REG - Zinc Media Group PLC - Final Results and Notice of AGM
25/04/2024 07:00
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RNS Number : 9378L Zinc Media Group PLC 25 April 2024
25 April 2024
Zinc Media Group plc
("Zinc" or the "Group")
Results for the year ended 31 December 2023
and
Notice of Annual General Meeting
Zinc Media Group plc (AIM: ZIN), the award-winning television and content
production group, is pleased to announce its audited results for the year
ended 31 December 2023 ("FY23").
The Group is pleased to report a strong set of results with a record year for
revenue and profit growth for FY23, including the following highlights:
Financial Highlights
• Full year revenue increased by 34% to £40.2m (FY22: £30.1m),
ahead of market expectations.
o Revenue growth was driven by 19% organic growth in television revenues of
£3.9m alongside a full year contribution of The Edge which was acquired in
August 2022.
o The Group has significantly outperformed the UK television production
sector with revenues growing by £23m in two years, a compound annual growth
rate (CAGR) of 52%.
o 80% of revenue was delivered from existing customers, in line with FY22.
• Gross margins have increased from 34.0% to 39.5%, driven by higher
margin TV work and the full year impact of The Edge.
• Adjusted EBITDA 1 of £1.0m (FY22: £0.1m), the highest for 13
years and in line with market expectations.
o Profitability was supressed by some of the Group's businesses still being
in an investment stage, where they are delivering rapid revenue growth but are
yet to reach profitability and made a combined loss of £1.2m.
• Robust balance sheet with cash of £4.9m as at 31 December 2023
(31 December 2022: £3.6m), a £1.3m increase on FY22 driven by the positive
trading performance and working capital inflows. Cash as at 19 April 2023 was
£5.8m.
• Loss before tax narrowed considerably to £2.0m (FY22: £3.3m).
The loss is largely driven by non-cash items including amortisation related to
previous acquisitions, depreciation and one-off costs related to share
options.
£m 2023 2022 Movement
Income Statement
Revenue 40.2 30.1 +10.1
Gross Profit 15.9 10.2 +5.7
Gross Margin 39.5% 34.0% +5.5%
Loss before tax (2.0) (3.3) +1.3
Adjusted EBITDA Profit ((1)) 1.0 0.1 +0.9
Statement of financial position
Cash 4.9 3.6 +1.3
Debt (3.5) (3.5) -
Net cash 1.4 0.1 +1.3
Operational Highlights
• The Group's diversification strategy continues to accelerate and
the diversified production base reduces the risk associated with exposure to
any one market or territory.
o Television production now accounts for 60% of the Group's revenues (FY22:
67%), whilst production for brands and businesses accounts for 40% (FY22:
33%).
o 23% of revenues come from outside the UK (FY22: 18%).
• The Group was crowned "Production Company of the Year" for the
second year running at the prestigious New York Festival Film and Television
Awards.
• The Edge Picture Company, acquired in August 2022, continues to
perform ahead of acquisition expectations, generating £13m of revenue in
FY23. Integration of The Edge includes cross-divisional business development
opportunities and the co-location with Zinc's other London businesses is
enabling cost savings and realising further synergies.
• The Edge won numerous awards for the quality of its work including
Cannes Corporate Media & TV Awards, EVCOM London Film Awards and New York
Festivals TV & Film Awards.
Highly Acclaimed Programmes
• A record 15 television series were recommissioned, along with 6
new series which have the potential to return in future years.
• The Group produced 250 hours of television production, up from 194
the previous year, with a number of documentaries leading the UK news agenda
in FY23, including:
• Putin vs The West, which made global headlines, was one of the
most watched programmes on BBC iPlayer and has been nominated for a BAFTA
Award.
• Deborah James: Bowelbabe in Her Own Words for the BBC, which
details the extraordinary last five years of cancer campaigner Dame Deborah
James' life, received national press coverage, was on the front page of the
Radio Times and was nominated for a Grierson award.
• Gender Wars explored the issue of transgender women's rights for
Channel 4 as part of its remit to make agenda setting programmes which tackle
contentious issues.
• The Group was commissioned for its largest ever USA television
series worth $9m called Top Gun: The Next Generation (working title) for
National Geographic Channel and which will be available on Disney+.
• The Group won its largest ever volume television commission in a
two-year deal worth over £7m from Channel 5 for 136 hours of the hit show
Bargain Loving Brits.
• The Group produced its biggest ever digital branded content
commission Big in America with Alex Polizzi, commissioned by the Department
for Business & Trade and broadcast on LinkedIn.
• The Group partnered with Idris Elba to co-produce Paid in Full:
The Battle for Payback (working title) for broadcasters CBC (Canadian
Broadcasting Corporation) and the BBC, examining the systematic exploitation
of black artists by the music industry.
• There are currently 40 television programmes produced by Zinc
companies available to view in the UK, either on terrestrial channels,
on-demand or via subscription TV platforms. A full list of Zinc produced
programmes currently available to watch is on the Group's website:
https://zincmedia.com/what-to-watch-on-tv/
(https://zincmedia.com/what-to-watch-on-tv/) .
FY24 Trading and Outlook
• The Group is trading strongly with £24m of revenue already booked
and expected to be recognised in FY24.
• The Group's pipeline remains strong with a further £8m of revenue
at a highly advanced stage, along with significant opportunities in earlier
stages of development.
• The Group is targeting £0.5m of savings p.a by the end of 2025 as
part of an efficiency and synergy programme.
• The Group has good visibility to more than double EBITDA profit as
current investments generate returns, modest organic growth continues and
identified efficiencies are realised.
• This provides the Board with confidence in delivering FY24 market
expectations.
The FY23 results are summarised in a short film on the Zinc website here:
https://zincmedia.com/annual-results-2023/
(https://url.uk.m.mimecastprotect.com/s/PkPpCK3wsVwg0HM7qoN?domain=zincmedia.com)
Mark Browning, CEO of Zinc Media Group, commented:
"This has been a year of record achievement for the Group and comes off the
back of significant investment in our people and our businesses along with our
acquisition of The Edge 18 months ago. We have big ambitions to scale this
Group through organic expansion and strategic acquisition".
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 2024
annual general meeting (the "AGM"), which will take place at 10.00am on 22 May
2024 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 / Sam Butcher
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.
The Edge Picture Company produces film content for brands and corporates in
the UK, Qatar and other international markets. Zinc Communicate specialises in
developing cross-platform content for brands, businesses and rights holders.
For further information on Zinc Media please visit www.zincmedia.com
(http://www.zincmedia.com/) .
Chairman's Statement
2023's financial results continue the strong improvement in performance of the
last few years. The Board is delighted to see revenue grow by over 30%,
especially in the face of a challenging UK production market, powered by
excellent organic growth and a full year contribution from The Edge. Most
importantly the Group delivered the highest Adjusted EBITDA in the last 13
years, in line with market expectations.
The Group reports high quality revenue with a significant volume of repeat
business, a record number of returning series and a highly diversified client
base. Gross margins in the year were at record levels and the Group closed the
year with a strong balance sheet.
The Group's content proposition is built on trust and quality. Zinc Media is
trusted to tell the world's most important stories, like Putin vs The West for
the BBC, trusted with complex and sensitive access, as seen in the brilliant
documentary Deborah James: Bowelbabe in Her Own Words, trusted with enormous
returning series like Bargain Loving Brits, and trusted to work with the
biggest stars in the world, as seen in our current collaboration with Idris
Elba. These are all delivered to the highest quality and are recognised with
awards such as Production Company of the Year at the New York Festival Film
and Television Awards, and the BAFTA nomination in March 2024.
The Group has a clear pathway to more than doubling EBITDA profit and with it
delivering long term sustainable operating profits. The Group continues to
balance profitability with further organic investment in new markets and
continues to seek out suitable acquisition opportunities which can accelerate
growth and add to shareholder value by driving further synergies and scale in
the Group.
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 record achievement
for the Group.
CEO's Review
The strategic priorities for 2023 were to:
• deliver strong organic growth initiated by investments made in
previous years;
• successfully integrate The Edge acquisition which completed in
August 2022; and
• deliver against market expectations for both revenue and EBITDA.
Each priority was achieved in the year.
Revenue: Strong organic growth
The Group defied weak market conditions in 2023, delivering total revenue
growth of 34% to £40.2m (FY22: £30.1m). It is particularly pleasing that
television revenue grew organically by 19% to £24.1m (FY22 £20.2m). This
significantly outperformed the wider television market and followed investment
in previous years which has seen the Group launch new television labels and
diversify into new markets in both the UK and US.
The Group comprises a total of twelve businesses that operate in two areas:
television production (Tern, Brook Lapping, Red Sauce, Supercollider, Rex,
Atomic Television and Bumblebee post-production) 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 and are consistently
profitable. Seven were launched as part of the Group's transformation plan and
are growing income at an accelerated rate, but not all are profitable yet.
These comprise the London TV labels Red Sauce, Supercollider and Rex,
alongside the Zinc Communicate businesses in brand entertainment, corporate
film and audio, the Bristol based business Atomic Television and the
post-production business Bumblebee. Together these new businesses contributed
£13m revenue (FY22 £9m), accounting for 32% of the Group's turnover.
The Edge performed strongly in the year, delivering £13m of revenue. It is
now co-located at the Zinc head office in London, which has supported cross
selling with all parts of the Group, and final integration, including all
finance systems, will be complete by the end of H1 24.
Excellent revenue quality and a highly diversified client base
The Group has established a loyal customer base built on high levels of repeat
business with 80% of revenue delivered from existing customers, which is in
line with FY22 and significantly ahead of FY21. This, despite a soft market,
demonstrates the Group's resilience and bodes well for when market conditions
return to more normal levels. A high level of returning business is
particularly pleasing when taking into account the number of new businesses
within the Group that are still establishing their client base.
Record levels of Adjusted EBITDA profit with clear path to operating profit
The Group is pleased to report £1.0m of Adjusted EBITDA for FY23 (FY22
£0.1m), with £0.9m of this coming in the second half of the year, which is
typically the Group's strongest half. This is the highest level of Adjusted
EBITDA since 2010, and before the Group became a predominantly
television-based business.
This million-pound milestone is a significant threshold and opens the door to
long term sustainable profitability. The £1.0m of Adjusted EBITDA was
supressed by some of the Group's businesses still being in an investment
stage, where they are delivering rapid revenue growth but are yet to reach
profitability and made a combined loss of £1.2m. The Bristol based Atomic
Television was launched in January 2023 and won its first commission in April
that year. Rex TV and Supercollider are at a similar stage of their
development. Alongside a profit lag caused by these investments in maturing
labels, two businesses within the Zinc Communicate portfolio struggled in the
face of a significant decline in the UK advertising market. The Branded
Entertainment and Audio business and the Corporate Film business were both hit
by tough trading conditions and were subsequently restructured in Q1 2024 and
are now more closely aligned with The Edge.
Everything we produce benefits from Zinc's platform. We've invested in
technology, operational infrastructure, post-production and remote workflows
so that we can produce content from anywhere in the world, and our work
environments enable creative collaboration to thrive. This powers all our
companies by bringing specialist expertise together, driving efficiencies,
improving margins and building a successful creative culture. Zinc's platform
means we can scale quickly as new opportunities arise and it has supported the
doubling of revenues over recent years.
To aid the delivery of sustainable operating profitability, the Group is
targeting further efficiencies which are anticipated to yield £0.5m of
annualised savings in FY25. Current investments generating returns and
further organic growth give the Board confidence that the Group can more than
double EBITDA without the need for further rapid revenue growth as realised
over the last few years.
With operating profitability expected as Adjusted EBITDA reaches the £2m
level, we're confident this will be achieved in the near future as the
television market recovers.
Programme highlights
2023 was an unrivalled year of programme and editorial highlights.
Across the Group's television labels, 15 series were recommissioned. This is
the highest number of returning series the Group has achieved. Returning
series are the critical factor of a successful television company as they
underpin long term growth and investment. Returning series include Sunday
Morning Live, Con or Cure, and Martin Compston's Norwegian Fling for the BBC,
Special Ops: Crime Squad UK for Dave, Zinc's largest ever volume commission,
Bargain Loving Brits, for Channel 5, and a second series of Putin vs The West
for the BBC. A significant number of series have once again been
recommissioned for FY24 with some crossing into FY25.
Our television companies produced a total of 250 hours of original television
production, up from 194 hours in FY22. Alongside the commercially valuable
returning series were a high volume of reputational feature documentaries and
singles. While these do not span numerous years they build considerable
industry reputation, which often sees the commissioning channel return year
after year for further commissions. These include Deborah James: Bowelbabe
in Her Own Words, Gender Wars, Gilbert and George, Blackadder: The Lost Pilot
and Get Your Eurovision On!.
Zinc's proposition is built on trust and quality. It has a global reputation
for delivering the highest quality production as evidenced in numerous awards
including being crowned Production Company of the Year for the second year
running at the New York Festival Awards. It is trusted by clients to deliver
exclusive access as demonstrated by the Putin vs The West series which
featured contributions from the UK Prime Minister and former Prime Ministers,
President Zelensky, the Director of the CIA and the UN Secretary General. Zinc
is trusted to deliver at significant scale, as evidenced by the 136 hour
series Bargain Loving Brits for Channel 5. It is trusted to work with some of
the biggest global presenters and is currently co-producing a high-profile
series with Idris Elba, and it is trusted to deliver on time and on budget
which is why the Group has received such high levels of repeat business.
There were a number of significant firsts in the year including:
• The Group's largest ever USA television series worth $9m called
Top Gun: The Next Generation (working title). This was commissioned by
National Geographic Channel and will be available on Disney+. Production
commenced in FY23 and the series is due to be delivered in FY25. Zinc has
secured trusted access to the US military training base for elite pilots.
• The Group won its largest ever volume television commission in a
two-year deal worth over £7m. The commission is from Channel 5 for the hit
show Bargain Loving Brits.
• The Group produced its biggest ever digital branded content
commission Big in America with Alex Polizzi. It was commissioned by
the Department for Business & Trade and was broadcast on LinkedIn.
LinkedIn is the largest B2B networking website in the world, and this is the
first televisual series it has broadcast.
• The Group partnered with Idris Elba to co-produce Paid in Full:
The Battle for Payback (working title) for broadcasters CBC (Canadian
Broadcasting Corporation) and the BBC. This series is examining the systematic
exploitation of black artists by the music industry.
There are currently over 40 television programmes produced by Zinc companies
available to view in the UK, either on terrestrial channels, on-demand or via
subscription TV platforms. A full list of Zinc produced programmes currently
available to watch is on the Group's new website:
https://zincmedia.com/what-to-watch-on-tv/
The number of television productions which are made outside London ("MoL") is
an important criterion for the UK's Public Service Broadcasters ("PSBs") and
Zinc is well placed to address this need, with substantive production centres
in Manchester, Glasgow and Belfast. 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. 70% of Zinc's television production revenues in FY23 were MoL, up
from 67% in FY22, 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 2023 for many of the world's largest and most recognisable
brands, with The Edge winning numerous awards for the quality of its work
including Cannes Corporate Media & TV Awards, EVCOM London Film Awards and
New York Festivals TV & Film Awards.
Dozens of other programmes were produced by Zinc Media Group in 2023, and many
more of these can be seen on the company's website, zincmedia.com
(http://www.zincmedia.com) , and social media channels. Zinc's group of
companies produce content that is watched by tens of millions of people across
the world every year, and its programmes lead the news and the national
conversation across the United Kingdom.
Market
In television, the UK PSB network groups (comprising the BBC, ITV, Channel 4
and Channel 5) represent the largest addressable market for Zinc with the
Group producing for all of them.
The total TV commissioning market for UK producers is worth approximately
£4bn 2 (UK PSB network groups account for approximately half this), with the
factual television spend (specialist factual, general factual and factual
entertainment), Zinc's core competence, at £1bn.
The fastest growing market for UK television producers is with the large
international channels and subscription video on demand ("SVoD") platforms,
which has almost doubled since 2021, reflecting the entry of new players like
Apple and Disney. Zinc is capitalising on the growth in this market, having
secured its highest ever commission in FY23 with the National Geographic
Channel, a joint venture with Disney, and includes SVoD platforms Disney+ and
Hulu.
The biggest growth in revenue and share is coming from the largest UK
television producers (over £70m turnover), which underlines Zinc's desire to
become a producer at scale.
Over the last three years, between 60% and 70% of UK original commissions
(i.e. not repeats or acquisitions) has been on returning series, underlying
Zinc's focus on securing its highest level of returning series in FY23.
Zinc is well placed to continue to grow from this large factual commissioning
market especially as the UK PSB's continue their push to spend on television
commissions made outside of London. This validates Zinc's continued investment
in Tern TV (Glasgow and Belfast), Red Sauce TV (Manchester) and Atomic
Television (Bristol).
While factual television, which is Zinc's television heartland, accounts for
approximately 25% of UK original television production, Entertainment and
Drama are the two largest genres, being 27% and 37% respectively. As Zinc's
proposition develops in the next phase of its growth, it will seek out
opportunities to expand organically and via acquisitions into these lucrative
genres.
In addition to broadcast television production, the Group's corporate and
brand production company The Edge continues to grow at pace, delivering record
revenues in FY23 and investing in new markets in FY24. It is anticipated
that these investments will deliver further record revenue for The Edge in
FY25, further cementing its position as one of the market leaders in this
large, and higher margin, production sector.
Outlook
The Group entered 2024 with a significant amount of pre-booked revenue,
putting it in the best possible position to navigate the ongoing weak
television commissioning market. As at 22 April 2024, revenue booked and at a
highly advanced stage on the pipeline totals £32m, which is in line with the
same stage in FY23. The Board is confident in achieving market expectations
for the year ahead and has heightened confidence that as the UK television
market and wider economy recovers, the long-term prospects for sustainable
growth, profitability and reputational success remain very strong.
CFO's Report
£m 2023 2022 Movement
Income Statement
Revenue 40.2 30.1 +10.1
Gross Profit 15.9 10.2 +5.7
Gross Margin 39.5% 34.0% +5.5%
Loss before tax (2.0) (3.3) +1.3
Adjusted EBITDA Profit 1.0 0.1 +0.9
Statement of financial position
Cash 4.9 3.6 +1.3
Debt (3.5) (3.5) -
Net cash 1.4 0.1 +1.3
Income statement
Revenue
The key drivers for the increase in revenue from £30.1m to £40.2m are
organic growth of £3.9m from television revenues and £6.2m from growth in
content production. Television revenue growth has been driven by the
investment in recent years launching new labels focused on particular sectors
of the television market to target new customers and diversify revenue.
Content production includes brand and corporate film production, radio and
podcast production and publishing, as well as a full year of The Edge which
had another strong year following its acquisition in August 2022.
Revenue (£m)
Gross margin and operating expenses
The Group's gross margin increased during the period from 34.0% to 39.5% as
margins increased across both television and content production due to winning
higher margin TV work and the full year impact of The Edge. In FY22 a
strategic decision was taken to increase the volume of lower margin television
revenue to support the Group's expansion into new television markets. As these
programmes have been recommissioned in FY23 the Group has been able to
increase margins due to learnings from earlier series and finding economies of
scale across productions. Content production for brands and businesses is
typically delivered at a higher margin than television production and a full
year effect of The Edge has helped to increase margins in aggregate for the
Group.
Group gross margins are the highest they've been in recent years, as
demonstrated in the graph below.
Group gross margins (%)
Adjusting items incurred during the year amounted to £0.3m (FY22: £1.3m),
which mainly comprised costs relating to share options of £0.5m (FY22:
£0.2m) offset by a £0.4m change in the fair value of contingent
consideration in respect of The Edge (FY22: nil).
Operating expenses have risen by £4.0m to £17.1m, and whilst this represents
a 31% increase on the prior year, the growth has been mainly driven by the
full year impact of the costs related to The Edge being part of the Group.
Nonetheless, operating costs as a percentage of revenue have fallen for a
second consecutive year to 42%.
Adjusted EBITDA of £1.0m (FY22: £0.1m) is the highest for 13 years and in
line with market expectations. Adjusted EBITDA is suppressed by £1.2m due to
businesses launched in recent years that are yet to reach profitability. The
businesses launched in recent years include Atomic Television, which was
launched in January 2023. It has already won its first commission, which is
being recognised across FY23 and FY24, and we expect it to grow in FY24 and
start to contribute to the Group's profitability. The Zinc Communicate
businesses in Brand Entertainment and Corporate Film had a challenging year
due to being sub-scale whilst trying to grow in difficult market conditions.
At the beginning of FY24 these businesses have been restructured and more
closely aligned with The Edge's brand and corporate film business. The loss
made by the Zinc Communicate businesses has partially offset The Edge's profit
within the Content Production segment of the Group.
Finance costs have risen from £0.4m to £0.8m as a result of £0.4m of
interest relating to the unwinding of the present value of contingent
consideration on The Edge acquisition (FY22: £nil). £0.3m of interest was
payable on the Group's long-term debt (FY22: £0.3m).
Loss before tax has narrowed by £1.3m to £2.0m driven by the improved
trading performance and non-recurring acquisition costs.
Earnings per share
Basic and diluted loss per share from continuing operations in FY23 was 9.05p
(FY22: loss per share of 12.43p). These measures were calculated on the losses
for the period from continuing operations attributable to Zinc Media Group
shareholders of £2.0m (FY22: loss of £2.3m) divided by the weighted average
number of shares in issue during the period being 21,985,965 (FY22:
18,480,039).
Dividend
The Board has not recommended a dividend in respect of the year ended 31
December 2023 (FY22: £nil).
Statement of Financial Position
Assets
The cash balance at the end of December 2023 was £4.9m, representing an
increase of £1.3m, or 36%, during the year. The increase in the Group's cash
balance was driven by the positive trading performance and working capital
inflows, particularly on large projects where working capital has been
efficiently managed.
Trade and other receivables have remained flat at £10.6m (FY22: £10.6m)
despite revenue increasing by 34%, having agreed more favourable payment terms
with customers.
Equity and Liabilities
Total equity has reduced from £7.0m to £5.8m as the loss in the year more
than offset the issue of new equity in relation to The Edge's year 1 earn out
target being achieved and share options exercised by directors.
Total liabilities increased by £1.4m to £18.5m due to advance payments being
received from customers for recognition in the income statement in FY24. The
Group had an outstanding balance on long-term debt of £3.5m at year-end
(FY22: £3.5m). The long-term debt holders are also major shareholders who own
41% of the Group's shares.
Cash Flows
The Group generated cash of £3.5m in the year (FY22: cash used of £4.6m) in
its operations, mainly driven by a decrease in working capital due to tight
working capital management, including receiving advance payments from
customers on some large productions. The net movement in the year was an
increase in cash of £1.3m (FY22: decrease of £2.0m) after financing activity
cash outflow and finance costs of £1.6m (FY22: inflow of £3.9m) and cash
used in investing activities of £0.5m (FY22: £1.2m), driven by £0.3m of
contingent consideration paid in respect of The Edge earn out, £0.5m on
capital expenditure (a £0.3m reduction year-on-year), lease payments of
£0.9m mainly relating to the Group's offices and £0.4m of long-term debt
interest payments.
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 2023
12 months ended 12 months ended
31 December 31 December
2023 2022
Notes £'000 £'000
Continuing operations
Revenue 4 40,225 30,083
Cost of sales 5 (24,328) (19,880)
Gross profit 15,897 10,203
Operating expenses 5 (17,093) (13,083)
Operating loss (1,196) (2,880)
Analysed as:
Adjusted EBITDA 1,006 75
Depreciation 5 (1,478) (947)
Amortisation 5 (462) (715)
Adjusting items 8 (262) (1,293)
Operating loss (1,196) (2,880)
Finance costs 9 (776) (390)
Finance income 9 9 1
Loss before tax (1,963) (3,269)
Taxation (charge)/ credit 10 (8) 987
Loss for the period (1,971) (2,282)
Attributable to:
Equity holders (1,990) (2,297)
Non-controlling interest 19 15
Retained loss for the period (1,971) (2,282)
Earnings per share
Basic 11 (9.05)p (12.43)p
Diluted 11 (9.05)p (12.43)p
The loss for the period attributable to equity holders from continuing
operations is £1,990k (31 December 2022: £2,297k).
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
2023
12 months ended 12 months ended
31 December 31 December
2023 2022
£'000 £'000
Loss for the year and total comprehensive expense for the period (1,971) (2,282)
Attributable to:
Equity holders (1,990) (2,297)
Non-controlling interest 19 15
(1,971) (2,282)
Consolidated statement of financial position as at 31 December 2023
2023 2022
Note £'000 £'000
Assets
Non-current
Goodwill and intangible assets 12 7,221 7,671
Property, plant and equipment 13 1,016 1,056
Right-of-use assets 18 443 1,084
8,680 9,811
Current assets
Inventories 14 63 73
Trade and other receivables 15 10,649 10,591
Cash and cash equivalents 16 4,948 3,632
15,660 14,296
Total assets 24,340 24,107
Equity
Called up share capital 23 28 27
Share premium account 23 9,546 9,546
Share based payment reserve 23 547 457
Merger reserve 23 1,163 566
Retained losses 23 (5,508) (3,653)
Total equity attributable to equity holders of the parent 5,776 6,943
Non-controlling interests 21 16
Total equity 5,797 6,959
Liabilities
Non-current
Borrowings 19 - 3,490
Lease liabilities 18 57 352
Deferred tax 21 - -
Provisions 22 276 242
Trade and other payables 17 1,940 2,476
2,273 6,560
Current
Trade and other payables 17 12,282 9,753
Current tax liabilities 165 160
Borrowings 19 3,463 -
Lease liabilities 18 360 675
16,270 10,588
Total liabilities 18,543 17,148
Total equity and liabilities 24,340 24,107
The consolidated financial statements were authorised for issue and approved
by the Board on 24 April 2024 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 2023
12 months ended 12 months ended
31 December 31 December
2023 2022
Note £'000 £'000
Cash flows from operating activities
Loss for the year before tax from continuing operations (1,963) (3,269)
(1,963) (3,269)
Adjustments for:
Depreciation 5 1,478 947
Amortisation and impairment of intangibles 5 462 715
Finance costs 9 385 390
Finance income 9 (9) (1)
Share based payment charge 7 195 180
Profit on disposal of fixed assets (29) -
Fees paid in shares 30 30
Remeasurement of contingent consideration payable 118 -
667 (1,008)
Decrease in inventories 10 191
Increase in trade and other receivables (58) (2,841)
Increase/ (decrease) in trade and other payables 2,876 (975)
Cash Generated from/(used in) operations 3,495 (4,633)
Finance income 9 1
Finance costs (411) (57)
Net cash flows Generated from/ (used in) operating activities 3,093 (4,689)
Investing activities
Purchase of property, plant and equipment 13 (505) (831)
Purchase of intangible assets 12 (12) (50)
Proceeds from disposal of tangible fixed asset 13 -
Acquisition of subsidiary net of cash acquired - (324)
Net cash flows used in investing activities (504) (1,205)
Financing activities
Issue of ordinary share capital (net of issue costs) - 4,767
Principal elements of lease payments (905) (555)
Borrowings repaid - (265)
Dividends paid to NCI (14) (23)
Contingent acquisition consideration paid (327) -
Net cash flows (used in)/generated from financing activities (1,246) 3,924
Net increase/ (decrease) in cash and cash equivalents 1,343 (1,970)
Translation differences (27) (6)
Cash and cash equivalents at beginning of year 16 3,632 5,608
Cash and cash equivalents at year 4,948 3,632
16
Consolidated statement of changes in equity for the year ended 31 December
2023
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 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
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
Balance at 1 January 2023 27 9,546 457 566 (3,653) 6,943 16 6,959
Loss and total comprehensive expense for the period - - - - (1,990) (1,990) 19 (1,971)
Equity-settled share-based payments - - 90 - 105 195 - 195
Consideration paid in shares 1 - - 597 - 598 - 598
Directors remuneration paid in shares - - - - 30 30 - 30
Dividends paid - - - - - - (14) (14)
Total transactions with owners of the Company 1 - 90 597 (1,855) (1,167) 5 (1,162)
Balance at 31 December 2023 28 9,546 547 1,163 (5,508) 5,776 21 5,797
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 2023 the cash holdings of the Group were £4.9m and net cash was
£1.5m. 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 41% of the Group's shares,
having agreed in Q1 2024 to extend the repayment date of the Group's long-term
debt from December 2024 to December 2025.
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 over 10% 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 2023. 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
The following pronouncements were effective from 1 January 2023:
· 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)
The following pronouncements were effective from 1 January 2024:
· Amendments to IAS 1 - Non-Current Liabilities with Covenants -
Amendments to IAS 1 and Classification of Liabilities as Current and
Non-Current (Effective 1 January 2024)
· Amendments to IFRS 16 - Lease Liability in a Sale and Leaseback
(Effective 1 January 2024)
· Amendments to IAS 7 and IFRS 7 - Supplier Finance Arrangements
(Effective 1 January 2024)
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, brands and businesses
comprises work carried out to produce film and audio content. Contracts to
produce TV programmes include 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 or content 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 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. This revenue is included within the
content production segment.
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 2023 there was under 1 year remaining for
Tern Television Productions and under 9 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
2023 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.
The Group assesses the fair value of contingent consideration liabilities on
an annual basis, taking into account changes in circumstances and updated
information regarding the probability and timing of payment. Any adjustments
to the fair value of contingent consideration liabilities are recognised as an
Adjusting Item in the income statement and changes due to discounting are
recognised in the income statements.
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 can be
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 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 for year 1 is based on actual performance and each of the remaining
two 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. Estimated
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
2023 2022 2023 2022 2023 2022 2023 2022
Continuing Operations £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000 £ '000
Revenue 24,122 20,218 16,103 9,865 - - 40,225 30,083
Adjusted EBITDA 1,736 611 390 573 (1,120) (1,109) 1,006 75
Depreciation (527) (541) (728) (192) (223) (214) (1,478) (947)
Amortisation - - (31) (10) (431) (705) (462) (715)
Adjusting Items and acquisition costs (29) (83) (81) (68) (152) (1,143) (262) (1,293)
Operating profit / (loss) 1,180 (13) (450) 303 (1,926) (3,171) (1,196) (2,880)
Finance costs (3) (5) - (11) (773) (374) (776) (390)
Finance income 3 - 5 1 1 - 9 1
Profit/ (loss)before tax 1,180 (18) (445) 293 (2,698) (3,545) (1,963) (3,269)
Taxation charge (8) (5) - 828 - 164 (8) 987
Profit/ (loss) for the year 1,172 (23) (445) 1,122 (2,698) (3,381) (1,971) (2,282)
Segment Assets 7,156 11,775 8,974 7,175 8,210 5,158 24,340 24,107
Segment Liabilities (7,126) (16,326) (3,650) (3,748) (7,767) 2,926 (18,543) (17,149)
Other Segment items:
Expenditure on intangible assets - - 12 50 - 4,394 12 4,444
Expenditure on tangible assets 416 190 333 544 51 97 800 831
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation and adjusting items as set out in note 8.
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 £30.9m (year ended
31 December 2022: £24.7m), and the total revenue from external customers in
other countries was £9.3m (2022: £5.4m). There were two customers that
accounted for more than 10% of Group revenue in the year: one customer
accounted for £9.1m or 23% of Group revenue and the other customer accounted
for £6.4m or 16% of Group revenue (2022: two customers accounted for £7.3m
and £5.9m of revenue). Within these two customers there are multiple separate
buyers and commissioners with separate budgets, and the customers are
multi-billion pound blue-chip organisations.
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.
2023 2022
£'000 £'000
Receivables, which are included in 'Trade and other receivables' 6,216 6,515
Contract assets 2,976 2,545
Contract liabilities (4,485) (1,895)
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 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.
2023
Contract assets Contract liabilities
£'000 £'000
Opening balance 1 January 2023 2,545 (1,895)
Revenue recognised that was included in the contract liability balance at the - 1,895
beginning of the period
Increases due to cash received, excluding amounts recognised as - (4,485)
revenue during the period
Transfers from contract assets recognised at the beginning of the (2,545) -
period to receivables
Increases as a result of changes in measure of progress 2,976 -
Closing balance 31 December 2023 2,976 (4,485)
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:
2023 2022
£'000 £'000
Cost of sales
Production costs 20,016 16,813
Salary costs 3,166 2,250
Royalties and distribution costs 1,146 817
Total cost of sales 24,328 19,880
Operating expenses
Salary costs 11,330 7,815
Leases on premises 10 10
Other administrative expenses 3,545 2,296
Foreign exchange gain 6 7
Adjusting Items 262 1,293
Depreciation and Amortisation 1,940 1,662
Total operating expenses 17,093 13,083
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:
2023 2022
£'000 £'000
Statutory audit services
Annual audit of the company and the consolidated accounts 180 189
6) STAFF COSTS
Staff costs from continuing operations, including directors, consist of:
2023 2022
£'000 £'000
Wages & salaries 12,688 8,682
Social security & other costs 1,273 994
Pension costs 505 359
Share based payment charge 195 180
Consideration paid in shares 30 30
Total 14,691 10,245
The average number of employees (including directors) employed by the Group
for continuing operations during the year was:
2023 2022
Zinc Television 146 134
Content Production 126 82
Central and Plc 11 8
Total 283 224
The directors consider that the key management comprises the directors of the
company, and their emoluments are set out below:
Directors' emoluments
Salaries and fees Bonus Shares Pension 2023 Total remuneration received by directors Tax paid on behalf of directors 2022 Total remuneration received by directors
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Executive Directors
Mark Browning 270 129 0 27 426 59 432
Will Sawyer 180 86 0 18 284 46 255
Non-Executive Directors
Christopher Satterthwaite (Chairman) 50 0 30 0 80 0 80
Nicholas Taylor 18 0 0 12 30 0 30
Andrew Garard 30 0 0 0 30 0 30
548 215 30 57 850 105 827
The tax paid by the Company on behalf of directors arose on the exercise of
EMI share options in line with the terms of the share options granted to
directors in 2020 and may otherwise have been funded by the directors' selling
shares.
Key management personnel compensation
2023 2022
£'000 £'000
Short term employee benefits (includes employers NICs) 866 840
Post-employment benefits 57 55
Shares (includes employers NICs) 34 34
Share-based payments charge 122 129
Total 1,079 1,058
The amount for share based payments charge (see note 7) which relates to the
Directors was £122k (2022: £129k).
7) SHARE BASED PAYMENTS
The charge for share based payments arises from the following schemes:
2023 2022
£'000 £'000
EMI share option scheme 121 104
Unapproved share option scheme 74 76
Total 195 180
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 ten 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
2023 2022
Number WAEP £ Number WAEP £
Outstanding at the beginning of the year 913,151 0.033 886,546 0.014
Transferred from EMI scheme - - 26,605 0.670
Granted - - - -
Lapsed during the year - - - -
Outstanding at the end of the year 913,151 0.033 913,151 0.033
Exercisable at the end of the year 171,201 0.033 - -
EMI Share option scheme
2023 2022
Number WAEP £ Number WAEP £
Outstanding at the beginning of the year 1,151,909 0.428 1,097,104 0.390
Granted during the year - - 151,622 0.875
Lapsed during the year (1,000) 3.750 (70,211) 0.713
Transferred to unapproved scheme - - (26,605) 0.670
Exercised during the year (270,073) 0.001 - -
Outstanding at the end of the year 880,837 0.555 1,151,909 0.428
Exercisable at the end of the year - - - -
The options outstanding as at 31 December 2023 have the following exercise
prices and expire in the following financial years:
Expiry Grant Date Exercise Price 2023 2022
£ No. No.
December 2026 December 2016 3.75 4,000 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 441,273 711,345
June 2031 June 2021 0.0013 711,345 711,345
June 2031 June 2021 0.6695 268,237 268,237
November 2031 November 2021 0.7060 202,511 202,511
December 2032 December 2022 0.8750 151,622 151,622
1,793,988 2,066,060
During the year, 270,073 EMI options were exercised by two Directors on the
22 August 2023, the aggregate amount of gains on the shares exercised by the
Directors was £221k (2022: Nil).
Options are forfeited at the discretion of the Board if an 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.
8) ADJUSTING ITEMS
2023 2022
£'000 £'000
Adjusting Items
Reorganisation and restructuring costs (121) (160)
Acquisition costs (80) (953)
Share based payment charge (195) (180)
Gain on disposal of tangible assets 29 -
Tax arising on share options paid by company (267) -
Change in fair value of contingent consideration in respect of The Edge 372 -
Total (262) (1,293)
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. 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.
Change in fair value of The Edge contingent consideration
The contingent consideration in respect of The Edge acquisition has been
remeasured based on latest forecasts. The Edge's base earnout targets are
still forecast to be exceeded.
Share based payment charge
This represents the expense recognised by the Group in relation to services
received from employees following the grant of share options.
Tax on share options
The tax paid by the Company on behalf of directors arose on the exercise of
EMI share options in line with the terms of the share options granted to
directors in 2020 and may otherwise have been funded by the directors' selling
shares.
9) FINANCE COSTS
2023 2022
Finance Costs £'000 £'000
Interest payable on borrowings (347) (336)
Interest on unwinding of present value of contingent consideration (387) -
Interest due to bank charges (5) -
Interest payable on lease liabilities (37) (54)
Finance Costs (776) (390)
Finance Income
Interest received 9 1
Net finance costs (767) (389)
10) INCOME TAX EXPENSE
Taxation Charge/credit
2023 2022
£'000 £'000
Current tax expense:
Current tax expense 4 4
Charge in respect of prior periods 4 -
8 4
Deferred tax
Origination and reversal of temporary differences - (953)
Effect of change in UK corporation tax rate - (39)
Adjustments in respect of prior periods - 1
- (991)
Total income tax charge/(credit) 8 (987)
Reconciliation of taxation expense:
2023 2022
£'000 £'000
Loss before tax (1,963) (3,269)
Taxation credit at UK corporation tax rate of 23.5% (2022: 19%) (461) (621)
Other non-taxable (income)/non-deductible expenses (8) 239
Tax losses not recognised/(recognised) 473 (610)
Group relief claimed - (4)
Effect of changes in UK corporation tax rates - (39)
Varying tax rates of overseas earnings - (100)
Adjustments to tax charge in respect of previous years 4 147
Charge in respect of prior periods - 1
Total income tax charge/ (credit) 8 (987)
The corporation tax rate increased to 25% in April 2023, a rate of 19% was
therefore used for the first three months of financial year 2023, with 25%
being used for 9 months of the year, to give an average for the full year of
23.5% in 2023 (2022: 19%).
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.
2023 2022
Number of Shares Number of Shares
Weighted average number of shares used in basic and diluted earnings per share 21,985,965 18,480,039
calculation
Potentially dilutive effect of share options 1,269,782 1,558,184
£'000 £'000
Loss for the year from continuing operations attributable to shareholders (1,990) (2,297)
Continuing operations
Basic Loss per share (pence) (9.05)p (12.43)p
Diluted Loss per share (pence) (9.05)p (12.43)p
12) INTANGIBLE ASSETS
Goodwill Brands Customer Relationships Distribution Catalogue Order Total
Software Book
£'000 £'000 £'000 £'000 £'000 £'000 £000
Cost
At 31 December 2021 8,953 679 3,303 230 443 - 13,608
Additions - - - 50 - - 50
Acquired through business combinations 1,503 1,464 1,450 119 4,536
- -
At 31 December 2022 10,456 2,143 4,753 280 443 119 18,194
Additions - - - 12 - - 12
At 31 December 2023 10,456 2,143 4,753 292 443 119 18,206
Amortisation and impairment
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)
Charge for the year - (172) (259) (31) - - (462)
At 31 December 2023 (5,898) (853) (3,402) (270) (443) (119) (10,985)
Net Book Value
At 31 December 2023 4,558 1,290 1,351 22 - - 7,221
At 31 December 2022 4,558 1,462 1,610 41 - - 7,671
Impairment Tests for Goodwill
Goodwill by cash generating unit is:
2023 2022
£'000 £'000
Tern TV CGU 1,444 1,444
London & Manchester TV CGU 1,611 1,611
The Edge CGU 1,503 1,503
Total 4,558 4,558
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 2024 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 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
2023 was 12.9 per cent (2022: 9.1 per cent). A sensitivity analysis of an
increase in the discount rate by 1 per cent is shown below.
London & Manchester TV, Tern TV and The Edge 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 12.9 per cent. An increase in the discount rate to 13.9 per cent will result in no impairment
charge.
Revenue London & Manchester TV's, Tern TV's and The Edge CGU revenue for 2024 is If there is a 20% shortfall in revenue versus FY23 there would be no
forecast to increase. impairment charge.
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 2025 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 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
Additions - - 505 505
Disposals and retirements - - (29) (29)
At 31 December 2023 448 21 2,589 3,058
Depreciation
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)
Charge for the period (78) (2) (463) (543)
Disposals and retirements - - 27 27
At 31 December 2023 (341) (16) (1,685) (2,042)
Net Book Value
At 31 December 2023 107 5 904 1,016
At 31 December 2022 185 7 864 1,056
14) INVENTORIES
31 Dec 31 Dec
2023 2022
£'000 £'000
Work in progress 63 73
Total Inventories 63 73
15) TRADE AND OTHER RECEIVABLES
31 Dec 31 Dec
2023 2022
£'000 £'000
Current
Trade receivables 6,453 6,872
Less provision for impairment (237) (380)
Net trade receivables 6,216 6,492
Prepayments 574 507
Other receivables 883 1,047
Contract assets 2,976 2,545
Total 10,649 10,591
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 £237,000 (2022: £380,000) has been
recognised for trade receivables in the Zinc Communicate division based on the
expected credit loss percentages for trade receivables 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 2023. 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 (2022: £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 2023
Gross carrying amount (£'000) 493 162 88 - - - 1,245
502
Loss allowance provision (£'000) - - - - - - -
-
The expected credit loss in this division is immaterial.
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 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 2023
Gross carrying amount (£'000) 923 386 440 - - - 3,426
1,677
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) - - - - - - -
-
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 2023
0-30 days
Expected loss rate (%) 3% 5% 8% 11% 13% 19% 32% 13%
Gross carrying amount (£'000) 162 47 96 30 110 590 1,390
355
Loss allowance provision (£'000) 6 6 10 6 31 174 237
4
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 2023
0-30 days
Gross carrying amount (£'000) 107 158 18 - - - 392
109
Loss allowance provision (£'000) - - - - - - -
-
The expected credit loss in this division is immaterial.
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) - - - - - - -
-
Movements in the impairment allowance for trade receivables are as follows:
31 Dec 31 Dec
2023 2022
£'000 £'000
Opening provision for impairment of trade receivables 380 549
Increase during the year 198 302
Receivables written off during the year as uncollectible (341) (471)
Movement in provision for impairment during the year (143) (169)
At 31 December 237 380
16) CASH AND CASH EQUIVALENTS
31 Dec 31 Dec
2023 2022
£'000 £'000
Total Cash and cash equivalents 4,948 3,632
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
2023 2022
£'000 £'000
Current
Trade payables 1,150 1,415
Other payables 130 492
Other taxes and social security 1,479 1,149
Accruals 4,646 4,139
Contract liabilities 4,485 1,895
Contingent consideration payable 392 663
Total 12,282 9,753
Non-Current
Contingent consideration payable 1,940 2,476
Total 14,222 12,229
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 2022 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
Additions 295 - 295
Depreciation (869) (67) (936)
Balance as at 31 December 2023 443 - 443
Lease liabilities are presented in the statement of financial position as
follows:
31 Dec 31 Dec
2023 2022
£'000 £'000
Current 360 675
Non-current 57 352
Total lease liabilities 417 1,027
The Groups future minimum lease payments are as follows:
31 Dec 31 Dec
2023 2022
£'000 £'000
Not later than 1 year 371 707
Later than 1 year and not later than 5 years 50 312
Later than 5 years - 50
421 1,069
19) BORROWINGS AND OTHER FINANCIAL LIABILITIES
31 Dec 31 Dec
2023 2022
£'000 £'000
Current
Lease liabilities 360 675
Debt facility - unsecured borrowings 2,485 -
Loan notes - unsecured borrowings 978 -
Sub total 3,823 675
Non-current
Debt facility - unsecured borrowings - 2,512
Loan notes - unsecured borrowings - 978
Lease liabilities 57 352
Sub total 57 3,842
Total 3,880 4,517
Maturity of Financial Liabilities
The maturity of borrowings (analysed by remaining contractual maturity) is as
follows:
31 Dec 31 Dec
2023 2022
£'000 £'000
Repayable within one year and on demand:
Lease liabilities 371 707
Trade and other payables 1,280 1,907
Accrued expenses 4,646 4,139
Debt facility - unsecured 2,682 -
Loan notes - unsecured 1,111 -
Contingent consideration 392 663
10,482 7,416
Repayable between one and two years:
Lease liabilities 50 312
Debt facility - unsecured - 3,080
Loan notes - unsecured - 1,111
Contingent consideration 1,940 -
1,990 4,503
Repayable between two and five years:
Lease liabilities - 50
Contingent consideration - 2,476
- 2,526
Total 12,472 14,445
Debt Facility
Loans totalling £2.5m (2022: £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. There
are no financial covenants in force in respect of this debt facility. The debt
facility is unsecured and at year end was repayable in full on 31 December
2024. Post year end Herald Investment Trust plc and the JBCF agreed to extend
the repayment date to 31 December 2025 on the same terms.
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%. At year end
the interest was accrued and was repayable along with the principal on 31
December 2024. Post year end Herald Investment Trust plc agreed to extend the
repayment date to 31 December 2025, with the interest rate remaining
unchanged. There are no financial covenants in place in respect of this debt.
Finance leases
Net obligations under finance leases are secured on related property, plant
and equipment and are included within lease liabilities.
Overdraft
The Group has an overdraft facility of £600k, which is secured over the
assets of subsidiary companies. During the year the Group has not drawn upon
the overdraft facility in place. The interest rate on the overdraft is 5.3%
per annum over the Bank of England rate.
Net Debt Reconciliation
31 Dec 31 Dec
2023 2022
£'000 £'000
Cash and cash equivalents (Note 16) 4,948 3,632
Lease liabilities (Note 19) (417) (1,027)
Debt facility - unsecured borrowings (Note 19) (3,463) (3,490)
Net Debt (1,068) (885)
Change in liabilities arising from financing activities
31 Dec 2022 Cash flows Interest charged Interest paid Non-cash changes 31 Dec 2023
£'000 £'000 £'000 £'000 £'000 £'000
Cash and Cash equivalents 3,632 1,316 - - - 4,948
Borrowings - debt facility (2,512) - (269) 296 - (2,485)
Borrowings - loan notes (978) - (78) 78 - (978)
Lease liabilities (1,027) 905 (37) 37 (295) (417)
Total liabilities from financing activities (885) 2,221 (295) 1,068
(384) 411
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 2023 31 Dec 2022
£'000 £'000
Borrowings (debt facility and loan notes) (3,463) (3,490)
Cash and cash equivalents 4,948 3,632
Net Cash 1,485 142
Total equity 5,811 6,959
Net cash to equity ratio 26% 2%
The Group's gearing ratio has changed due to an increased cash balance
resulting from operational cash inflows and a decrease in equity due to
overall movement in loss and comprehensive expense for the period and share
issuance being lower than previous year.
Financial instruments by category
31 Dec 31 Dec
2023 2022
£'000 £'000
Categories of financial assets and liabilities
Financial assets - measured at amortised cost
Trade and other receivables 10,075 10,083
Cash and cash equivalents 4,948 3,632
Financial liabilities - other financial liabilities at amortised cost
Trade and other payables (5,926) (6,046)
Borrowings (3,463) (3,490)
Lease liabilities (417) (1,027)
Financial liabilities - other financial liabilities at fair value
Contingent consideration payable (2,332) (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 the first year is based on actual
performance and each of the remaining two years is an independent, normally
distributed random variable. An EBIT of £1.3m has been used for year one,
£0.8m for year two and £1.2m for year three. 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 12.9%.
A £0.1m increase in EBIT in each of years two and three could increase the
contingent consideration payable by £0.2m, and a £0.2m decrease in EBIT in
each of years two and three could decrease the contingent consideration
payable by £0.4m.
21) DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 25% (2022:25%) 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
At 1 January 2022 - (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) -
Recognised on intangible assets - 163 163
Recognised on current period amortisation - - -
Recognised on tax losses (163) - (163)
At 31 December 2023 828 (828) -
Deferred tax assets estimated at £5.1 million (2022: £4.2 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
2023 2022
£'000 £'000
Provisions 276 242
Movement in provisions
£'000
At 31 December 2022 242
Additions 76
Utilised in the year (42)
At 31 December 2023 276
Provisions comprise dilapidation provisions relating to properties. The
associated forecast cash outflows are £0.2m in 2024. The movement in the
provision in the year comprises a £0.04m cash outflow in relation to The Edge
vacating their London office to co-locate with the rest of Zinc and an
additional £0.08m provision in relation to Tern's Glasgow office.
23) SHARE CAPITAL AND RESERVES
31 Dec 23 31 Dec 22
Ordinary shares with a nominal value of: 0.125p 0.125p
Authorised:
Number Unlimited Unlimited
Issued and fully paid:
Number 22,765,327 21,806,834
Nominal value (£'000) 28 27
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 2023 31 Dec 2022
Number of Shares Share Capital Share Premium Merger Share Based Number of Shares Share Capital Share Premium Merger
Reserve Payment Reserve Reserve
Ordinary shares £'000 £'000 £'000 £'000 £'000 £'000 £'000
At start of year 21,806,834 27 9,546 566 457 16,200,919 20 4,785 27
Share placing and subscription for cash - - - - - 5,037,059 6 5,031 -
Expenses of issue of shares - - - - - - - (270) -
Consideration paid in shares 654,637 1 - 597 - 540,000 1 - 539
Shares issued in lieu of fees 33,783 - - - - 28,856 - - -
Shares issued to directors 270,073 - - - 90 - - - -
At end of year 22,765,327 28 9,546 1,163 547 21,806,834 27 9,546 566
Consideration paid in shares
On 21 November 2023 the Group issued 654,637 new ordinary shares in relation
to contingent consideration payable in relation to the acquisition of The
Edge.
Shares issued in lieu of fees
On 28 August 2023 the Group issued 33,783 new ordinary shares at a price of
£0.88 per share to a Director in lieu of payment of director fees.
Shares issued to Directors
On 28 August 2023 the Group issued 270,073 new ordinary shares in relation to
the exercise of share options that were awarded to directors under the
Company's EMI Share Option Scheme in February 2020 and have been exercised at
a price of 0.125 pence per share.
Nature and purpose of the individual reserves
Below is a description of the nature and purpose of the individual
reserves:
· Share capital represents the nominal value of shares issued;
· Share premium includes the amounts over the nominal value in
respect of share issues. In addition, costs in respect of share issues are
debited to this account;
· Merger reserve is used where more than 90 per cent of the shares
in a subsidiary are acquired and the consideration includes the issue of new
shares by the Company, which 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.
24) 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
2023 including accrued interest is £3.5m (2022: £3.5m). Interest accrued on
the debt amounted to £0.1m (2022: £0.1m).
25) POST BALANCE SHEET EVENTS
Post year end the long-term debt holders agreed to extend the term of the debt
by one year, such that the repayment of the debt is now due on 31 December
2025.
26) GUARANTEE IN RELATION TO SUBSIDIARY AUDIT EXEMPTION
On 18 April 2024, 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)
The Edge Picture Co Limited (02557058)
Cautionary note regarding forward-looking statements
This press release may contain certain forward-looking information. The words
"expect", "anticipate", believe", "estimate", "may", "will", "should",
"intend", "forecast", "plan", and similar expressions are used to identify
forward looking information.
The forward-looking statements contained in this press release are based on
management's beliefs, estimates and opinions on the date the statements are
made in light of management's experience, current conditions and expected
future development in the areas in which the Company is currently active and
other factors management believes are appropriate in the circumstances. The
Company undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of new
information, future events or otherwise, unless required by applicable law.
Readers are cautioned not to place undue reliance on forward-looking
information. By their nature, forward-looking statements are subject to
numerous assumptions, risks and uncertainties that contribute to the
possibility that the predicted outcome will not occur, including some of which
are beyond the Company's control. There can be no assurance that
forward-looking statements will prove to be accurate as actual results and
future events could vary or differ materially from those anticipated in such
statements.
Inside Information
The information contained within this announcement constitutes inside
information for the purposes of Article 7 of the Market Abuse Regulation (EU)
no. 596/2014 as it forms part of UK domestic law by virtue of the European
Union (Withdrawal) Act 2018 ("MAR") and is disclosed in accordance with the
Company's obligations under Article 17 of MAR. On the publication of this
announcement via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
1 Adjusted EBITDA is defined as EBITDA before Adjusting Items (see Note 8)
comprising share based payment charges, gains on disposal of fixed assets,
reorganisation and restructuring costs, acquisition costs and contingent
consideration
2 Source: PACT UK Television Production Survey 2023, by Oliver and Ohlbaum
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