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Hollywood Media Services Plc

Final Results for the year to 31 December 2007

Hollywood Media Services Plc ('Hollywood' or the 'Company'), the television and film facilities business, announces its final results for the year to 31 December 2007.

Highlights

• Group sales down 2.2% with facilities sales up 30% and catering sales down 31%

• Gross profit up 76% to £367,246 (2006: £208,728) reflecting move to higher margin business

• Pre tax loss of £261,000 after float and group reorganisation costs of £128,000 (2006: pre tax profit of £44,000)

• Admission to AIM on 31 August 2007

• Placing to raise £473,000, net of expenses

• £0.2 million invested in new facilities equipment with further investment in 2008

• Year end cash and cash equivalents of £276,000 (2006: £4,000)

Commenting on the announcement, Martin Eberhardt, the Chief Executive stated:

'Although challenging, 2007 was a year in which we laid the foundations for growth. Since the year end, the Company has continued to invest in facilities equipment and we now have 5 fleets in use compared to just three at the time of the AIM admission. In February we acquired the contract for The Bill which has significantly added to our turnover and the appointment of a dedicated events manager has resulted in new business being won with pop festivals. After a period of lower than expected activity in the first four months of 2008, the sales, there has been a marked improvement in current trading and the sales pipeline. The Board remains confident of an improved performance in the second half.'

Martin Eberhardt, CEO Hollywood Media Services		Tel: 0207 332 2200
Nominated Adviser to Hollywood Dowgate Capital Advisers Limited Tony Rawlinson / Antony Legge		Tel: 020 7492 4777
Broker to Hollywood IAF Securities Limited David Coffman		Tel: 020 7747 7400

CHAIRMAN'S STATEMENT

I am pleased to present our full results for 2007, our first since the Company's admission to AIM. The year was one of mixed fortunes with growth in facilities sales more than offset by decline in catering with the consequence that overall sales for the year declined 2% to £1,019,000 (2006: £1,117,000). As we stated at the time of the admission, the catering services market has proved challenging and the result was a 31% decline in sales to £419,000 (2006: £604,000) for this part of the business. In contrast, facilities sales grew 31% to £672,000 (2006: £513,000), in line with management expectations.  Gross profit increased by 76% to £367,000 (2006 £209,000) reflecting the change in the sales mix to the higher margin facilities services business.

Higher trading expenses are due mainly to an increase in staffing as the Company laid the foundations for future growth. The Company also incurred head office costs of £95,000 (2006: £nil) most of which relates to the costs of being a quoted company. As a result, the Company registered a loss of £91,000, before the costs of the re-organisation and admission which totalled £128,000.  

Higher net interest charges at £42,000 (2006: £19,000) reflected a full years leasing charge in 2007 on facilities taken up during 2006.

As a result of the above, a loss before tax of £261,000 was incurred compared to profits of £65,000 in 2006. Loss per share was 1.0p.

In addition to the re-organisation and admission costs of £128,000 in the Income Statement, further costs of £377,000 were incurred in the admission of the Company which were written off to Share Premium account.  

The Company raised £473,000 net of expenses in a placing at the time of the admission. Of this, £176,000 was invested in the facilities and catering fleet and £88,000 was used to repay certain finance leases. Cash at bank was £276,000 (2006: £4,000) and the net cash/(debt) position was £66,000 (2006: £(299,000)). Net assets at 31 December 2007 were £382,000 (2006: £45,000).

The first quarter is traditionally a slow period, however 2008 saw an even slower start than expected due to the after effects of the writers' strike in the USA and postponements of new production commissions by both the BBC and ITV. The sales trend has recently much improved with sharply higher sales during May and June. The development of our facilities and catering fleet continued with expenditure of £176,000 during 2007 and further investment in the first half of 2008. We now have the capacity to service 5 productions simultaneously compared to three in mid 2007. As anticipated the Company reached the lowest point in its cash position during recent weeks since when the position has improved in line with the uplift in sales.

In February 2008 we also acquired the rights to provide catering services to the television production 'The Bill' which in 2007 delivered turnover and attributable gross profit of £1.07 million and £182,000 respectively. 

In our Admission document, we stated that we would recruit a dedicated events manager. This appointment was made in 2007 and in 2008 the Company has been appointed caterers to the crews and casts of major pop festivals including Gatecrasher, Rockness, Wakestock, Latitude, Belladrum, Bloodstock, Creamfield, Reading and Leeds. 

The board are encouraged by the current trading trends in facilities which, combined with the contribution from The Bill and the pop festivals, is expected to yield an improved result in the second half.  

With regard to acquisitive growth, the board commenced discussions with a number of potential opportunities post the year end and these remain ongoing. Whilst there can be no certainty that any discussions will be conclude successfully, the Board continue to believe that there are opportunities to grow the business by acquisition. 

As set out in our Admission document, the Company also remains committed to appointing a full time Finance Director as soon as the business justifies such an appointment and will continue to keep under review the need for an additional non executive director.  

I would like to thank our board and senior management team and all the staff for their dedication to the building of this business.

James Holmes

Chairman

Consolidated Income Statement

		Year ended 31 December
		2007		2006
	Notes	£		£
Revenue		1,090,775		1,117,132
Cost of sales		(723,529)		(908,404)
Gross profit		367,246		208,728
Administrative expenses:
Trading expenses		(362,839)		(146,149)
Trading profit		4,407		62,579
Head office costs		(95,393)		-
Float and reorganisation costs		(128,050)		-
Operating (Loss)/profit		(219,036)		62,579
Financial income		2,329		193
Financial expense		(44,736)		(18,937)
(Loss)/profit before taxation		(261,443)		43,835
Taxation		-		20,928
(Loss)/profit for the financial year		(261,443)		64,763
Attributable to equity holders of the parent		(261,443)		64,763
(Loss)/earnings per share	2
Basic (loss)/earnings per share		(0.01)		3,238.00
Fully diluted		(0.01)		-

All amounts relate to continuing operations.

Consolidated and Company Statement of Recognised Income and Expenditure
		31 December
		2007		2007			2006
		Group		Company			Group and Company
	Notes	£		£			£
(Loss)/profit for the financial year	5	(261,443)		(128,913)			64,763
Costs of floatation written off to share premium account	5	(377,156)		(377,156)			-
Total (losses)/gains recognised since last annual report		(638,599)		(506,069)			64,763
Total (losses)/gains attributable to equity holders of the parent	5	(638,599)		(506,069)			64,763

Consolidated and Company Balance Sheet

		31 December
		2007		2007		2006
		Group		Company		Group and Company
Non current assets	Notes	£		£		£
Property, plant and equipment		529,422		45,842		441,133
Investment in subsidiary		-		725		-
Deferred tax asset		-		-		7,682
		529,422		46,567		448,815
Current assets
Inventories		15,406		-		40,325
Trade and other receivables		192,391		441,762		290,970
Cash and cash equivalents		275,909		257,263		4,011
		483,706		699,025		335,306
Total assets		1,013,128		745,592		784,121
Current liabilities
Trade and other payables		(421,981)		(193,412)		(432,341)
Financial liabilities (borrowings)		(171,149)		(37,911)		(186,617)
Current tax liabilities		-		-		(3,128)
		(593,130)		(231,323)		(622,086)
Net current (liabilities)/assets		(109,424)		467,702		(286,780)
Non current liabilities
Borrowings		(38,259)		-		(116,677)
Net assets		381,739		514,269		45,358
Equity
Called up share capital	4,5	85,417		85,417		20
Shares to be issued	5	70,000		70,000		-
Share premium account	5	437,427		437,427		-
Profit and loss reserve	5	(216,105)		(83,575)		45,338
Share option reserve	5	5,000		5,000		-
Total Equity		381,739		514,269		45,358

 

Consolidated and Company Cash Flow Statement

			Year ended 31 December
		2007			2007		2006
		Group			Company		Group and Company
		£			£		£
Net cash from operating activities		60,712			(163,462)		332,941
Cash flows from investing activities
Interest received		2,329			2,329		193
Proceeds of disposal of business		-			45,357		-
Proceeds on disposal of property, plant and equipment		-			-		6,000
Purchases of property, plant and equipment		(176,367)			(81,241)		(467,029)
Net cash used in investing activities		(174,038)			(33,555)		(460,836)
Cash flows from financing activities
Costs of flotation		(377,156)			(377,156)		-
New finance lease liabilities		-			-		260,200
Repayment of obligations under finance lease		(87,574)			(22,528)		(73,169)
Issue of new shares		850,000			850,000		116,216
Net cash from financing activities		385,270			450,316		303,247
Net increase in cash and cash equivalents
		271,944			253,299		175,352
Cash and cash equivalents
At beginning of year		3,964			3,964		(171,388)
Net increase in cash and cash equivalents		271,945			253,299		175,352
At end of year		275,909			257,263		3,964
Bank overdraft		-			-		(47)
Cash and cash equivalents		275,909			257,263		4,011
		275,909			257,263		3,964

CONSOLIDATED AND COMPANY CASH FLOWS FROM OPERATING ACTIVITIES

		2007		2007		2006
		Group		Company		Group and Company
		£		£		£
(Loss)/profit from operations		(219,036)		(120,976)		62,579
Adjustments for:
Movement in share option reserve		5,000		5,000		-
Depreciation of property, plant and equipment		88,077		3,717		37,917
Loss on disposal of property, plant and equipment		-		-		1,000
Operating cash flows before movements in working capital		(125,959)		(112,259)		101,496
(Decrease)/increase in inventories		24,919		24,500		(40,325)
(Decrease)/increase in receivables		106,261		(107,254)		(61,848)
(Decrease)/increase in payables		100,227		55,192		352,555
Cash generated by operations		105,448		(139,821)		351,878
Income taxes paid		-		(3,129)		-
Interest paid		(44,736)		(20,512)		(18,937)
Net cash flow from operating activities		60,712		(163,462)		332,941

Notes 

1. Basis of preparation

The financial information set out in this announcement does not constitute statutory accounts for the purposes of Section 240 Companies Act 1985. The financial information for the year ended 31 December 2006 has been extracted from the statutory accounts of Hollywood Media Services plc (formerly Hollywood Catering Services limited) for that year, which have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under sections 237(2) or (3) of the Companies Act 1985. This preliminary announcement was approved by the board of directors on 25 June 2008. The financial statements in respect of the year end 31 December 2007 will be delivered to the Registrar of Companies in due course and will also be disclosed on the Companies website. An unmodified audit opinion has been issued.

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2007.

For all periods up to and including the year ended 31 December 2006 the Group prepared its financial statements in accordance with UK generally accepted accounting principles ('UK GAAP'). This is the first year in which the Group has prepared its group financial statements under IFRS and the comparatives have been restated from UK GAAP accordingly. 

2. (Loss)/earnings per share

Basic earnings per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the year.

		2007		2006
		£		£
Loss/profit attributable to shareholders		(261,443)		64,763
Weighted average number of ordinary shares in issue for calculating basic earnings per share		25,049,348		20
Increase in weighted average number of ordinary shares in issue at a nominal value of 0.125p following sub division of shares				15,980
Weighted average number of warrants and options		6,592,692
Weighted average number of preference shares		6,703,297
Weighted average number of shares for calculating dilutive earnings per share		38,345,337		16,000
Basic (loss)/earnings per share		(0.010)		3,238.00
Earnings per share of 0.125p (note)				4.05
Fully diluted		(0.007)

Note: The EPS calculation for 2006 has been recalculated to show the effect of the share split which took place on 17 July 2007 as if that split had occurred on 1 January 2006.

For the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares.  

3. Dividend

 

The directors do not recommend the payment of a dividend 

4. Called up Share Capital

			Authorised share capital						Issued share capital
			Number			£				Number				£
At 1 January 2007			1,000			1,000				20				20
Increase in authorised share capital by the creation of 249,000 new ordinary shares of £1 each			249,000			249,000
Allottment and issue of 49,980 of new ordinary shares of £1 each										49,980				49,980
Sub-division of the authorised issued and unissued ordinary shares of £1 of the Company was into ordinary shares of £0.00125 each			199,750,000							39,950,000
			200,000,000			250,000				40,000,000				50,000
Conversion of 20,000,000 ordinary shares into 20,000,000 Non Voting Preference Shares			20,000,000			25,000				20,000,000				25,000
Sub-division of the Non Voting Preference Shares			180,000,000			225,000				20,000,000				25,000
			200,000,000			250,000				40,000,000				50,000
Issue of shares on admission to AIM on 31 August 2007;
Ordinary shares										28,333,333				35,417
Non Voting Preference Shares										-				-
										28,333,333				35,417
At 31 December 2007
Ordinary shares			200,000,000			25,000				48,333,333				60,417
Non Voting Preference Shares			200,000,000			225,000				20,000,000				25,000
			400,000,000			250,000				68,333,333				85,417
Shares to be issued										2,333,333				2,917

The following options and warrants also existed as at 31 December 2007:

Employee options

The Company granted 8,333,333 options to employees in the year.  The Options are exercisable into Ordinary Shares at the Placing Price, at anytime from the later of: (a) the 3rd anniversary of the date of Admission; and (b) the date when the average earnings per share (as defined in the option deed), on a fully diluted basis, for the 3 years ending 31 December 2009, has increased on average by at least 10 per cent. per annum compared to the earnings per share of the Company based on the Company's audited accounts for 2006 and calculated on the assumption that there were 20,000,000 shares in issue at the end of 2006.   Save for certain limited circumstances, the Options are only exercisable whilst the holder of the Option is a director or employee of the group.  The Options lapse and cease to be exercisable on the 10th anniversary of the date of Admission. The period in which the shares may be exercised is September 2010 to September 2017.

Founder warrants
The Company granted 5,000,000 warrants to employees in the year.  Each Founder Warrant entitles the holder to purchase one Ordinary Share at the Placing Price on or before the 10th anniversary of the date of admission, 31 August 2007, after which time the Founder Warrants will be void and of no value.

CFA warrants
The Company has issued 670,000 warrants to Dowgate Capital Advisers Limited, formerly City Financial Associates Limited. Each warrant entitles the holder to purchase one Ordinary Share at the price of 0.125p on or before the 10th anniversary of the date of admission to AIM, after which time the warrants will be void and of no value.

Placing warrants

The Company issued 5,666,666 placing warrants pursuant to its admission to AIM. Each warrant entitles the holder to purchase one Ordinary Share at the price of 3p on or before the 3rd anniversary of the date of admission to AIM, after which time the warrants will be void and of no value.

5. Consolidated Statement of Changes in Equity

		Equity share capital		Share premium		Retained earnings		Share option reserve		Shares to be issued		Total
		£		£		£		£		£		£
Balance at 1 January 2006		20		-		(19,425)		-				(19,405)
Profit for the year						64,763		-				64,763
Balance at 31 December 2006 and 1 January 2007		20		-		45,338		-		-		45,358
Increase in share capital		85,397		814,583								899,980
Loss for the year						(261,443)						(261,443)
Floatation costs written  off against Share Premium				(377,156)								(377,156)
Shares to be issued										70,000		70,000
Gain on Share options granted								5,000				5,000
Balance at 31 December 2007		85,417		437,427		(216,105)		5,000		70,000		381,739

 

6. Post balance sheet events

On 7th February 2008, the group acquired the benefit of a contract for the provision of catering services in respect of the Bill television programme (the 'Bill Contract').  This contract was acquired from Wood Hall Catering and Events Limited ('Wood Hall'), a subsidiary of The C4E Group plc ('C4E'), together with certain assets to enable the contract to be serviced including stock, support vehicles and a number of employees. The maximum consideration payable under the agreement is £575,200, of which £94,500 was paid in cash on completion and the balance as deferred consideration to be satisfied by the issue to Wood Hall of 6,856,666 non voting convertible preference shares (Preference Shares) issued at 3p per share. The Preference Shares were or are due to be issued in equal instalments on 30 April 2008, 31 July 2008 and 30 October 2008 provided that the Bill Contract has not been terminated on or before the due date for payment of the relevant instalment.

 

If the Bill Contract is renewed in accordance with its terms for up to a further 2 years from December 2008, further consideration totalling up to £275,000 will be immediately payable to Wood Hall, satisfied by the issue of up to an additional 9,166,667 Preference Shares at 3p per share. 

On 14 February 2008, a wholly owned subsidiary of the Company, registered in the Isle of Man, Hollywood Media Services (Isle of Man) Limited was incorporated in order to serve film and television productions based on the Isle of Man.

On 17 April 2008 the Company issued and allotted, credited as fully paid, 2,333,333 new ordinary shares of 0.125p each in the Company, representing 4.61 per cent. of the Company's issued ordinary share capital, (the 'New Ordinary Shares') at a price of 3 pence per share to Grundberg Mocatta Rakison LLP in settlement of professional advisers' fees incurred at the time of the Company's admission to AIM in August 2007.

7. Explanation of Transition to IFRS

This is the first year that the Company has presented its financial information under IFRS. The following disclosures are required in the year of transition. The last financial statements under UK GAAP were for the year ended 31 December 2006 and the date of transition to IFRSs was therefore 1 January 2006.

Significant changes to the Income statement and the Balance Sheet for 2006

There are no adjustments arising from the transition to IFRS, and therefore there is no impact on reported income statement or balances.

Significant changes to the Cash flow statement for 2006

The Company was exempt from the requirement to prepare a cash flow statement under UK GAAP on the basis that it was a small company. There are no such exemptions under IFRS. There are no adjustments arising from the transition to IFRS, and therefore there is no impact on reported cash flows.

IAS 7 'Cash flow statement' extends the definition of cash to 'cash and cash equivalents' which includes movements on short-term deposits. The Company has not held any short-term deposits.

8. Availability of report and accounts

 

The group's full report and accounts will be dispatched to shareholders on 27 June 2008. Copies will also be available on the group's website, www.hmservicesplc.com and on request from the group's head office at 7th Floor, Aldermary House, 10-15 Queen Street, London, EC4N 1TX.

ENDFR SEDSUWSASEFM