcaster licence fees.
These are combined performance obligations because the production and licence
are indistinct, and the licence is not the primary or dominant component of
the combined performance obligation. The Group considers the combined
performance obligation to be satisfied over time as it does not create an
asset with an alternative use at contract inception and the Group has an
enforceable right to payment for performance completed to date.
The Group recognises revenue over time by measuring the progress towards
complete satisfaction of the performance obligation, in line with transferring
control of goods or services promised to a customer. The Group transfers
control of the programme over time, and costs are incurred in line with
performance completed. The percentage of completion is calculated as the ratio
of the contract costs incurred up until the end of the period to the total
estimated programme cost.
TV - distribution revenue
Distribution revenue comprises sums receivable from the exploitation of
programmes in which the company owns rights and is received as advances and
royalties.
Advances are fixed sums receivable at the beginning of exploitation that are
not dependent on the sales performance of the programme. They are recognised
when all the following criteria have been met:
i) an agreement has been executed by both parties; and
ii) the programme has been delivered; and
iii) the licence period has begun.
Royalty revenue is dependent on the sales performance of the programme and is
recognised when royalty amounts are confirmed.
Zinc Communicate
The three types of revenue, which comprise distinct performance obligations,
are:
1. Publishing: advertising revenue is recognised on the date publications
are dispatched to customers which is when control transfers.
2. Online: revenue is recognised at the point of delivery or fulfilment
for single/discrete services which is when control transfers.
3. Content production: recognition of revenue is by reference to stage of
completion of the specific transaction assessed based on the actual service
provided as a proportion of the total services to be provided, which is done
on the same basis as TV production revenue.
3.2) Government grants
Grants received as part of Government assistance to retain employees during
the Covid-19 pandemic have been recognised in the Consolidated Statement of
Comprehensive Income in the same period that the related employee cost has
been recognised.
3.3) Property, plant and equipment
Property, plant and equipment are stated at cost net of depreciation and any
provision for impairment.
Depreciation is calculated to write down the cost less estimated residual
value of all property, plant and equipment by equal annual instalments over
their expected useful lives. The rates generally applicable are:
Leasehold premises over the term of the
lease
Office equipment 10%-20% on cost
Computer equipment 20%-33% on cost
Motor vehicles 25% on cost
Useful economic lives are reviewed annually. Depreciation is charged on all
additions to, or disposals of, depreciating assets in the year of purchase or
disposal. Any impairment in values is charged to the income statement.
3.4) Intangible assets
Business combinations are accounted for by applying the acquisition method.
Goodwill represents the difference between the cost of the acquisition and the
fair value of the net identifiable assets acquired. Identifiable intangibles
are those which can be sold separately, or which arise from legal rights
regardless of whether those rights are separable.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is not amortised but tested annually
for impairment.
Goodwill arising on acquisitions is attributable to operational synergies and
earnings potential expected to be realised over the longer term.
The intangible assets other than goodwill are in respect of the customer
relationships, brand and distribution catalogue acquired in respect of the
acquisition of Reef Television and Tern Television Productions and in each
case, are amortised over the expected life of the earnings associated with the
asset acquired.
Brands, Customer relationships, Distribution catalogue
Over 7 years
Software
Over 2 years
The distribution catalogue intangible asset arises on the acquisition of Tern
Television Productions. It is amortised over 5 years and as at 31 December
2021 the remaining useful life was 2.5 years.
Brands and customer relationships relate to the acquisition of Reef Television
and Tern Television Productions. They are amortised over a period of 7 years
and as at 31 December 2021 there were 0.5 more years of useful life remaining
for Reef Television and 2.5 years remaining for Tern Television Productions.
The software relates to a finance system that was purchased in 2020 and is
used across the group.
3.5) Leased assets
For any new contracts the Group considers whether a contract is, or contains,
a lease. A lease is defined as 'a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset) for a period of time
in exchange for consideration'. To apply this definition the Group assesses
whether the contract meets three key evaluations which are whether:
· The contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group; and
· The Group has the right to obtain substantially all the economic
benefits from use of the identified asset throughout the period of use,
considering its rights within the defined scope of the contract; and
· The Group has the right to direct the use of the identified asset
throughout the period of use. The Group assess whether it has the right to
direct 'how and for what purpose' the asset is used throughout the period of
use.
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability on the balance sheet. The right-of-use asset is measured at
cost, which is made up of the initial measurement of the lease liability, any
initial direct costs incurred by the Group, an estimate of any costs to
dismantle and remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any incentives
received).
The group depreciates the right-of-use assets on a straight-line basis from
the lease commencement date to the earlier of the end of the useful life of
the right-of-use asset or the end of the lease term. The Group also assesses
the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the
Group's incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up
of fixed payments, variable payments based on an index or rate, amounts
expected to be payable under a residual value guarantee and payments arising
from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments
made and increased for interest. It is remeasured to reflect any reassessment
or modification.
When the lease liability is remeasured, the corresponding adjustment is
reflected in the right-of-use asset, or income statement if the right-of-use
is already reduced to zero. The Group has elected to account for short-term
leases and leases of low-value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the payments in
relation to these are recognised as an expense in the income statement on a
straight-line basis over the lease term.
3.6) Inventories
Inventories in TV comprise of costs on productions that are incomplete at the
year-end less any amounts recognised as cost of sales.
Inventories in Zinc Communicate comprise:
· Cumulative costs incurred in relation to unpublished titles or
events, less provision for future losses, and are valued based on direct costs
plus attributable overheads based on a normal level of activity. No element of
profit is included in the valuation of inventories.
· Inventories comprise costs of unsold publishing stock and costs
on projects that are incomplete at the year-end less any amounts recognised as
cost of sales.
3.7) Impairment of assets
For the purposes of assessing impairment, non-financial assets are grouped at
the lowest levels for which there are separately identifiable cash flows
(cash-generating units). As a result, some assets are tested individually for
impairment and some are tested at the cash-generating unit level.
Goodwill is allocated to those cash generating units that are expected to
benefit from the synergies of the related business combination and represent
the lowest level within the Group at which management monitors the related
cash flows. Goodwill and other individual assets or cash-generating units are
tested for impairment annually or whenever events / changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the assets or
cash-generating unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions
less costs to sell, and value in use based on an internal discounted cash flow
evaluation. Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying amount of
goodwill. Any remaining impairment loss is charged pro rata to the other
assets in the cash generating unit. Except for goodwill, all assets are
subsequently reassessed for indications that an impairment loss previously
recognised may no longer exist.
3.8) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with
maturity of less than three months.
3.9) Current and deferred taxation
Current tax is the tax currently payable based on taxable profit for the year.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between the
carrying amounts of assets and liabilities and their tax bases.
Deferred tax is not recognised in respect of:
· the initial recognition of goodwill that is not tax deductible;
and
· the initial recognition of an asset or liability unless the
related transaction is a business combination or affects tax or accounting
profit. In addition, tax losses available to be carried forward as well as
other income tax credits to the Group are assessed for recognition as deferred
tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are
calculated at tax rates and laws that are expected to apply to their
respective year of realisation, provided they are enacted or substantively
enacted at the reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the income statement, except where they relate to items that
are charged or credited directly to equity in which case the related deferred
tax is also charged or credited directly to equity.
3.10) Financial instruments
Recognition of financial instruments
Financial assets and liabilities are recognised on the Group's Statement of
Financial Position when the Group becomes a party to the contractual
provisions of the instrument.
Financial assets
Initial and subsequent measurement of financial assets
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other
short-term deposits held by the company with maturities of less than three
months.
Trade and other receivables
Trade receivables are initially measured at fair value. Other receivables are
initially measured at fair value plus transaction costs. Receivables are
subsequently measured at amortised cost using the effective interest rate
method.
Impairment of trade receivables
For trade receivables, expected credit losses are measured by applying an
expected loss rate to the gross carrying amount. The expected loss rate
comprises the risk of a default occurring and the expected cash flows on
default based on the aging of the receivable. The risk of a default
occurring always takes into consideration all possible default events over the
expected life of those receivables ("the lifetime expected credit
losses"). Different provision rates and periods are used based on
groupings of historic credit loss experience by product type, customer type
and location.
Impairment losses and any subsequent reversals of impairment losses are
adjusted against the carrying amount of the receivable and are recognised in
profit or loss.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the
company after deducting all of its liabilities.
Initial and subsequent measurement of financial liabilities
Trade and other payables
Trade and other payables are initially measured at fair value, net of direct
transaction costs and subsequently measured at amortised cost.
Loan notes
Loan notes are initially recognised at fair value, adjusted for transaction
costs, and subsequently measured at amortised cost using the effective
interest rate method.
Finance charges, including premiums payable on settlement and direct issue
costs, are accounted for on an effective interest method and are added to the
carrying amount of the instrument to the extent that they are not settled in
the year in which they arise.
Contingent consideration
The acquisition-date fair value of any contingent consideration is recognised
as part of the consideration transferred by the Group in exchange for the
acquiree. Changes in the fair value of contingent consideration that result
from additional information obtained during the measurement period (maximum
one year from the acquisition date) about facts and circumstances that existed
at the acquisition date are adjusted retrospectively against goodwill. Other
changes resulting from events after the acquisition date are recognised in
profit or loss.
Equity instruments
Equity instruments issued by the Company are recorded at fair value on initial
recognition net of transaction costs.
Derecognition of financial assets (including write-offs) and financial
liabilities
A financial asset (or part thereof) is derecognised when the contractual
rights to cash flows expire or are settled, or when the contractual rights to
receive the cash flows of the financial asset and substantially all the risks
and rewards of ownership are transferred to another party.
When there is no reasonable expectation of recovering a financial asset it is
derecognised ('written off').
The gain or loss on derecognition of financial assets measured at amortised
cost is recognised in profit or loss.
A financial liability (or part thereof) is derecognised when the obligation
specified in the contract is discharged, cancelled or expires.
Any difference between the carrying amount of a financial liability (or part
thereof) that is derecognised, and the consideration paid is recognised in
profit or loss.
3.11) Employee benefits
Equity settled share-based payments
Where employees are rewarded using equity settled share-based payments, the
fair values of employees' services are determined indirectly by reference to
the fair value of the instrument granted to the employee. This fair value is
appraised at the grant date and excludes the impact of non-market vesting
conditions.
All equity-settled share-based payments are ultimately recognised as an
expense in the income statement with a corresponding credit to reserves.
If vesting periods apply, the expense is allocated over the vesting period,
based on the best available estimate of the number of share options expected
to vest. Estimates are revised subsequently if there is any indication that
the number of share options expected to vest differs from previous
estimates. Any cumulative adjustment prior to vesting is recognised in the
current year. No adjustment is made to any expense recognised in prior years
if share options that have vested are not exercised.
Retirement benefits
Obligations for contributions to defined contribution pension plans are
recognised as an expense in the income statement when they are due.
3.12) Provisions
Provisions are recognised when: the group has a present legal or constructive
obligation as result of past events; it is probable that an outflow of
resources will be required to settle the obligation; and the amount has been
reliably estimated.
Provisions are measured at the present value of the expenditures expected to
be required to settle the obligation using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific
to the obligation. Any increase in the provision due to the passage of time
is recognised as interest expense.
3.13) Foreign currencies
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the income statement.
3.14) Significant judgements and estimates
The preparation of consolidated financial statements under IFRS requires the
Group to make estimates and assumptions that affect the application of
policies and reported amounts. Estimates and judgements are continually
evaluated and are based on historical experience and other factors including
expectations of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. The estimates
and assumptions which have a significant risk of causing a material adjustment
to the carrying amount of assets and liabilities are discussed below.
Revenue recognition
The main judgements regarding revenue recognition relate to TV production
revenue. The Group considers the production and licence elements to be a
combined performance obligation to be satisfied and recognised over time.
This is explained in note 3.1.
Impairment of goodwill and intangible assets
The Group is required to test, at least annually, whether goodwill has
suffered any impairment. The recoverable amount is determined based on value
in use calculations. The use of this method requires the estimation of future
cash flows and the choice of a suitable discount rate to calculate the present
value of these cash flows. Actual outcomes could vary. See note 13 for details
of how these judgements are made.
Deferred tax asset on losses
Judgements are made to determine deferred tax assets on losses. Deferred tax
assets are recognised to the extent that it is probable that future taxable
profit will be available against which the unused tax losses and unused tax
credits can be utilised. Assessment of future taxable profit is performed at
every reporting date. See note 22 for details of the deferred tax asset
recognised at 31 December 2021.
3.15) Segmental reporting
In identifying its operating segments, management follows the Group's service
lines, which represent the main products and services provided by the Group.
The activities undertaken by the TV segment include the production of
television and radio content. The Zinc Communicate unit includes publishing
and content production.
Each of these operating segments is managed separately as each service line
requires different resources as well as marketing approaches. All
inter-segment transfers are carried out at arm's length prices.
The measurement policies the Group uses for segment reporting under IFRS 8 are
the same as those used in its financial statements.
4) SEGMENTAL INFORMATION AND REVENUE
Segmental information
The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been
identified as the Board of Directors who categorise the Group's two service
lines as two operating segments: Television and Zinc Communicate. These
operating segments are monitored, and strategic decisions are made on the
basis of adjusted segment operating results.
Television Zinc Communicate Central and plc Total
Year ended 18 Months ended Year ended 18 Months ended Year ended 18 Months ended Year ended 18 Months ended
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2021 2020 2021 2020 2021 2020 2021 2020
Continuing Operations £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 14,565 27,790 2,926 2,759 - 3 17,491 30,552
Adjusted EBITDA* 932 1,633 (241) (287) (1,303) (2,139) (612) (793)
Depreciation (582) (1,107) (48) (7) (151) (158) (782) (1,272)
Amortisation (650) (974) - - (54) - (704) (974)
Share based payment charge - - - - (122) (22) (122) (22)
Loss on disposal of fixed assets (4) (22) - - - - (4) (22)
Exceptional items (2) (176) (51) (19) (88) (394) (141) (589)
Operating (loss) (307) (646) (340) (313) (1,718) (2,713) (2,365) (3,672)
Finance costs (12) (26) - - (229) (434) (241) (460)
Finance income - 2 - - - - - 2
Loss before tax (319) (670) (340) (313) (1,947) (3,147) (2,606) (4,130)
Taxation credit/(charge) 4 - - - 82 (157) 86 (157)
Loss for the year (315) (670) (340) (313) (1,865) (3,304) (2,520) (4,287)
Segment Assets 12,571 11,872 2,151 1,109 862 4,946 15,584 17,927
Segment Liabilities (15,294) (6,432) (1,207) (839) 4,664 (4,658) (11,837) (11,929)
Other Segment Items:
Expenditure on intangible assets - - - - - 108 - 108
Expenditure on tangible assets 236 126 6 - 31 862 273 988
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation, share based payment charges, loss on disposal of fixed assets
and exceptional items
Items included under 'Central and Plc' do not constitute an operating segment
and relate mainly to Group activities based in the United Kingdom. Central and
plc costs relate to Directors, support functions and costs resulting from
being listed.
The internal reporting of the Group's performance does not require that costs
and/or Statement of Financial Position information is gathered based on the
geographical streams
The Group's principal operations are in the United Kingdom. Its revenue from
external customers in the United Kingdom for the year was £16.0m (18 months
ended 31 December 2020: £23.3m), and the total revenue from external
customers in other countries was £1.5m (2020: £7.2m). There were two
customers that accounted for more than 10% of Group revenue in the year: one
customer accounted for £3.8m or 22% of Group revenue and the other customer
accounted for £3.1m or 17% of Group revenue (2020: one customer accounted for
£8.8m revenue).
Non-current assets are all located in the Group's country of domicile.
Revenue
Contract balances
The following table provides information about receivables, contract assets
and contract liabilities from contracts with customers.
2021 2020
£'000 £'000
Receivables, which are included in 'Trade and other receivables' 2,060 2,160
Contract assets 1,502 1,755
Contract liabilities (1,068) (1,275)
The contract assets primarily relate to the Group's rights to consideration
for work completed but not billed at the reporting date on contracts with
customers. The contract assets are transferred to receivables when the rights
become unconditional. The contract liabilities primarily relate to the advance
consideration received from customers for TV production related contracts, for
which revenue is recognised on the percentage stage of completion of the
production.
Significant changes in the contract assets and the contract liabilities
balances during the year are as follows.
2021
Contract assets Contract liabilities
£'000 £'000
Opening balance 1 January 2021 1,755 (1,275)
Revenue recognised that was included in the contract liability balance at the - 1,275
beginning of the period
Increases due to cash received, excluding amounts recognised as - (1,068)
revenue during the period
Transfers from contract assets recognised at the beginning of the (1,755) -
period to receivables
Increases as a result of changes in the measure of progress 1,502 -
Closing balance 31 December 2021 1,502 (1,068)
Transaction price allocated to the remaining performance obligations
The Group has applied the practical expedient in paragraph 121 of IFRS 15 and
chosen to not disclose information relating to performance obligations for
contracts that had an original expected duration of one year or less, or where
the right to consideration from a customer is an amount that corresponds
directly with the value of the completed performance obligations.
5) EXPENSES BY NATURE
Costs from continuing operations consist of:
2021 2020
£'000 £'000
Cost of sales
Production costs 7,660 15,541
Salary costs 1,803 4,828
Royalties and distribution costs 1,296 990
Total cost of sales 10,759 21,359
Operating expenses
Salary costs 6,402 6,927
Leases on premises 6 -
Other administrative expenses 1,199 3,654
Foreign exchange loss 4 38
Depreciation 782 1,206
Amortisation 704 1,040
Total operating expenses 9,097 12,865
Furlough income in the year totalled £71k (2020: £396k), this is included in
salary costs in both operating expenses and cost of sales.
Included in other administrative expenses is the auditor, tax and share option
advisors' remuneration, including expenses for audit and non-audit services,
as follows:
2021 2020
£'000 £'000
Statutory audit services
Annual audit of the company and the consolidated accounts 107 123
Other professional services
Tax advisory services 18 20
Payroll services - 4
Other services 14 4
Total 32 28
6) STAFF COSTS
Staff costs from continuing operations, including directors, consist of:
2021 2020
£'000 £'000
Wages & salaries 6,888 9,970
Social security & other costs 778 1,142
Pension costs 509 496
Share based payment charge 122 22
Consideration paid in shares 30 147
Total 8,327 11,777
The average number of employees (including directors) employed by the Group
for continuing operations during the year was:
2021 2020
Zinc Television 115 121
Zinc Communicate 45 39
Central and Plc 8 8
Total 168 168
The directors consider that the key management comprises the directors of the
company, and their emoluments are set out below:
Directors' emoluments
2021 2020
Salaries and fees Benefits in kind Pension Total Total
Bonus Shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Executive Directors
Mark Browning 270 - 162 - 27 459 688
Will Sawyer 150 - 81 - 15 246 328
Non-Executive Directors
Christopher Satterthwaite (Chairman) 50 - - 30 - 80 108
Nicholas Taylor 18 - - - 12 30 41
Andrew Garard 30 - - - - 30 33
518 - 243 30 54 845 1,198
The Remuneration Committee has benchmarked the Executive Directors'
remuneration packages against the market during the year.
Key management personnel compensation
2021 2020
£'000 £'000
Short term employee benefits (includes employers NICs) 870 1,229
Post-employment benefits 54 76
Shares (includes employers NICs) 34 147
Share-based payments charge 101 118
Total 1,059 1,570
The amount for share based payments charge (see note 7) which relates to the
Directors was £101k (2020: £118k).
7) SHARE BASED PAYMENTS
The charge for share based payments arises from the following schemes:
2021 2020
£'000 £'000
EMI share option scheme 74 (8)
Unapproved share option scheme 48 30
Total 122 22
The share based payment charge for options granted since February 2020 are
calculated using a Stochastic model and options previously granted have been
valued using the Black Scholes model.
Share options held by directors are disclosed in the Directors' Report.
Share Option Schemes
Under the terms of the EMI and unapproved share option schemes, the Board may
offer options to purchase ordinary share options to employees and other
individuals. Share options granted under the Group's schemes are normally
exercisable for a ten-year period. The vesting period is from the date of
grant up to three years. Some of the EMI share options and unapproved share
options have market criteria that mean they only vest if the share price is at
a minimum level at that point.
Details of the number of share options and the weighted average exercise price
(WAEP) outstanding during the year are as follows:
Unapproved share option scheme
2021 2020
Number WAEP £ Number WAEP £
Outstanding at the beginning of the year 173,201 2.527 28,000 3.800
Transferred from EMI scheme 2,000 3.750 171,201 0.001
Granted 711,345 0.001 - -
Lapsed during the year - - (26,000) 3.781
Outstanding at the end of the year 886,546 0.014 173,201 2.527
Exercisable at the end of the year - - - -
EMI Share option scheme
2021 2020
Number WAEP £ Number WAEP £
Outstanding at the beginning of the year 566,144 0.784 259,233 2.350
Granted during the year 539,960 0.683 540,144 0.001
Lapsed during the year (7,000) 3.921 (233,233) 2.196
Transferred to unapproved scheme (2,000) 3.750 - -
Outstanding at the end of the year 1,097,104 0.390 566,144 0.784
Exercisable at the end of the year - - - -
The options outstanding as at 31 December 2021 have the following exercise
prices and expire in the following financial years:
Expiry Exercise Price 2021 2020
£ No. No.
December 2026 3.75 6,000 10,000
November 2027 4.15 5,000 12,000
April 2028 3.75 4,000 2,000
November 2028 2.00 6,000 4,000
February 2030 0.0013 711,345 711, 345
June 2031 0.0013 711,345 -
June 2031 0.6695 337,449 -
February 2030 0.7060 202,511 -
1,983,650 739,345
No options were exercised during the year (2020: Nil).
Options are forfeited at the discretion of the Board if the employee leaves
the Group before the options vest. The Share Option Plan provides for the
grant of both tax-approved Enterprise Management Incentives (EMI) options and
unapproved options. The model used to calculate a share option charge involves
using several estimates and judgements to establish the appropriate inputs,
covering areas such as the use of an appropriate interest rate and dividend
rate, exercise restrictions and behavioural considerations. A significant
element of judgement is therefore involved in the calculation of the charge.
Options issued in November 2021
The Group issued 202,511 share options to the Managing Director of Zinc
Television on the 8(th) of November 2021 under the Company's EMI Share Option
Plan.
The options are exercisable at 70.6 pence per share on or after the third
anniversary of their grant. Half the options will vest if the share price is
at least £1.0590 for a period of 30 consecutive dealing days ending on or
after 7th of November 2024. The remaining half of the Options will vest
unconditionally on the third anniversary of the grant date, being 7 November
2024.
The inputs into the option pricing model for the options granted in June 2021
are as follows:
Scheme EMI
Weighted average share exercise price 70.60 pence
Weighted average expected volatility - tranche 1 57.82%
Weighted average expected volatility - tranche 2 68.37%
Average expected life (years) - tranche 1 4.12 years
Average expected life (years) - tranche 2 6.5 years
Weighted average risk-free interest rate - tranche 1 0.56%
Weighted average risk-free interest rate - tranche 2 0.60%
Expected dividend yield 0%
The expected volatility was calculated over a period of five years immediately
prior to the date of the grant. The risk-free interest rate has been
calculated using the gilt rates over a period of five years from the date of
grant.
Options issued in June 2021
The Group issued 474,230 share options to the Chief Executive Officer, Mark
Browning, and 237,115 to the Chief Financial Officer, Will Sawyer and 337,449
to senior staff on the 10(th) of June 2021. Mark Browning and Will Sawyer's
awards have been made under an Unapproved Share Option Scheme. The remaining
awards issued have been made under the Company's EMI Share Option Plan.
Mark Browning and Will Sawyer's unapproved option awards are exercisable at
0.125 pence per share on or after the third anniversary of their grant. Half
of the options granted to each director will vest if the share price is at
least £0.60 for a period of 30 consecutive dealing days ending on or after
9(th) of June 2024, and the other half will vest if the share price is at
least £0.90 for a period of 30 consecutive dealing days ending on or after
9th of June 2024.
The EMI Option awards awarded to other members of staff were granted under the
condition that half of the options granted will vest if the share price is at
least £1.00425 for a period of 30 consecutive dealing days ending on or after
9th of June 2024, and the other half will vest non-conditionally on the third
anniversary of the grant date, being 9(th) June 2024.
The inputs into the option pricing model for the options granted in June 2021
are as follows:
Scheme EMI Unapproved
Weighted average share exercise price 66.95 pence 0.125 pence
Weighted average expected volatility - tranche 1 67.85% 67.85%
Weighted average expected volatility - tranche 2 78.09% 78.09%
Average expected life (years) - tranche 1 4.06 years 3.75 years
Average expected life (years) - tranche 2 6.5 years 4.02 years
Weighted average risk-free interest rate - tranche 1 0.33% 0.33%
Weighted average risk-free interest rate - tranche 2 0.33% 0.50%
Expected dividend yield 0% 0.%
The expected volatility was calculated over a period of five years immediately
prior to the date of the grant. The risk-free interest rate has been
calculated using the gilt rates over a period of five years from the date of
grant.
8) EXCEPTIONAL ITEMS
Exceptional items are presented separately as, due to their nature or for the
infrequency of the events giving rise to them, this allows shareholders to
understand better the elements of financial performance for the year, to
facilitate comparison with prior years and to assess better the trends of
financial performance.
2021 2020
£'000 £'000
Change in fair value of contingent consideration in respect of Tern Television - (41)
Reorganisation and restructuring costs (81) (388)
Contingent consideration treated as remuneration - (160)
Other exceptional items (consultancy costs) (60) -
Total (141) (589)
Reorganisation and restructuring costs
Management made changes to operational roles across the Group to improve
efficiency and decision making. The non-recurring element of the costs have
been presented as exceptional to enable a more refined evaluation of financial
performance.
9) FINANCE COSTS
2021 2020
Finance Costs £'000 £'000
Interest payable on borrowings (176) (303)
Interest payable on lease liabilities (65) (88)
Interest on unwinding of present value of contingent consideration - (69)
Finance Costs (241) (460)
Finance Income
Interest received - 2
Net finance costs (241) (458)
10) INCOME TAX EXPENSE
Taxation Charge
2021 2020
£'000 £'000
Current tax expense:
Current tax expense 4 8
Charge in respect of prior periods - -
4 8
Deferred tax
Deferred tax asset write-off - 265
Origination and reversal of temporary differences (126) (183)
Effect of change in UK corporation tax rate 42 46
Adjustments in respect of prior periods (6) 21
(90) 149
Total income tax charge / (credit) (86) 157
Reconciliation of taxation expense:
2021 2020
£'000 £'000
Loss before tax from continuing operations (2,606) (4,447)
Loss before tax from discontinued operations - (624)
Loss before tax (2,606) (5,071)
Taxation expense at UK corporation tax rate of 19% (2020: 19%) (495) (964)
Other non-taxable income/non-deductible expenses 54 216
Tax losses not recognised 311 573
Group relief (claimed)/surrendered 4 -
Temporary timing differences - -
Effect of changes in UK corporation tax rates 42 46
Deferred tax asset write-off - 265
Charge in respect of prior periods (2) 21
Total income tax expense (86) 157
Factors that may affect future tax charges
The March 2021 budget announced that the rate of 19% will continue to apply
until the financial year beginning 1 April 2023, at which point the rate will
be changed to 25%. This will increase the company's future tax charge
accordingly and immaterially increase the deferred tax liability.
11) DISCONTINUED OPERATIONS
The CSR business was closed in the 2020 period and the associated close down
costs are disclosed as exceptional items in this period.
The CSR division had a negative impact on the Group's overall profitability in
the period ending 31 December 2020 from the loss of the TFL sponsorship
contract for The Children's Traffic Club and following a strategic and market
review of the highly specialised niche market of CSR and STEM education the
Group decided to withdraw from this market in early 2020 and wind down all the
loss-making contracts in the CSR business.
Year ended 18 months ended
31 Dec 2021 31 Dec 2020
£'000 £'000
Revenue - 628
Expenses - (1,061)
Adjusted EBITDA* loss - (433)
Exceptional items - (119)
Amortisation and depreciation - (72)
Loss before tax from discontinued operations - (624)
Income tax - -
Loss after tax from discontinued operations - (624)
* Adjusted EBITDA defined as EBITDA before share based payment charge, loss on
disposal of fixed assets and exceptional items
The cash flows relating to discontinued operations have all been included
within 'Net cash flows used in operating activities' as amounts related to
other activities are not material to the financial statements.
12) EARNINGS PER SHARE
Basic loss per share (EPS) for the period is calculated by dividing the loss
for the year attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the year.
When the Group makes a profit from continuing operations, diluted EPS equals
the profit attributable to the Company's ordinary shareholders divided by the
diluted weighted average number of issued ordinary shares. When the Group
makes a loss from continuing operations, diluted EPS equals the loss
attributable to the Company's ordinary shareholders divided by the basic
(undiluted) weighted average number of issued ordinary shares. This ensures
that EPS on losses is shown in full and not diluted by unexercised share
options or awards.
2021 2020
Number of Shares Number of Shares
Weighted average number of shares used in basic and diluted earnings per share 16,095,991 6,507,620
calculation
Potentially dilutive effect of share options 1,117,890 416,485
£'000 £'000
Loss for the year from continuing operations attributable to shareholders (2,544) (4,320)
Loss for the year from discontinued operations attributable to shareholders - (624)
Continuing operations
Basic Loss per share (pence) (15.80)p (66.38)p
Diluted Loss per share (pence) (15.80)p (66.38)p
Discontinued operations
Basic Loss per share (pence) (0.00)p (9.59)p
Diluted Loss per share (pence) (0.00)p (9.59)p
13) INTANGIBLE ASSETS
Customer Distribution
Goodwill Brands Relationships Software Catalogue Total
£'000 £'000 £'000 £'000 £'000 £000
Cost
At 30 June 2019 29,394 4,497 3,419 122 443 37,875
Additions - - - 108 - 108
At 31 December 2020 29,394 4,497 3,419 230 443 37,983
Other changes* (20,441) (3,818) (116) - - (24,375)
At 31 December 2021 8,953 679 3,303 230 443 13,608
Amortisation and impairment
At 30 June 2019 (26,339) (4,143) (1,748) (61) (148) (32,439)
Charge for the period - (146) (696) (65) (133) (1,040)
At 31 December 2020 (26,339) (4,289) (2,444) (126) (281) (33,479)
Charge for the year - (97) (464) (54) (89) (704)
Other changes* 20,441 3,818 116 - - 24,375
At 31 December 2021 (5,898) (568) (2,792) (180) (370) (9,808)
Net Book Value
At 31 December 2021 3,055 111 511 50 73 3,800
At 31 December 2020 3,055 209 975 104 162 4,505
* The goodwill, brands and customer relationship intangibles have been
de-recognised as they were previously fully amortised or impaired.
The current year amortisation charge includes £nil (2020: £61,000) from the
Group's discontinued operations which is disclosed in note 11.
Impairment Tests for Goodwill
Goodwill by cash generating unit is:
2021 2020
£'000 £'000
London & Manchester TV CGU 1,444 1,444
Tern TV CGU 1,611 1,611
Total 3,055 3,055
Goodwill is not amortised but tested annually for impairment with the
recoverable amount being determined from value in use calculations. The key
assumptions for the value in use calculations are those regarding the discount
rate, growth rates and forecasts in new business.
The Group assessed whether the carrying value of goodwill was supported by the
discounted cash flow forecasts of each operating segment based on financial
forecasts approved by management, taking into account both past performance
and expectations for future market developments. Management has used a
perpetuity model (5-year Group forecast and GDP growth rate in perpetuity).
Management estimates the discount rate using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific
to media businesses.
The 2022 business unit forecasts are based on the budget set for the year.
In TV expected revenue and net margin improvements have been forecast in 2023
and in the following years a growth rate of 2 per cent has been used.
Management believe the 2 per cent growth rate does not exceed the growth rate
of the industry and is a cautious assumption, which may be significantly lower
than the growth rate management would expect to achieve.
In evaluating the recoverable amount, we employ the discounted cash flow
methodology, which is based on making assumptions and judgements on forecasts,
margins, discount rates and working capital needs. These estimates will differ
from actuals in the future and could therefore lead to material changes to the
recoverable amounts. The key assumptions used for estimating cash flow
projections in the Group's impairment testing are those relating to EBITDA
growth, which take account of the businesses' expectations for the projection
period. These expectations consider the macroeconomic environment, industry
and market conditions, the unit's historical performance and any other
circumstances particular to the unit, such as business strategy and client
mix.
The two cash generating units operate in a similar media landscape and the
pre-tax discount rate applied across to the segments for period ended 31
December 2021 was 10 per cent (2020: 9.3 per cent). A sensitivity analysis of
an increase in the discount rate by 1.6 per cent is shown below.
London & Manchester TV and Tern TV CGUs
Changes in assumptions can have a significant effect on the recoverable amount
and therefore the value of the impairment recognised.
Assumption Judgement Sensitivity
Discount Rate As indicated above the rate used is 10 per cent. An increase in the discount rate to 11.6 per cent (2019 year rate) will result
in no impairment charge.
Growth Rate An average rate of 2 per cent has been used for financial year 2024 onwards. If a zero per cent average growth rate was applied for 2024 onwards there
would be no impairment in either CGU.
New Business London & Manchester TV's and Tern CGU revenue for 2022 is forecast to be If there is a shortfall in revenue of 20%, there would be no impairment
in line with pre-Covid 2019 revenue and from 2023 is expected to slightly charge.
exceed pre-Covid levels.
Sensitivity analysis using reasonable variations in the assumptions shows no
indication of impairment.
14) PROPERTY, PLANT AND EQUIPMENT
Short leasehold land and buildings Motor vehicles Office and computer equipment Total
£'000 £'000 £'000 £'000
Cost
At 30 June 2019 312 111 2,666 3,089
Additions 365 - 623 988
Disposals and retirements (13) (76) (32) (121)
Transfers - - (23) (23)
At 31 December 2020 664 35 3,234 3,933
Additions - - 273 273
Disposals and retirements (240) (22) (1,893) (2,155)
At 31 December 2021 424 13 1,614 2,051
Depreciation
At 30 June 2019 (291) (70) (2,359) (2,720)
Charge for the period (67) (19) (248) (334)
Disposals and retirements - 54 - 54
Transfers - - 1 1
At 31 December 2020 (358) (35) (2,606) (2,999)
Charge for the period (69) - (219) (288)
Disposals and retirements 240 22 1,878 2,140
At 31 December 2021 (187) (13) (947) (1,147)
Net Book Value
At 31 December 2021 237 - 667 904
At 31 December 2020 306 - 628 934
15) INVENTORIES
31 Dec 31 Dec
2021 2020
£'000 £'000
Work in progress - Zinc Communicate 62 67
Work in progress - TV 164 117
Total Inventories 226 184
16) TRADE AND OTHER RECEIVABLES
31 Dec 31 Dec
2021 2020
£'000 £'000
Current
Trade receivables 2,609 2,628
Less provision for impairment (549) (468)
Net trade receivables 2,060 2,160
Prepayments 325 364
Contract assets 1,502 1,755
Total 3,887 4,279
The carrying amount of trade and other receivables approximates to their fair
value. The creation and release of provision for impaired receivables have
been included in administration expenses in the income statement.
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of asset above. The Group does not hold any collateral as
security for trade receivables. The Group is not subject to any significant
concentrations of credit risk.
There is no expected credit loss in relation to contract assets recognised
because the measure of expected credit losses was not material to the
financial statements.
Impairment of financial assets
The group's credit risk management practices and how they relate to the
recognition and measurement of expected credit losses are set out below.
Definition of default
The loss allowance on all financial assets is measured by considering the
probability of default.
Receivables are considered to be in default when the principal or any interest
is significantly more than the associated credit terms past due, based on an
assessment of past payment practices and the likelihood of such overdue
amounts being recovered.
Write-off policy
Receivables are written off by the group when there is no reasonable
expectation of recovery, such as when the counterparty is known to be going
bankrupt, or into liquidation or administration.
Impairment of trade receivables and contract assets
The group calculates lifetime expected credit losses for trade receivables
using a portfolio approach. Receivables are grouped based on the credit
terms offered and the type of product sold. The probability of default is
determined at the year-end based on the aging of the receivables, historical
data about default rates on the same basis. That data is adjusted if the
group determines that historical data is not reflective of expected future
conditions due to changes in the nature of its customers and how they are
affected by external factors such as economic and market conditions.
As noted below, a loss allowance of £549,000 (2020: £320,000) has been
recognised for trade receivables in the Zinc Communicate division based on the
expected credit loss percentages for trade receivables that are aged more than
30 days to over a year past due and reflecting future conditions. The loss
allowance relates to the Building Control Communications sub-divisions within
Zinc Communicate, which has been assessed separately to other Zinc Communicate
sub-divisions because it has a different debt collection profile due to its
focus selling low value / high volume adverts for publications.
In relation to the Television division, the directors do not believe there are
any other forward-looking factors to consider in calculating the loss
allowance provision as at 31 December 2021. No expected loss provision has
been recognised as the directors expect any loss to be immaterial.
No expected credit loss is expected for contract assets (18 month period
ending 31 December 2020: £nill).
Television
Trade receivables: Aging 30-60 days 60-90 days 90-120 days 120-150 days 150-365 days Over 365 days Total
0-30 days 2021
Gross carrying amount (£'000) 31 229 163 - - - 769
346
Loss allowance provision (£'000) - - - - - - -
-
The expected credit loss in this division is immaterial.
Zinc Communicate - Publishing "Building Control Communications" division
Trade receivables: Aging 30-60 days 60-90 days 90-120 days 120-150 days 150-365 days Over 365 days Total 2021
0-30 days
Expected loss rate (%) 21% 24% 27% 30% 34% 38% 86% 46%
Gross carrying amount (£'000) 174 114 66 67 314 337 1,191
119
Loss allowance provision (£'000) 42 31 20 23 119 289 549
25
Zinc Communicate - All other divisions
Trade receivables: Aging 30-60 days 60-90 days 90-120 days 120-150 days 150-365 days Over 365 days Total 2021
0-30 days
Gross carrying amount (£'000) 85 46 9 0 2 2 651
507
Loss allowance provision (£'000) - - - - - - -
-
The expected credit loss in this division is immaterial.
17) CASH AND CASH EQUIVALENTS
31 Dec 31 Dec
2021 2020
£'000 £'000
Total Cash and cash equivalents 5,608 6,805
The Group's credit risk exposure in connection with the cash and cash
equivalents held with financial institutions is managed by holding funds in a
high credit worthy financial institution (Moody's A1- stable).
18) TRADE AND OTHER PAYABLES
31 Dec 31 Dec
2021 2020
£'000 £'000
Current
Trade payables 764 568
Other payables 133 58
Other taxes and social security 1,348 985
Accruals 3,486 3,885
Contract liabilities 1,068 1,275
Total 6,799 6,771
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. The Group's payables are unsecured.
19) LEASES UNDER IFRS 16
Right-of-use assets
Short leasehold land and buildings Office and computer equipment Total
£'000 £'000 £'000
Balance as at 1 July 2019 399 49 448
Additions 1,469 305 1,774
Depreciation (795) (150) (945)
Balance as at 31 December 2020 1,073 204 1,277
Additions 373 - 373
Depreciation (407) (82) (489)
Balance as at 31 December 2021 1,039 122 1,161
Lease liabilities are presented in the statement of financial position as
follows:
31 Dec 31 Dec
2021 2020
£'000 £'000
Current 431 337
Non-current 735 1,066
Total lease liabilities 1,166 1,403
20) BORROWINGS AND OTHER FINANCIAL LIABILITIES
31 Dec 31 Dec
2021 2020
£'000 £'000
Current
Lease liabilities 431 337
Debt facility - unsecured borrowings 2,450 -
Loan notes - unsecured borrowings 978 -
Sub total 3,859 337
Non-current
Debt facility - unsecured borrowings - 2,455
Loan notes - unsecured borrowings - 971
Lease liabilities 735 1,066
Sub total 735 4,492
Total 4,594 4,829
Maturity of Financial Liabilities
The maturity of borrowings (analysed by remaining contractual maturity) is as
follows:
31 Dec 31 Dec
2021 2020
£'000 £'000
Repayable within one year and on demand:
Lease liabilities 475 337
Trade and other payables 897 616
Accrued expenses 3,486 3,885
Debt facility - unsecured 2,531 -
Loan notes - unsecured 1,189 -
8,578 4,838
Repayable between one and two years:
Lease liabilities 413 475
Debt facility - unsecured - 2,646
Loan notes - unsecured - 1,124
413 4,245
Repayable between two and five years:
Lease liabilities 282 591
Total 9,273 9,674
Debt Facility
Loans totalling £2.45m (2020: £2.46m) are held by Herald Investment Trust
Plcand The John Booth Charitable Foundation ("JBCF"), all of whom are a
related party through shareholding. During the year the interest on the
facility was based on monthly LIBOR plus a margin of 4%. The debt facility is
unsecured and at year end was repayable in full on 31 December 2022. Post year
end Herald Investment Trust plcthe JBCF agreed to extend the repayment date to
31 December 2024, and the interest is based on monthly SONIA plus a margin of
4%, subject to a floor of RPI, from April 2022. There are no financial
covenants in force in respect of this debt facility.
Loan notes - unsecured
The unsecured loan notes of £0.98m (2020: £0.97m) relates to short-term loan
notes issued to Herald Investment Trust plc, a related party through
shareholding. Interest during the year was at a fixed rate of 8%. At year end
the interest was accrued and was repayable along with the principal on 31
December 2022. Post year end Herald agreed to extend the repayment date to 31
December 2024, with the interest rate remaining unchanged. There are no
financial covenants in place in respect of this debt.
Finance leases
Net obligations under finance leases are secured on related property, plant
and equipment and are included within lease liabilities.
Overdraft
The Group has an overdraft facility of £600k, which is secured over the
assets of subsidiary companies. During the year the Group has not drawn upon
the overdraft facility in place. The interest rate on the overdraft is 5.3%
per annum over the Bank of England rate.
Change in liabilities arising from financing activities
31 Dec 2020 Cash flows Non-cash changes 31 Dec 2021
£'000 £'000 £'000 £'000
Borrowings - debt facility 2,455 (105) 100 2,450
Borrowings - loan notes 971 (71) 78 978
Lease liabilities 1,403 (497) 260 1,166
Total liabilities from financing activities 4,829 (673) 438 4,594
21) FINANCIAL INSTRUMENTS
The Group's financial instruments comprise borrowings, cash and liquid
resources and various items, such as trade and other receivables and trade and
other payables that arise directly from its operations. The main purpose of
these financial instruments is to raise finance for the Group's operations.
The principal financial risk faced by the Group is liquidity/funding. The
policies and strategies for managing this risk is summarised as follows:
Risk Potential impact How it is managed
Liquidity The Group's debt servicing requirements and investment strategies, along with The Group's treasury function is principally concerned with internal funding
the diverse nature of the Group's operations, means that liquidity management requirements, debt servicing requirements and funding of new investment
is recognised as an important area of focus. strategies.
Liquidity issues could have a negative reputational impact, particularly with Internal funding and debt servicing requirements are monitored on a continuing
suppliers. basis through the Group's management reporting and forecasting. The Group
also maintains a continuing dialogue with the Group's lenders as part of its
information covenants. The requirements are maintained through a combination
of retained earnings, asset sales or capital markets.
An overdraft of £0.6m is in place to help fund potential working capital
fluctuations.
New investment strategies are to be funded through existing working capital or
where possible capital markets.
Capital management policy and risk management
The Group manages its capital to ensure that entities in the Group will be
able to continue as a going concern while maximising the return to
shareholders through the optimisation of the debt and equity balance. The
capital structure of the Group consists of debts, which include the borrowings
disclosed in note 20, cash and cash equivalents and equity attributable to the
owners of the parent, comprising issued capital, reserves and retained
earnings as disclosed in the Consolidated Statement of Changes in Equity.
The Group's Board reviews the capital structure on an on-going basis. As part
of this review, the Board considers the cost of capital and the risks
associated with each class of capital. The Group seeks a conservative gearing
ratio (the proportion of net debt to equity). The Board considers at each
review the appropriateness of the current ratio considering the above. The
Board is currently satisfied with the Group's gearing ratio.
The gearing ratio at the year-end is as follows:
31 Dec 2021 31 Dec 2020
£'000 £'000
Borrowings (debt facility and loan notes) (3,428) (3,426)
Cash and cash equivalents 5,608 6,805
Net Cash 2,180 3,379
Total equity 3,775 6,114
Net cash to equity ratio -58% -55%
The Group's gearing ratio has remained relatively static due to cash reducing
proportionately in line with losses.
Financial instruments by category
31 Dec 31 Dec
2021 2020
£'000 £'000
Categories of financial assets and liabilities
Financial assets - measured at amortised cost
Trade and other receivables 3,566 3,904
Cash and cash equivalents 5,608 6,805
Financial liabilities - other financial liabilities at amortised cost
Trade and other payables (4,383) (4,501)
Borrowings (3,428) (3,426)
Lease liabilities (1,166) (1,403)
The fair values of the Group's cash and short-term deposits and those of other
financial assets equate to their carrying amounts. The Group's receivables and
cash and cash equivalents are all classified as financial assets and carried
at amortised cost. The amounts are presented net of provisions for doubtful
receivables and allowances for impairment are made where appropriate. Trade
and other payables and loan borrowings are all classified as financial
liabilities measured at amortised cost.
22) DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 19% (2020:19%) for UK differences. The
movements in deferred tax assets and liabilities during the year are shown
below.
Losses carried forward Intangible assets Total
£'000 £'000 £'000
At 31 December 2020 - (280) (280)
Recognised in the income statement - 90 90
At 31 December 2021 - (190) (190)
Deferred tax assets estimated at £4.8 million (2020: £4.5 million) in
respect of losses carried forward have not been recognised due to
uncertainties as to when income will arise against which such losses will be
utilised.
23) PROVISIONS
31 Dec 31 Dec
2021 2020
£'000 £'000
Provisions 250 75
A dilapidations provision has been recognised in the period in relation to the
costs associated with restoring a rented property back to its previous
condition.
Movement in provisions
£'000
At 31 December 2020 75
Increase in provision in the year 175
At 31 December 2021 250
24) SHARE CAPITAL AND RESERVES
31 Dec 21 31 Dec 20
Ordinary shares with a nominal value of: 0.125p 0.125p
Authorised:
Number Unlimited Unlimited
Issued and fully paid:
Number 16,200,919 15,963,039
Nominal value (£'000) 20 20
Fully paid ordinary shares carry one vote per share and carry the right to
dividends.
The movements in share capital and reserves in the year are made up as
follows:
31 Dec 2021 31 Dec 2020
Number of Shares Share Capital Share Premium Merger Number of Shares Share Capital Share Premium Merger Reserve
Reserve
Ordinary shares £'000 £'000 £'000 £'000 £'000
£'000
At start of year 15,963,039 20 4,654 27 1,419,113,435 5,928 30,509 875
Share placing and subscription for cash - - - - 10,555,555 13 7,487 -
Consideration paid in shares 237,880 0.3 131 - 42,385,832 1 489 65
Shares issued in lieu of fees - - - - 5,176,190 - 48 -
Expenses of issue of shares - - - - - - (406) -
Shares issued in debt conversion - - - - 651,054 1 427 -
Shares issued in preference share conversion - - - - 24,675,435 8 923 -
Capital Reduction - - - - - (5,931) (34,823) (913)
Share consolidation - - - - (1,486,594,462) - - -
At end of year 16,200,919 20 4,785 27 15,963,039 20 4,654 27
Consideration paid in shares
On the 11 June 2021 the Group issued a total of 237,880 new ordinary shares to
Directors in lieu of payment of director fees, of which 44,809 shares were
issued at a price of 66.95p per share and 193,071 shares at a price of 52.5p
per share.
Nature and purpose of the individual reserves
Below is a description of the nature and purpose of the individual
reserves:
· Share capital represents the nominal value of shares issued;
· Share premium includes the amounts over the nominal value in
respect of share issues. In addition, costs in respect of share issues are
debited to this account;
· Merger reserve is used where more than 90 per cent of the shares
in a subsidiary are acquired and the consideration includes the issue of new
shares by the Company, which attracting merger relief under the Companies Act
1985 and, from 1 October 2009, the Companies Act 2006;
· Share based payment reserve arises on recognition of the
share-based payment charge in accordance with IFRS2 'Share Based Payment
Transactions';
· Retained earnings include the realised gains and losses made by
the Group and the Company; and
25) RELATED PARTY TRANSACTIONS
Herald Investment Trust plc and John Booth Charitable Foundation
The Company is the borrower of unsecured debt and loan notes with Herald
Investment Trust plc and John Booth Charitable Foundation requiring a bullet
repayment on 31 December 2024. The total amount outstanding at 31 December
2021 including accrued interest is £3.43m (2020: £3.43m). Interest accrued
on the debt amounted to £0.04m (2020: £0.04m).
26) POST BALANCE SHEET EVENTS
Post year end the long-term debt holders agreed to extend the term of the debt
by two years, such that the repayment of the debt is now due on 31 December
2024, and the interest rate on the debt was amended as follows from April
2022: the debt facility interest basis was amended from LIBOR to SONIA and the
monthly interest rate is subject to an RPI floor.
27) GUARANTEE IN RELATION TO SUBSIDIARY AUDIT EXEMPTION
On 19 April 2022, the Directors of the Company provided guarantees in respect
of its trading subsidiary companies in accordance with section 479C of the
Companies Act 2006. As a result, the following subsidiary entities of the
Company are exempt from the requirements of the Companies Act 2006 relating to
the audit of accounts under section 479A of the Companies Act 2006:
Blakeway Productions Limited (02908076)
Zinc Television London Limited (formerly Brook Lapping Productions Limited)
(02800925)
Zinc Communicate CSR Limited (formerly Zinc Communicate Limited) (06271341)
Films of Record Limited (01446899)
Reef Television Limited (03500852)
Zinc Television Regions Limited (formerly Ten Alps TV Limited) (02888301)
Zinc Communicate Productions Limited (formerly Ten Alps Communications
Limited) (03136090)
Tern Television Productions Limited (SC109131)
Cautionary note regarding forward-looking statements
This press release may contain certain forward-looking information. The words
"expect", "anticipate", believe", "estimate", "may", "will", "should",
"intend", "forecast", "plan", and similar expressions are used to identify
forward looking information.
The forward-looking statements contained in this press release are based on
management's beliefs, estimates and opinions on the date the statements are
made in light of management's experience, current conditions and expected
future development in the areas in which the Company is currently active and
other factors management believes are appropriate in the circumstances. The
Company undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of new
information, future events or otherwise, unless required by applicable law.
Readers are cautioned not to place undue reliance on forward-looking
information. By their nature, forward-looking statements are subject to
numerous assumptions, risks and uncertainties that contribute to the
possibility that the predicted outcome will not occur, including some of which
are beyond the Company's control. There can be no assurance that
forward-looking statements will prove to be accurate as actual results and
future events could vary or differ materially from those anticipated in such
statements.
Inside Information
The information contained within this announcement constitutes inside
information for the purposes of Article 7 of the Market Abuse Regulation (EU)
no. 596/2014 as it forms part of UK domestic law by virtue of the European
Union (Withdrawal) Act 2018 ("MAR") and is disclosed in accordance with the
Company's obligations under Article 17 of MAR. On the publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
1 Adjusted EBITDA defined as EBITDA before share based payment charge, loss
on disposal of fixed assets and exceptional items
2 Free Cash Flow defined as operating cashflow less capex
3 Source: Ofcom, PACT census, Oliver and Ohlbaum
4 Adjusted EBITDA defined as EBITDA before share based payment charge, loss
on disposal of fixed assets and exceptional items
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