REG - Zinc Media Group PLC - Final Results and Notice of AGM
26/04/2023 07:00
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RNS Number : 4502X Zinc Media Group PLC 26 April 2023
26 April 2023
Zinc Media Group plc
("Zinc" or the "Group")
Results for the year ended 31 December 2022
and
Notice of Annual General Meeting
Zinc Media Group plc (AIM: ZIN), the award-winning television, brand and audio
production group, is pleased to announce its audited results for the year
ended 31 December 2022 ("FY22").
The Group is pleased to report excellent progress for FY22, including the
following highlights:
Financial highlights
• Revenue and Adjusted EBITDA 1 (#_ftn1) ahead of market
expectations, with the Group profitable at Adjusted EBITDA level
• Revenue increased 72% to £30.1m (FY21: £17.5m) and marks the
highest revenue the Group has generated in the last ten years
• Organic revenue growth of £6.8m or 39% year-on-year, reflecting
the investment in new businesses and contracts
• H2 revenues increased 83% to £19.2m (H2 2021: £10.5m)
• Approximately 80% of revenue was delivered from existing
customers, up from 69% in FY21
• Adjusted EBITDA of £0.1m, compared to a loss of £0.6m in FY21
• Strong H2 2022 performance with Adjusted EBITDA of £0.7m
• £3.6m of cash at 31 December 2022 and £4.6m as at 19(th) April
2023
• Loss before tax of £3.3m (FY21: £2.6m) is largely driven by
acquisition costs related to The Edge acquisition in the year and amortisation
related to previous acquisitions
Operational highlights
• The successful acquisition of The Edge in August 2022 has brought
a quality, high margin business with significant repeat revenue
• The Edge is performing ahead of acquisition expectations, having
achieved its best ever trading performance last year, generating £13m of
revenue and £1.3m of profit before tax (of which £5.8m of revenue and £0.7m
of profit before tax has been included in the Group's consolidated results)
• The acquisition of The Edge has added considerable scale to the
Group, with pro-forma revenues for the enlarged group of £37m in FY222
(#_ftn2)
• The Group has been awarded "Production Company of the Year" at the
prestigious New York Festival Film and Television Awards
Delivering a number of significant programme successes during the year
• Highly acclaimed documentaries that led the news agenda and got
the nation talking include Putin vs The West, Tom Daley: Illegal to be me and
Afghanistan: Getting out for the BBC
• Zinc's largest ever volume commission, Bargain Loving Brits for
Channel 5
• Programming with fresh talent and from new buyers such as
Unprecedented for Discovery+, Space Jump for Red Bull, Martin Compston's
Scottish Fling for BBC, Spooked Ireland for Really, Naughty Tories for Channel
5 and Sunday Morning Live for the BBC
Current trading and outlook
• The Group is trading strongly with £26m of revenue already booked
and expected to be recognised in FY23 (7 February 2023: £15m)
• In addition the Group's pipeline remains strong with a further
£6m of revenue at a highly advanced stage
• Together this provides the Board with confidence in delivering
FY23 market expectations
• Integration of The Edge is progressing well: cross-divisional
business development opportunities have been identified and the planned
co-location with Zinc's other London businesses later this year will enable
cost savings and further synergies
Mark Browning, CEO of Zinc Media Group, commented:
"We are delighted to report a strong set of results for FY22: exceeding market
expectations and revenues at a 10-year high. This is a great achievement and
has been testament to the breadth and depth of our creative output.
Performance in FY23 is very encouraging and there is a feeling of momentum and
optimism around the Group. Zinc has a considerable pipeline of business and
has already booked £26m of revenue to be recognised this year. As a result,
the Board is positive for the outlook of the business and views the remainder
of the year with confidence."
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 annual report and accounts is notice of the Group's 2023
annual general meeting (the "AGM"), which will take place at 10.00am on 25 May
2023 at Singer Capital Markets' offices at 1 Bartholomew Lane, London, EC2N
2AX.
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation. The Directors of the Company take responsibility for
this announcement.
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 Adviser and Broker)
+44 (0) 20 7496
3000
James Moat / George Tzimas / Alex Emslie
IFC Advisory Ltd (Financial
PR)
+44 (0) 20 3934 6630
Graham Herring / Zach Cohen
About Zinc Media Group
Zinc Media Group plc is a premium television and content creation group.
The award-winning and critically acclaimed television labels comprise Brook
Lapping, Red Sauce, Supercollider, Tern Television, Rex and Atomic, along with
Bumblebee Post Production, and produce programmes across a wide range of
factual genres for UK and international broadcasters.
Zinc Communicate specialises in developing cross-platform content for brands,
businesses and rights holders.
The Edge Picture Company produces film content for brands and corporates in
the UK, Qatar and other international markets.
For further information on Zinc Media please visit www.zincmedia.com
(http://www.zincmedia.com/) .
Chairman's Statement
2022's results reflect a transformational year for the Group. The Board is
delighted to see revenue grew 72% overall to a ten-year high, powered by
excellent organic growth of 39% and a strong Adjusted EBITDA performance of
£0.7m during the second half, plus the successful acquisition of The Edge
Picture Company ("The Edge"). This follows huge amounts of hard work and is a
much improved performance on the prior year.
The strong growth delivered by the Company and the high level of revenues
delivered from repeat customers provides the Board with confidence of
sustained Adjusted EBITDA profitability. The Board is pursuing a strategy
built on strong organic growth, supplemented by selective acquisitions, to
deliver long term profitable growth. The Group has continued to invest in
talent and new business opportunities that are resulting in numerous contracts
and should lead to growth and profitability in 2023 and beyond.
The acquisition of The Edge in August 2022 has been a strong addition to the
Group. It has delivered record financial results in its fourth quarter,
helping the Group to report strong H2 profitability. The Edge entered 2023 in
a good position with record pre-booked revenue. Cross-selling opportunities
and integration into the wider Group is progressing well and cost benefits
will be realised with the planned move of The Edge from its current premises
in Covent Garden into Zinc's London headquarters in H2 2023.
The Group continues to deliver world class television and brand content.
Putin vs The West grabbed the news headlines across the world when it was
first broadcast in early 2023. Afghanistan: Getting Out gave the inside track
on the chaotic withdrawal of western forces from Afghanistan and Bowelbabe In
Her Own Words provided exclusive access to the final days of Dame Deborah
James' battle with bowel cancer. In addition, Zinc has produced hundreds of
hours of television for all the main UK and many international broadcasters
including Zinc's largest ever volume commission for Bargain Loving Brits, and
brand content produced for companies including Red Bull, EasyJet and Lego
alongside large multi-nationals in the FTSE100, government departments and
NGOs. The Company continues to receive notable endorsements for its quality of
production and programming, most recently winning "Production Company of the
Year" at the New York Festival Awards.
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 strong progress.
CEO's Review
The strategic priorities for 2022 were to deliver good organic growth,
supported by high quality acquisitions, with the ambition to build a strong
core business by the end of 2022 that would deliver long term sustainable
profitability. All these were delivered in the year.
Revenue growth
The Group grew strongly in 2022 with total revenue up 72% on FY21 to £30.1m.
This growth was achieved as a result of investments made in London Television
and Zinc Communicate during the previous two financial years and the
acquisition of The Edge in August 2022. Following the easing of Covid-19
restrictions in H1, revenue growth in H2 was even stronger, increasing 83%
year-on-year to £19.2m, and delivering an H2 Adjusted EBITDA of £0.7m, in
part driven by the acquisition of The Edge in August, which has performed
ahead of our expectations.
Organic revenue growth powered Zinc's top line performance and grew £6.8m or
39% in FY22, driven by a very strong performance from the Group's new
businesses which were up 97% (£4.2m) as well as excellent growth from the
Group's established businesses, which grew 20% (£2.6m).
The Group comprises twelve businesses that operate in two areas: television
production (Tern TV, Brook Lapping, Red Sauce, Supercollider, Rex, Bumblebee
and Atomic TV) and content production for brands and businesses (The Edge and
the Zinc Communicate businesses in Brand Entertainment, Audio, Corporate Film
and Publishing).
Four of these businesses, Tern TV, Brook Lapping, Zinc Communicate Publishing
and The Edge have been established for many years. Seven are new businesses
that have been launched in the last three years as part of the Group's
transformation plan and are growing at an accelerated rate. These comprise the
London TV labels Red Sauce, Supercollider and Rex, alongside Zinc Communicate
businesses in branded entertainment, corporate film and podcasting, and the
post-production business Bumblebee. Together the new businesses contributed
£9m of revenue in FY22, almost doubling year-on-year. A new Bristol based TV
label, Atomic TV, was launched in January 2023.
The Edge has helped add scale to the Group, as well as an increasing
proportion of revenue from repeat customers. Zinc's pro-forma group revenue
for FY22 was over £37m (on the basis of The Edge having been acquired at the
start of FY22).
Strong customer base built on high levels of repeat customers
The Group has a solid and growing base of existing business with 79% of
revenue in FY22 from repeat customers, up from 69% in the prior year,
delivering a high level of earnings predictability. This is particularly
pleasing when taking into account that the Group has a large number of new
businesses that are still establishing their client base. The revenue
delivered from the repeat customer base within the Group's established
businesses is 90% of their revenue.
Continued revenue diversification delivering a more robust Group
The Group's revenue and customer diversification was enhanced with the
acquisition of The Edge in August 2022. The Edge is one of the world's
leading producers of corporate and brand films, producing work of a
consistently high quality for a stable base of long-term returning clients.
It achieved healthy gross margins of around 50% and had its best ever year in
2022. It started 2023 with record levels of pre-booked revenue.
The addition of The Edge creates a more balanced Group where television now
accounts for around 60% of Group revenue and Zinc Communicate and The Edge
representing the remaining 40%. This revenue mix and diversified portfolio has
created a strong platform on which to build future growth and de-risks the
Group's previous dependency on high value but binary TV commissions.
Path to sustainable profitable growth
The Group is pleased to report a profit at Adjusted EBITDA level for FY22 of
£0.1m, including a profit of £0.7m in the second half, and we will look to
accelerate growth in profitability in the coming years.
Five of the eight new businesses launched in the last three years are in the
investment and early growth phase, and we expect them to start contributing
positively to Adjusted EBITDA in FY23 and beyond. Similarly, the Group has
added some strategic high volume, lower margin TV revenue in FY22 that is
supporting the Group's expansion into new TV markets. We believe these
contracts will provide long-term benefits by bringing new capabilities to the
Group, establishing Zinc in new markets and driving profitability in the
future. These contracts include a seven-figure development funding from a
global streaming service for an access documentary, securing the Group's first
weekly live television series for the BBC and the commission of a high-volume
daytime commission for Channel 5, which have provided a foothold in the
previously untapped global streaming, live television and daytime markets.
Shareholder engagement
The Group conducted many engagements with shareholders during the year.
Alongside regular trading updates, the CEO and CFO presented to all
shareholders and interested parties three times during the year using the
Investor Meets Company platform and investors can follow the Group via the
DirectorsTalk platform. In addition, the Group held a capital markets day at
the Zinc headquarters in London. This provided the opportunity for investors
to meet the executive team and Chairman along with members of the senior
management team, and the CEO presented market insights and showcased the
creative work from around the Group. Following its success, the Company
intends to present another capital markets day this year and further details
will be announced via RNS in due course. Investor Focus Communications (IFC)
is the Group's investor relations and financial PR advisor. 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) .
Looking forward in FY23 with confidence
The Group entered 2023 with the highest amount of pre-booked revenue since the
new management team took over in 2019. As at 18 April 2023, revenue booked and
expected to deliver and be recognised in FY23 stands at £26m, with a further
£6m on the pipeline at a highly advanced stage. Last year £18m of revenue
was booked between May and December and recognised in FY22. Taken together,
these underpin the Board's confidence in comfortably achieving market
expectations for the year ahead.
Zinc's programmes have led the national conversation so far this year and
include Putin vs The West and Bowelbabe: In her Own Words which received
5-star reviews with The Times calling the film "a masterclass in how to make
life and death meaningful". Channel 4 has announced a high profile
commission titled Gender Wars which will explore one of the most polarised
issues of our time, the meaning of sex and gender. BBC One has broadcast Dr
Xand: Con or Cure and also recently announced their first commission from Rex
TV called Get your Eurovision on!.
The size of the opportunity ahead is significant. H2 2022 results provide
evidence that the Group can generate healthy Adjusted EBITDA and cash as it
scales. Growth will come organically and from pursuing selected earnings
accretive acquisitive opportunities. We are optimistic that growth will
accelerate in 2023 and beyond.
Programme highlights
2022 was packed with programme and editorial highlights.
Putin vs The West was produced in 2022 for the BBC and aired in Q1 2023. This
programme secured exclusive access to world leaders including former UK Prime
Ministers Theresa May, David Cameron and Boris Johnson, along with former
French President François Hollande and current Ukrainian President Volodymyr
Zelenskyy, in addition to the Director of the CIA. This three-part series told
the story of how through the decades of clashes, the West has struggled to
deal with President Putin.
Bargain Loving Brits: the long running series was super-sized in 2022 with
Channel 5 commissioning over 50 episodes of fun-loving ex-pats in Spain
setting up businesses, enjoying retirement and always searching for a bargain
on the Costa del Sol.
Tom Daley: Illegal to be me: As thousands of athletes prepared to compete on
the global stage at the 2022 Commonwealth Games in Birmingham gold medallist
and double world champion diver Tom Daley exposed the brutality faced by gay
athletes in many competing countries where it remains illegal to be gay,
including 56 member states of the Commonwealth.
Space Jump: This special feature documentary for Red Bull was released to mark
the tenth anniversary of Felix Baumgartner's 2012 record-breaking sound
barrier bursting, mega jump from space. Baumgartner broke the speed of sound
in freefall reaching a speed of 843mph, and also broke all records for live
streaming, a record that still stands today.
Afghanistan: Getting Out was a two part documentary for the BBC in partnership
with numerous other global broadcasters telling the twenty year story of the
West's conflict with Afghanistan culminating in the chaotic withdrawal of
Western forces in 2021.
Martin Compston's Scottish Fling: Tern TV secured The Line of Duty star to
present this factual entertainment series for the BBC, showcasing the spirit
of Scotland through its people and places.
Sunday Morning Live: Tern TV secured this live weekly programme for BBC ONE in
an open competitive tender, in a production partnership with Green Inc Film
and Television. Sunday Morning Live is an ethical discussion programme picking
up on the week's topical news and events.
Productions made outside London ("MoL") are important for the UK's Public
Service Broadcasters ("PSBs") and Zinc is well placed to address this need,
with substantive long term production centres in Manchester, Glasgow, Belfast
and Aberdeen. At the beginning of 2023 the Group opened a new TV label in
Bristol, a city world renowned for producing specialist factual programmes
including natural history, travel and adventure and history. Over two thirds
of Zinc's production revenues in 2022 were MoL, driven by the success of Red
Sauce in Manchester and Tern TV in Scotland and Northern Ireland.
Supercollider, Zinc Communicate and The Edge produced hundreds of brand and
corporate films in 2022 for many of the world's largest and most recognisable
brands including Red Bull, EasyJet and Lego alongside multi-national FTSE100
organisations as well as NGOs and government organisations.
There were dozens of other programmes produced by Zinc Media Group in 2022,
which can be seen on www.zincmedia.com (http://www.zincmedia.com) . Zinc's
group of companies produces content watched by tens of millions of people
across the world every year, and its programmes have led the news and the
national conversation across the United Kingdom.
Market and outlook
In television the PSBs (comprising the BBC, ITV, Channel 4 and Channel 5)
represent the largest market for Zinc and the Group produces for all these
channels.
The total TV commissioning market in 2022 for UK producers still remained
below pre-Covid levels at £4.3bn (£4.7bn in 2019) but the factual television
spend in 2022 remained consistent at £1bn, of which c. £850m was spent with
independent production companies, not owned by the main broadcasters or
channels (Source: Ofcom 2022). PSB's account for just over 50% of this
commissioning market and Channel 4 is the single largest commissioning channel
from the independent production sector. Zinc has made specific investments in
Tern TV and Rex TV to grow the number of programmes it makes for Channel 4.
Subscription Video on Demand (SVoD) spending on UK factual programming by the
likes of Netflix and Disney+ has risen significantly, although the number of
hours commissioned remains far lower than the PSBs, and UK multi-channels have
also increased their spend from the independent production sector.
Zinc is well placed to continue to grow from this large factual commissioning
market. Approximately £200m of the UK PSB spend on television commissions
is spent outside of London, which validates Zinc's continued investment in
Tern TV (Glasgow and Belfast), Red Sauce TV (Manchester) and the launch in
2023 of the new Atomic TV (Bristol).
While premium documentary programmes such as Putin vs The West and Tom Daley:
Illegal to be me have generated both recognition and awards for Zinc, it is
the factual entertainment market which offers the greatest potential for
accelerated growth. This genre represents the largest proportion of PSB
commissioning spend in non-scripted television and Zinc has diversified into
this market in recent years with the launch of Red Sauce TV and Rex TV as well
as new investment in factual entertainment within Tern TV. While this is the
largest addressable factual market for Zinc, it is dominated by a large number
of returning series. This makes it initially hard to penetrate but provides
lucrative and long running returning revenues once business is secured. The
super-sized Red Sauce commission from Channel 5 is testament to this, and Rex
TV has a growing pipeline in this market. Factual entertainment also offers
the opportunity for increased international distribution and format sales.
In addition to broadcast television production, the Group's commercial content
production division Zinc Communicate continues to grow at pace, with CAGR of
22% over the last three years. If these high levels of organic growth can be
sustained in the years ahead, the Group will have developed a prominent
position in this large, and higher margin, market for corporate and brand
films. The addition of The Edge accelerates the Group's presence in this
market.
We are very encouraged by the high rate of new business wins in recent months,
including high profile television programmes, large volume series and the new
businesses gaining excellent traction in the market:
• The Group's newest TV labels, Red Sauce, Rex and Supercollider,
have booked £9m of revenue into FY23; Bristol based Atomic TV was launched in
January this year
• The Edge has booked £8m that is expected to be recognised in
FY23, which is the highest amount of pre-booked revenue it has had at this
stage of a financial year
• Red Sauce has won the Group's largest ever commission worth
£7.3m, to be recognised over FY23 and FY24, and is in production for two new
series which are yet to be announced
CFO's Report
Income Statement
Revenue 30.1 17.5 12.6
Gross Profit 10.2 6.7 3.5
Gross Margin 34.0% 38.5% (4.5%)
Loss before tax (3.3) (2.6) (0.7)
Adjusted EBITDA 0.1 (0.6) 0.7
Statement of financial position
Cash 3.6 5.6 (2.0)
Long-term debt (3.5) (3.4) (0.1)
Net cash 0.1 2.2 (2.1)
Income statement
Revenue
The key drivers for the increase in revenue from £17.5m to £30.1m are
organic growth of £6.8m from the TV and Zinc Communicate divisions and the
acquisition of The Edge, which contributed £5.8m of revenue since its
acquisition. The organic growth was driven by an increase of £5.6m, or 39%,
year-on-year from the TV business via its new labels and a £1.2m increase
from Zinc Communicate, a 40% increase year-on-year, which has grown its brand
and corporate film offering.
Revenue (£m)
Gross margin and operating expenses
The Group's gross margin decreased during the period from 38.5% to 34.0% due
to a strategic increase in the volume of lower margin TV revenue that is
supporting the Group's expansion into new TV markets and accounted for £7m of
revenue in FY22. Gross margins excluding this lower margin TV revenue have
risen to 40.5% from 38.5% in FY21. This was mainly driven by the acquisition
of The Edge which delivers higher margins.
Whilst Group gross margin decreased in FY22, it remains notably ahead of the
performance achieved in previous years, as demonstrated in the graph below.
Group gross margins (%)
Adjusting items incurred during the year amounted to £1.3m (FY21: £0.3m),
which mainly comprised the costs relating to the acquisition of The Edge which
were £0.95m, in addition to restructuring and share based payment costs of
£0.3m (FY21: £0.2m).
Operating expenses have risen by £4.0m to £13.1m, and whilst this represents
a 44% increase on the prior year, the rate of growth has been significantly
outpaced by the 72% increase in revenue due to the Group's relatively high
operating leverage. As a result, operating costs as a percentage of revenue
have fallen from 52% to 44%.
Finance costs, which mainly relate to interest on the Group's long-term debt,
have risen from £0.2m to £0.4m as the relevant interest rate is based on the
Bank of England base rate, and also subject to a floor of RPI, both of which
increased during the year.
Earnings per share
Basic and diluted loss per share from continuing operations in FY22 was 12.43p
(FY21: loss per share of 15.80p). These measures were calculated on the losses
for the period from continuing operations attributable to Zinc Media
shareholders of £2.3m (FY21: loss of £2.5m) divided by the weighted average
number of shares in issue during the period being 18,480,039 (FY21:
16,095,991).
Dividend
The Board has not recommended a dividend in respect of the year ended 31
December 2022 (FY21: £nil).
Statement of Financial Position
Net assets have increased by £3.2m to £7.0m at the end of December 2022,
driven by the acquisition of The Edge which added £1.9m of net assets at year
end.
Assets
Cash balance at the end of December 2022 was £3.6m. This represents a
decrease of £2.0m during the year, as the cash consideration paid for The
Edge, outflows from operating activities, capital expenditure, property leases
and the servicing of the long-term debt offset the net proceeds from the
equity fundraise in August 2022.
Trade and other receivables have increased by £6.7m to £10.6m, driven by The
Edge's receivables of £4.9m.
Equity and Liabilities
Total equity has increased from £3.7m to £7.0m as the issue of new equity
more than offset the loss in the year.
Total liabilities have increased by £5.3m due The Edge's liabilities being
consolidated into the Group and contingent consideration payable as part of
the acquisition. The Group had an outstanding balance on long-term debt of
£3.5m at year-end (FY21: £3.4m). The Directors believe the Group has strong
shareholder support, evidenced by shareholders investing £5.0m in new equity
in the year. The long-term debt holders are also major shareholders who own
42% of the Group's shares.
Cash Flows
The Group used cash of £4.6m in the year (FY21: £0.2m) in its operations
mainly due to an increase in working capital from a high receivable position
in the last year and as a result of The Edge acquisition. The net movement in
the year was a decrease in cash of £2.0m (FY21: decrease of £1.2m) after
financing activity cash inflow of £3.9m (FY21: outflow of £0.6m) and cash
used in investing activities of £1.2m (FY21: £0.3m), driven respectively by
the £4.8m equity fundraise (net of costs) and associated acquisition of The
Edge which contributed a net cash outflow of £0.3m (£1.2m consideration paid
less £0.9m of cash acquired).
Key Performance Indicators (KPIs)
In monitoring the performance of the business, the executive management team
uses the following KPIs:
· Revenue growth, including revenue from repeat customers and new
business pipeline strength
· Profitability assessed by key measures including gross margins
and Adjusted EBITDA
· Cash generation and cash management
· Performance and integration of acquisitions
These KPIs have been reported on within the Strategic Report.
Consolidated income statement for the year ended 31 December 2022
12 months ended 12 months ended
31 December 31 December
2022 2021
Notes £'000 £'000
Continuing operations
Revenue 4 30,083 17,491
Cost of sales 5 (19,880) (10,759)
Gross profit 10,203 6,732
Operating expenses 5 (13,083) (9,097)
Operating loss (2,880) (2,365)
Analysed as:
Adjusted EBITDA 75 (612)
Depreciation 5 (947) (782)
Amortisation 5 (715) (704)
Adjusting items 8 (1,293) (267)
Operating loss (2,880) (2,365)
Finance costs 9 (390) (241)
Finance income 9 1 -
Loss before tax (3,269) (2,606)
Taxation credit/(charge) 10 987 86
Loss for the period (2,282) (2,520)
Attributable to:
Equity holders (2,297) (2,544)
Non-controlling interest 15 24
Retained loss for the period (2,282) (2,520)
Earnings per share
Basic 11 (12.43)p (15.80)p
Diluted 11 (12.43)p (15.80)p
The loss for the period attributable to equity holders from continuing
operations is £2,297k (31 December 2021: £2,544k).
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
2022
12 months ended 12 months ended
31 December 31 December
2022 2021
£'000 £'000
Loss for the year and total comprehensive expense for the period (2,282) (2,520)
Attributable to:
Equity holders (2,297) (2,544)
Non-controlling interest 15 24
(2,282) (2,520)
Consolidated statement of financial position as at 31 December 2022
2022 2021
Note £'000 £'000
Assets
Non-current
Goodwill and intangible assets 12 7,671 3,800
Property, plant and equipment 13 1,056 904
Right-of-use assets 18 1,084 1,159
9,811 5,863
Current assets
Inventories 14 73 226
Trade and other receivables 15 10,591 3,887
Cash and cash equivalents 16 3,632 5,608
14,296 9,721
Total assets 24,107 15,584
Equity
Called up share capital 24 27 20
Share premium account 24 9,546 4,785
Share based payment reserve 457 277
Merger reserve 24 566 27
Retained losses 24 (3,653) (1,386)
Total equity attributable to equity holders of the parent 6,943 3,723
Non-controlling interests 16 24
Total equity 6,959 3,747
Liabilities
Non-current
Borrowings 19 3,490 -
Lease liabilities 18 352 735
Deferred tax 21 - 190
Provisions 22 242 250
Trade and other payables 17 2,476 -
6,560 1,175
Current
Trade and other payables 17 9,753 6,799
Current tax liabilities 160 4
Borrowings 19 - 3,428
Lease liabilities 18 675 431
10,588 10,662
Total liabilities 17,148 11,837
Total equity and liabilities 24,107 15,584
The consolidated financial statements were authorised for issue and approved
by the Board on 25 April 2023 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 2022
12 months ended 12 months ended
31 December 31 December
2022 2021
Note £'000 £'000
Cash flows from operating activities
Loss for the year before tax from continuing operations (3,269) (2,606)
(3,269) (2,606)
Adjustments for:
Depreciation 5 947 782
Amortisation and impairment of intangibles 5 715 704
Finance costs 9 390 241
Finance income 9 (1) -
Share based payment charge 7 180 122
Contingent consideration deemed remuneration 8 - -
Consideration paid in shares 30 131
Loss on disposal of assets 8 - 4
(1,008) (623)
Decrease/(increase) in inventories 191 (42)
(Increase)/decrease in trade and other receivables (2,841) 392
(Decrease)/increase in trade and other payables (975) 28
Cash used in operations (4,633) (245)
Finance income 1 -
Finance costs (57) (65)
Net cash flows used in operating activities (4,689) (310)
Investing activities
Payment of contingent consideration on acquisition of subsidiary - -
Purchase of property, plant and equipment 13 (831) (273)
Purchase of intangible assets 12 (50) -
Acquisition of subsidiary net of cash acquired 23 (324) -
Net cash flows used in investing activities (1,205) (273)
Financing activities
Issue of ordinary share capital (net of issue costs) 24 4,767 -
Principal elements of lease payments 18 (555) (432)
Borrowings repaid 19 (265) (176)
Dividends paid to NCI (23)
Net cash flows generated from / (used in) from financing activities 3,924 (608)
Net decrease in cash and cash equivalents (1,970) (1,191)
Translation differences (6) (6)
Cash and cash equivalents at beginning of year/period 16 5,608 6,805
Cash and cash equivalents at year/period end 3,632 5,608
16
Consolidated statement of changes in equity for the year ended 31 December
2022
Share Share Share based payment Merger Retained Total equity attributable to equity holders of Non-controlling Total
capital premium reserve reserve earnings the parent interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2021 20 4,654 155 27 1,158 6,014 12 6,026
Loss and total comprehensive expense 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
Balance at 1 January 2022 20 4,785 277 27 (1,386) 3,723 24 3,747
Loss and total comprehensive expense for the period - - - - (2,297) (2,297) 15 (2,282)
Equity-settled share-based payments - - 180 - - 180 - 180
Shares issued in placing net of expenses 6 4,761 - - - 4,767 - 4,767
Consideration paid in shares 1 - - 539 - 540 - 540
Shares issued in lieu of fees/Directors remuneration paid in shares - - - - 30 30 - 30
Dividends paid - - - - - - (23) (23)
Total transactions with owners of the Company 7 4,761 180 539 (2,267) 3,220 (8) 3,212
Balance at 31 December 2022 27 9,546 457 566 (3,653) 6,943 16 6,959
Notes to the consolidated financial statements
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
4th 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
The financial statements of the Group 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.
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 2022 the cash holdings of the Group were £3.6m and net cash was
£0.1m. The Group also has an overdraft facility of £0.6m available.
The Directors believe the Group has strong shareholder support, evidenced by
shareholders investing £12.5m in new equity in recent years and the long-term
debt holders, who are also major shareholders with 42% of the Group's shares,
having agreed in 2022 to extend 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 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. Whilst the sales
pipeline is healthy the timing of new sales is hard to predict, the scenarios
include revenues being 15% down on budget. 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 shareholders and 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 2022. 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
No new standards were adopted in 2022. A number of other new pronouncements
are effective from 1 January 2023 the principal ones are listed below:
· Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2:
Disclosure of Accounting policies (Effective 1 January 2023)
· Amendments to IAS 12 Deferred Tax related to Assets and Liabilities
arising from a Single
Transaction (Effective 1 January 2023)
· Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition
of Accounting Estimates (Effective 1 January 2023)
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 exceeds 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 and content 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.
Publishing
Advertising revenue is recognised on the date publications are published which
is when control transfers to the customer.
3.2) 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.
3.3) 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 The Edge 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
Over 7
- 10 years
Distribution
catalogue
Over 5 years
Software
Over 2 years
Brands and customer relationships relate to the acquisition of Tern Television
Productions and The Edge. They are amortised over a period of 7 and 10 years
respectively and as at 31 December 2022 there was under 2 years remaining for
Tern Television Productions and under 10 years for The Edge.
The distribution catalogue intangible asset arose on the acquisition of Tern
Television Productions. It is amortised over 5 years and as at 31 December
2022 the remaining useful life was nil.
The software relates to a finance system that is used across the group and CRM
system in Zinc Communicate.
3.4) 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 assesses 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.
3.5) Inventories
Inventories in Zinc Communicate and The Edge 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.
3.6) 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.
3.7) Current and deferred taxation
Current tax is the tax currently payable based on taxable profit/(loss) 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.
3.8) 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.
3.9) 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.
3.10) Provisions
Provisions are recognised when: the Group has a present legal or constructive
obligation as a 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.
3.11) 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.
3.12) Significant judgements and estimates
The preparation of consolidated financial statements in accordance with
UK-adopted International Accounting Standards 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.
i) Judgements
Revenue recognition
The main judgements regarding revenue recognition relate to TV production and
content 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.
ii) Estimates
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 12 for details
of how these judgements are made and the estimation sensitivities disclosed.
Valuation of intangibles arising on acquisition
The intangible assets acquired on the acquisition of The Edge Picture Co
Limited have been valued using the income approach. This involves forecasting
the expected future economic benefits attributable to an asset and calculating
the net present value of these future economic benefits using an appropriate
asset specific discount rate. The discount rate used has factored in the
market rate of return, the specific risks associated with the industry as well
as the risk associated with the asset being valued. See note 23 for more
detail on the acquisition.
Valuation of contingent consideration
The contingent consideration payable in relation to the acquisition of The
Edge has been measured at its fair value using a Monte Carlo simulation where
the EBIT of each of the three years of the earn out period is an independent,
normally distributed random variable. Values have been calculated for all
three years and the total, and the average of these represents the fair value.
Estimation sensitivity has been disclosed in note 20.
3.13) 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 content. The Content Production segment includes brand and
corporate film production, radio and podcast production and publishing.
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 Content Production. These
operating segments are monitored, and strategic decisions are made on the
basis of adjusted segment operating results.
TV Content Production Central and plc Total
2022 2021 2022 2021 2022 2021 2022 2021
Continuing Operations £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000
Revenue 20,218 14,565 9,865 2,926 - - 30,083 17,491
Adjusted EBITDA 611 932 573 (241) (1,109) (1,303) 75 (612)
Depreciation (541) (582) (192) (48) (214) (151) (947) (782)
Amortisation - - (10) - (705) (704) (715) (704)
Adjusting Items and acquisition costs (83) (6) (68) (51) (1,143) (211) (1,293) (267)
Operating profit / (loss) (13) 344 303 (340) (3,171) (2,369) (2,880) (2,365)
Finance costs (5) (12) (11) - (374) (229) (390) (241)
Finance income - 0 1 - - - 1 0
Loss before tax (18) 332 293 (340) (3,545) (2,597) (3,269) (2,606)
Taxation credit/(charge) (5) 4 828 - 164 82 987 86
Loss for the year (23) 336 1,122 (340) (3,381) (2,515) (2,282) (2,520)
Segment Assets 11,775 12,571 7,175 2,151 5,158 862 24,107 15,584
Segment Liabilities (16,326) (15,294) (3,748) (1,207) 2,926 4,664 (17,149) (11,837)
Other Segment items:
Expenditure on intangible assets - - 50 - 4,394 108 4,444 108
Expenditure on tangible assets 190 236 544 6 97 862 831 1,104
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation and adjusting items as set out in note.
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 £24.7m (year ended
31 December 2021: £16.0m), and the total revenue from external customers in
other countries was £5.4m (2021: £1.5m). There were two customers that
accounted for more than 10% of Group revenue in the year: one customer
accounted for £7.3m or 24% of Group revenue and the other customer accounted
for £5.9m or 20% of Group revenue (2021: one customer accounted for £3.8m
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.
2022 2021
£'000 £'000
Receivables, which are included in 'Trade and other receivables' 6,515 2,060
Contract assets 2,545 1,502
Contract liabilities (1,895) (1,068)
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
milestones per the production agreements are met and an invoice is raised. 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.
2022
Contract assets Contract liabilities
£'000 £'000
Opening balance 1 January 2022 1,502 (1,068)
Revenue recognised that was included in the contract liability balance at the - 1,068
beginning of the period
Increases due to cash received, excluding amounts recognised as - (1,006)
revenue during the period
Transfers from contract assets recognised at the beginning of the (1,502) -
period to receivables
Increases as a result of changes in the measure of progress 2,132 -
Increase as a result of The Edge acquisition 413 (889)
Closing balance 31 December 2022 2,545 (1,895)
Transaction price allocated to the remaining performance obligations
The Group has applied the practical expedient in paragraph 121 of IFRS 15 and
chosen not to 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:
2022 2021
£'000 £'000
Cost of sales
Production costs 16,813 7,660
Salary costs 2,250 1,803
Royalties and distribution costs 817 1,296
Total cost of sales 19,880 10,759
Operating expenses
Salary costs 7,815 6,402
Leases on premises 10 6
Other administrative expenses 2,296 932
Foreign exchange gain 7 4
Adjusting Items 1,293 267
Depreciation and Amortisation 1,662 1,486
Total operating expenses 13,083 9,097
Furlough income in the year totalled £nil (2021: £71k), this is included in
salary costs in both operating expenses and cost of sales.
Auditor, tax and share option advisor fees are included in other
administrative expenses. The auditor did not provide any non-audit services in
the current or prior year. The fee for statutory audit services was as
follows:
2022 2021
£'000 £'000
Statutory audit services
Annual audit of the company and the consolidated accounts 189 107
6) STAFF COSTS
Staff costs from continuing operations, including directors, consist of:
2022 2021
£'000 £'000
Wages & salaries 8,682 6,888
Social security & other costs 994 778
Pension costs 359 509
Share based payment charge 180 122
Consideration paid in shares 30 30
Total 10,245 8,327
The average number of employees (including directors) employed by the Group
for continuing operations during the year was:
2022 2021
Zinc Television 134 115
Content Production 82 45
Central and Plc 8 8
Total 224 168
The directors consider that the key management comprises the directors of the
company, and their emoluments are set out below:
Directors' emoluments
2022 2021
Salaries and fees Benefits in kind Pension Total Total
Bonus Shares
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Executive Directors
Mark Browning 270 - 135 - 27 432 459
Will Sawyer 159 - 80 - 16 255 246
Non-Executive Directors
Christopher Satterthwaite (Chairman) 50 - - 30 - 80 80
Nicholas Taylor 18 - - - 12 30 30
Andrew Garard 30 - - - - 30 30
527 - 215 30 55 827 845
The executive director bonuses solely relate to the successful acquisition,
integration and fundraise related to The Edge Picture Co. Almost 40% of the
bonuses received by the executive directors were re-invested back in the Group
via an equity fundraise during the year.
Key management personnel compensation
2022 2021
£'000 £'000
Short term employee benefits (includes employers NICs) 840 870
Post-employment benefits 55 54
Shares (includes employers NICs) 34 34
Share-based payments charge 129 101
Total 1,058 1,059
The amount for share based payments charge (see note 7) which relates to the
Directors was £129k (2021: £101k).
7) SHARE BASED PAYMENTS
The charge for share based payments arises from the following schemes:
2022 2021
£'000 £'000
EMI share option scheme 104 74
Unapproved share option scheme 76 48
Total 180 122
The share based payment charge for options granted since February 2020 are
calculated using a Stochastic model and options granted prior to February 2020
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
2022 2021
Number WAEP £ Number WAEP £
Outstanding at the beginning of the year 886,546 0.014 173,201 2.527
Transferred from EMI scheme 26,605 0.670 2,000 3.750
Granted - - 711,345 0.001
Lapsed during the year - - - -
Outstanding at the end of the year 913,151 0.033 886,546 0.014
Exercisable at the end of the year - - - -
EMI Share option scheme
2022 2021
Number WAEP £ Number WAEP £
Outstanding at the beginning of the year 1,097,104 0.390 566,144 0.784
Granted during the year 151,622 0.875 539,960 0.683
Lapsed during the year (70,211) 0.713 (7,000) 3.921
Transferred to unapproved scheme (26,605) 0.670 (2,000) 3.750
Outstanding at the end of the year 1,151,909 0.428 1,097,104 0.390
Exercisable at the end of the year - - - -
The options outstanding as at 31 December 2022 have the following exercise
prices and expire in the following financial years:
Expiry Grant Date Exercise Price 2022 2021
£ No. No.
December 2026 December 2016 3.75 6,000 6,000
November 2027 November 2017 4.15 5,000 5,000
April 2028 April 2018 3.75 4,000 4,000
November 2028 November 2018 2.00 6,000 6,000
February 2030 February 2020 0.0013 711,345 711,345
June 2031 June 2021 0.0013 711,345 711,345
June 2031 June 2021 0.6695 268,237 337,449
November 2031 November 2021 0.7060 202,511 202,511
December 2032 December 2022 0.8750 151,622 -
2,066,060 1,983,650
No options were exercised or expired during the periods covered by the above
tables.
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 December 2022
The Group issued 151,622 share options to senior member of staff of Zinc Media
Group on the 12(th) of December 2022 under the Company's EMI Share Option
Plan.
The options are exercisable at 87.5 pence per share on or after the third
anniversary of their grant. Half the options will vest if the share price is
at least £1.3125 for a period of 30 consecutive dealing days ending on or
after 12(th) of December 2025. The remaining half of the Options will vest
unconditionally on the third anniversary of the grant date, being 12 December
2025.
The inputs into the option pricing model for the options granted in December
2022 are as follows:
Scheme EMI
Weighted average share exercise price 87.5 pence
Weighted average expected volatility - tranche 1 47.15%
Weighted average expected volatility - tranche 2 61.05%
Average expected life (years) - tranche 1 4.3 years
Average expected life (years) - tranche 2 6.5 years
Weighted average risk-free interest rate - tranche 1 3.25%
Weighted average risk-free interest rate - tranche 2 3.27%
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.
8) ADJUSTING ITEMS
2022 2021
£'000 £'000
Adjusting Items
Reorganisation and restructuring costs (160) (81)
Acquisition costs (953) (60)
Share based payment charge (180) (122)
Loss on disposal of tangible assets - (4)
Total (1,293) (267)
Adjusting 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.
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 has
been presented as adjusting to enable a more refined evaluation of financial
performance.
Acquisition costs
Acquisition costs represent costs incurred in the acquisition of The Edge
Picture Co during the year. These costs are non-recurring in nature and are
therefore treated as an adjusting item for management to better understand the
underlying performance of the Group in the year. These costs are also included
in operating activities in the cash flow statement.
9) FINANCE COSTS
2022 2021
Finance Costs £'000 £'000
Interest payable on borrowings (336) (176)
Interest payable on lease liabilities (54) (65)
Finance Costs (390) (241)
Finance Income
Interest received 1 -
Net finance costs (389) (241)
10) INCOME TAX EXPENSE
Taxation Charge/credit
2022 2021
£'000 £'000
Current tax expense:
Current tax expense 4 4
Charge in respect of prior periods - -
4 4
Deferred tax
Origination and reversal of temporary differences (953) (126)
Effect of change in UK corporation tax rate (39) 42
Adjustments in respect of prior periods 1 (6)
(991) (90)
Total income tax credit (987) (86)
Reconciliation of taxation expense:
2022 2021
£'000 £'000
Loss before tax (3,269) (2,606)
Taxation expense at UK corporation tax rate of 19% (2021: 19%) (621) (495)
Other non-taxable income/non-deductible expenses 239 54
Tax losses (recognised)/not recognised (610) 311
Group relief (claimed)/surrendered (4) 4
Effect of changes in UK corporation tax rates (39) 42
Varying tax rates of overseas earnings (100) -
Adjustments to tax charge in respect of previous years 147 -
Charge in respect of prior periods 1 (2)
Total income tax credit (987) (86)
11) 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.
2022 2021
Number of Shares Number of Shares
Weighted average number of shares used in basic and diluted earnings per share 18,480,039 16,095,991
calculation
Potentially dilutive effect of share options 1,558,184 1,117,890
£'000 £'000
Loss for the year from continuing operations attributable to shareholders (2,297) (2,544)
Continuing operations
Basic Loss per share (pence) (12.43)p (15.80)p
Diluted Loss per share (pence) (12.43)p (15.80)p
12) INTANGIBLE ASSETS
Goodwill Brands Customer Relationships Software Distribution Catalogue Order Book Total
£'000 £'000 £'000 £'000 £'000 £'000 £000
Cost
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
Additions - - - 50 - - 50
Acquired through business combinations 1,503 1,464 1,450 - 4,536
- 119
At 31 December 2022 10,456 2,143 4,753 280 443 119 18,194
Amortisation and impairment
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)
Charge for the year - (113) (351) (59) (73) (119) (715)
At 31 December 2022 (5,898) (681) (3,143) (239) (443) (119) (10,523)
Net Book Value
At 31 December 2022 4,558 1,462 1,610 41 - - 7,671
At 31 December 2021 3,055 111 511 50 73 - 3,800
* The goodwill, brands and customer relationship intangibles have been
de-recognised as they were previously fully amortised or impaired.
Impairment Tests for Goodwill
Goodwill by cash generating unit is:
2022 2021
£'000 £'000
Tern TV CGU 1,444 1,444
London & Manchester TV CGU 1,611 1,611
The Edge CGU 1,503 -
Total 4,558 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, gross margins 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 2023 business unit forecasts are based on the budget set for the year.
In TV a growth rate of 2 per cent has been used for the following years into
perpetuity. Management believes 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, the discounted cash flow methodology has
been employed, which is based on assumptions and judgements related to
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 three cash generating units operate in a similar media landscape and the
pre-tax discount rate applied across the segments for period ended 31 December
2022 was 9.1 per cent (2021: 10 per cent). A sensitivity analysis of an
increase in the discount rate by 2.4 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 9.1 per cent. An increase in the discount rate to 11.5 per cent will result in no impairment
charge.
Revenue and Gross Margins London & Manchester TV's and Tern TV's CGU revenue for 2023 is forecast to If there is a shortfall in revenue of 20% or a reduction in gross margin of
increase and London & Manchester TV's gross margin is forecast to 4%, there would be no impairment charge.
increase.
EBITDA growth Rate An average rate of 2 per cent has been used for financial year 2025 onwards. If a zero per cent average growth rate was applied for 2024 onwards there
would be no impairment in any of the CGU's.
Sensitivity analysis using reasonable variations in the assumptions shows no
indication of impairment.
13) PROPERTY, PLANT AND EQUIPMENT
Short leasehold land and buildings Motor vehicles Office and computer equipment Total
£'000 £'000 £'000 £'000
Cost
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
Additions 24 - 331 355
Disposals and retirements - - (17) (17)
Acquired through business combinations - 8 185 193
At 31 December 2022 448 21 2,113 2,582
Depreciation
At 31 December 2020 (358) (35) (2,606) (2,999)
Charge for the period (73) - (219) (292)
Disposals and retirements 244 22 1,878 2,144
At 31 December 2021 (187) (13) (947) (1,147)
Charge for the period (76) (1) (319) (396)
Disposals and retirements - - 17 17
At 31 December 2022 (263) (14) (1,249) (1,526)
Net Book Value
At 31 December 2022 185 7 864 1,056
At 31 December 2021 237 - 667 904
14) INVENTORIES
31 Dec 31 Dec
2022 2021
£'000 £'000
Work in progress 73 226
Total Inventories 73 226
15) TRADE AND OTHER RECEIVABLES
31 Dec 31 Dec
2022 2021
£'000 £'000
Current
Trade receivables 6,872 2,609
Less provision for impairment (380) (549)
Net trade receivables 6,492 2,060
Prepayments 507 325
Other receivables 1,047 -
Contract assets 2,545 1,502
Total 10,591 3,887
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 is 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 and
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 £380,000 (2021: £549,000) 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-division 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 2022. 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 (2021: £nil).
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 2022
Gross carrying amount (£'000) 590 172 106 - - - 1,649
781
Loss allowance provision (£'000) - - - - - - -
-
The expected credit loss in this division is immaterial.
The Edge
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 2022
Gross carrying amount (£'000) 1,126 303 366 - - - 3,201
1,406
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 2022
0-30 days
Expected loss rate (%) 12% 15% 18% 20% 23% 37% 51% 34%
Gross carrying amount (£'000) 130 128 57 50 354 416 1,266
131
Loss allowance provision (£'000) 18 21 10 10 116 190 380
15
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 2022
0-30 days
Gross carrying amount (£'000) 113 68 27 - - - 757
549
Loss allowance provision (£'000) - - - - - - -
-
The expected credit loss in this division is immaterial.
16) CASH AND CASH EQUIVALENTS
31 Dec 31 Dec
2022 2021
£'000 £'000
Total Cash and cash equivalents 3,632 5,608
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).
17) TRADE AND OTHER PAYABLES
31 Dec 31 Dec
2022 2021
£'000 £'000
Current
Trade payables 1,415 764
Other payables 492 133
Other taxes and social security 1,149 1,348
Accruals 4,139 3,486
Contract liabilities 1,895 1,068
Contingent consideration payable 663 -
Total 9,753 6,799
Non-Current
Contingent consideration payable 2,476 -
Total 12,229 6,799
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value. The Group's payables are unsecured.
18) 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 January 2021 1,073 204 1,277
Additions 373 - 373
Depreciation (407) (82) (489)
Balance as at 31 December 2021 1,039 122 1,161
Additions - 42 42
Acquired through business combinations 433 - 433
Depreciation (455) (97) (552)
Balance as at 31 December 2022 1,017 67 1,084
Lease liabilities are presented in the statement of financial position as
follows:
31 Dec 31 Dec
2022 2021
£'000 £'000
Current 675 431
Non-current 352 735
Total lease liabilities 1,027 1,166
The Groups future minimum lease payments are as follows:
31 Dec 31 Dec
2022 2021
£'000 £'000
Not later than 1 year 707 475
Later than 1 year and not later than 5 years 312 413
Later than 5 years 50 282
1,069 1,170
19) BORROWINGS AND OTHER FINANCIAL LIABILITIES
31 Dec 31 Dec
2022 2021
£'000 £'000
Current
Lease liabilities 675 431
Debt facility - unsecured borrowings - 2,450
Loan notes - unsecured borrowings - 978
Sub total 675 3,859
Non-current
Debt facility - unsecured borrowings 2,512 -
Loan notes - unsecured borrowings 978 -
Lease liabilities 352 735
Sub total 3,842 735
Total 4,517 4,594
Maturity of Financial Liabilities
The maturity of borrowings (analysed by remaining contractual maturity) is as
follows:
31 Dec 31 Dec
2022 2021
£'000 £'000
Repayable within one year and on demand:
Lease liabilities 707 475
Trade and other payables 1,907 897
Accrued expenses 4,139 3,486
Debt facility - unsecured - 2,531
Loan notes - unsecured - 1,189
Contingent consideration 663 -
7,416 8,578
Repayable between one and two years:
Lease liabilities 312 413
Debt facility - unsecured 3,080 -
Loan notes - unsecured 1,111 -
4,503 413
Repayable between two and five years:
Lease liabilities 50 282
Contingent consideration 2,476 -
2,526 282
Total 14,445 9,273
Debt Facility
Loans totalling £2.5m (2021: £2.5m) are held by Herald Investment Trust Plc
and The John Booth Charitable Foundation ("JBCF"), all of whom are a related
party through shareholding. During the year the interest on the facility is
based on monthly SONIA plus a margin of 4%, subject to a floor of RPI. The
debt facility is unsecured and is repayable in full on 31 December 2024. There
are no financial covenants in force in respect of this debt facility.
Loan notes - unsecured
The unsecured loan notes of £1.0m (2021: £1.0m) 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%. The loan
notes are repayable in full on 31 December 2024. 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 2021 Cash flows Interest charged Interest paid Non-cash changes 31 Dec 2022
£'000 £'000 £'000 £'000 £'000 £'000
Borrowings - debt facility 2,450 - 249 (187) - 2,512
Borrowings - loan notes 978 - 78 (78) - 978
Lease liabilities 1,166 (612) 57 - 416 1,027
Total liabilities from financing activities 4,594 (612) 384 (265) 416 4,517
20) 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 19, 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 is currently satisfied
with the Group's gearing ratio.
The gearing ratio at the year-end is as follows:
31 Dec 2022 31 Dec 2021
£'000 £'000
Borrowings (debt facility and loan notes) (3,490) (3,428)
Cash and cash equivalents 3,632 5,608
Net Cash 142 2,180
Total equity 6,959 3,747
Net cash to equity ratio -2% -58%
The Group's gearing ratio has changed due to a reduced cash balance resulting
from operational cash outflows and an increase in equity due to an equity
fundraise in the year.
Financial instruments by category
31 Dec 31 Dec
2022 2021
£'000 £'000
Categories of financial assets and liabilities
Financial assets - measured at amortised cost
Trade and other receivables 10,083 3,566
Cash and cash equivalents 3,632 5,608
Financial liabilities - other financial liabilities at amortised cost
Trade and other payables (6,046) (4,383)
Borrowings (3,490) (3,428)
Lease liabilities (1,027) (1,166)
Financial liabilities - other financial liabilities at fair value
Contingent consideration payable (3,139) -
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.
The contingent consideration payable is measured at fair value, using level 3
inputs in the calculation of fair value. The contingent consideration is made
up of two parts. The larger portion of the consideration is fair valued using
a Monte Carlo simulation where the EBIT of each of the three years is an
independent, normally distributed random variable. An EBIT of £1.2m has been
used for year one with a 5% increase in each of years 2 and 3. Values have
been calculated for all three years and in total and the average represents
the fair value. As this is based on estimated EBIT the actual amount may be
different. The smaller part of the contingent consideration relates to a
performance bond that is owed to The Edge. All contingent consideration has
been discounted using a discount rate of 9.2%.
A £100k increase in EBIT in each of the three years could increase the
contingent consideration payable by £113k, and a £100k decrease in EBIT in
each of the three years could decrease the contingent consideration payable by
£126k.
21) DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 25% (2021:19%) for UK differences. The
movements in deferred tax assets and liabilities during the year are shown
below.
Deferred Tax Asset Deferred Tax Liability Net Position
£'000 £'000 £'000
Recognised on intangible assets - (190) (190)
At 31 December 2021 - (190) (190)
Recognised on intangible assets - (801) (801)
Recognised on current period amortisation 164 - 164
Recognised on tax losses 827 - 827
At 31 December 2022 991 (991) -
Deferred tax assets estimated at £4.2 million (2021: £4.8 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.
22) PROVISIONS
31 Dec 31 Dec
2022 2021
£'000 £'000
Provisions 242 250
Movement in provisions
£'000
At 31 December 2021 250
Net decrease in provision in the year (8)
At 31 December 2022 242
Provisions comprise dilapidation provisions relating to properties. The
associated forecast cash outflows are £0.1m in 2023 and £0.1m in 2025. The
movement in the provision in the year comprises a £0.05m cash outflow and an
additional £0.04m provision in relation to The Edge.
23) BUSINESS COMBINATIONS
The Edge Picture Co Limited
In August 2022, the Company acquired the entire issued share capital of The
Edge Picture Co Limited ("The Edge").
The consideration comprised initial consideration of £1.24m in cash and
£0.54 million paid in shares and deferred consideration of up to a further
£3.875m. The deferred consideration will be satisfied by (i) cash and (ii) a
combination of cash, the issue of shares and/or the issue of loan notes in
Zinc (in each case at Zinc's sole discretion) contingent on the trading
performance of The Edge over each of the 12 month periods ending 30 June 2023,
30 June 2024 and 30 June 2025. An additional amount of deferred consideration
up to an approximate amount of £0.8m may become payable in cash following The
Edge receiving the same amount under an existing financial arrangement and is
not considered an additional cost to Zinc.
The acquisition was funded by the share placing of 5,037,059 new ordinary
shares at £1 per share with certain of the Company's shareholders and new
investors. The placing raised gross proceeds for the Company of £5.037m.
Issue costs of £0.27m which were directly attributable to the issue of the
shares have been netted against the deemed proceeds.
The Edge's full year trading performance resulted in £13m of revenue and
£1.3m of profit before tax, of which £5.8m of revenue and £0.7m of profit
before tax has been included in the Group's consolidated results.
The fair value of the assets acquired and liabilities assumed were as follows:
Fair Value
£'000
Property, plant and equipment 193
Right of use assets 433
Trade and other receivables 4,000
Work in progress 38
Cash and cash equivalents 913
Trade and other payables (3,743)
Lease liabilities (371)
Current tax liabilities (145)
Deferred tax (43)
Net assets acquired 1,275
Brand capitalised 1,464
Order book capitalised 119
Customer relations capitalised 1,450
Deferred tax liability on intangible assets (758)
Goodwill capitalised 1,503
Consideration 5,053
Satisfied by:
Issue of shares 540
Cash 1,237
Deferred contingent consideration 3,276
5,053
The acquisition of The Edge forms part of the Group's growth strategy. The
acquisition resulted in a goodwill value of £1.5m of which £nil is tax
deductible.
24) SHARE CAPITAL AND RESERVES
31 Dec 22 31 Dec 21
Ordinary shares with a nominal value of: 0.125p 0.125p
Authorised:
Number Unlimited Unlimited
Issued and fully paid:
Number 21,806,834 16,200,919
Nominal value (£'000) 27 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 2022 31 Dec 2021
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 16,200,919 20 4,785 27 15,963,039 20 4,654 27
Share placing and subscription for cash 5,037,059 6 5,031 - - - - -
Expenses of issue of shares - - (270) - - - - -
Consideration paid in shares 540,000 1 - 539 - - - -
Shares issued in lieu of fees 28,856 - - - 237,880 0.3 131 -
At end of year 21,806,834 27 9,546 566 16,200,919 20 4,785 27
Share Placing
In August 2022 the company raised £5.04m (before expenses) through a placing
of 5,037,059 new ordinary shares at £1 per share.
Consideration paid in shares
On the 23rd of August 2022, the company issued 540,000 new ordinary shares as
part of the consideration for the acquisition of The Edge.
Shares issued in lieu of fees
On the 11 June 2022 the Group issued 28,856 new ordinary shares at a price of
£1.04 per share to a Director in lieu of payment of director fees.
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 attract 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'; and
· Retained earnings include the realised gains and losses made by
the Group and the Company.
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
2022 including accrued interest is £3.5m (2021: £3.4m). Interest accrued on
the debt amounted to £0.1m (2021: £0.0m).
26) POST BALANCE SHEET EVENTS
There are no post balance sheet events to disclose.
27) GUARANTEE IN RELATION TO SUBSIDIARY AUDIT EXEMPTION
On 19 April 2023, 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 (02800925)
Zinc Communicate CSR Limited (06271341)
Films of Record Limited (01446899)
Reef Television Limited (03500852)
Zinc Television Regions Limited (02888301)
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 (#_ftnref1) Adjusted EBITDA is defined as EBITDA before Adjusting Items
(see Note 8) comprising share based payment charges, loss on disposal of fixed
assets, reorganisation and restructuring costs, acquisition costs and
contingent consideration treated as remuneration
2 (#_ftnref2) Pro-forma revenues demonstrate performance had The Edge been
owned by the Group for the whole of FY22
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