Pinewood Shepperton PLC Annual Report 2010

Pinewood Shepperton plc Annual Report & Accounts 2010
Pinewood Shepperton plc is a leading provider of studio and related services to the global film and television industry. Our services support film production, filmed television and studio television recording, digital content services and facilities for media related businesses. The Groups strategy is to: Optimise the use of existing facilities; Enhance the Studios through improvement and expansion; and Develop other opportunities that provide benefits to the Group.
Contents Highlights Chairmans statement Operating review Financial review Board of Directors Directors report Key business risks Corporate governance Employees Corporate responsibility Directors remuneration report
01 03 05 12 16 18 23 26 32 34 36
Consolidated financial statements Independent auditors report Group income statement Group statement of other comprehensive income Group statement of financial position Group statement of cash flows Group reconciliation of movement in net debt Group statement of changes in equity Notes to the consolidated financial statements
48 50 51 52 53 54 55 56
Company financial statements (UK GAAP) Independent auditors report Company statement of financial position Notes to the financial statements Company information
93 95 96 108
Highlights
Revenue increased 8% to 43.4m (2009: 40.3m) Operating profit increased 20% to 9.1m (2009: 7.6m) Profit before tax increased 31% to 5.8m (2009: 4.5m) Basic earnings per share 9.3p (2009: 9.1p) EBITDA increased 13% to 12.8m (2009: 11.4m) Increased total dividend of 3.60p (2009: 3.45p) Further progress on international strategy Additional stage capacity to be built at Pinewood Studios Commitment to low risk investment in smaller UK films
Harry Potter and the Deathly Hallows: Part 1 on D Stage at Pinewood Studios 2011 Warner Bros. Entertainment Inc. Harry Potter Publishing Rights J.K.R. Harry Potter Characters, names and related indicia are trademarks of and Warner Bros. Ent. All rights reserved.
Chairmans statement
Pinewood Shepperton plcs performance during 2010 has delivered tangible progress on the clear long-term strategy that the Company is pursuing. The Company continues to focus on developing its core film, television and media park businesses and ensuring that the studios possess up-to-date infrastructure to service its diverse and growing client base. The Company is committed to building on its unique assets to develop a dedicated cluster for the creative industries in the UK whilst leveraging the Pinewood brand and expertise to create international revenues. It is this strategy which provides a foundation for stability and growth. Against the backdrop of a poor economic climate, the Company has produced strong results as it has tackled head-on increased international competition in film, pricing pressures in UK television and a challenging property rental market. In line with its stated goals, the Company has targeted new markets and established a brand presence in Canada, Germany, Malaysia and recently the Dominican Republic, bringing marketing and revenue benefits to the Company with minimal investment. Likewise the Company continues to ensure that its Media Park builds upon its reputation as one of the foremost creative hubs in the UK and Europe. This would be further enhanced by the Companys proposed long-term scheme to create a living and working community for the creative industries Project Pinewood. The Board is pleased to be recommending an increased final dividend of 2.50p making a total dividend for the year of 3.60p (2009: 3.45p). During the year the Board invited Steven Underwood, currently a full-time executive of the Peel Group (Peel), to join the Board as a Non-Executive Director with effect from 29 June 2010. As a result the Nomination Committee is leading a process to recruit an additional independent Non-Executive Director. It is worth recording that our shareholder register has consolidated materially over the last year. Two (mutually independent) shareholders now currently hold 54.61% between them. On 30 September 2011, Pinewood Studios will celebrate its 75th anniversary. Its rich heritage of film and television production and state-of-the-art facilities make it the UKs premier destination for film-makers, television producers and increasingly for video game developers and the wider creative industries. Building on this rich film heritage, and our successful strategy to date gives us confidence to begin increasing our capacity and to make further commitment to the UK film industry. One of the key factors that contributed to the Companys strong performance is the contribution and commitment of Pinewood Sheppertons staff. On behalf of my fellow Board colleagues, I would like to thank all of them for their efforts it is they who drive our success.
Lord Grade of Yarmouth, CBE Chairman 7 March 2011
Dancing On Ice broadcast live in HD from Shepperton Studios on J and K Stages ITV Studios
Operating review
Company Overview Pinewood Shepperton plc is a world-class film studio that has an unrivalled heritage and access to an invaluable skill base for makers of film and television programmes. The Company owns substantial freehold land and has a media park with a diverse range of media related tenants. The Companys unique assets in the UK, together with its international and strategic initiatives, mean that it is well placed to cater for the existing and planned global growth in creative content. Pinewood is now an expanding global brand, allowing access to premium services around the world. The global entertainment and media market is expected to grow by 5.0% compounded annually between now and 2014 reaching US$1.7trn1. Global film box-office sales have reached an all-time high at US$31.8bn2. Meanwhile, global television is expected to increase from US$185.9bn in 2009 to US$258.1bn in 20143. More than 245 European television channels were launched in 2009, bringing the total to 7,2004. UK television industry revenue in 2009 was 11.1bn5. Pinewood Shepperton plc has three complementary revenue streams film, television and media park. In film, the Company aims to capitalise on the strength of its infrastructure, service offering and brand by maximising utilisation of its studio facilities in the UK. It is also taking opportunities to extend the brand to other global regions, through joint venture and operating agreements with minimal capital commitment. This has been evidenced so far by four long-term agreements with strategic partners in Canada, Germany, Malaysia and most recently the Dominican Republic. The Company has developed a leading television business which often utilises its film stages to host major television productions (and vice versa). This ability to interchange the Companys assets to meet market demand gives the business a competitive edge. During the course of the year, several television productions were recorded on film stages and, conversely, a major film used all the television facilities at Pinewood Studios during the second half of 2010. The third revenue stream is Media Park. The Company has invested for the long-term in its Media Park assets to ensure that its studios remain the preferred destination for leading companies in the screen-based industries. The Company stands ready to take full advantage of its unique property assets and infrastructure which it has outline planning consents to expand and develop as soon as the economy and demand allow. Film Film revenues for 2010 were 29.1m (2009: 22.6m), an increase of 28%. In the second half of 2010, film generated revenues of 18.2m (2009: 10.8m). Despite the increasingly competitive international market, both Pinewood Studios and Shepperton Studios were near full capacity during the second half of 2010. On 14 January 2011 the American Federation of Television and Radio Artists (AFTRA) and Screen Actors Guild (SAG) ratified a new three-year agreement with the Alliance of Motion Picture and Television Producers. This latest agreement will be effective from 1 July 2011, until 30 June 2014 and will provide certainty around US film production. This is a welcome development.
1 2 3 4 5
Global Entertainment and Media Outlook: 20102014, PricewaterhouseCoopers 15 June 2010 Theatrical Market Statistics Report for 2010, Motion Picture Association of America, 23 Feb 2011 Global Entertainment and Media Outlook: 20102014, PricewaterhouseCoopers 15 June 2010 European Audiovisual Observatory, 2009 Yearbook, 13 January 2010 The Communications Market 2010, Ofcom, 2010
Pinewood Shepperton plc Annual Report & Accounts 2010 Operating review continued
Meet the Doyles recorded at Teddington Studios in Studio 1 Caryn Mandabach Productions
Film continued The Companys film facilities include 34 high quality stages which range from 2,000 sq ft to the 59,000 sq ft 007 Stage. In addition, Pinewood Studios offers globally unique water filming facilities, which include one of the worlds largest water tanks with an 800,000 gallon capacity and a specialist underwater stage. All of the Companys stages are fully equipped with power, lighting, heating, large loading doors and many have internal water tanks. There are 67 workshops totalling 218,646 sq ft, 286 production offices totalling 67,277 sq ft and three backlots for outdoor filming. The largest film production based at Pinewood Studios during the year was Pirates of the Caribbean: On Stranger Tides (Disney) and the largest production based at Shepperton Studios was Hugo Cabret (GK Films). Other productions that used Pinewood Shepperton facilities included Clash of the Titans (Warner Bros), Captain America: The First Avenger (Marvel), X-Men: First Class (Fox), Dark Tide (Magnet Media), Johnny English Reborn (Working Title), Jane Eyre (Ruby Films), My Week with Marilyn (Trademark Films), The Woman in Black (Hammer Films) and Harry Potter and the Deathly Hallows (Warner Bros). The Companys state-of-the-art facilities offer attractive options for clients, enabling it to win significant business from international productions. The film stages and television studios were deployed interchangeably to ensure maximum utilisation of both the facilities and services. The flexibility of the film stages also allow them to be used for tour rehearsals and promotional videos. During the course of the year the stages were used by artists such as Kylie Minogue, Shakira, Chris Rea, Stevie Wonder, Rod Stewart, Eric Clapton, Tom Jones, Status Quo and Kasabian. The Company provided digital content services generating revenues of 5.8m (2009: 6.4m), now reflecting the transition to a fully digital and more efficient process. These services were provided to a number of high profile film and television productions, including Harry Potter and the Deathly Hallows (Warner Bros), 127 Hours (Cloud 8/Film 4), Hanna (Focus Features) and the fourth television series of Would I Lie to You. Digital content services were also provided to a number of computer games, including Driver: San Francisco (Ubisoft) and Enslaved (Ninja Theory). These digital services provide game developers with premium facilities and reaffirm the Companys strategy of a flexible offering. Following an agreement with StudioCanal in late 2009 to digitise and preserve its extensive library of film and television, audio and picture assets, the Company has completed work on a number of films and television series including Murder on the Orient Express, Whisky Galore, Cross of Iron, Peeping Tom, Brighton Rock, Poirot, and the digital cinema re-release of The Railway Children. During 2010, the Company entered into a new agreement with Associated Press to house the GMTV programme library. The development of a digital restoration, preservation and archive facility allowed the Company to invest in expanding its digital infrastructure providing film and television productions and tenants such as ITV and Associated Press with technology which meets their increasing needs. The long-term agreement with Disney Character Voices International is performing well. The Company also provided international language versions to a wide range of other productions, including Iron Man 2 (Marvel), How to Train Your Dragon (Dreamworks) and Karate Kid (Sony). The Company opened its on-site data centre in April 2010 which is also performing well. Combined with the Sohonet media network, the data centre provides co-location and hosting services tailored to the requirements of the media and entertainment industries and adds to the wide range of innovative facilities at the Studios. These improvements form part of the Companys ongoing commitment to add value through investment in its technical infrastructure. The Company won Best Film Mix Facility of the Year in October 2010 at the UK Screen Sound Awards (The Conch). During the year the demand for use of the Companys stage and studio assets continued to grow. Accordingly the Board has approved, subject to detailed planning consent, the building of a unique 30,000 sq ft stage suitable for both film and television. This significant addition to stage capacity for the Company of 7% is at an anticipated cost of 5.1m. Completion of this new stage, is anticipated by the second half of 2012.
Film continued The Company has continued to monitor the market demand for film production in the UK. 2010 has once again demonstrated strong growth in inward investment film production. Despite the overall growth in production, smaller budget, UK productions, have struggled to maintain a sustainable level of output as financial markets have constricted access to film finance. These smaller budget films are a valuable part of the Companys mix of revenues. The Government offers attractive fiscal incentives for such productions. The Companys unique offering and market standing provides the Company with the ability to support productions from this segment of the market. Without unduly risking capital, the Company will target a limited number, up to four per annum, of films, with total production budgets of circa 2m each. To that end, the Company intends to provide facilities and co-investment of up to 20% in the equity of such small budget films. International The Pinewood brand is well recognised and highly regarded internationally. The Companys international offering seeks to build on that reputation and selectively leverage its brand strength and expertise. The Companys first sales and marketing agreement was in Canada. Pinewood Toronto Studios is proving popular with a wide range of US production companies and US television networks. Film and television productions that have used the facilities include Scott Pilgrim vs. the World (Universal), Dreamhouse (Morgan Creek), The Thing (Universal), Breakout Kings (Fox) and Battle of the Blades (CBC). Phase one construction of Pinewood Iskandar Malaysia Studios, the Companys second international agreement, which will comprise 100,000 sq ft of film stages (ranging from 15,000 sq ft to 30,000 sq ft) and 24,000 sq ft of TV studios (2 x 12,000 sq ft) plus a number of offices, workshops and post production facilities is on schedule. The detailed design work is now significantly completed and the construction phase commenced in February 2011 with a view to opening in early 2013. In February 2010, Pinewood Studios and Studio Hamburg entered into a joint venture that allows European and international filmmakers to take advantage of our joint infrastructure and skills when producing feature films in Germany. The newly created entity, Pinewood Studios Berlin Film Services, offers international filmmakers a full range of production service opportunities, targeting European producers. The venture is on track to host its first production later this year. The Company entered into a long-term agreement with the Indomina Group, an investment managed by VICINI, a leading asset management company with investments in food and beverages, retail, energy, finance, tourism and real estate in the Caribbean and Central America. This agreement is for the operation of new film and television studios to be built in the Dominican Republic. Pinewood will receive annual fees for its sales and management services and an equity participation which accrues over time from 2013. The construction will be funded by the Indomina Group. This new venture, Pinewood Indomina Studios is expected to commence initial operations in 2012, targeting the growing Latino film and television market. International revenues in 2010 of 0.6m (2009: 0.5m) are in line with the Companys expectations. Once all four international studios are fully operational they will make incremental contributions to revenue and provide access to key expanding markets such as in the Asia Pacific and South American regions. Television The Companys television revenues were, as expected, reduced for the year at 8.2m (2009: 11.3m). Revenues were impacted by ITV and BBC deciding to direct their productions to their own in-house studio facilities. The competition for providers of smaller television studio space has increased significantly as a result. Demand for the Companys large scale flexible facilities is growing. This has given the Company a competitive advantage in hosting the big event television shows. The Companys full service television offering and range of facilities which produce high quality, cost effective solutions continues to prove attractive to broadcasters and programme makers.
Television continued Pinewood and Teddington television studios played host to new and repeat business from My Family (DLT), A League of Their Own (CPL), Britains Best Dish (ITVS), Would I Lie to You (Zepperton), Perrin (Objective Productions), The Rob Brydon Show (Talkback Thames), Grounded for Life (Caryn Mandabach), Dick & Dom (BBC), Piers Morgans Life Stories (ITV) and IT Crowd (talkbackTHAMES). During the year, television productions such as Episodes (Hat Trick Productions), Dragons' Den (BBC), New Tricks (Wall to Wall) and Grandma's House (Tiger Aspect) used large film stages at Pinewood Studios. R and S stages at Pinewood Studios were used for two large ITV game shows Ant & Decs Push The Button (Gallowgate) and The Whole 19 Yards (Endemol) both of which required the space to accommodate large sets and large audiences. The live ITV programme Dancing on Ice commenced pre-production late in 2010 and continues to use film stages at Shepperton Studios to host complex sets and large audiences. The Companys television facilities and film stages were used during the course of the year for a variety of television advertising campaigns, including Virgin Atlantics 'Your airline's either got it or it hasn't', Stella Artois online TV show, CO2eux Soire and the Speedo 2010 campaign, MySpeedo. The transmission facilities at Teddington Studios provide additional services which are attractive to smaller channels. During the course of the year channel hosting facilities were provided to CBeebies, Racing UK, Turf TV, Chinese Channel and Ulster TV. The Company is bidding to renew its contract with Racing UK on enhanced channel hosting needs. The Company notes the recent formal announcement by the BBC to redevelop for other uses the BBCs studio facilities at Television Centre, White City, London. Media Park The Companys Media Park is an integral part of the creative industries cluster that exists at the studios the benefits of which are well known. Media Park is a unique asset offering a variety of complementary services for film and television productions utilising the studios. Media Park is an important component of the Companys strategy. Despite tough market conditions, Media Park comprises 297 (2009: 300) media related businesses ranging from small to large, offering services to the film, television and video game industries. The Company will continue to target prospective media tenants as it seeks to expand its unique network of related services and businesses on an occupier led basis. Media Park revenues for 2010 were 6.2m (2009: 6.3m) including the Groups 50% interest in the Shepperton Studios Property Partnership (SSPP). Occupancy was 90% (2009: 88%) which was a resilient performance in a depressed commercial property market. A contributing factor to the reduced revenues was the diversion of 30,000 sq ft of tenant space to meet the requirement from film productions. The Media Park facilities comprise 380,000 sq ft of tenanted areas used by technology, digital service companies, a film processing laboratory and numerous other support businesses related to the film, television, video game and wider creative industries. The Company continues to look to exploit its master planning consents at each of the Pinewood and Shepperton Studio sites for market led demand for new Media Park facilities. In 2010, the Company committed to capital expenditure of 3.3m over three years for a major electricity supply upgrade at Pinewood Studios, increasing power to the site from 4.5 MVA to 15 MVA. This significant infrastructure improvement will not only allow the Company to increase the permanent power provision available to productions at the Studio but also to meet future demand. The Company continues to invest in its studios, ensuring it can meet the needs of businesses that want to relocate into one of Europes foremost creative clusters. During the course of the year the Company invested 0.7m on a 10,000 sq ft facility for a new tenant on a 10 year lease, Take 2 Lighting, at Pinewood Studios. This new facility, the North Lamp Store, was opened on 12 November 2010.
10
Project Pinewood Project Pinewood is a long-term scheme of national significance to create a living and working community for the creative industries. Project Pinewood is aimed at building upon the creative hub developing at Pinewood Studios. The Company believes that Project Pinewood will benefit individuals, the creative industries and more widely UK plc, through job creation, its emphasis on skills and training and access to affordable housing. Project Pinewoods green credentials will also enable film and television productions significantly to reduce their carbon emissions and it is a project of national and regional significance which will be of long-term benefit to all stakeholders. The Coalition Government has recognised that the creative industries have a crucial role to play in driving economic recovery in the UK. Their significance to future economic prosperity has been recognised by the Prime Minister who highlighted the need to support the growth of the creative industries in his speech Transforming the British economy: Coalition strategy for economic growth on 28 May 2010. Private sector initiatives such as Project Pinewood are an important contribution to the process of economic recovery. The Companys appeal by way of Public Inquiry against the initial refusal by South Bucks District Council of planning permission for Project Pinewood will commence on 5 April 2011. The decision will be made by the Secretary of State for Communities and Local Government. Separately an application by local residents in opposition to Project Pinewood to register part of the proposed site as a Town or Village Green was heard in September 2010. On 21 December 2010 the Buckinghamshire County Council Rights of Way Committee unanimously upheld the recommendation from the Independent Inspector appointed by Buckinghamshire County Council to reject this application. Total costs incurred since the project inception to 31 December 2010, including the Town or Village Green defence costs were 6.0m (2009: 4.8m). Return on Capital Employed (ROCE) As we set out in the overview section of this report, since its IPO in May 2004 the Company has followed a clearly defined strategy for developing its business. This long-term strategy and the Companys significant and integral property assets distinguish the Company from other businesses in the media sector. The Companys long-term property investments add to the capital employed by the Company and returns from these investments will impact the ROCE measure whilst the Company continues to build out its Studios in accordance with the consented Masterplan. It is therefore particularly pleasing to see that ROCE has grown to 7.7% for 2010 (2009: 6.6%). The Board is always mindful of the need to improve ROCE as one of a basket of measures of performance and senior management remains incentivised accordingly. Dividend The Board is recommending an increased final dividend of 2.50p (2009: 2.40p) making a total dividend for the year of 3.60p (2009: 3.45p). Outlook The year has begun positively. The Company is hosting a number of international big budget films and has also attracted large television shows such as Dancing on Ice (ITV) and Got to Dance (Sky). Media Park revenues continue to be consistent, reflecting the value of the Companys offering in the market place. As a result of this performance to date, and the visibility of contracted revenues from major films for the rest of the year, the Company expects continuing growth in revenues in 2011. Looking to the longer term, the Company intends to add to its film stage capacity to help meet an increasing demand for its services in the UK. The Company looks to the future with confidence. Ivan Dunleavy Chief Executive 7 March 2011
11
Virgin Atlantic commercial "Your airline's either got it or it hasn't" by ad agency RKCR and Partizan, shot at Pinewood Studios
12
Financial review
The Board use a number of key performance indicators (KPIs) to monitor the Companys performance, as well as to measure progress against the Companys objectives. The KPIs used are: revenue, profitability, return on capital employed, cash flow and net debt which are discussed as part of this Financial Review: Revenue Total revenues for the year were 43.4m (2009: 40.3m), the 8% increase in total revenues reflected strong growth in film revenues. Film revenues of 29.1m (2009: 22.6m) increased 28%, benefitting from the Companys strong performance during the second half of 2010 where revenues were 18.3m, compared to 10.8m for the first half of the year. Film revenues were generated from the provision of services and facilities, including: stages, workshops, wardrobes, dressing rooms, production offices, outdoor filming facilities, ancillary services and digital content services. International revenues of 0.6m (2009: 0.5m) were generated from providing sales and marketing services in Canada and Malaysia. These revenues provide a meaningful margin contribution with minimal capital employed. Television revenues of 8.2m (2009: 11.3m) reflected the difficult commissioning environment and the diversion of the Companys television facilities at Pinewood for film production where there has been high demand. The Company provides dedicated digital television studios on a fully serviced basis which includes freelance contractors, lighting, cameras, technical equipment, dressing rooms and production offices, all of which are priced into the contract in accordance with the requirements of each television customer. Within film and television are revenues generated from digital content services, which covers sound and picture post production, foreign language versioning and archive and restoration services. For the full year revenues were 5.8m (2009: 6.4m) now reflecting the transition to a fully digital and more efficient process. Media Park revenues were 6.2m (2009: 6.3m) including the Companys 50% interest of 0.9m (2009: 0.9m) from the Shepperton Studios Property Partnership. The reduction in revenue reflected a loss of a number of tenants during the year, and the removal of 30,000 sq ft from the tenanted property estate for future redevelopment. Tenants within the Media Park are contracted on a range of terms inclusive of service, utility and facility charges which vary from six months to 15 years, supporting the sustainability and resilience of the Companys overall revenues. Profit performance and earnings per share Gross profit was 17.4m (2009: 15.6m) with gross margins achieving 40% (2009: 39%). Reported operating profit increased 20% to 9.1m (2009: 7.6m), resulting in an operating profit margin of 21% (2009: 19%). EBITDA, i.e. earnings before exceptional items, interest, tax, depreciation and amortisation, was 12.8m (2009: 11.4m). Profit before tax increased 31% to 5.8m (2009: 4.5m). Basic earnings per share were 9.3p (2009: 9.1p). Basic earnings per share after adjusting for the effects of the release of the provision for the potential capital gains taxation on properties and for exceptional items were 8.0p (2009: 6.3p). Diluted earnings per share were 8.9p (2009: 8.8p). Diluted earnings per share after adjusting for the effects of the release of the provision for potential capital gains taxation on properties and for exceptional items were 7.7p (2009: 6.2p). The weighted average number of shares in issue was 46.2m (2009: 46.1m). Adjusting for shares potentially issuable as a result of employee share schemes, the average number would be 48.2m (2009: 47.3m).
Pinewood Shepperton plc Annual Report & Accounts 2010 Financial review continued
13
Return on capital employed The Company measures return on capital employed which for the 12 months ended 31 December 2010 increased to 7.7% (2009: 6.6%) by reference to annual operating profit, before exceptional items as a percentage of average capital employed, being total equity plus interest-bearing loans and borrowings. Exceptional income Exceptional income amounted to 0.6m. The Company negotiated a business rates rebate of 0.5m relating to prior periods. In addition, following a review of the Total Shareholder Return component of the Companys Long-Term Incentive Plan awards, granted in 2008, 0.1m of the IFRS 2 charges to the Company income statement in previous years were reversed as an exceptional credit in the year. Exceptional costs Exceptional costs for the year amounted to 0.6m. The Company incurred costs of 0.4m in restructuring certain administrative functions and wrote off 0.2m of the set-up costs of establishing its international initiatives. Dividend The Board is recommending a final dividend of 2.50p (2009: 2.40p), taken together with the interim dividend of 1.10p (2009: 1.05p), the total dividend is 3.60p (2009: 3.45p). The dividend for 2010 is covered 2.6 times (2009: 2.5 times) by profit for the year after tax. The dividends reflected in the statutory accounts for the 12 months to December 2010 are the final dividend in respect of 2009 of 2.40p and the interim dividend in respect of 2010 of 1.10p. The final dividend for 2010 will be accounted for in 2011. Subject to approval by the shareholders at the Annual General Meeting to be held on 31 May 2011, the final dividend will be paid on 10 June 2011 to shareholders on the register at 13 May 2011 (ex-dividend date of 11 May 2011). It remains the Boards intention to continue its progressive dividend policy. Cash flow and net debt The Company generated operating cash flow of 13.0m (2009: 10.7m). After adjusting for movements in working capital, including a 4.4m increase in deferred income, cash generated from operations was 17.6m (2009: 8.5m) from which finance costs of 3.0m (2009: 2.8m) and corporation tax 1.9m (2009: 1.5m) were paid. During the year cash outflow on capital expenditure was 6.7m (2009: 6.3m), including 1.9m of capital expenditure payable carried forward from 31 December 2009. The main items of capital expenditure during the year were: investment in the archiving and data centre projects amounting to 1.0m, life cycle expenditure of 3.0m, infrastructure power upgrade of 1.0m, the completed 10,000 sq ft pre-let of 0.5m and Project Pinewood costs of 1.2m. Net debt at 31 December 2010 was 42.7m (31 December 2009: 46.1m) which included 12m (2009: 12m) relating to the Groups 50% interest in the non-recourse Aviva loan to the Shepperton Studios Property Partnership (SSPP). The reduction in debt reflects improved trading. The Company has banking facilities of up to 70m which comprise a 35m revolving credit facility, a 30m facility for pre-let development and a 5m overdraft facility, all of which are secured by a floating charge over the Companys assets. The revolving and pre-let facilities contain no scheduled repayments and mature in August 2013. The 5m overdraft facility is available until August 2013 and is subject to annual reviews. At 31 December 2010, 22.5m (2009: 26m) of the revolving credit facility and 6m (2009: 6m) of the pre-let development facility were drawn. The overdraft facility was undrawn at 31 December 2010 (2009: 0.9m). During the year the Company also drew down a further 1.3m of asset financing which at 31 December 2010 totalled 1.8m (2009: 0.9m).
14
Cash flow and net debt continued There are a range of covenants appropriate to the revolving credit facility, pre-let development facility and overdraft facility. The Company was covenant compliant with adequate headroom on all covenants at 31 December 2010. In addition to the 70m banking facilities, there are non-recourse facilities provided to SSPP by our joint venture partner Aviva, which total 40m, of which 24m was drawn at the year end. This loan which is 50% consolidated at 12m (2009: 12m) is included in the Company statement of financial position. These facilities are available until 2026 and are covenant free with no scheduled repayments. The Companys financial risk management, objectives and policies are discussed in more detail in Note 26 to the financial statements. Investment property Investment property is recognised in accordance with IAS 40 as a category within assets in the Company statement of financial position. At 31 December 2010, investment property is recorded at a carrying cost of 6.4m (2009: 6.3m). This compares to the Directors assessment of the fair value of 7.1m (2009: 6.8m). Further information can be found in Note 15 to the financial statements. Capital commitments The Company had capital commitments of 2.3m at 31 December 2010 (2009: nil) relating to its additional power upgrade. Financial gearing At 31 December 2010, net debt including the Companys share of the SSPP non-recourse drawn loan was 42.7m (2009: 46.1m). Financial gearing at the year end, excluding fair value and loan issue costs, was 55.8% (2009: 63.2%). Finance costs and hedging Net finance costs were 3.3m (2009: 3.2m) which are comparable to the previous year and include the relevant fees and margins incurred under the facilities. The Company has at its disposal undrawn facilities on which it pays non-utilisation fees which are a percentage of the margin. Interest capitalised during the period on Project Pinewood was 150,000 (2009: 0.1m). Net finance costs were covered 2.8 times (2009: 2.4 times) by operating profit. The Company continued to use interest rate derivatives to manage interest rate exposure. The Company has a 7.5m hedge with an effective rate of 2.89% plus a variable margin of 2.5% that was entered into in April 2009 and expires in July 2013. The Company also has a 15m hedge with an effective rate of 5.15% plus a variable margin of 2.5% that was entered into in October 2008 and expires in July 2013. At 31 December 2010, 22.5m (2009: 22.5m) of the companys facilities were under interest rate swaps and 1.8m (2009: 0.9m) was under a fixed interest rate asset financing facility. At 31 December 2010, 57% (2009: 51%) of the Companys borrowings were at a fixed rate of interest. The Board regularly reviews the hedging arrangements to manage interest rate exposure. Further details on interest rate risk management can be found in Note 26 of the financial statements. Project Pinewood Included within Property, plant and equipment on the statement of financial position, is 6.0m of costs incurred to 31 December 2010 (2009: 4.8m) in relation to Project Pinewood. Capitalisation of costs is based on the Boards judgement that the economic benefits expected from the asset will exceed the carrying costs of Project Pinewood. Costs are reviewed monthly by the Board. Taking into consideration all aspects of the project, the Board views the carrying cost of the capitalised expenditure incurred up to 31 December 2010 to be appropriate.
15
Taxation The current corporation tax expense for the year ended 31 December 2010, based on profit before tax of 5.8m, was 2.0m, a current tax rate of 35% (2009: 21%). After adjusting 0.5m for the effect of the release of a provision for potential capital gains taxation on properties and other deferred tax adjustments, the tax charge is 26% (2009: 6%). On 22 June 2010, the UK Government announced its intention to reduce the main rate of corporation tax from 28% to 24%. The fall will be phased in over a period of four years with a 1% reduction in the main corporation tax rate for each year starting on 1 April 2011. The Finance (No. 2) Act 2010 enacted on 27 July 2010, included legislation on the initial phase to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. It is expected that the rate changes will have an effect of reducing the net UK deferred tax position recognised at 31 December 2010 by approximately 0.1m. Going concern In assessing the going concern basis, the Directors considered the Companys business activities, the financial position of the Company and the Companys financial risk management objectives and policies. The Directors considered that the Company has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing these financial statements.
Patrick Garner FCA Finance Director 7 March 2011
16
Board of Directors
Non-Executive Chairman
Lord Grade of Yarmouth, CBE (67) began his career as a sports journalist; previous positions include Chief Executive of Channel 4 (19881997), Chairman and Chief Executive of First Leisure plc and Chairman of the Governors of the BBC and Chairman and Chief Executive of ITV plc. He is Non-Executive Chairman of Ocado and the entertainment talent services company, James Grant Group. Lord Grade has been Chairman of Pinewood Shepperton since February 2000. He was created a Peer in 2010.
Executive Directors
Ivan Dunleavy, Chief Executive (51) has spent his career in media businesses initially in finance roles. Prior to his current role he was Chief Executive of VCI plc, until it was acquired by Kingfisher plc in November 1998. He is a Director of UK Screen Association Limited, the industry trade body, and has been Chief Executive of Pinewood Shepperton since February 2000. Patrick Garner FCA, Finance Director (65) was a Director of Trafalgar House Property Limited and Finance Director of Canary Wharf Limited from 1993 to 1995 (appointed by the secured lenders on exit from administration), Vice President Property and Finance for Village Cinemas Limited. He joined Pinewood Shepperton in September 2001 and was appointed to the Board in October 2001. Nicholas Smith, Commercial Director (48) joined Pinewood Shepperton in May 2002 and was appointed to the Board in July 2005. Previous positions include Head of European Sales for Nokia (Home Communications), European Sales Director for beenz.com, Broadcast Director for TSMS Ltd and Marketing Manager at London Weekend Television. He is currently on the management Board of the Production Guild of Great Britain.
Adrian Burn FCA * (65) trained as a chartered accountant. He has spent most of his career in professional practice, becoming Managing Partner and then Senior Partner of Binder Hamlyn and a member of the UK Board of Arthur Andersen. He is currently a Non-Executive Director of GE Money Home Lending and a trustee of the Royal British Legion. He was appointed to the Board in April 2000 and is the Senior Independent Director and Chairman of the Audit Committee. Nigel Hall FCA * (55) trained as a chartered accountant. He joined the Burton Group in 1984 (renamed Arcadia Group plc following the demerger of Debenhams in January 1998) being appointed to its Board in August 1997 and becoming Group Finance Director in November 1997, a role he continued in until March 2003. He is currently Non-Executive Chairman of Countrywide Farmers plc and a Non-Executive Director of Unite Group plc and C & J Clark Limited. He was appointed to the Board in April 2004 and is Chairman of the Remuneration and Nomination Committees. James Donald FRICS * (66) was Chairman of Strutt & Parker for seven years until his retirement from the partnership in 2004. He continues to act as a consultant to the firm and a number of previous clients. For many years his main focus has been the development or redevelopment of large commercial or mixed use sites, advising occupiers, developers and investors. He was appointed to the Board in March 2006. Steven Underwood ACA (36) trained as a chartered accountant with Coopers & Lybrand. He joined the Board of the Peel Group as Corporate Development Director in March 2007, after eight years in Investment Banking with Rothschild. He represents the Peel Group on the Boards of a number of its investee companies. He was appointed to the Board in June 2010.
* Member of the Audit Committee Member of the Nomination Committee Member of the Remuneration Committee
Non-Executive Directors
Pinewood Shepperton plc Annual Report & Accounts 2010 Board of Directors continued
17
Company Secretary
Andrew M. Smith (48) Joined in June 2008, as Group Director Corporate Affairs and is responsible for communications, public affairs, human resources and corporate and social responsibility. He was appointed Company Secretary on 20 December 2010. He is a member of the Film Skills Council. Prior to this he was Managing Partner of The Policy Partnership.
18
Directors report
The Directors present their Annual Report together with the financial statements for the year ended 31 December 2010.
Principal activities, business review and future developments
The principal activity of the Company is the provision of studio and related services to the global film and television industry. The Board considers the Company to be well placed and views its future prospects with confidence. The information that fulfils the requirements of the Business review can be found in the following sections, which are incorporated into this report by reference: Operating review, Financial Review, Key Business Risks, Corporate Governance, Employees and Corporate Responsibility (pages 5 to 35). Future developments are discussed within the Chairmans Statement and Operating Review (pages 3 to 11).
Results and dividend
Profit for the financial year ended 31 December 2010 was 4.3m (2009: 4.2m). A final dividend of 2.50p (2009: 2.40p) per share is recommended for the year ended 31 December 2010.
The Directors at 31 December 2010 and their interests in the share capital of the Company, other than those interests in options and awards in respect of ordinary shares (which are contained within the Directors remuneration report), were as follows:
Number of ordinary shares at 1 January 2010 Number of ordinary shares at 31 December 2010
Directors and their interests
Acquired during the year
Lord Grade of Yarmouth Ivan Dunleavy Patrick Garner Nicholas Smith Adrian Burn Nigel Hall James Donald Steven Underwood
1. Purchased in connection with long-term incentive plan grants.
620,486 1,266,458 208,822 25,196 66,660 18,289 10,000
20,000
620,486 1,286,458 208,822 25,196 66,660 18,289 10,000
2. Steven Underwood is an Executive Director of the Peel Group which indirectly owns 26.64% of the issued share capital through Goodweather Investment Management.
Since 31 December 2010, there have been no changes in the Directors interests in shares. The Company has complied with the Financial Services Authority announcement on 9 January 2009 with respect to Disclosure and Transparency Rule 3.1.2, and discloses relevant information to the market via Regulatory News Service bulletins as soon as it receives notification of transactions.
Pinewood Shepperton plc Annual Report & Accounts 2010 Directors report continued
19
Directors and their interests continued
Lord Grade and Nigel Hall will retire by rotation at the forthcoming Annual General Meeting on 31 May 2011 and, being eligible, will offer themselves for re-election. In accordance with the Companys Articles of Association, Steven Underwood will offer himself for election as he has been appointed to the Board since the Companys last Annual General Meeting. In accordance with the Companys Articles of Association, Adrian Burn will offer himself for re-election as he has held office as a Non-Executive Director for more than nine years. For the reasons set out in the section on Corporate Governance on page 26 the Board considers that notwithstanding the fact that Adrian Burn has served on the Board for 11 years, he is independent for the purposes of the Combined Code and his level of experience brings a significant and valuable contribution to the Board. Details of Directors service contracts are provided in the Directors remuneration report. Directors interests in contracts in the Groups business are disclosed as related party transactions in Note 25 to the accounts. The Company appoints and replaces Directors in accordance with the Companys Articles of Association and has a process of selection and recruitment of replacements as noted in the Nomination Committee section of the Corporate Governance Report.
Corporate governance
Details of the Companys corporate governance policies are incorporated into the report by reference and can be found on pages 26 to 31.
Annual General Meeting
The notice convening the Annual General Meeting of the Company, to be held at J.P. Morgan Cazenove Limited, 20 Moorgate, London EC2R 6DA, at 10.30 am on 31 May 2011, together with an explanation of the resolutions to be proposed at the meeting, is contained in a circular to shareholders enclosed with this Annual Report.
Share capital
The Companys share capital comprises one class of ordinary shares which carry no restrictions on the transfer of shares or on voting rights (other than set out in the Companys Articles of Association). There are no agreements known to the Company between holders of shares in the Company which may result in restrictions on the transfer of shares or on voting rights in relation to the Company. Details of issued share capital are contained in Note 20 to the accounts. At 2 March 2011, the beneficial interests amounting to 3% or more of the issued share capital of the Company, as notified to the Company, comprised:
Number of shares Percentage held
Crystal Amber Advisers (UK) LLP Goodweather Investment Management Aberdeen Asset Management Group SVG Capital Plc Warren James Holdings Limited Aegon Asset Management
12,930,861 12,318,000 4,577,500 3,410,148 2,175,000 1,643,602
27.97 26.64 9.90 7.38 4.70 3.56
No holder of shares in the Company has any special rights with regard to control of the Company, nor does the Sharesave Scheme (details in the Remuneration Committee report) provide rights with regards to the control of the Company.
20
Share capital continued
The Board invited Steven Underwood, currently a full-time executive of the Peel Group (Peel), to join the Board as a Non-Executive Director with effect from 29 June 2010. Peel holds 26.64% of the issued share capital of Pinewood Shepperton plc via Goodweather Investment Management. In connection with the appointment of Steven Underwood, Peel has provided undertakings pursuant to which, inter alia, it has agreed that during the period that Steven Underwood or any other representative of Peel is a director of the Company (the Peel Representative) and, in the event that there ceases to be a Peel Representative, for a further period of six months thereafter, Peel shall not, without the recommendation of the Board, make an offer for the Company or put itself in a position where it is obliged to make such an offer under the Takeover Code. These restrictions shall not apply in the event that an unconnected third party announces a firm intention to make an offer for the Company. In addition, it has been agreed that whilst there is a Peel Representative the Company shall at all-times operate independently of the Peel Group, in particular, there should always be a majority of directors of the Company who are independent of the Peel Group and that all transactions, dealings and other relationships between the Peel Group and the Pinewood Group shall be on arm's length terms and on a normal commercial basis. In the event of a change of control of the Group, the banking facilities become repayable on demand if the Group and the syndicate banks agent are unable to agree alternative terms within thirty days of the Groups notification of a change of control. There are no other significant agreements to which the Company is a party to, that take effect, alter or terminate upon a change of control of the Company following a takeover bid, nor are there any agreements between Directors or Employees providing for compensation for loss of office or employment that occurs because of a takeover bid. The Directors have the authority to buy-back the Companys shares provided that the maximum number is 4,623,200 and subject to minimum and maximum price levels as defined in a resolution passed at the Annual General Meeting on 29 June 2010. The authority to buy-back shares expires on the date of the next Annual General Meeting, 31 May 2011.
Creditor payment policy
Group trade creditors at 31 December 2010 were equivalent to 26 days (2009: 33 days) of purchases during the year in line with Group policy; specific terms are agreed between operating companies and their respective suppliers, and that payments are made to suppliers in accordance with those terms.
Charitable donations
During the year the Group donated 9,000 to charitable causes, and has continued to demonstrate its commitment to the support of local charities and causes, in addition to supporting media related charities. Further details are contained in the Corporate responsibility report on page 34. No political donations were made during the year.
Financial instruments
The financial risk management objectives and policies of the Group are included in Note 26 to the accounts.
Subsequent developments
The Company has entered into a long-term agreement with the Indomina Group, an investment managed by VICINI, a leading asset management company with investments in food and beverages, retail, energy, finance, tourism and real estate in the Caribbean and Central America. The agreement is for the operation of new film and television studios to be built in the Dominican Republic. Pinewood will receive annual fees for its sales and management services and an equity participation which accrues over time from 2013. The construction will be funded by the Indomina Group. This new venture, Pinewood Indomina Studios is expected to commence initial operations in 2012.
21
Principal risks and analysis of Key Performance Indicators
The principal risks to which the Group and Company are exposed are disclosed in the Key business risks section of the Annual Report and in Note 26 to the accounts. In monitoring and assessing business performance the Board uses a number of key performance indicators which are covered on pages 12 to 15 in the Financial Review section of the Annual Report.
Directors liabilities
The Company has granted an indemnity to all its Directors against liability brought by third parties, subject to the conditions set out in the Companies Act 2006. Such qualifying third party indemnity provision remains in force as at the date of approving the Directors report.
Going concern
The Groups business activities, together with the key business risks that may impact its future development, performance and position are within the following sections: Operating review, Financial review, Key business risks, Corporate governance and Corporate responsibility which form part of the Business review within the Directors report. The Finance Directors Financial review covers the financial position of the Group and its cash flows, liquidity position and borrowing facilities on pages 12 to 15. In addition, Notes 21 and 26 to the financial statements include the Groups objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk. The Group has primary banking facilities and an overdraft facility in place until 2013, the overdraft is subject to an annual review. In addition, the Shepperton Studios Property Partnership joint venture partnership with Aviva has a non-recourse facility in place until 2026. The Group also has a strong brand and reputation in the marketplace with a wide number of customers and suppliers in the film and television industry. As a consequence, the Directors believe that the Group is well placed to manage its business risks and operations successfully despite the current economic environment. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements, as there are no material uncertainties related to events or conditions that may cast significant doubt about the ability of the Group to continue as a going concern. The going concern assessment has been prepared in accordance with Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009, published by the Financial Reporting Council in 2009.
Directors statement as to disclosure of information to auditors
The Directors who were members of the Board at the time of approving the Directors report are listed on page 16. Having made enquiries of fellow directors and of the Groups auditors, each of these Directors confirms that: so far as he is aware, there is no relevant information of which the Groups auditors are unaware; and he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Groups auditors are aware of that information.
22
Registered auditors
In accordance with Section 489 of the Companies Act 2006 resolutions proposing the reappointment of Ernst & Young LLP as auditors to the Group will be proposed at the Annual General Meeting at a level of remuneration to be agreed by the Directors.
Statement of Directors responsibilities
The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom law and International Financial Reporting Standards as adopted by the European Union. The Directors are required to prepare Group financial statements for each financial year which present fairly the financial position of the Group and the financial performance and cash flows of the Group for that period. In preparing those Group financial statements, the Directors are required to: select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently; make judgements and estimates that are reasonable and prudent; present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Groups financial position and financial performance; and state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and parent company and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Each of the Directors, whose names and functions are listed on page 16, confirms that, to the best of their knowledge: the Group financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and the Chairmans statement, Operating review, Financial review and the Directors report, when taken together, include a true and fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that it faces. By order of the Board
Andrew M. Smith Company Secretary 7 March 2011
23
Key business risks
The Board views effective risk management as a primary part of the Groups wider strategy and is fully committed to the identification, evaluation and management of significant risks facing the Group. The table below outlines the key risks and uncertainties identified by the Board together with an outline of mitigation activities. 1.
Risk
General risks
Description Mitigation
Importance of key customers and big budget films
The Groups largest customers account for a high percentage of revenues. If big budget filmmakers cease to choose the Groups facilities this would reduce revenues.
Maintaining strong, long-standing relationships through consistent levels of service and retaining employees to offer continuity. Diversification of revenues through the development of the Groups strategy. Maintaining strong relationships and an open line of communication with customers and international partners through the Directors and executive management team. No direct mitigating actions can be taken.
Loss of reputation
Providing services to the worldwide film industry and representing studios internationally requires a robust reputation. Damage to the reputation could have an adverse impact on the Group. Members of the various trade guilds/unions work on a high proportion of UK inward investment films. A delay in the recovery of the economic environment may lead to a reduction in customers and revenue.
Guild/Union disruptions
Delay in the recovery of the economy
The Board monitors the external environment and its impact on the industry and has a number of strategic initiatives to respond to anticipated changes. The Board regularly monitors the performance of the entities it has agreements with and the wider geopolitical context.
International agreements
Less direct and indirect control.
24
Pinewood Shepperton plc Annual Report & Accounts 2010 Key business risks continued
2.
Risk
Financial risks
Fiscal incentives
The UKs film tax incentives help ensure the UK is a competitive location for film production.
No direct mitigating actions can be taken. Reasoned evidence-based arguments are put forward to the Government highlighting the economic contribution that film makes to the economy. No direct mitigating actions can be taken however, the reputation of the Group and the long-standing relationships assist in reducing this risk.
Exchange rates
The majority of international film customers are in the US and an adverse movement in exchange rates may result in a reduction in the Groups competitive edge versus other European or international locations. Risk is in a number of areas including credit risk, liquidity risk, interest rate risk and market risk. Potential increase in business rates and valuation would adversely impact the business.
Treasury
These are discussed in detail in Note 26 to the Annual Report. No direct mitigating actions can be taken albeit representations would be made to Government.
Increases to business rates and valuation
Pinewood Shepperton plc Annual Report & Accounts 2010 Key business risks continued
25
3.
Risk
Operational risks
Health and safety, environmental and disaster recovery
A significant incident could put people and/or the environment at risk as well as damage the Groups reputation. A major incident such as a fire or explosion may result in a number of issues including revenue loss and reputational damage.
A dedicated health, safety and fire team carries out regular risk evaluation. Further details can be found in the Corporate responsibility section of the Annual Report. A Business Continuity Team has been established and a policy is in place to ensure that operational business continues as far as possible in the event of a major incident. Adequate insurance cover is in place to mitigate the risk of the business suffering no permanent long-term detrimental effects from a significant negative event. The Group would assess alternative uses that are in line with the wider Group strategy should such a situation occur.
Property Planning
The Group has exposure to risk if not able to commercially exploit existing and proposed planning consents to the fullest potential in accordance with long range plans. The current economic climate could result in key suppliers to the Group being unable to maintain an effective supply chain.
Failure of key suppliers
The Group retains good supplier relationships and alternative suppliers for generic services could be sourced in the medium term.
Health risk of pandemics, acts of terrorism and natural disasters
Diseases, terrorist threats and natural disasters With UK-based studios and operational partners may reduce the appeal to customers to travel and in a number of international locations the Group consider that the availability of location options may impact local operational capability. would reduce the risk in this area.
The Business review contains forward-looking statements that are made by the Directors in good faith. This information is based on the view of the Board of Directors at the date of approval of this Annual Report and based on knowledge and information at that time together with what are considered to be reasonable judgements. By their nature, forwardlooking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors outside of the Groups control which could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including factors outside of the Groups control. Any forward-looking statements speak only as of the date that they are made, and the Group gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes to events, conditions or circumstances on which any such statement is based.
26
Corporate governance
During the year under review, the Board has continued to support the principles of corporate governance, as advocated by the Combined Code which can be found at www.frc.org.uk/corporate/combinedcode.cfm. The Companys approach to its application of the principles set out in the Combined Code is detailed below. The Company has remained compliant with all requirements of the Code.
Membership of the Board

The Board comprises the Non-Executive Chairman, Lord Grade of Yarmouth; three Executive Directors, Ivan Dunleavy, Patrick Garner and Nicholas Smith; four Non-Executive Directors, Adrian Burn, Nigel Hall, James Donald and Steven Underwood. Further details of the Board members can be found on page 16 of the Annual Report. The Nomination Committee is currently leading a process to recruit an additional independent Non-Executive Director.
Independence of Directors
Adrian Burn, the Senior Independent Director, joined the Board in April 2000. Nigel Hall joined the Board in April 2004, and James Donald joined the Board in March 2006. Adrian Burn, Nigel Hall and James Donald continue to contribute significantly to the Groups strategic direction. The Board considers Adrian Burn, Nigel Hall and James Donald to be independent for the purposes of the Combined Code. Adrian Burn has served on the Board for eleven years. The Combined Code points to a number of factors that may impact independence including length of service on the Board. The Boards view is that independence is determined by the nonexecutives character, objectivity and integrity and that the extended service of Adrian Burn does not compromise his independence and, indeed, his level of experience brings a significant and valuable contribution to the Board. The Nomination Committee is leading a process to recruit an additional independent Non-Executive Director.
Conflicts of interest
In accordance with Section 175 of the Companies Act 2006, procedures have been put into place for the disclosure by Directors of potential and/or actual conflicts of interest, and these have been operated effectively. Each potential and/or actual conflict is disclosed as it arises and is considered by an appropriate quorum of Directors. Directors leave a Board meeting when matters relating to them or which may constitute a conflict of interest are being discussed. The Group complies with the Model Code on share dealings and this extends beyond Directors to Persons Discharging Managerial Responsibilities (PDMRs). In accordance with the FSA requirements over PDMRs, a policy has been introduced to ensure that PDMRs disclose appropriate and relevant information directly to the Company Secretary.
Role and responsibility of the Board

The Board is responsible for determining corporate strategy, treasury policy, approval of capital expenditure projects in excess of 50,000, dividend policy, interim and annual financial statements, all regulatory communications required by the Group and appointments to the Board. In the continuing challenging economic climate the Board continues to maintain and, where it considers necessary, enhance the financial disciplines across the Group. In advance of the monthly Board meeting the Board members are provided with comprehensive historic and forwardlooking financial and operational information to support their understanding of the business and related strategic and operational issues, and to enable them to fulfil their responsibilities accordingly. Where there are specific items that require Board approval, additional reports and supporting information are circulated. Directors are provided with regular access to the Company Secretary and to the executive management team to facilitate their understanding of significant operational issues and assessment of the Groups prospects, including the ongoing consideration of succession planning. This also ensures that the Directors can make further enquiries on financial, operational and strategic matters as and when required. There are also procedures in place to enable Board members to take independent professional advice as necessary.
Pinewood Shepperton plc Annual Report & Accounts 2010 Corporate governance continued
27
Board evaluation
The Board regularly conducts evaluations of its performance. The Chairman reviews individual Board members contributions to the Board and its Committees. The Chairmans performance is likewise reviewed by the Senior Independent Director. These evaluations are carried out on a rolling basis.
Directors training
Prior to their appointment to the Board, all Directors are provided with a detailed understanding of the Group, by meeting with existing Directors, and being provided with comprehensive financial and operational information. Additionally, Directors are fully briefed and kept up-to-date on issues impacting their role and responsibilities as Directors. Directors continue to be updated on significant financial and operational issues via Board meetings and regular communications from the Group, as well as being provided with direct access to the Groups executive management team.
Meetings of Directors
During the year under review the Board held 11 scheduled Board meetings. The following table sets out attendance of the Directors at the Board and Committee meetings during 2010:
Board meetings Audit Committee meetings Remuneration Committee meetings Nomination Committee meetings
Chairman Lord Grade of Yarmouth Executive Directors Ivan Dunleavy Patrick Garner Nicholas Smith Non-Executive Directors Adrian Burn Nigel Hall James Donald Steven Underwood (appointed 29 June 2010) 11/11 11/11 10/11 5/5 3/3 3/3 3/3 5/5 5/5 4/5 2/2 2/2 11/11 11/11 11/11 11/11 2/2
Communication with institutional shareholders

Executive Directors maintain regular and structured dialogue with major shareholders via direct scheduled meetings and communication in response to ad hoc queries and requests from shareholders. In addition, the Chairman and the Senior Independent Director are available to meet significant shareholders, as required.
Share capital
The information about share capital required to be included in this statement can be found on page 19 in the Directors report.
28
Board Committees
The Board has established three Committees Audit, Nomination and Remuneration. The Chairman and members of these Committees are appointed by the Board on the recommendation of the Nomination Committee, following consultation with the appropriate Committees chairman. The terms of reference of the Audit, Nomination and Remuneration Committees are contained in the Corporate governance section of the Companys Investor Relations website at www.pinewoodshepperton.com. Audit Committee Adrian Burn Chairman Nigel Hall James Donald Adrian Burn, Nigel Hall and James Donald are all independent Non-Executive Directors and contribute significant financial and commercial expertise following previously held senior positions in major commercial organisations. The Committee has written terms of reference reflecting the requirements of the Combined Code, which have been approved by the Board. The Committee provides the Board with assurance in respect of the integrity of the Groups financial reporting procedures, policies and controls. The Groups external auditors meet directly with the Audit Committee in advance of full year and interim results, and on other occasions as required. The Audit Committee reports to the full Board of the Company. The Committee also reviews the effectiveness of the external audit process including the issue of auditor independence. In line with best practice, the Audit Committee introduced a policy that defines non-audit services that the Groups auditors may or may not provide. The key point of the policy is that the Audit Committee will not support the use of the appointed audit firm for book-keeping services and any other services deemed incompatible with auditor independence by professional or government regulations. For certain other types of work including, but not limited to, taxation, governance, accounting advice and consultancy services the policy allows for a review of a range of suppliers and costs above a predetermined level are required to be approved by the Audit Committee. Further unscheduled communication between the members of the Committee is conducted as required. The Audit Committee continues to consider, that given the size of the Company, an internal audit function is not currently required. During the year matters considered by the Committee included: The Annual Report and Accounts; Preliminary results; Interim report and results; The Group accounting policies; The use of the going concern basis in the preparation of the accounts; Audit report from Ernst & Young on the interim and annual results; A management letter report from Ernst & Young on recommendations of improvements to internal control; Compliance with the Combined Code; and Approval of the appointment of Ernst & Young as independent external auditor together with audit scope and fees. The Committee met on three occasions during 2010.
29
Board Committees continued

Nomination Committee Nigel Hall Chairman Adrian Burn Lord Grade of Yarmouth The Committee has written terms of reference reflecting the requirements of the Code, which have been approved by the Board. The Committees purpose is to make recommendations to the Board on all proposed appointments of Directors, to review succession plans for the Group and to review Board effectiveness. The Committee met on two occasions in 2010. When the need arises to recruit a director a role profile will be prepared that identifies the requirements of the role and the experience and background of a candidate. This will then be used to assess the applicants. External search consultants will be engaged as necessary to undertake the identification of appropriate candidates. Should the need arise to appoint a successor to the Chairman of the Committee, then the current Chairman, Nigel Hall, would not be permitted to chair relevant meetings. The Committee is currently leading a process to recruit an additional independent Non-Executive Director. The Committee has engaged search consultants to undertake the identification of appropriate candidates. The executive management team are a key component of effective succession planning within the Group. The team have been selected based on experience, background and ability to support the Board in delivering the Group strategy and maximising stakeholder value. Their training and development needs are regularly reviewed as this is a critical part of the succession plan for the wider business to ensure that a pipeline of talent and knowledge is developed and retained. An overview of the executive management team can be found under the Employees section of the Annual Report. Remuneration Committee Nigel Hall Chairman Adrian Burn James Donald A detailed report on the Remuneration Committees activities is contained within the Directors remuneration report. The Committee met on five occasions in 2010.
30
Internal control
The Board acknowledges that it is responsible for the Groups system of internal control and has reviewed its effectiveness in accordance with the provisions of the Combined Code. The Audit Committee, in accordance with the terms of reference, has reviewed the effectiveness of the internal control systems and has found the systems to be effective. The internal control system implemented at the Company for the year under review, and continuing, is structured in order that the Groups risks are effectively identified, evaluated and managed to provide reasonable but not absolute reassurance that there is no material misstatement or loss. This process is consistent with the requirements of the Turnbull Guidance. The main elements of the Groups internal control system, including risk identification, are as follows: Board The Board of Directors is ultimately responsible for internal control procedures, with an organisational structure that supports clearly defined authority levels. The primary responsibility for the operation of the internal control systems lies with the Executive Directors and the executive management team. Board meetings include consideration of strategic, financial, operational and compliance issues, which are endorsed through assessment by the Audit Committee of the effectiveness of the internal, financial and operating control environment. Operating Company controls The identification and mitigation of major business risks is the responsibility of the Executive Directors and executive management team who have ongoing operational responsibility. A part of this remit includes the maintenance and regular review of procedures to identify and mitigate potential areas of risk, supported by the Groups in-house legal counsel, in addition to external advisor guidance. This process and review also ensures that procedures comply with Group policies and guidelines. Authorisation procedures The authorisation procedures in respect of matters such as purchase commitments, capital expenditure, investment limits and treasury transactions are clearly defined within the Group. Insurance The Company has granted an indemnity to all its Directors against liability brought by third parties, subject to the conditions set out in the Companies Act 2006. The continuing adequacy of insurance cover for the Group is evaluated on an annual basis and the Board concluded that the insurance cover for the Group is currently adequate Financial reporting In advance of each financial year, the Board approves a comprehensive budget, incorporating a detailed appraisal of underlying assumptions and business risks. The Board is provided with financial information on a monthly basis detailing historical and forecast results against budget and prior year, incorporating monthly and year to date trading results, statement of financial position and summary notes, cash flow statements, capital expenditure, levels of indebtedness and covenant compliance. In addition, monthly Board meetings include an appraisal of current forecasts, treasury policy, financial resources, borrowing facilities and hedging strategy. The executive management team are also provided with key financial data on a monthly basis, to assess performance against budgets and provide explanations on the results to the Board. Treasury management The treasury function is managed in accordance with guidance approved by the Board and procedures are regularly reviewed to ensure that they remain suitable. Appropriate segregation of duties is in place and significant transactions are authorised by the Board. Financial reports and analysis are provided to the Board on a monthly basis as noted in financial reporting above.
31
Internal control continued

Shareholder communication Pinewood Shepperton plc maintains a strong communication strategy with its shareholders. The Company also communicates regularly with the employees of the Group, a number of who are direct shareholders in the Company, or are members of the Company Sharesave Scheme. All Company announcements are posted on the investor relations section of the Companys website at www.pinewoodshepperton.com as they are released. Relevant shareholder presentations, notably those given to institutional shareholders on publication of the interim and annual results for the year, are also accessible to all investors via the website. The Companys dedicated investor relations section of its website includes historic financial and share price information, as well as a link to About us which provides information on the business and the services and facilities available. Additionally, the Annual General Meeting, to be held this year on 31 May 2011, will provide shareholders with a further opportunity to meet and question the Companys Board, and to review the previous years results and business. By order of the Board
Andrew M. Smith Company Secretary 7 March 2011
32
Employees
The Company actively considers the position of its employees rights through comprehensive and regularly reviewed employment practices in the areas of recruitment, training, welfare, remuneration, employee relations and health and safety. The Chief Executive has Board responsibility for these areas and regularly updates the Board on relevant issues. At the executive management team level, the Group Director Corporate Affairs maintains responsibility for all operational human resources issues and provides the Board with a monthly report. In addition to a published grievance policy, the Company maintains a Whistleblower policy, providing an opportunity for employees to raise grievances with senior management initially and ultimately with the Chairman of the Audit Committee. The Companys stated policy on Equal Opportunities recognises the diversity of individuals, and has procedures in place to ensure that recruitment and promotion recognises such diversity and is not biased by any consideration of age, gender, disability, colour, racial origin, religion or sexual orientation, as well as seeking to provide employees with reasonable conditions of employment and prospects. Employees also receive regular and relevant communication in terms of operational issues and trading performance, and where appropriate, the views of employees are sought in guiding business practices and strategy. The Group has adopted a training policy whereby all members of staff are actively encouraged to contribute to their own development. The Group believes that personal development is a partnership between the individual and the Company, and the attitude of the individual to their own development is a key element of this process. Training is seen as serving three main purposes: helping to meet the Groups corporate aims and objectives; helping to improve the individuals performance in undertaking their current duties and developing the individuals abilities and potential by extending knowledge, skills and influencing attitudes. During the year 30% of training was health and safety related and 70% skills training and career progression. Eight staff members are studying for NVQs in customer service and business administration and two apprentices in Drapes and Post Production Maintenance. Executive management team The executive management team members are the first line of support for the Board and their combined experience and backgrounds assist in delivering the Groups strategy and maximising stakeholder value. They are a key part of the succession plan for the Group and their training and development needs are reviewed regularly to ensure that the talent pool is developed and retained. Paul Baker MBA Group Director Sales (37). Joined in 2006 as Head of Sales, responsible for sales of the Groups film and television facilities. In January 2008, he was promoted to Sales Director and his role expanded to cover the sale of all facilities across the Group and late in 2010 he relocated to Los Angeles. He previously held commercial positions at DMGT, News Corporation and Pearson. Paul Darbyshire Managing Director, Television (59). Joined Teddington Studios in 1998 and is responsible for the Groups television and channel hosting facilities. In addition he oversees operational responsibilities for all television studios and related facilities across the Group. Before joining, Paul worked for BTTV as a Channel Development Manager and later Operations Director. Giles Farley Managing Director, Group Digital Content Services (42). Joined in 2000 and, in 2010, was promoted to Managing Director, Group Digital Content Services. He was previously responsible for UK training, installations and technical sales at Avid and DigiDesign. David Godfrey MCMI Director International Operations (49). Joined in 1985 and has held positions as Assistant Studio Manager, Television and Commercials Manager, Studio Manager and Head of Group Studio Operations. He was appointed Director of International Operations for the Group in 2010 with responsibility to develop international studio offerings worldwide. David is also responsible for Group Health and Safety.
Pinewood Shepperton plc Annual Report & Accounts 2010 Employees continued
33
Employees continued
Executive management team continued Peter Hicks Group Studio Manager (36). Joined in 1991 and has held positions at Shepperton such as Assistant Studio Manager and Studio Manager. He was appointed Group Studio Manager in June 2010 and is responsible for the operational running of both Pinewood and Shepperton studios. Magdalena Duke Legal Counsel (31). Solicitor responsible for the Companys legal matters including negotiation of stage and studio agreements, customer and supplier agreements and litigation. Joined in October 2010 from media law firm Davenport Lyons after a career as a broadcast journalist with the BBC. Chris Naisby FCCA Group Financial Controller (39). Joined in 2001 as Finance Manager, having previously worked in financial roles at various media companies, including Reed Elsevier. Promoted to Financial Controller in April 2008 with key responsibilities of supporting the Finance Director and the Board with strategic financial information, preparation of statutory accounts and Board reports as well as managing the Finance team. Andrew M. Smith Group Director Corporate Affairs & Company Secretary (48). Joined in June 2008, as Group Director Corporate Affairs and is responsible for communications, public affairs, human resources and corporate and social responsibility. He was appointed Company Secretary on 20 December 2010. He is a member of the Film Skills Council. Prior to this he was Managing Partner of The Policy Partnership. David Wight MA Cantab Head of Group Property (52). Responsible for the Companys real estate portfolio of land, buildings and Media Park occupiers, property development and planning. Joined in 2003 as Studio Manager of Pinewood Studios. Prior to this he was operations director in the independent sector of the cinema industry after a career as an officer in the Royal Navy. Darren Woolfson Group Director Technology (41). Joined in October 2007 having held a number of technical roles in the film and television post-production industry. He is responsible for the co-ordination and delivery of the Groups strategy of enhancing its technology infrastructure. Previously was the Technical Director at Molinare Limited.
34
Corporate responsibility
The Company remains committed to its staff and to the communities in which it operates. The Company is aware of the importance of this role and continues to invest in and support programmes that benefit the industry it operates in and the local community. Helping and advising those from diverse backgrounds to pursue careers in the film, television and wider creative industries remains a priority. The Company continues to support its nominated charity, First Light, and its follow-up scheme, Second Light, a new talent and development training scheme for young Black and Minority Ethnic filmmakers from across the UK. 31 work placements have been organised by Second Light as part of the scheme; and three of these will be taken up after March 2011 within the Company. The Companys support for the Iver Heath Youth Project continued for a fourth year. The project, which aims to deliver practical insights into the film industry for 12 young people from the immediate area, includes visits to the studios for workshops and practical tutorials covering the basics of short film making. Follow up work experience is also organised for those who wish to further their interest. Created by Screen South with support from Skillsets Film Skills Fund, the nationwide On The Lot initiative was launched in May 2009, attracting close to 600 applications. The programme enabled its five winning participants to gain paid, fulltime, work-based training with host companies based at Pinewood and Shepperton Studios. After successfully completing the year-long training programme, all five participants have now secured positions in the industry, three of these within the Company. Health and Safety issues The Group is committed to building a safe working environment and to improve already high standards of health and safety, acknowledging its responsibilities under the Health and Safety at Work Act and subordinate Regulations. To achieve this, the Group places the safety of all persons in high regard and has a detailed Policy that clearly sets out the Groups intentions and details everyones responsibilities. The Group has extended the Smoke Free campaign at Pinewood Studios throughout 2010 which was set-up in 2009 in conjunction with the NHS to assist staff, customers and tenants to stop smoking. A number of successful groups were held throughout 2010. Pinewood continues to promote this support facility with NHS posters and regular messaging across the site. The Health and Safety Executive made one visit to the studios during 2010 and one official Notice was served to the Group (2009: five visits and no notices). There were a total of 27 accidents in 2010 (35 in 2009). Out of these, two (nine in 2009) were notifiable accidents under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR). Board responsibility for health and safety issues remains with the Finance Director, supported by the executive management team with monthly monitoring by the Board of relevant issues.
Pinewood Shepperton plc Annual Report & Accounts 2010 Corporate responsibility continued
35
Environmental issues The Group is very aware of its environmental responsibilities and has developed a comprehensive, Board reviewed Environmental Policy. This Policy seeks to minimise the adverse impact on the environment from the Groups activities, to ensure compliance with regulatory requirements, to reduce CO2 emissions and to continuously improve its environmental performance. Practical measures in support of this policy that have been implemented include: Recycling facilities at Pinewood and Teddington Increased number of shuttle buses and number of services to local transport hubs Measuring and monitoring CO2 emissions Green Travel Plan promotional activities. The recycling facility at Pinewood has significantly reduced the number of lorry movements to and from the site and continues to divert large amounts of waste away from landfill. The different waste streams that are being recycled at Pinewood and Teddington are regularly monitored, with productions and tenants being actively encouraged to recycle as much waste as possible. New recycling facilities for Shepperton are currently under consideration. New Travel Plan measures have been introduced to reduce the number of vehicles arriving at all sites, to cut the subsequent CO2 emissions and to promote sustainable travel and wellbeing. These measures are in excess of those the Group is currently required to implement by the respective County Councils. Improvements to the shuttle bus timetables, the provision of additional services and the employment of larger buses have resulted in an increase in the total number of passenger journeys made on both the Shepperton and Pinewood shuttle bus services. The 2010 Shepperton passenger figures of 11,325 showed an increase of 11% on the 2009 figure (10,198). Similarly, the 2010 Pinewood total of 67,256 showed a 19% increase on the 2009 figures (56,546). Pinewood Shepperton is a full participant in the Governments Carbon Reduction Commitment Energy Efficiency Scheme (CRC), which aims to reduce CO2 emissions by reducing energy consumption. The Group has successfully completed registration with the CRC scheme and continues to comply with the regulations. The Group aims to comply with the Governments stated aim of reducing CO2 emissions by setting a target of reducing its own emissions by 10% in 2011 (in relation to 2010s benchmark). This will be achieved by: Reporting CO2 emissions on a monthly basis to the Finance Director Installing a comprehensive system of Automatic Meter Readers on all gas and electricity supplies Appointing an Environmental Manager to oversee the reduction target Creation of a Green Team and Green Champions across the Group Installing energy efficient products wherever possible. Ethical business practices The Board continues to consider the principles which support ethical business practices with a policy that guides employee conduct in consideration of such issues and is mindful of the Groups responsibility to consider human rights.
36
Directors remuneration report
Remuneration Committee
The Board presents its remuneration report to shareholders of the Company. The Board has established a Remuneration Committee (the Committee) to advise it on appropriate policies and procedures in determining suitable remuneration packages for Directors and senior management, and continues to take advice from external advisers as considered necessary by the Committee. The Committee comprises Nigel Hall (Chairman), Adrian Burn and James Donald. During 2010, the Committee met on five separate occasions. All members of the Committee were present on each occasion, save for one meeting for which James Donald was unavailable. The Committees responsibilities include the monitoring, review and recommendation to the Board on the Groups broad policy for the remuneration of all Executive Directors, and to determine, and thereafter review at least annually, the remuneration packages of all Executive Directors, including basic salary, pension arrangements and annual and long-term incentives, and, as appropriate, make recommendations in respect of other senior management. In addition, the Committee reviews the corporate targets and objectives relating to the Executive Directors compensation, including an evaluation of their performance. The Committees terms of reference are contained in the Corporate Governance section of the Companys Investor Relations website at www.pinewoodshepperton.com. The Committee continues to take advice, where appropriate, in order to support its up-to-date understanding of current market trends, comparable remuneration packages in similar organisations, and general issues for consideration in determining appropriate rewards. During the year the Committee sought advice from PricewaterhouseCoopers LLP, the Groups remuneration advisers on Executive Directors remuneration, Non-Executive Directors remuneration, long-term incentives and how the long-term incentive plan is monitored, in addition to updates on performance criteria and the accounting implications for existing grants. In addition, appropriate legal advice relating to contractual issues is taken as necessary to ensure compliance with best practice.
General policy
The Groups remuneration policy is to provide remuneration packages to Executive Directors and senior management which align their interests to those of shareholders, whilst retaining appropriate flexibility to cater for potential future changes in remuneration policy best practice and the environment in which the Group operates. Group policy aims to provide competitive rewards based on the achievement of recognised short-term and long-term performance based targets, recognising that the value of awards to Directors and employees should be commensurate with individual responsibilities within the Group. In establishing remuneration packages, the Committees remuneration policy seeks to benchmark the components of Executive Directors remuneration against comparators drawn from UK listed companies in the media sector (FTSE All Share, Fledgling and AIM). The policy has been defined against these comparators as follows: basic salary lower quartile to median; bonus potential upper quartile; benefits market rate and share incentives median to upper quartile. The Committee reviews on an annual basis whether its remuneration policy remains appropriate for the relevant financial year. Factors taken into account by the Committee include: market conditions affecting the Group; current financial macro economic conditions; the recruitment market in the Groups sector; changing market practice; and the changing views of institutional shareholders and their representative bodies. The Committee has concluded that the remuneration policy remains valid for 2011.
Pinewood Shepperton plc Annual Report & Accounts 2010 Directors remuneration report continued
37
Balance between fixed and variable elements of remuneration
The following table shows the balance between fixed and variable performance based compensation for 2010, where the fixed component is made up of salary, benefits and pension contributions and the variable component comprises: the maximum potential bonus, and the market value at the date of grant of the maximum number of shares which could vest by virtue of the LTIP awards if all relevant performance conditions are fully met.
Fixed % Variable %
Ivan Dunleavy Patrick Garner Nicholas Smith
24 24 31
76 76 69
Overview of equity participation
The Company actively encourages share ownership by its employees and operates a Sharesave Scheme. Employees were invited to participate in the scheme in 2004, 2006, 2007, 2009 and a further invitation was made in 2010. Details of the options made to Executive Directors are set out under the table in this report entitled Directors share options. Details of awards made to Executive Directors during 2010 under the Pinewood Shepperton plc 2006 Long-Term Incentive Plan, are contained within the section of this report entitled Long-Term Incentive Plan. The Committee is responsible for selecting performance measures relating to the Company Share Option Plans and the Long-Term Incentive Plan, and for determining whether or not targets have been met.
Components of the Executive Directors Remuneration

The key components of the Executive Directors remuneration are: Basic salary and benefits in kind The basic salary for each Executive Director reflects the Committees assessment of performance, responsibilities and market value for comparable positions, as guided by independent advice. The Committee has access to information on the pay and conditions of other employees in the Group when determining the remuneration packages for Executive Directors. The Committee actively considers the relationship between general changes to employees pay and conditions and any proposed changes in the remuneration packages for Executive Directors to ensure it can be sufficiently robust in its determinations in light of the position of the Company as a whole. The basic salary and benefits in kind of all Executive Directors are reviewed annually. The following table shows the basic salary in 2010:
2009 salary 2010 salary Percentage increase
290,000 200,000 170,000
290,000 200,000 170,000
nil nil nil
The Committee has reviewed basic salary for the Executive Directors taking into account the above criteria with effect from 1 January 2011 as basic salary has been unchanged since 2008 and 2009 in the case of Nicholas Smith. Ivan Dunleavys salary has been increased to 305,000. Although this remains below comparable market positions for his role, at his request the increase was restricted to 5.1%.
38
Components of the Executive Directors Remuneration continued

Basic salary and benefits in kind continued Patrick Garners salary has been increased to 206,000. Nicholas Smiths salary has been increased to 200,000 to recognise the experience and expertise he has gained in his role over the past period, along with his performance, justifying a move closer to the Companys stated salary policy for Executive Directors Benefits in kind include provision of a car allowance, pension, medical and life insurance, and permanent health insurance. Annual bonus The Executive Directors participate in an annual bonus scheme, which is linked to the achievement of annual financial targets set by the Committee, based on the Groups budget approved prior to the commencement of the financial year. For 2010, bonus was payable on the achievement of 100% of budgeted earnings before interest and tax (EBIT) performance and at this level of earnings, bonus payable was 33% of salary. The maximum bonus entitlement for the Executive Directors was 100% of salary, payable on the achievement of 120% of budgeted EBIT performance, with a straight line mechanism operating between 100% and 120% of budgeted EBIT performance. In approving the 2010 bonus levels the Committee measured the level of achievement against the performance targets set and also the contribution of the individual Executive Directors. The targets for the annual bonus scheme and the maximum annual bonus potential are reviewed and agreed by the Committee at the beginning of each financial year to ensure that they are appropriate to the current market conditions and position of the Group in order to ensure that they continue to remain challenging. Following this review during 2010, the Committee decided that the target should be amended. The Committee agreed that for 2011 the bonus structure would remain based on achievement of budgeted EBIT and would be triggered when 100% of the budget is achieved. At this level the bonus payable would be 25% of salary. The maximum bonus entitlement remains 100% of salary and would be payable on the achievement of 120% of budgeted EBIT performance. A straight line mechanism operates between 100% and 120% of budgeted EBIT performance.
39
Components of the Executive Directors Remuneration continued

Long-Term Incentive Plan (LTIP) During 2010, the Company granted awards of shares to the Executive Directors and certain members of staff in accordance with the rules of the Pinewood Shepperton plc 2006 Long-Term Incentive plan. Such an element of total remuneration based on the achievement of financial targets for the Company over a sustained period, as part of an overall competitive package, is considered vital to the retention of key employees. Full details of awards granted to Executive Directors that are yet to vest, are contained within the table in this report entitled Long-Term Incentive Plan on page 44. The Plan seeks to align the Executive Directors interests with those of shareholders, and ensure transparency in terms of associated performance hurdles. The nature of the awards also provides for the requirement for Executive Directors to build up meaningful shareholdings in the Company. Share options The Company established a Sharesave Scheme at the time of the Initial Public Offering. Sharesave Scheme options have been issued at a 20% discount to the then prevailing market value. Employees were invited to participate in the scheme in 2004, 2006, 2007, 2009 and a further invitation was made during 2010. Details of the options made to Executive Directors are set out under the table on page 43 in the report entitled Directors share options. Dilution The Company operates all of its share arrangements (both discretionary and all employee) within the ABI Guidelines on dilution. The ABI Guidelines provide that the Company can issue a maximum of 10% of its issued share capital in a rolling ten-year period to employees under all its share plans. In addition, of this 10% the Company can only issue 5% to satisfy awards under discretionary or executive plans. Pension arrangements For Executive Directors, only basic salary is pensionable. All Executive Directors are eligible to become members of the personal pension plan arranged by the Group, which is a defined contribution scheme. The Companys contribution for the Executive Directors is set at a maximum of 12.5% of basic salary. All other employer contributions for the executive management team and employees reflect longevity of service with the Group but are capped at a maximum of 10% of basic salary.
40
Executive Directors service agreements

The Executive Directors have rolling service agreements, which are all subject to 12 months notice. The Committee regards the notice period on these contracts as being appropriate in the event of termination of an Executive Directors service agreement. The service agreements for the Executive Directors (other than for Nicholas Smith) specify the compensation which must be paid to the Executive Director where the Company terminates the agreement either without notice or without cause, which is limited to salary and benefits payable during the Executive Directors notice period. The service agreement for Nicholas Smith provides that the Company may opt to terminate the agreement with notice or a payment in lieu of notice, and provides for inherent mitigation. The Committee will ensure that there have been no unjustified payments for failure on an Executive Directors termination of employment. There are no special provisions in the service agreements extending notice periods on a change of control, liquidation of the Company or termination of employment. The dates of Executive Directors service agreements are: Ivan Dunleavy Patrick Garner Nicholas Smith 20 April 2004 20 April 2004 1 July 2005
Chairman and Non-Executive Directors service agreements and remuneration

The Chairman and Non-Executive Directors have specific letters of engagement, the dates of which are: Michael Grade Adrian Burn Nigel Hall James Donald Steven Underwood 19 April 2004 19 April 2004 19 April 2004 27 March 2006 25 June 2010
The Chairman is appointed for an initial term of one year and Non-Executive Directors for an initial term of three years, subject to normal provisions as to retirement by rotation. Subsequent additional terms of one or three years may be awarded with notice to terminate being six months and immediate under specific circumstances including breach of terms.
41
Chairman and Non-Executive Directors service agreements and remuneration continued

Retirements by rotation are noted in the Directors report. The appointment and reappointment of the Chairman and NonExecutive Directors are matters reserved for the full Board. Fees for Non-Executive Directors, including the Chairman, are determined by the full Board, reflecting market practice, levels of service, as well as their contribution of time and expertise in support of the Group, and are reviewed annually. The Chairman and Non-Executive Directors have service agreements, each with a notice period of six months. They are not eligible for pension scheme membership and do not participate in any of the Groups bonus or share plans. Steven Underwood does not receive any fees in connection with his role as a Non-Executive Director. The fees of the Chairman and Non-Executive Directors were last adjusted with effect from 1 January 2008. During the year the Board reviewed these fees taking into account a bench marking exercise carried out by PricewaterhouseCoopers LLP. As a result the basic Non-Executive Director fee has been increased by 1,500 to 40,000, and the additional fees paid to those who chair Committees increased by 1,500 to 4,000. The fee payable to the Chairman has been increased by 2,500 to 105,000. As a result the following changes were made on 1 January 2011: the fee paid to the Chairman, Lord Grade of Yarmouth, will increase by 2.5% to 105,000, the fee paid to the Chairman of the Audit Committee and Senior Independent Director, Adrian Burn, will increase by 7.3% to 44,000, the fee paid to the Chairman of the Remuneration and the Nomination Committee, Nigel Hall, will increase by 7.3% to 44,000, the fee paid to James Donald will increase by 3.8% to 40,000.
42
Performance graph
The graph below details the percentage change in total shareholder return for the six-year period from 31 December 2005 to 31 December 2010 against both the FTSE Small Cap and the FTSE Media and Photography index, which the Board considers to be appropriate peer groups for the Company. Total shareholder return: Pinewood Shepperton plc vs FTSE Small Cap and FTSE Media and Photography for the five-year period from 31 December 2005 to 31 December 2010 (rebased to 100).
160 140 120 100 80 60 40 20
31/03/05 01/05/06 01/09/06 01/01/07 01/05/07 01/09/07 01/01/08 01/05/08 01/09/08 01/01/09 01/05/09 01/09/09 01/01/10 01/05/10 01/09/10
Pinewood Shepperton Total Return
FTSE All Share Media Total Return
FTSE Small Cap Total Return
The starting value for the Company is based on the market price of 242.0p on 31 December 2005.
43
Directors remuneration
Basic salary and fees 2010 Benefits in kind 2010 Annual bonus 2010 Pension contributions 2010 Total remuneration 2010 Total remuneration 2009
Chairman Lord Grade of Yarmouth Executive Directors Ivan Dunleavy Patrick Garner Nicholas Smith Non-Executive Directors Adrian Burn Nigel Hall James Donald Steven Underwood 41,000 41,000 38,500 nil n/a n/a n/a nil n/a n/a n/a nil n/a n/a n/a nil 41,000 41,000 38,500 nil 41,000 41,000 38,500 nil 290,000 200,000 170,000 22,786 18,395 14,642 90,800 63,500 63,500 36,240 25,000 21,250 439,826 306,895 269,392 351,677 242,602 204,005 102,500 n/a n/a n/a 102,500 102,500
None of the above Directors received reimbursement for expenses during the year requiring separate disclosure as required by The Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008.
Directors share options

Company Scheme Date of grant
Held at 31 December 2009
Held at 31 December 2010
Exercise price (pence)
Earliest exercise date
Expiry date
Ivan Dunleavy Nicholas Smith
Sharesave Sharesave
27 Apr 2009 27 Apr 2009
16,234 9,941
16,234 9,941
96.4 1 Aug 2014 1 Feb 2015 96.4 1 Aug 2012 1 Dec 2013
No Directors Sharesave options were exercised, lapsed or vested during the year.
44
The Pinewood Shepperton plc 2006 LTIP provides for the grant of Level 1 and Level 2 awards to Executive Directors, to a maximum, in aggregate, of 250% of basic salary, on an annual basis.
Number of shares subject to awards Award held at type 31 December 2009 Number of shares subject to awards lapsed during the year Number of shares subject to awards granted during the year Number of shares subject to awards held at 31 December 2010 Market value of awards granted at date of grant ()
Long-Term Incentive Plan
Date of grant
Release date
Ivan Dunleavy
30 Mar 2007 11 May 2007 7 May 2008 24 Jun 2008 1 April 2010 18 May 2010
Level 2 Level 1 Level 2 Level 1 Level 2 Level 1 Level 2 Level 1 Level 2 Level 1 Level 2 Level 2 Level 1 Level 2 Level 1 Level 2
156,609 40,000 152,954 63,130 97,701 73,500 105,485 23,558 80,459 6,232 84,388 2,430
(156,609) (40,000) (97,701) (73,500) (80,459) (6,232)
288,079 40,000 198,675 168,874
152,954 63,130 288,079 40,000 105,485 23,558 198,675 84,388 2,430 168,874
340,625 102,000 362,500 145,200 434,999 55,000 212,500 200,290 250,000 58,660 299,999 175,000 16,612 200,000 5,796 255,000
30 Mar 2010 11 May 2010 07 May 2011 24 Jun 2011 31 Mar 2013 17 May 2013 30 Mar 2010 11 May 2010 07 May 2011 24 Jun 2011 31 Mar 2013 30 Mar 2010 11 May 2010 07 May 2011 24 Jun 2011 31 Mar 2013
Patrick Garner
30 Mar 2007 11 May 2007 07 May 2008 24 Jun 2008 1 April 2010
Nicholas Smith
30 Mar 2007 11 May 2007 07 May 2008 24 Jun 2008 1 April 2010
45
Long-Term Incentive Plan continued
In order for Level 1 awards to be granted, Executive Directors are required to have purchased shares in the Company (to a maximum value of 50% of Level 2 awards), which are matched on a two for one basis up to a maximum of 125% of salary. The number of executive shares purchased is detailed in the section entitled Directors and their interests in the Directors report. Level 2 awards are restricted to a maximum of 150% of basic salary. Awards granted on 30 March and 11 May 2007 failed to meet the Total Shareholder Return and Return on Capital employed targets over the three year measurement period and therefore lapsed. In respect of the grants during 2010, the value of Level 2 awards was set at 125% of basic salary. Level 1 awards were granted on the basis of two matching shares for every executive share purchased during the 30 business days from 1 April 2010, the date of grant of the Level 2 awards. The Committee intends to satisfy 2010 LTIP awards with new issue shares.
Basis of performance condition selection and measurement
The shares subject to the LTIP awards will only be released to Executive Directors in three years from the date of grant, subject to the retention of the related executive shares purchased for three years, the continued employment of the Executive Directors, and the satisfaction of performance conditions based 50% on Total Shareholder Return and 50% on annual average Return on Capital Employed (ROCE) performance, both measured over the three year period. Total shareholder return (TSR) Comparative TSR was selected as a performance condition for part of the awards granted by the Committee as it ensures that the executives have outperformed their peers over the measurement period in delivering shareholder value before being entitled to receive any of their awards, irrespective of general market conditions. Prior to the measurement of the TSR performance of the Company the Remuneration Committee will determine whether the precondition has been satisfied. The precondition has to be satisfied prior to determining the actual level of release of the part of the award subject to the TSR performance condition. The test used by the Remuneration Committee to determine whether this part of the award is capable of release will be the level of financial performance of the Company over the measurement period against budgeted levels for the following financial criteria: (a) ROCE; (b) EBITDA; and (c) Normalised Earnings per Share. If the Remuneration Committee on measurement finds that the majority of these criteria have not been met and that suitable justification for this has not been provided by the Board, this part of the award will be incapable of release irrespective of the TSR performance of the Company. TSR is measured against an appropriate comparator group of companies consisting of those forming the FTSE Small Cap index. This is set for each award year by reviewing and updating the comparator group data to ensure that the information reflects those companies who have moved in or out of the index. The 2007 comparator group was set at 30 March 2007, the 2008 group was set at 7 May 2008 and the 2010 group was set at 1 April 2010. Where the performance measure is TSR PricewaterhouseCoopers LLP, the Committees advisers, shall calculate the TSR in accordance with the rules of the LTIP and approve those figures prior to the release of any award.
46
The comparative performance targets set for the minimum and maximum award releases are as follows:
Year of grant Period of measurement 20% release of award 100% release of award
2007 2008 2010
3 years 3 years 3 years
Median Median Median
Upper decile Upper decile Upper decile
Return on capital employed (ROCE) It is the view of the Committee that ROCE is an appropriate performance condition for part of the awards granted under the LTIP because it is one of the key investment criteria used throughout the business and a consistent return enhances shareholder value over the medium to longer term; ROCE measures consistent value creation and is, therefore, a particularly valuable measure in a cyclical business and ROCE is a measure well understood by the executive team and something that they can directly influence. The Committee determines whether the performance conditions for share awards or options are satisfied. Where the performance requirements are based on ROCE the Committee will use the principles behind the audited figures disclosed in the Groups financial statements, and may take advice from independent advisers as to whether any adjustments are required to ensure consistency in accordance with the terms of the performance conditions. ROCE targets set for the minimum and maximum award releases are as follows:
Year of grant Period of measurement 20% release of award 100% release of award
2007 2008 2010
3 years 3 years 3 years
12.5% 8.0% 9.0%
17.0% 11.0% 12.0%
The Committee took into account the following factors when setting the ROCE targets for the 2010 LTIP: the median and upper quartile historic levels of ROCE for the comparator group companies and the projected ROCE for the Group provided by external analysts, the increase in capital investment in the performance period focussed predominantly on capital projects relating to the Groups Media Park development strategy and Project Pinewood which will not flow through to increased earnings within the 2010 LTIP performance period; and the challenging economic climate for earnings over this performance period. The Committee will continue to be mindful of the timing of the Groups capital investments and the expected period over which returns will be generated when setting the ROCE targets for future years LTIP awards.
47
Impact on profit for the year
The impact, by Executive Director, of all share plans on the Group income statement of Pinewood Shepperton plc for the year ended 31 December 2010 is summarised as follows:
Current year charge 000 IFRS 2 exceptional credit 000 Impact on profit for the year 000
31 19 17
(38) (24) (16)
(7) (5) 1
Following a review of the TSR component of the Groups LTIP awards, granted in 2008, part of the total IFRS 2 charges to the Group income statement were reversed. This resulted in the impact on profit for the year for the Executive Directors being a credit to the Group income statement. Further details are contained in Note 7 on page 67 of the Annual Report. On behalf of the Board
Nigel Hall Chairman of the Remuneration Committee 7 March 2011
48
Independent auditors report to the members of Pinewood Shepperton plc

We have audited the financial statements of Pinewood Shepperton plc for the year ended 31 December 2010 which comprise of the Statement of Financial Position, the Statement of Comprehensive Income, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes 1 to 26. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the Companys members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Companys members those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Companys members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors Responsibilities Statement set out on page 22, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Boards Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Companys circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.
Opinion on financial statements

In our opinion the financial statements: give a true and fair view of the state of the Companys affairs as at 31 December 2010 and of its profit for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006

In our opinion: the part of the Directors Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and the information given in the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Pinewood Shepperton plc Annual Report & Accounts 2010 Independent auditors report continued
49
Matters on which we are required to report by exception

We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: Adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or The financial statements and the part of the Directors Remuneration Report to be audited are not in agreement with the accounting records and returns; or Certain disclosures of directors remuneration specified by law are not made; or We have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: The Directors statement, set out on page 21, in relation to going concern; The part of the Corporate Governance Statement relating to the Companys compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and Certain elements of the report to the shareholders by the Board on directors remuneration.
Iain Wilkie (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 7 March 2011
Notes: 1. The maintenance and integrity of the Pinewood Shepperton plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site. 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
50
Group income statement for the year ended 31 December

2010 000 2009 000
Notes
Revenue Rendering of services Cost of sales Gross profit Selling and distribution expenses Administrative expenses Operating profit before exceptional items Exceptional income Exceptional costs Operating profit Finance costs Profit before tax Current tax expense Deferred tax expense Effect of release of deferred tax provision on property Total corporation tax expense Profit for the year Attributable to: Equity holders of the parent company Earnings per share basic for result for the year diluted for result for the year 12 12 9.3p 8.9p 9.1p 8.8p 4,288 4,182 11 9 7 8 3 43,409 (26,007) 17,402 (1,561) (6,766) 9,075 632 (579) 9,128 (3,309) 5,819 (2,016) (97) 582 (1,531) 4,288 40,321 (24,742) 15,579 (1,573) (6,337) 7,669 804 (851) 7,622 (3,171) 4,451 (955) (406) 1,092 (269) 4,182
51
Group statement of other comprehensive income for the year ended 31 December
2010 000 2009 000
Profit for the year Net movement on cash flow hedges Transfer of cash flow hedge reserve to income statement Deferred taxation credit/(charge) Other comprehensive (loss)/income for the year, net of tax Total comprehensive income for the year, net of tax Attributable to: Equity holders of the parent company
4,288 (1,185) 848 78 (259) 4,029 4,029
4,182 (672) 757 (24) 61 4,243 4,243
52
Group statement of financial position at 31 December

2010 000 2009 000
Notes
Assets Non-current assets Property, plant and equipment Investment property Intangible assets Long-term asset Current assets Inventories Trade and other receivables Prepayments Cash Total assets Equity and liabilities Equity attributable to equity holders of parent Share capital Share premium Capital redemption reserve Merger reserve Fair value of cash flow hedge Retained earnings Total equity Non-current liabilities Interest-bearing loans and borrowings Deferred tax liabilities Current liabilities Trade and other payables Interest-bearing loans and borrowings Tax payable Total liabilities Total equity and liabilities 22 21 15,387 1,074 16,461 60,957 136,017 8,548 944 963 10,455 57,498 130,048 21 11 43,190 1,306 44,496 45,149 1,894 47,043 20 20 20 20 20 4,623 43,692 135 348 (1,186) 27,448 75,060 4,610 43,692 135 348 (927) 24,692 72,550 19 18 491 5,355 1,980 495 8,321 136,017 337 2,424 2,771 5,532 130,048 14 15 16 17 115,385 6,360 5,604 347 127,696 112,570 6,342 5,604 124,516
The financial statements were approved by the Board of Directors on 7 March 2011 and are signed on its behalf by: Patrick Garner FCA Finance Director
53
Group statement of cash flows for the year ended 31 December

2010 000 2009 000
Notes
Cash flow from operating activities Profit before tax Adjustments to reconcile profit before tax to net cash flows Exceptional items non cash Depreciation Share-based payment charges Finance costs Cash flow from operating activities before changes in working capital (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories Increase/(decrease) in trade and other payables Cash generated from operations Finance costs paid Corporation tax paid Net cash flow from operating activities Cash flow from/(used in) investing activities Proceeds from insurance for 007 Stage Purchase of property, plant and equipment Additions to investment property Additions to long-term assets Net cash flow used in investing activities Cash flow (used in)/from financing activities Payment of asset financing liabilities Payment of loan issue fees Dividends paid Proceeds from asset financing Proceeds from borrowings of joint venture Repayment of bank borrowings Proceeds from bank borrowings Net cash flow from financing activities Net increase in cash Overdraft at the start of the year Cash/(overdraft) at the end of the year 12 (379) (1,619) 1,297 (3,500) (4,201) 1,439 (944) 495 (77) (24) (1,541) 1,000 631 2,000 1,989 254 (1,198) (944) (6,673) (347) (7,020) 439 (5,652) (696) (5,909) 9 7 4 (126) 3,755 202 3,309 12,959 (2,140) (154) 6,891 17,556 (2,990) (1,906) 12,660 (804) 3,699 196 3,171 10,713 252 76 (2,537) 8,504 (2,831) (1,499) 4,174 5,819 4,451
54
Group reconciliation of movement in net debt for the year ended 31 December
2010 000 2009 000
Notes
Reconciliation of net cash flow to movement in net debt Increase in cash Repayments of asset financing obligations Proceeds from asset financing Loan issue costs Amortisation of loan issue costs Proceeds from borrowings of joint venture Repayment of bank borrowings Proceeds from bank borrowings Movement in fair value of cash flow hedge Movement in net debt Net debt at start of year Net debt at end of year 1,439 379 (1,297) (286) 3,500 (337) 3,398 (46,093) (42,695) 254 77 (1,000) 24 (277) (631) (2,000) 85 (3,468) (42,625) (46,093)
Attributable to: Cash Current liabilities Interest-bearing loans and borrowings Non-current liabilities Revolving credit facility loan Pre-let development facility loan Drawn facility loan Fair value of cash flow hedge Unamortised loan issue costs Asset financing Share of joint venture loan Interest bearing loans and borrowings Net debt at end of year 21 21 21 21 21 21 (22,500) (6,000) (28,500) (1,624) 777 (1,841) (12,002) (43,190) (42,695) (26,000) (6,000) (32,000) (1,287) 1,063 (923) (12,002) (46,093) (46,093) 21 (944) 495
55
Group statement of changes in equity
From 1 January 2010 to 31 December 2010

Share capital 000 Share premium 000 Capital redemption reserve 000 Merger reserve 000 Fair value of cash flow hedge reserve 000 Retained earnings 000 Total equity 000
At 1 January 2010 Profit for the year Other comprehensive income net of tax Total net comprehensive income Equity dividends (Note 12) New shares issued (Note 20) Share-based payments At 31 December 2010
4,610 13 4,623
43,692 43,692
135 135
348 348
(927) (259) (259) (1,186)
24,692 4,288 4,288 (1,619) (13) 100 27,448
72,550 4,288 (259) 4,029 (1,619) 100 75,060
From 1 January 2009 to 31 December 2009

Share capital 000 Share premium 000 Capital redemption reserve 000 Merger reserve 000
Fair value of cash flow hedge reserve 000
Retained earnings 000
Total equity 000
At 1 January 2009 Profit for the year Other comprehensive income net of tax Total net comprehensive income Equity dividends (Note 12) New shares issued (Note 20) Share-based payments At 31 December 2009
4,594 16 4,610
43,692 43,692
135 135
348 348
(988) 61 61 (927)
22,220 4,182 4,182 (1,541) (169) 24,692
70,001 4,182 61 4,243 (1,541) 16 (169) 72,550
56
Notes to the consolidated financial statements at 31 December 2010
1. Authorisation of financial statements and statement of compliance with IFRS
The Group financial statements of Pinewood Shepperton plc for the year ended 31 December 2010 were authorised for issue by the Board of the Directors on 7 March 2011 and the statements of financial position were signed on the Boards behalf by the Finance Director. Pinewood Shepperton plc is a public limited company incorporated and domiciled in England and Wales. The registered office is located at Pinewood Studios, Pinewood Road, Iver Heath, Buckinghamshire SL0 0NH, United Kingdom. The Groups ordinary shares are traded on the London Stock Exchange. The Groups financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2010. The Groups financial statements are also consistent with IFRSs as issued by the IASB. The principal accounting policies adopted by the Group are set out in Note 2.
2. Accounting policies
Basis of preparation and statement of compliance The consolidated financial statements of Pinewood Shepperton plc and all of its subsidiaries and joint ventures have been prepared in accordance with IFRS as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2010 and applied in accordance with the Companies Act 2006. The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2010. The Group financial statements are presented in UK sterling and all values are rounded to the nearest thousand pounds (000) except when otherwise indicated. Going concern In assessing the going concern basis, the Directors considered the Groups business activities, the financial position of the Group and the Groups financial risk management objectives and policies. The Directors considered that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing these financial statements. The Groups assessment of going concern is explained further in the Directors report on page 21 of the Annual Report. Basis of consolidation The Group consolidated financial statements comprise the financial statements of Pinewood Shepperton plc and its subsidiaries and joint ventures as at 31 December each year. All intercompany balances and transactions have been eliminated in full. Subsidiaries and joint ventures are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where there is a loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting year during which Pinewood Shepperton plc has control. Changes in accounting policy and disclosures The accounting policies adopted are consistent with those of the previous financial year except as follows: The following new and amended IFRS and IFRIC interpretations are mandatory as of 1 January 2010 unless otherwise stated and the impact is described below. IAS 27 (amended) Consolidated and Separate Financial Statements The amended standard requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners and these transactions will no longer give rise to goodwill or gains and losses. The standard also specifies the accounting when control is lost and any retained interest is re-measured to fair value with gains or losses recognised in profit or loss. This amendment did not have any impact on the financial position or performance of the Group, as the Group does not have such arrangements.
Pinewood Shepperton plc Annual Report & Accounts 2010 Notes to the consolidated financial statements continued
57
Changes in accounting policy and disclosures continued Amendment to IAS 39 Financial Instruments: Recognition and Measurement Eligible hedged items The amendment clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as a hedged item. This also covers the designation of inflation as a hedged risk or portion in particular situations. The Group has concluded that the amendment did not have any impact on the financial position or performance of the Group, as the Group has not entered into any such hedges. Improvements to IFRSs (issued 2009) In May 2009 the Board issued its second omnibus of amendments to its standards, primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each amendment. The adoption of the amendments resulted in changes to accounting policies but did not have any impact on the financial position or performance of the Group. Standards and interpretations issued but not yet applied* The following standards and interpretations have an effective date after the date of these financial statements but the Group has not early adopted them. IAS 24 Related Party Disclosures (Amendment) (effective 1 January 2011) The amended standard clarified the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government related entities. The Group does not expect any impact on its financial position or performance. IFRS 9 Financial Instruments: Classification and Measurement (effective 1 January 2013) IFRS 9 as issued reflects the first phase of the IASB work on the replacement of IAS 39 and applies to classification and measurement of financial assets as defined in IAS 39. In subsequent phase, the IASB will address classification and measurement of financial liabilities, hedge accounting and de-recognition. The completion of this project is expected in early 2011. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Groups financial assets. The Group will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture. IFRIC 19 Extinguishing financial Liabilities with Equity Instruments (effective 1 July 2010) IFRIC 19 clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as a consideration paid. The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in profit or loss. The adoption of this interpretation will have no effect on the financial statements of the Group. Improvement to IFRS (issued in May 2010) The Group expects no impact from the adoption of the amendments on its financial position or performance. Summary of significant accounting policies Interest in a joint venture The Group has an interest in three joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.
*The effective dates stated above are those given in the original IASB/IFRIC standards and interpretations. As the Group prepares its financial statements in accordance with IFRS as adopted by the European Union (EU), the application of new standards and interpretations will be subject to their having been endorsed for use in the EU via the EU endorsement mechanism. In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts the Groups discretion to early adopt standards.
2. Accounting policies continued
58
Summary of significant accounting policies continued Interest in a joint venture The Group recognises its joint ventures interests using the proportionate consolidation method. The Group combines its share of each of the assets, liabilities, income and expenses of the joint venture with the similar items, line by line, in its consolidated financial statements. The financial statements of the joint ventures are prepared for the same reporting year as the parent company. Accounting policies are consistent with the exception that the joint ventures carries its property, plant and equipment at valuation rather than cost. Adjustments are made to bring such dissimilar accounting policies into line with the Group accounting policies. If the Group purchases assets from the joint ventures, the Group does not recognise its share of the profits of the joint venture from the transaction until it resells the assets to an independent party. Foreign currency translation The functional and presentation currency of Pinewood Shepperton plc and its subsidiaries is UK sterling (UK ). Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of transactions. Exchange differences resulting from the settlement of such transactions and from the translation at exchange rates ruling at the statement of financial position date of monetary assets and liabilities denominated in currencies other than the functional currency are recognised in the consolidated income statement. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration receivable, excluding discounts, rebates, VAT and other sales taxes or duty. The Group has assessed its revenue arrangements and has concluded that it is acting as a principal in all of its revenue arrangements. Where a contract spans an accounting cut off date, the value of the revenue recognised is the time proportion of the total value of the contract completed by the cut off date. The following specific recognition criteria apply: Film customers utilise services for a period of time. Film revenues are also derived from international agreements providing sales and marketing services. Revenue is recognised as the Group earns the right to consideration for the service provided and this is time apportioned and earned as time elapses. Television revenue is derived from the provision of services and is recognised on a time apportioned basis in relation to the television production process. Media Park revenue, which includes revenue from Investment property, is derived from customers contracting to use the Groups facilities for a period of time. Revenue is recognised on a straight line basis over the term of the agreement. Royalty revenue is recognised on an accruals basis in accordance with the relevant contracted agreement. Revenue is recognised as the Group earns the right to consideration for the royalty and this is time apportioned and earned as time elapses. Tax Deferred tax Deferred corporation tax is provided, using the liability method, on all temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred corporation tax liabilities are recognised for all taxable temporary differences: except where the deferred corporation tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of taxable temporary differences associated with investments in subsidiaries and interests in joint ventures except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
59
Summary of significant accounting policies continued Deferred tax continued Deferred corporation tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised except: where the deferred corporation tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred corporation tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred corporation tax asset to be utilised. Deferred corporation tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial position date. Corporation tax Corporation tax relating to items recognised directly in equity is recognised in other comprehensive income and the statement of changes in equity and not in the income statement. Value added tax The net amount of value added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Revenues, expenses and assets are recognised net of the amount of value added tax except: where the value added tax incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the value added tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of value added tax included. Pensions and other post-employment benefits The Group operates a defined contribution scheme. Contributions are charged to the income statement as they become payable in accordance with the rules of the schemes. Share-based payment transactions Employees (including Directors) of the Group may receive part of their remuneration in the form of share-based payment transactions, whereby employees render their services in exchange for shares or rights over shares (equity-settled transactions). The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using the binomial method. In valuing equity-settled transactions, no account is taken of any performance conditions, other than the conditions linked to the price of the shares of Pinewood Shepperton plc (market conditions).
60
Summary of significant accounting policies continued Share-based payment transactions continued The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the Directors of the Group at that date based on the best available estimate of the number of equity instruments, will ultimately vest. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition and in circumstances where holders of awards with no performance conditions attached cancel their awards whilst remaining in the employment of the Group. These are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification. Where an equity-settled award is cancelled by the award holder whilst remaining in the employment of the Group, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. Where an equity-settled award is cancelled due to the holder of the award no longer remaining in the employment of the Group, no expense is recognised. The dilutive effect of outstanding issuable awards is reflected as additional share dilution in the computation of earnings per share. Awards that are contingently issuable are not considered dilutive unless the performance conditions for ultimate vest are met. Cash and cash equivalents Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand. For the purpose of the Group statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as described above, net of outstanding bank overdrafts. Interest-bearing loans and borrowings Obligations for loans and borrowings are recognised when the Group becomes party to the related contracts and are measured initially at the fair values of consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method, allocating the interest income or interest expense over the relevant period. The loan issue costs are amortised in the income statement over the remaining maturity of the loans at a constant carrying amount and are reviewed for changes in circumstances that may indicate that the loans will not be held to maturity. Derivative financial instruments The Group has interest rate swaps to hedge against risks associated with interest rate fluctuations. These derivative financial instruments are stated at fair value. The fair values of the interest rate swap contracts are determined by reference to market values for similar instruments. The interest rate swaps are cash flow hedges which hedge exposure to variability in cash flows that are attributable to the interest rate risk on the Groups external borrowings.
61
Summary of significant accounting policies continued Derivative financial instruments continued The portion of the gain or loss on the hedging instruments that is determined to be an effective hedge is recognised directly in other comprehensive income and the statement of changes in equity in a cash flow hedge reserve and the ineffective portion is recognised in the Group income statement in finance costs. Amounts taken to other comprehensive income and the statement of changes in equity are transferred to the income statement when the hedged transaction affects Group income. Hedge accounting is discontinued when the hedging instruments expire, or are sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instruments recognised in other comprehensive income and the statement of changes in equity is kept in other comprehensive income and the statement of changes in equity until the forecasted transactions occur. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in other comprehensive income and the statement of changes in equity is transferred to the Group income statement for that year. Property, plant and equipment Property, plant and equipment are stated at cost to the Group less accumulated depreciation and any impairment loss. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to making the asset capable of operating as intended. Depreciation is calculated on all property, plant and equipment, other than land, from the time they are available for use on a straight line basis over the estimated useful life as follows: Freehold buildings Freehold improvements Fixtures, fittings and equipment Leasehold improvements 50 years 25 years 3 to 10 years shorter of 25 years or the term of the lease
Land and assets under construction are not depreciated. The carrying value of freehold land and buildings within Property, plant and equipment in the statement of financial position is based on external valuations undertaken by an independent firm of Chartered Surveyors in February 2000 (as amended in January 2001) and November 2000, on each occasion to establish the fair values of the Pinewood Studios and Shepperton Studios businesses acquired. Subsequent to these valuations, which established the cost to the Group of freehold land and buildings, additions, disposals and depreciation have been recorded in line with Group accounting policies. The carrying value of property, plant and equipment is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable, and is written down immediately to the recoverable amount. Useful lives residual values are reviewed annually and where adjustments are required these are made prospectively. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising in de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognised.
62
Summary of significant accounting policies continued Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangements at the inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased item, or if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and the reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability, using the effective interest rate method. Finance charges are recognised in the income statement on a straight line basis. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term. Leases, where the lessor retains substantially all the risks and benefits of ownership of the asset, are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term. Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or development of certain investment capital expenditure projects that necessarily take a substantial period of time to get ready for their intended use, or sale, are capitalised as part of the cost of the respective assets. All other borrowing costs are recognised as an expense in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. The Group capitalises borrowing costs for all eligible assets where development or construction was commenced on or after 1 January 2007. No changes have been made for borrowing costs incurred prior to this date that have been expensed. Investment property As defined by IAS 40, investment property is property held to earn rental income and/or for capital appreciation. Assets classified as investment property are carried at cost (including transaction costs) less accumulated depreciation and any recognised impairment in value, and exclude the costs of the day to day servicing of an investment property. The depreciation policies for investment property are in accordance with the Group depreciation policy, as defined within Property, plant and equipment in Note 2 to the financial statements. In accordance with IAS 40, the Group has determined the fair value of assets classified as investment. The key assumptions used in arriving at the fair value and the fair value are contained in Note 15, Investment property, on page 75. Impairment of assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the assets recoverable amount. An assets recoverable amount is the higher of an assets or cash-generating units (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share price for the publicly traded Pinewood Shepperton plc or other fair value indicators.
63
Summary of significant accounting policies continued Impairment of assets continued Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates assets or CGUs recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement. After such reversal the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount, less any residual value, on a systematic basis over the remaining useful life. Goodwill Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirers interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment loss. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill is allocated to the related cash-generating unit monitored by management. Where the recoverable amount of the cash-generating unit is less than the carrying amount, including goodwill, an impairment loss is recognised in the income statement. Intangible assets Intangible assets, when identified, are capitalised at cost and subsequently amortised over their useful economic life. Available-for-sale financial assets Available-for-sale financial investments include equity securities. Equity investments classified as available-for-sale are those which are neither classified as held for trading nor designated at fair value though profit or loss. The Group evaluates its available-for-sale financial assets and whether the ability to sell them is still appropriate. The Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost, where significant is estimated to be around 20% of the original cost of the investment and prolonged is no less than 12 months. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairment are recognised directly in other comprehensive income. Inventories Inventories are valued at the lower of cost and net realisable value. Cost includes all costs incurred in bringing each product to its present location and condition. Net realisable value is based on the estimated selling price less any estimated further costs expected to be incurred to completion and disposal.
64
Summary of significant accounting policies continued Trade and other receivables Trade receivables are recognised and carried at the lower of their original invoice value and recoverable amount. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified and are determined using business knowledge and individual circumstances specific to each customer. Exceptional items of income and expense The Group discloses as exceptional items on the face of the income statement those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate disclosure to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in financial performance. Dividends The equity transaction is recognised when the shareholders right to receive payment is established. Share issue costs Costs directly attributable to the raising of equity are charged to the share premium account. Significant accounting judgements, estimates and assumptions Estimates The preparation of the Groups consolidated financial statements requires management to make judgements, estimates and assumptions that affect reported amounts at the end of the period. In the process of applying the Groups accounting policies, the Directors have made the following judgement in relation to the carrying amounts of assets and liabilities within the next financial year: Project Pinewood The costs incurred to 31 December 2010 of 6,015,000 on Project Pinewood have been capitalised and classified within Property, Plant and Equipment in Note 14. Capitalisation of costs is based on the Boards judgement that the economic benefits expected from the asset will exceed the carrying costs of Project Pinewood. Costs are reviewed monthly by the Board. Taking into consideration all aspects of the project, the Board views the carrying cost of the capitalised expenditure incurred up to 31 December 2010 to be appropriate. Judgements The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date are discussed below. Impairment of goodwill The carrying amount of goodwill at 31 December 2010 was 5,604,000 (2009: 5,604,000). The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cashgenerating unit to which the goodwill is allocated. The Group considers Pinewood Shepperton plc and its subsidiaries to be one cash-generating unit. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cashgenerating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The cash flows are derived from the Board approved budget for the next year and the Board approved long range plan and do not include non-cash generating assets, any activities that the Group is not yet committed to or significant future investments that will enhance the assets performance of the cash-generating unit. This calculation is sensitive to the discount rate used for the calculation of present values of cash flows. The key assumptions used to determine the value in use are further explained in Note 16.
65
3. Segment information and revenue analysis
The chief operating decision-maker is the Board of Directors. The Group operates in one principal continuing area of activity, that of media services, primarily arising in the United Kingdom. It provides studio and related services to the film, television and wider creative industries. Revenues from these activities can be further analysed by type of customer as follows:
Year ended 31 December 2010 000 Year ended 31 December 2009 000
Film Television Media Park
29,051 8,206 6,152 43,409
22,635 11,339 6,347 40,321
Other information provided to the Board of Directors is in a format consistent with that in the financial statements. Information about major customers Revenue from two customers, operating through several separate subsidiaries, of 12.1m and 5.0m (2009: three customers of 4.0m, 3.9m and 3.9m) was recognised in the year.
4. Operating profit before exceptional items

This is stated after charging:
2010 000 2009 000
Cost of inventories recognised as an expense Depreciation of property, plant and equipment Depreciation of investment property Operating lease payments
1,709 3,624 131 1,559
1,432 3,575 124 1,554
Operating lease payments relating to the cost to the Group of the operating lease of the Shepperton Studios premises were 897,000 (2009: 892,000) and relating to the Teddington Studios premises were 662,000 (2009: 662,000).
5. Auditors remuneration
Audit of the Group financial statements Other fees to auditors: audit of the Group pension scheme taxation services other services
2010 000
2009 000
85 2 110 3 115
87 2 84 2 88
66
6. Interests in joint ventures
(a) The Group has a 50% interest in Shepperton Studios Property Partnership, an entity controlled jointly with a third party, Aviva Group, which holds a 996 year lease on the Shepperton Studios property. The Groups consolidated share of the joint ventures assets, liabilities and results, which are proportionately consolidated in the consolidated financial statements, are as follows:
2010 000 2009 000
Share of joint venture balance sheet Property, plant and equipment Current assets Interest-bearing loans and borrowings Current liabilities Share of joint venture income and expenses Revenue Cost of sales Administrative expenses Finance costs Net loss 790 (1,013) (48) (780) (1,051) 852 (507) (10) (739) (404) 20,168 733 20,901 (12,002) (406) (12,408) 20,623 73 20,696 (12,002) (511) (12,513)
The Groups share of the capital commitments in respect of property, plant and equipment was nil (2009: nil). (b) The Group also has a 50% interest in Pinewood Studio Berlin Film Services GmbH in Germany. The Groups consolidated share of this joint ventures assets, liabilities and results are proportionately consolidated in the consolidated financial statements as follows:
2010 000 2009 000
Share of joint venture balance sheet Current assets Share of joint venture income and expenses Revenue Cost of sales Selling and distribution expenses Net loss (10) (97) (107) 23
The Groups share of the capital commitments in respect of property, plant and equipment was nil (2009: nil). (c) The Group also has a 50% interest in Shepperton Studios (General Partner) Limited. There are no material amounts consolidated for this joint venture.
67
7. Exceptional income
Exceptional income for the year was 632,000 and consists of: Rates rebate The Group successfully negotiated an exceptional business rates rebate during the year, 506,000 of which relates to prior years. Share-based payment Following a review of the Total Shareholder Return component of the Groups Long-Term Incentive Plan awards, granted in 2008, 126,000 of the IFRS 2 charges to the Group income statement was reversed as an exceptional credit in the year ended 31 December 2010.
8. Exceptional costs
Exceptional costs for the period were 579,000 and consist of: Group reorganisation The Group incurred exceptional reorganisation costs of 386,000 in relation to the restructuring of certain business areas in the year ended 31 December 2010. International ventures The Group also incurred exceptional start up costs of 193,000 in relation to the commencement of the joint venture with Studio Hamburg GmbH and establishment of international offices in the USA and Canada in the year ended 31 December 2010.
9. Finance costs
2010 000 2009 000
Bank loans and overdrafts Interest rate hedging Share of joint venture loan Bank charges Finance charges payable under asset financing Other loans
1,455 848 780 142 60 24 3,309
1,543 759 739 27 43 60 3,171
Finance costs of 150,000 (2009: 120,000) directly attributable to the development of capital items have been capitalised based on LIBOR plus a variable margin consistent with the Groups secured bank loan. The capitalisation rate was 3.15% (2009: 6.0%).
68
10. Staff costs and Directors emoluments

(a) Staff costs including Directors Wages and salaries Social security costs Pension costs Share-based payments Other employee benefits
2010 000 2009 000
8,809 918 510 76 359 10,672
9,102 1,000 320 (169) 321 10,574
(b) The average monthly number of employees, including Directors during the year was made up as follows:
2010 No. 2009 No.
Management Administration Operating and technical
23 51 144 218
25 60 150 235
Details of Directors remuneration are included in the audited portion of the Directors remuneration report.
69
11. Taxation
(a) The major components of corporation tax expense are:

Consolidated income statement Current corporation tax: UK corporation tax Amounts under/(over) provided in previous years Total current corporation tax Deferred tax: Relating to origination and reversal of temporary differences Amounts (over)/under provided in previous years Tax charge in the income statement The tax charge in the income statement comprises: Tax on profit before exceptional items Tax under/(over) provided in previous years Tax provision adjustments relating to exceptional items Tax under provided in previous years on exceptional items Tax charge in the income statement Tax relating to items charged or credited to equity Deferred tax: Deferred tax (credit)/charge on movements in provisions for cash flow hedges Deferred tax reported in equity on share-based payments Tax (credit)/charge in the statement of changes in equity The Group statement of changes in equity is set out on page 55. (78) (24) (102) 24 24 1,357 110 19 45 1,531 659 (167) (223) 269 (483) (2) 1,531 (558) (128) 269 1,906 110 2,016 1,122 (167) 955
70
11. Taxation continued
(b) Reconciliation of the total tax charge A reconciliation between tax expense and the product of accounting profit multiplied by the standard rate of corporation tax in the UK for the years ended 31 December 2010 and 2009 is as follows:
2010 000 2009 000
Accounting profit before corporation tax Profit on ordinary activities multiplied by UK rate of 28% (2009: 28%) Adjustments in respect of: Corporation tax under/(over) provided in previous years Deferred tax over provided in previous years Non-allowable depreciation on buildings Other non-allowable expenses Release of provision for potential capital gains tax on properties Industrial buildings allowances Acquired goodwill Effect of taxation rate change on provision for deferred taxation Corporation tax expense reported in the Group income statement (c) Deferred tax Deferred tax relates to the following: Deferred tax in the income statement
5,819 1,629 110 (2) 469 147 (582) (174) (66) 1,531
4,451 1,246 (167) (128) 521 149 (1,092) (232) (28) 269
2010 000
2009 000
Consolidated income statement Deferred tax (credit)/charge: Accelerated capital allowances Share-based payments Release of provision for potential capital gains tax on properties 149 (52) 97 (582) (485) 248 158 406 (1,092) (686)
2010 000
2009 000
Deferred tax liability: Accelerated capital allowances Potential capital gains tax liability on Group properties Deferred tax asset relating to share-based payments Deferred tax asset arising on the fair value of the cash flow hedge Net deferred tax liabilities 1,820 (75) 1,745 (439) 1,306 1,672 582 2,254 (360) 1,894
71
11. Taxation continued
(c) Deferred tax continued Deferred tax in the income statement continued In accordance with generally accepted accounting principles, the Companys policy is to maintain a deferred taxation provision to reflect the potential capital gains tax that would be payable if the Companys properties were sold at an amount equivalent to the net book value included in the Group accounts. The amount of this provision has been reduced each year as the potential tax liability has reduced as a result of depreciation reducing the net book value, and indexation allowances increasing the base value for capital gains tax purposes. During the year to 31 December 2010, the effect of these two factors has been to reduce the potential capital gains tax to nil and the remaining deferred taxation liability has been released. (d) Potential deferred tax assets unrecognised A potential deferred tax asset of 143,760 (31 December 2009 and 1 January 2009: 149,084) in respect of 4,307 nontrading losses and 501,376 capital losses in Pinewood-Shepperton Studios Limited and 26,760 (31 December 2009 and 1 January 2009: 26,760) trading losses in Teddington Studios Limited has not been recognised as it is not anticipated that suitable gains will arise to enable the reversal of these temporary differences.
12. Earnings per ordinary share and dividend
Earnings per ordinary share Basic earnings per ordinary share are calculated by dividing profit for the year attributable to the holders of ordinary equity of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per ordinary share are calculated by dividing profit for the year attributable to the holders of ordinary equity of the parent by the weighted average number of ordinary shares outstanding during the year adjusted for the effects of the dilution of potential ordinary shares resulting from employee share schemes. The Group presents as exceptional items on the face of the income statement those items where the cost or income is of such size or incidence that the additional disclosure is required for the reader to understand the financial statements. Basic and diluted earnings per share are also presented on this basis. Basic and diluted earnings per share is also presented adjusting for the combined effect of the exceptional items and the effects of the release of deferred tax provision on property assets. In order to provide a meaningful comparison the prior year deferred tax number has been revised to include the effects of property depreciation (2010: 469,000, 2009: 521,000) as explained in Note 11(c). The following reflects the profit and number of shares used in the basic and diluted earnings per ordinary share computations:
2010 000 2009 000
Profit attributable to equity holders of the parent Adjustments to profit for calculation of adjusted earnings per share: Exceptional income Exceptional costs Taxation adjustments on exceptional items Tax adjustment on prior years exceptional items Effect of release of deferred tax provision on property assets Adjusted profit for adjusted earnings per share
4,288 (632) 579 19 45 (582) 3,717
4,182 (804) 851 (223) (1,092) 2,914
72
12. Earnings per ordinary share and dividend continued

Earnings per ordinary share continued
Thousands Thousands
Basic weighted average number of ordinary shares Dilutive potential ordinary shares resulting from employee share schemes Diluted weighted average number of ordinary shares
46,201 2,024 48,225
45,985 1,342 47,327
Earnings per share basic for result for the year diluted for result for the year basic for result for the year adjusted for exceptional items and effect of release of provision for potential capital gains tax on properties diluted for result for the year adjusted for exceptional items and effect of release of provision for potential capital gains tax on properties Dividend paid
2010
2009
9.3p 8.9p 8.0p 7.7p
9.1p 8.8p 6.3p 6.2p
2010 000
2009 000
Final dividend for 2008 paid at 2.30p per share Interim dividend for 2009 paid at 1.05p per share Final dividend for 2009 paid at 2.40p per share Interim dividend for 2010 paid at 1.10p per share
1,110 509 1,619
1,057 484 1,541
The Board is recommending a final dividend of 2.50p per ordinary share for approval at the Annual General Meeting and, based on the shares in issue at the date the Board approved the Group financial statements, this would amount to a total dividend payment of 1,155,800. The final dividend has not been recognised as a liability at 31 December 2010.
13. Share-based payment plans
Company Sharesave Scheme (SAYE) The Group has an SAYE under which options to subscribe for the Groups shares have been granted to employees wishing to participate in the scheme. Options have been granted at a discount of 20% to the market value on the date of grant. The contractual lives of options are three and a half and five and a half years. The options are equity settled and there are no cash settlement alternatives. The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, SAYE options during the year.
2010 No. 2010 WAEP 2009 No. 2009 WAEP
Outstanding at the beginning of the year Granted during the year Lapsed during the year Cancelled during the year Forfeited during the year Outstanding at the end of the year
356,679 73,238 (26,293) (50,543) (183) 352,898
120.0p 108.4p 195.8p 115.5p 208.8p 112.6p
223,918 276,024 (143,263) 356,679
200.7p 96.4p 178.4p 120.0p
73
13. Share-based payment plans continued
Company Sharesave Scheme (SAYE) continued The weighted average remaining contractual life for the SAYE options outstanding as at 31 December 2010 is 2.23 years (2009: 2.94 years). The weighted average fair value of the options granted during the year was 47.6p (2009: 56.0p). The range of exercise prices for options outstanding at the end of the year was 96.4p 208.8p (2009: 96.4p 208.8p). The fair value of equity-settled options granted is estimated as at the date of grant using a binomial model taking into account the terms and conditions upon which the options were granted. Company Long-Term Incentive Plan (LTIP) The Group has an LTIP under which Executive Directors and senior managers may be granted annual equity awards up to a maximum value of 250%, and 100% respectively, of basic salary. Please see the Directors report on pages 18 to 22 for additional information. Awards issued will vest subject to performance criteria, being based 50% on Total Shareholder Return and 50% on annual average Return on capital employed and minimum performance criteria. The contractual life of each award is ten years. The awards are equity-settled and there are no cash settlement alternatives. The following table illustrates the number (No.) and movements in LTIP awards during the year.
2010 No. 2009 No.
Outstanding at the beginning of the year Forfeited during the year Exercised during the year Granted during the year Outstanding at the end of the year
1,299,461 (662,641) 1,245,628 1,882,448
1,902,651 (443,075) (160,115) 1,299,461
The weighted average remaining contractual life for the LTIP awards outstanding as at 31 December 2010 is 8.59 years (2009: 7.85 years). The weighted average fair value of the awards granted during the year was 110.0p (2009: nil). The fair value of equity-settled options and grants are estimated as at the date of grant using binomial and Monte Carlo models taking into account the terms and conditions upon which the options or grants were awarded. The following table lists the inputs to the model used for the years ended 31 December 2010 and 31 December 2009.
SAYE 2010 Scheme LTIP 2010 Scheme SAYE 2009 Scheme LTIP 2008 Scheme LTIP 2007 Scheme SAYE 2007 Scheme SAYE 2006 Scheme
Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life (years) Weighted average share price
2.40 34.60 1.84 3.95 142.5p
2.29 33.00 1.83 3.00 150.6p
2.35 38.25 2.22 4.05 142.5p
1.50 31.71 4.65 3.00 240.0p
1.15 32.00 5.45 3.00 229.0p
1.08 33.00 4.97 3.79 208.8p
1.10 31.00 4.80 4.10 204.5p
The expected life of the options and awards is based on the Groups best estimate and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.
74
14. Property, plant and equipment

Freehold Freehold buildings and Leasehold land improvements improvements 000 000 000 Fixtures, fittings and equipment 000 Assets under construction 000 Total 000
Cost: At 1 January 2009 Additions Disposals Transfers At 31 December 2009 Additions Transfers At 31 December 2010 Depreciation: At 1 January 2009 Provided during the year Depreciation on disposals At 31 December 2009 Provided during the year At 31 December 2010 Net book value: At 31 December 2010 At 31 December 2009 At 1 January 2009 54,151 52,892 50,968 49,989 48,123 47,665 1,134 1,156 731 8,357 8,270 9,155 1,754 2,129 2,598 115,385 112,570 111,117 8,789 1,579 10,368 1,783 12,151 379 242 621 215 836 16,028 1,754 (25) 17,757 1,626 19,383 25,196 3,575 (25) 28,746 3,624 32,370 50,968 1,598 326 52,892 968 291 54,151 56,454 1,426 611 58,491 3,628 21 62,140 1,110 314 353 1,777 193 1,970 25,183 788 (54) 110 26,027 1,650 63 27,740 2,598 931 (1,400) 2,129 (375) 1,754 136,313 5,057 (54) 141,316 6,439 147,755
Included within Freehold land is 6.0m of capitalised costs in relation to Project Pinewood. Pages 10 to 64 of the Annual Report provides further information on the project and the management judgement applied in supporting the carrying value of the costs. Assets under construction at 31 December 2010 primarily relates to building refurbishment and infrastructure costs, these are not depreciated in this period. The Groups long-term loan is secured by a floating charge over the Groups assets. Shepperton Studios Property Partnerships (SSPP) long leasehold interest in the Shepperton Studios site was valued at 35,730,000 by an independent firm of Chartered Surveyors in December 2010 (2009: 32,830,000). The Group carries its 50% interest in the long leasehold of SSPP at 20,168,000 (2009: 20,623,000) being depreciated cost.
75
15. Investment property

000
Cost: At 31 December 2008 Additions At 31 December 2009 Additions At 31 December 2010 Depreciation: At 31 December 2008 Provided during the year 2009 At 31 December 2009: Provided during the year 2010 At 31 December 2010 Net book value: At 31 December 2010 At 31 December 2009 At 31 December 2008 6,360 6,342 6,122 131 255 124 6,122 344 6,466 149 6,615
No independent valuation has been undertaken. A Directors valuation was carried out to determine the fair value of the investment property. A yield based valuation has been used which provided a fair value of 7.1m at 31 December 2010 using a 7.25% yield and allowing for purchasers costs of 5.76%. The fair value at 31 December 2009, again using the yield based valuation method provided a fair value of 6.8m, assuming a 7.25% yield and allowing for purchasers costs of 5.75%.
16. Intangible assets and impairment testing

At 31 December 2010 and 2009
Goodwill 000
5,604
Goodwill has been acquired through business combinations and has been allocated to the Groups single cash-generating unit. The recoverable amount of the cash-generating unit is based on a value in use calculation and is tested at least annually for impairment. Other than goodwill there are no intangible assets with indefinite lives. Outcome of impairment review The recoverable amount of the Groups cash-generating unit exceeds its carrying value and no impairment charge has been recognised (2009: no impairment charge recognised).
76
16. Intangible assets and impairment testing continued
Key assumptions The value in use calculations use five year cash flow projections derived from the Board approved budget for the next year and the Board approved long range plan and do not include non-cash generating assets, any activities that the Group is not yet committed to or significant future investments that will enhance the assets performance of the cash generating unit. The key assumptions used in the value in use calculations are: Discount rate The discount rate reflects the current market assessment of the risks specific to the cash-generating unit. The discount rate was calculated using the Groups cost of debt together with an estimate based on the average cost of equity for the industry, adjusted to reflect the market assessment of any risk specific to the cash-generating unit for which future estimates of cash flows have not been adjusted. The pre-tax discount rate used for 2010 is 8.8% which is compared to 9.3% in the prior year. Perpetuity growth rate The cash flows subsequent to the Board approved period are based on the long-term growth rate prospects of the industry in which the Group operates. The perpetuity growth rate used is 2.5% (2009: 2.5%). Cash flow from operations Cash flow projections have been estimated using a combination of assumptions including, but not limited to, facility utilisation, income growth and Media Park void ratios and rent increases. Considering previously achieved trading levels and the anticipated future operating environment for the business and taking into account any cost efficiencies which may be achieved, the Company has retained the assumptions used in its Board approved budget and its long range plan. Sensitivities The Groups impairment review is sensitive to a change in the key assumptions used, notably the discount rate. The discount rate would need to move to 14.2% to result in a breakeven position and, should the discount rate remain at 8.8%, the perpetuity growth rate would need to be a negative 5.3% to reach a breakeven point. Based on the Groups sensitivity analysis, a reasonable possible change in a single factor would not cause an impairment charge.
17. Long-term asset

Toronto sales and marketing agreement transaction costs Malaysia long-term agreement Dominican Republic transaction costs
2010 000
2009 000
94 188 65 347
The Group signed a 10 year sales and marketing agreement with Pinewood Toronto Studios on 26 May 2009. Transaction costs of 94,000 in relation to this agreement have been recognised as a long-term asset and are being amortised over the term of the agreement. Pinewood Malaysia Limited signed a long-term agreement on 16 December 2009 until the 10th anniversary of the opening of Pinewood Iskandar Malaysia Studios to provide marketing, operations and management support. Transaction costs of 188,000 in relation to this agreement have been recognised as a long-term asset. Pinewood Dominican Republic Limited signed an agreement on 20 May 2010 with a term of 15 years to provide sales, marketing and operations support to Pinewood Dominican Republic Studios. Transaction costs of 65,000 in relation to this agreement have been recognised as a long-term asset.
77
18. Trade and other receivables

2010 000 2009 000
Trade receivables Related parties
5,355 5,355
2,391 33 2,424
As at 31 December, the ageing analysis of trade receivables is as follows:

Past due but not impaired Neither past due nor impaired 000
Total 000
<30 days 000
30-60 days 000
60-90 days 000
90+ days 000
2010 2009 2008
5,355 2,424 3,383
3,515 1,565 2,491
1,155 255 580
165 172 129
61 106 45
459 326 138
At 31 December 2010, trade receivables at initial value of 232,000 (2009: 683,000) were impaired and fully provided for (see in Note 26 for further details). The movement in impairment loss recognised is recorded within Selling and distribution expenses in the Group income statement and is as follows:
000
At 1 January 2010 Credit for the year Utilised At 31 December 2010
683 (134) (317) 232
19. Inventories
Finished goods
2010 000
2009 000
491
337
20. Share capital and reserves

Authorised
2010 000 2009 000
Ordinary shares of 10p each
7,000
7,000
78
20. Share capital and reserves continued

Issued, called up and fully paid
2010 No. 000 No. 2009 000
Ordinary shares of 10p each Shares issued under the Pinewood Shepperton plc Sharesave scheme: 10p ordinary shares issued on 14 September 2009 10p ordinary shares issued on 30 October 2009 10p ordinary shares issued on 31 March 2010
46,104,906
4,610
45,944,791
4,594
101,990 58,125 127,100 46,232,006 13 4,623 46,104,906
10 6 4,610
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the general meetings of the Company. Share option schemes The Group has one share-based payment plan under which options to subscribe for the Groups shares have been granted. At 31 December 2010, 352,898 shares were outstanding (2009: 356,679). Details of this scheme can be found in Note 13. Long-term incentive plan The Group has a long-term incentive plan under which awards for the Groups shares have been granted to certain executives and senior employees. At 31 December 2010, 1,882,448 share awards were outstanding (2009: 1,299,461). Details of this scheme can be found in Note 13. Nature and purpose of reserve Reserve for own shares Included within the cash capital account are the costs of Pinewood Shepperton plc shares purchased in the market and held by the Pinewood Shepperton plc Employee Benefit Trust to satisfy future exercise of awards under the Company share option scheme. As at 31 December 2010 the Company held 127,100 (2009: nil) of its own shares at an average cost of 10p per share. The market value of these shares at 31 December 2010 was 187,473 (2009: nil). Share premium reserve The share premium increased by nil (2009: nil) in the year as a result of the issue of share issues noted in the table above. Capital redemption reserve The capital redemption reserve arose as a result of the repurchase of shares in 2001. Merger reserve On acquiring Shepperton Studios Limited the Group issued ordinary shares as part of the consideration. Merger relief was taken in accordance with Section 131 of the Companies Act 1985 (since succeeded by Section 612 of the Companies Act 2006), and hence 348,000 was credited to the merger reserve. Fair value of cash flow hedge reserve The cash flow hedge reserve is used to record the fair value gains or losses, and related deferred tax, on the hedging instruments used by the Group to manage interest rate risk. The cash flow hedges are determined to be effective hedges.
79
21. Interest-bearing loans and borrowings

Current borrowings Bank overdraft Non-current borrowings Revolving credit facility Pre-let development facility Total drawn facility loan Asset financing Share of joint venture loan Non-current drawn loan facilities Cash flow hedge (7.5m) Cash flow hedge (15m) Secured bank loan arrangement costs 2.89% + variable margin 5.195% + variable margin 1 July 2013 1 July 2013 Implicit rate of 7.3% Base rate + 2% margin 30 May 2014 30 September 2026 LIBOR + variable margin LIBOR + variable margin 15 August 2013 15 August 2013 22,500 6,000 28,500 1,841 12,002 42,343 257 1,367 (777) 43,190 Total current and non-current interest-bearing loans and borrowings Banking facilities The Group has agreements with a syndicate of banks, which provides facilities as follows: Overdraft A 5,000,000 (2009: 5,000,000) overdraft facility to support the future operating activities of the business, secured by a floating charge over the Groups assets. This facility is in place until August 2013 and is subject to annual review with interest charged at 225 basis points over bank base rate. Revolving credit facility A revolving credit facility of up to 35,000,000 to support the operating activities of the business, secured by a floating charge over the Groups assets. Interest is charged at LIBOR plus a variable margin of between 175 and 275 basis points based on specific covenant levels. This facility is in place until August 2013. Pre-let development facility A pre-let development facility of up to 30,000,000 to support the pre-let Media Park development strategy. Interest is charged at LIBOR plus a variable margin of between 175 and 225 basis points based on the status of the pre-let development. This facility is in place until August 2013. 43,190 26,000 6,000 32,000 923 12,002 44,925 42 1,245 (1,063) 45,149 46,093
Effective interest rate % Maturity 2010 000 2009 000
Base rate + 2.25% margin
Annual renewal
944 944
80
21. Interest-bearing loans and borrowings continued
The banking facilities become repayable on demand following a change of control in the Group. If the Group and the syndicate of banks agent are unable to agree alternative terms within thirty days of the Groups notification of a change of control. The overdraft, revolving credit facility and pre-let development facility are secured by a floating charge over the principle assets of the Group, other than those secured by a fixed charge by Shepperton Studios Property Partnership. Covenants The banking agreements contain a range of covenants appropriate for the revolving credit facility, pre-let development facility and overdraft facility. The Group was covenant compliant at 31 December 2010. Cash flow hedge At 31 December 2010, the Group held interest rate swaps designated as hedges against drawn debt obligations amounting to 22,500,000 (2009: 22,500,000). Further information can be found in Note 26. Asset financing facility The asset financing facility is a sterling chattel mortgage facility over a fixed term with fixed monthly payments and is secured over identifiable assets of an equal value. These assets are classified as Fixtures, Fittings and Equipment within Property, Plant and Equipment in the statement of financial position. Share of joint venture loan This relates to the Groups 50% interest, 12,002,000 (2009: 12,002,000) of the joint ventures 24,004,000 investor and development loan (2009: 24,004,000). These loans which have no financial covenants attached to them are secured by a fixed charge on the assets of Shepperton Studios Property Partnership, are non-recourse to the Group and are repayable in full on 30 September 2026. Interest on the loans is at base rate plus 2% with an interest rate floor of 6.5%. The interest rate floor is an embedded derivative in the loan agreement; however the derivative has not been separated from the loan agreement as it satisfies the criteria for non-separation in IAS 39.
81
Borrowing facilities The available but undrawn committed facilities at 31 December are as follows: Year ended 31 December 2010
Within 1 year 000 12 years 000 23 years 000 34 years 000 45 years 000 More than 5 years 000 Total 000
Facilities: Revolving credit facility Pre-let development facility Secured bank facility Asset financing facility Share of joint venture loan Bank overdraft Total facilities Drawn loans: Revolving credit facility Pre-let development facility Asset financing facility Share of joint venture loan Total drawn loans Undrawn facilities: Bank overdraft Revolving credit facility Pre-let development facility Share of joint venture loan Total undrawn committed facilities 5,000 5,000 12,500 24,000 36,500 7,998 7,998 5,000 12,500 24,000 7,998 49,498 (22,500) (6,000) (28,500) (1,841) (1,841) (12,002) (12,002) (22,500) (6,000) (1,841) (12,002) (42,343) 5,000 5,000 35,000 30,000 65,000 65,000 1,841 1,841 20,000 20,000 35,000 30,000 65,000 1,841 20,000 5,000 91,841
82

Borrowing facilities continued Year ended 31 December 2009
Facilities: Revolving credit facility Pre-let development facility Secured bank facility Asset financing facility Share of joint venture loan Bank overdraft Total facilities Drawn loans: Bank overdraft Revolving credit facility Pre-let development facility Asset financing facility Share of joint venture loan Total drawn loans Undrawn facilities: Bank overdraft Revolving credit facility Pre-let development facility Asset financing facility Share of joint venture loan Total undrawn committed facilities 4,056 4,056 9,000 24,000 33,000 7,998 7,998 4,056 9,000 24,000 7,998 45,054 (944) (944) (26,000) (6,000) (32,000) (923) (923) (12,002) (12,002) (944) (26,000) (6,000) (923) (12,002) (45,869) 5,000 5,000 35,000 30,000 65,000 65,000 923 923 20,000 20,000 35,000 30,000 65,000 923 20,000 5,000 90,923
83
22. Trade and other payables

2010 000 2009 000
Trade payables Value added tax Payroll taxes Other payables Accruals Capital expenditure payables Deferred income
2,249 915 3 615 3,049 1,824 6,732 15,387
1,993 416 277 622 1,015 1,908 2,317 8,548
Terms and conditions of the above financial liabilities: Trade payables are non-interest bearing and are settled, on average, on 26 day terms (2009: 33 days). Other payables are non-interest bearing and are settled as they become due. Accruals are non-interest bearing and are settled as they become due. Deferred income is recognised as it is earned.
23. Obligations under leases
Operating lease commitments Group as a lessee Teddington Studios Teddington Studios Limited has entered into a commercial property lease on the Teddington Studios property with a third party. The lease term expires on 23 August 2024, with a tenants break option exercisable after completion of the tenants rent review which commenced on 24 August 2009. Teddington Studios Limited has three months following determination of the 24 August 2009 rent review to give no less than 12 months, notice to terminate the lease. Under the terms of the lease the tenant may not assign the lease until the rent review has been settled. In accordance with the lease an external expert has been appointed to determine the rent review. Future minimum rentals payable on the non-cancellable Teddington Studios operating lease as at 31 December are as follows:
2010 000 2009 000
Within one year After one year but not more than five years
662 993 1,655
662 993 1,655
84
23. Obligations under leases continued
Operating lease commitments Group as a lessee continued Shepperton Studios Shepperton Studios Limited entered into a commercial property lease on the Shepperton Studios property with Shepperton Studios Property Partnership, its 50% owned joint venture partnership. The lease term expires on 18 August 2026 with no break option. Under the terms of the agreement the tenant may not assign the lease until 18 August 2016. The net cost to the Group of future minimum rentals payable under the non-cancellable Shepperton Studios property operating lease as at 31 December is as follows:
2010 000 2009 000
Within one year After one year but not more than five years After five years but not more than 20 years
940 3,760 9,964 14,664
892 3,568 10,380 14,840
Operating lease commitments Group as a lessor The Group has entered into a commercial property lease on the property classified as Investment property. This noncancellable lease has a remaining term of between 9 and 14 years. The lease includes a clause to enable upward revision of the principal rental charge on an annual basis subject to prevailing market conditions. Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows:
2010 000 2009 000
Within one year After one year but not more than five years After five years but not more than 20 years
518 2,080 1,562 4,160
518 2,080 2,080 4,678
24. Commitments and contingencies
Capital commitments At 31 December 2010 the Group had capital commitments contracted for but not provided in the accounts in relation to the completion of the power upgrade of 2.3m (31 December 2009: nil). Guarantees At 31 December 2010, the Group had guarantees in place, in the form of documentary credits, that were not provided for in the accounts totalling 155,000 (2009: 163,250) in relation to certain Section 278 highways related infrastructure.
85
25. Related party disclosures
The consolidated financial statements include the financial statements of Pinewood Shepperton plc, its subsidiaries and its 50% interest in the joint ventures listed in the following table.
% equity interest Country of incorporation 2010 2009
Pinewood Studios Limited Shepperton Studios Limited Pinewood-Shepperton Studios Limited Studiolink Limited Teddington Studios Limited The Studio Broadcasting Company Limited Baltray No.1 Limited Baltray No.2 Limited Shepperton Management Limited Sauls Farm and Stables Limited Sauls Farm Limited Pinewood Malaysia Limited Pinewood Germany Limited Pinewood Dominican Republic Limited Pinewood USA Inc Pinewood Film Production Studios Canada Inc Pinewood Shepperton plc is the parent entity of the Group.
United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom USA Canada
100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
100 100 100 100 100 100 100 100 100 100 100 100 100 100
% Joint venture interest Joint ventures 2010 2009
Shepperton Studios (General Partner) Limited Shepperton Studios Property Partnership Pinewood Studios Berlin Film Services GmbH
United Kingdom United Kingdom Germany
50 50 50
50 50 50
86
25. Related party disclosures continued
During the year the Group entered into transactions with the following related parties, involving the utilisation of media facilities at normal market rates and settlement terms. No impairment was recognised against the amounts owed at each year end.
Sales to related party 000 Amounts owed by related party 000
Entity with which Lord Grade of Yarmouth was associated during the year: ITV plc ITV plc 2010 2009 425 33
Effective as of 31 December 2009, Lord Grade of Yarmouth resigned as Chairman and Director of ITV plc. Joint ventures: Shepperton Studios Limited has a commercial property lease on the Shepperton Studios property. The net cost to the Group of principal lease rentals during the year ended 31 December 2010 was 897,000 (2009: 892,000). In addition the Group pays a top up rent to the joint venture partnership based on certain of its trading activities at the Shepperton Studios site. During the year the net cost to the Group of the top up rent was 288,000 (2009: nil). The Groups share of amounts owed to the 50% joint venture partnership at 31 December 2010 was 406,000 (2009: 511,000). Shepperton Management Limited manages the assets of the joint venture partnership and charges an asset manager fee based on independent valuations of the Shepperton Studios site. Asset manager fees charged during the year ended 31 December 2010 were 99,000 (2009: 95,000).
26. Financial risk management, objectives and policies
The Groups principal financial liabilities, other than derivatives, comprise loans and borrowings, asset financing chattel mortgage and trade and other payables. The main purpose of these financial liabilities is to provide finance for the Groups operations. The Group has financial assets such as trade and other receivables and cash that arise directly from its operations. The Group is exposed to market risk, credit risk and liquidity risk. The Board of Directors oversee the management of these risks and are supported by the appropriate members of the Executive Management Team together with specialist advisors as required. All derivative activities for risk management purposes are carried out with specialists involved who have the appropriate skills and experience. It is the Groups policy that no trading in derivatives for speculative purposes shall be undertaken.
87
26. Financial risk management, objectives and policies continued
The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below. Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity risk. The Groups financial instruments affected by market risk include loans and borrowings and derivative financial instruments. Interest rate risk Interest rate risk is the risk that the fair value or future values of a financial instrument will fluctuate because of changes in market interest rates. The Groups exposure to the risk of changes in market interest rates relates primarily to the Groups long-term debt obligations with floating interest rates. In order to manage its interest rate risk the Groups policy is to have a minimum of 50% (2009: up to 50%) of its borrowings at fixed rates of interest. To manage this, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specific intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principle amount. These swaps are designated to hedge debt obligations and are monitored to ensure continued effectiveness. At 31 December, the Group had the following interest rate swaps in place to minimise the volatility in cash flows from a change in LIBOR:
Cash flow hedge Cash flow hedge
2.89% + variable margin 5.195% + variable margin
1 July 2013 1 July 2013
7,500 15,000 22,500
7,500 15,000 22,500
88
Interest rate risk continued The interest rate swaps held are determined to be effective hedges and the interest swap finance costs are charged to the Group income statement when they are payable. These are payable on a quarterly basis in March, June, September and December. The change in the fair value is recognised in Other Comprehensive Income. At 31 December 2010, 28,500,000 of the Groups revolving credit facility, overdraft facility and pre-let development facility (2009: 32,944,000) and 12,002,000 (2009: 12,002,000) of the joint venture loan had been drawn (Note 21). 18,002,000 (2009: 22,446,000) of drawn facility is at a floating interest rate of LIBOR plus a margin, or UK Bank base rate plus a margin, and is therefore subject to market risk through interest rate fluctuations. The remaining drawn loan of 22,500,000 (2009: 22,500,000) has been converted to a fixed rate with interest rate swaps. During the year the Group entered into an asset financing agreement for a 1,297,000 asset financing facility over a fixed term with fixed monthly payments and is secured over identifiable assets of an equal value. These assets are classified as Fixtures, fittings and equipment within Property, plant and equipment on the statement of financial position. At 31 December 2010, the balance payable was 1,841,000 (2009: 923,000). Taking into consideration the fixed rate instruments in place, a one percentage point increase in LIBOR would increase the interest charge, and reduce the Group profit before taxation, by 60,000 (2009: 215,000). At 31 December 2010, after taking into account the effect of interest rate swaps and the chattel mortgage facility, approximately 57% (2009: 51%) of the Groups borrowings are at a fixed rate of interest. A summary of fixed and floating rate debt at 31 December is as follows: Year ended 31 December 2010
Secured bank loan at floating rate portion of loan effectively converted to fixed rate with an interest rate swap Effective floating portion of secured loan at floating rate Share of joint venture loan Floating rate drawn loan Fixed rate asset financing Fixed rate drawn loan Total drawn loan
(28,500)
(28,500)
22,500 (6,000) (6,000) (22,500) (28,500)
(1,841) (1,841)
22,500 (6,000)
(12,002) (12,002) (12,002) (18,002) (1,841) (22,500)
(12,002) (42,343)
89

Interest rate risk continued Year ended 31 December 2009
Secured bank loan at floating rate portion of loan effectively converted to fixed rate with an interest rate swap Effective floating portion of secured loan at floating rate Share of joint venture loan Bank overdraft Floating rate drawn loan Fixed rate drawn loan Total drawn loan
(32,000)
(32,000)
(944) (944) (944)
22,500 (9,500) (9,500) (22,500) (32,000)
(923) (923)
(12,002) (12,002) (12,002)
22,500 (9,500) (12,002) (944) (22,446) (923) (22,500) (45,869)
Foreign currency risk The Group does not hedge against foreign currency exposure due to its minimal exposure to foreign currency movements as its business is conducted primarily in UK sterling. The Board continues to review this area to identify any potential exposure with the increase in international arrangements. Equity price risk The Group does not hedge against equity price risk as it does not have exposure in this area. Credit risk Credit risk is the risk that counterparty will not meet its obligation under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities, primarily trade receivables, and financial instruments. Credit risks related to receivables Customer credit risk is managed across the Group in accordance with policy, procedures and controls relating to customer credit risk management. The Group trades with recognised, creditworthy third parties and it is the Groups policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis to manage the Groups exposure to bad debts. The requirement for impairment is reviewed each month on an individual customer basis and not on a collective basis. The review to assess the need for impairment is not dependent on the age of the receivable and is determined using business knowledge and individual circumstances specific to each customer. There were no changes to the Group policy during the year. As at 31 December 2010 the Groups maximum exposure to credit risk was 5,587,000 (2009: 3,107,000), of which 232,000 (2009: 683,000) is considered to be potentially impaired and 1,840,000 (2009: 859,000) has exceeded credit terms but has not been impaired. Note 18 provides further details of the ageing profile of receivables. Credit risks related to financial instruments With respect to credit risk relating to cash, cash equivalents and other financial instruments the Groups exposure to credit arises from default of the counterparty, with the maximum exposure equal to the carrying amount of these instruments. At 31 December 2010 the Group has a positive cash balance (31 December 2009: negative cash balance) and has a total of 22,500,000 interest rate swaps (2009: 22,500,000) and a 1,841,000 (2009: 923,000) asset financing facility agreement.
90
Liquidity risk The Groups objective is to maintain a balance between the continuity of operating and development funding and flexibility through the use of an overdraft facility, a revolving credit facility, a pre-let development facility and a share of a joint venture loan. Short-term flexibility is achieved by the overdraft facility of 5,000,000 (2009: 5,000,000) which is available to the Group for drawdown until 15 August 2013 (subject to an annual review). The revolving credit facility, which supports the operating activities of the Group, and the pre-let development facility which supports the pre-let Media Park development strategy, are both available for drawdown until 15 August 2013. The share of the joint venture loan is available until 30 September 2026. The Board has reviewed the Groups banking facilities and current levels of headroom on those facilities and considers that there is sufficient capacity going forward. The table below summarises the maturity profile of the Groups main financial liabilities based on contractual undiscounted payments at 31 December: Year ended 31 December 2010
On demand 000 Less than 3 months 000 312 months 000 1 to 5 years 000 > 5 years 000 Total 000
Drawn facility loans Share of joint venture loan Cash flow hedge Asset financing Trade and other payables
8,656 8,656
211 181 201 133 726
633 543 603 399 2,178
32,720 2,635 820 1,527 37,702
15,226 15,226
33,564 18,585 1,624 2,059 8,656 64,488
Year ended 31 December 2009

On demand 000 Less than 3 months 000 312 months 000 1 to 5 years 000 > 5 years 000 Total (restated) 000
Drawn facility loans Share of joint venture loan Cash flow hedge Bank overdraft Asset financing Trade and other payables
944 6,231 7,175
234 181 201 60 676
705 543 603 108 1,959
39,520 2,635 483 874 43,512
15,534 15,534
40,459 18,893 1,287 944 1,042 6,231 68,856
91
Fair values Set out below is a comparison by category of book values and fair values of all the Groups financial assets and liabilities as at 31 December:
Book value 2010 000 2009 000 2010 000 Fair value 2009 000
Financial assets: Cash Trade and other receivables Financial assets Financial liabilities: Bank overdraft Interest-bearing loans and borrowings Floating rate borrowings Floating rate borrowings converted to fixed rate Asset financing Share of joint venture loan Interest-bearing loans and borrowings Trade and other payables Financial liabilities Derivative financial instruments held to manage the interest rate profile: Cash flow hedge (7.5m at 5.525% + variable margin) Cash flow hedge (7.5m at 2.89% + variable margin) Cash flow hedge (15.0m at 5.195% + variable margin) Interest rate swaps fair value of liability 257 1,367 1,624 42 1,245 1,287 257 1,367 1,624 42 1,245 1,287 6,000 22,500 1,841 12,002 42,343 15,387 57,730 9,500 22,500 923 12,002 44,925 8,548 54,417 6,000 22,500 2,059 18,585 49,144 15,387 64,531 9,500 22,500 1,042 18,893 51,935 8,548 61,427 944 944 495 5,355 5,850 2,424 2,424 495 5,355 5,850 2,424 2,424
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities. Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
92
Fair values continued At 31 December 2010 the Group held interest rate swap contracts, an asset financing liability and a share of a joint venture loan. The fair value of these contracts is valued using a level 2 technique as it is determined by reference to market values for similar instruments. During the year ended 31 December 2010, there were no transfers between the different fair value measurement levels. Capital management The primary objective of the Groups capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2010 and 31 December 2009. The Group monitors capital using a gearing ratio, which is net debt divided by total equity. The Group includes within net debt, interest-bearing loans and borrowings (excluding the fair value of the cash flow hedge and loan costs), joint venture loans and cash. This ratio is reviewed regularly by management with the appropriate measures (noted above) being considered to maintain a capital structure to support the business.
2010 000 2009 000
Non-current liabilities: Non-current drawn loan facilities Fair value of cash flow hedge Secured bank loan arrangement costs Interest-bearing loans and borrowings: Current liabilities: Bank overdraft Current assets: Cash Net debt Total equity Gearing ratio Net debt excluding fair value and loan costs Gearing ratio (495) 42,695 75,060 56.9% 41,848 55.8% 46,093 72,550 63.5% 45,869 63.2% 944 42,343 1,624 (777) 43,190 44,925 1,287 (1,063) 45,149
Pinewood Shepperton plc Annual Report & Accounts 2010 Company UK GAAP financial statements
93
Independent auditors report to the members of Pinewood Shepperton plc

We have audited the parent Company financial statements of Pinewood Shepperton plc for the year ended 31 December 2010 which comprise Statement of Financial Position and the related notes 1 to 15. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Companys members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Companys members those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Companys members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Directors responsibilities statement set out on page 22, the Directors are responsible for the preparation of the parent Company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the parent Company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Boards Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent companys circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In our opinion the parent Company financial statements: give a true and fair view of the state of the Companys affairs as at 31 December 2010; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements.
94
Pinewood Shepperton plc Annual Report & Accounts 2010 Company UK GAAP financial statements continued
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the parent Company financial statements are not in agreement with the accounting records and returns; or certain disclosures of Directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit.
Other matters
We have reported separately on the Group financial statements of Pinewood Shepperton plc for the year ended 31 December 2010.
Iain Wilkie (Senior Statutory Auditor) For and on behalf of Ernst & Young LLP, Statutory Auditors London 7 March 2011
Notes: 1. The maintenance and integrity of the Pinewood Shepperton plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site. 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
95
Company statement of financial position at 31 December 2010

As at 31 December 2010 000 As at 31 December 2009 000
Notes
Fixed assets Investments Long-term assets Current assets Debtors: Amounts falling due after one year Amounts falling due within one year Cash Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Capital and reserves Called up share capital Share premium account Capital redemption reserve Merger reserve Fair value of cash flow hedge Retained earnings Equity shareholders funds 12 12 12 12 13 13 13 4,623 43,692 135 348 (1,186) 2,535 50,147 4,610 43,692 135 348 (927) 3,612 51,470 11 10 9 9 63,463 676 64,139 (16,106) 48,033 80,832 (30,685) 50,147 57,751 614 777 59,142 (7,362) 51,780 84,485 (33,015) 51,470 6 8 32,705 94 32,799 32,705 32,705
The financial statements were approved by the Board of Directors on 7 March 2011 and were signed on its behalf by:
Patrick Garner FCA Finance Director
96
Notes to the financial statements at 31 December 2010
1. Authorisation of financial statements
The Companys ordinary shares are traded on the London Stock Exchange. The financial statements of Pinewood Shepperton plc for the year ended 31 December 2010 were authorised for issue by the Board of the Directors on 7 March 2011 and the statement of financial position was signed on the Boards behalf by the Finance Director. Pinewood Shepperton plc is a public limited company incorporated and domiciled in England and Wales. The registered office is located at Pinewood Studios, Pinewood Road, Iver Heath, Buckinghamshire SL0 0NH, United Kingdom. The Companys ordinary shares are traded on the London Stock Exchange.
2. Accounting policies
Accounting convention The financial statements are prepared under the historical cost convention and in accordance with applicable accounting standards. Basis of preparation The Company has taken advantage of the exemption available under Section 408 of the Companies Act 2006 not to present its own profit and loss account. The Company accounts have been prepared in accordance with UK Generally Accepted Accounting Policies as they apply to the financial statements of the Company for the year ended 31 December 2010 and applied in accordance with the Companies Act 2006. The Company has taken advantage of the exemption in paragraph 2D of FRS 29 Financial Instruments: Disclosures and has not disclosed information required by that standard, as the Groups consolidated financial statements, in which the Company is included, provide equivalent disclosures for the Group under IFRS 7 Financial Instruments: Disclosures. Going concern The Groups assessment of going concern is explained in the Directors report on page 21 of the Annual Report. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, VAT and other sales taxes or duty. The Company has assessed its revenue arrangements and has concluded that it is acting as a principal in all of its revenue arrangements. Fixed asset investments Investments in subsidiaries are stated initially at cost. The carrying values are reviewed for impairment if events or changes in circumstances indicate the carrying values may not be recoverable. Loan issue costs Loans are initially recorded at their net proceeds. The loan issue costs are amortised in the profit and loss account over the remaining maturity of the loans at a constant carrying amount and are reviewed for changes in circumstances that may indicate that the loans will not be held to maturity. Share issue costs Costs directly attributable to the raising of equity are offset against share premium arising on share issuance. Share-based payment transactions Employees (including Directors) of the Group may receive part of their remuneration in the form of share-based payment transactions, whereby employees render their services in exchange for shares or rights over shares (equity-settled transactions). The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using the binomial method. In valuing equity-settled transactions, no account is taken of any performance conditions, other than the conditions linked to the price of the shares of Pinewood Shepperton plc (market conditions).
Pinewood Shepperton plc Annual Report & Accounts 2010 Company UK GAAP financial statements continued Notes to the financial statements continued
97
Share-based payment transactions continued The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the Directors of the Group at that date based on the best available estimate of the number of equity instruments, will ultimately vest. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition and in circumstances where holders of awards with no performance conditions attached cancel their awards whilst remaining in the employment of the Group. These are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification. Where an equity-settled award is cancelled by the award holder whilst remaining in the employment of the Group, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. Where an equity-settled award is cancelled due to the holder of the award no longer remaining in the employment of the Group, no expense is recognised. The dilutive effect of outstanding issuable awards is reflected as additional share dilution in the computation of earnings per share. Awards that are contingently issuable are not considered dilutive unless the performance conditions for ultimate vest are met. The financial effect of awards by the parent company of options over its equity shares to the employees of subsidiary undertakings are recognised by the parent company in its individual financial statements. In particular the parent company records an increase in its investment in subsidiaries with a credit to equity equivalent to the FRS 20 cost in the subsidiary undertakings. Financial assets Financial assets in the scope of FRS 26 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or as available-for-sale financial assets, as appropriate. The Company determines the classification of its financial assets at initial recognition and re-evaluates this designation at each financial year-end. When financial assets are recognised initially, they are measured at fair value. All regular way purchases and sales of financial assets are recognised on the trade date, being the date that the Company commits to purchase or sell the asset. Regular way transactions require delivery of assets within the timeframe generally established by regulation or convention in the marketplace. The subsequent measurement of financial assets depends on their classification, as follows: Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, do not qualify as trading assets and have not been designated as either fair value through profit and loss or available-for-sale. Such assets are carried at amortised cost using the effective interest method if the time value of
98
Loans and receivables continued money is significant. Gains and losses are recognised in profit when the loans and receivables are derecognised or impaired, as well as through the amortisation process. If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the carrying amount of the asset is reduced, with the amount of the loss recognised in administration costs. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit and loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Derivative financial instruments The Company has interest rate swaps to hedge against risks associated with interest rate fluctuations. These derivative financial instruments are stated at fair value. The fair values of the interest rate swap contracts are determined by reference to market values for similar instruments. The interest rate swaps are cash flow hedges which hedge exposure to variability in cash flows that are attributable to the interest rate risk on the Companys external borrowings. The portion of the gain or loss on the hedging instruments that is determined to be an effective hedge is recognised directly in other comprehensive income and the statement of changes in equity in a cash flow hedge reserve and the ineffective portion is recognised in the income statement in finance costs. Amounts taken to other comprehensive income and the statement of changes in equity are transferred to the income statement when the hedged transaction affects income. Hedge accounting is discontinued when the hedging instruments expire, or are sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instruments recognised in other comprehensive income and the statement of changes in equity is kept in other comprehensive income and the statement of changes in equity until the forecasted transactions occur. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in other comprehensive income and the statement of changes in equity is transferred to the income statement for that year. Pensions The Company operates defined contribution schemes. Contributions are charged to the profit and loss account as they become payable in accordance with the rules of the schemes. Corporation taxes Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates and laws that are enacted or substantively enacted by the statement of financial position date. Deferred tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exception: deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the statement of financial position dates.
99
3. Auditors remuneration
2010 000 2009 000
Audit of the financial statements Other fees to auditors: taxation services
5 5
5 5
4. Directors remuneration
Basic salary and fees 2010
Benefits in kind 2010
Annual bonus 2010
Pension Total Total contributions remuneration remuneration 2010 2010 2009
Chairman Michael Grade Executive Directors Ivan Dunleavy Patrick Garner Nicholas Smith Non-Executive Directors Adrian Burn Nigel Hall James Donald Steven Underwood 41,000 41,000 38,500 nil n/a n/a n/a nil n/a n/a n/a nil n/a n/a n/a nil 41,000 41,000 38,500 nil 41,000 41,000 38,500 nil 290,000 200,000 170,000 22,786 18,395 14,642 90,800 63,500 63,500 36,240 25,000 21,250 439,826 306,895 269,392 351,677 242,602 204,005 102,500 n/a n/a n/a 102,500 102,500
None of the above Directors received reimbursement for expenses during the year requiring separate disclosure as required by the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008.
100
5. Taxation
(a) Analysis of charge for the year:

Current tax: UK corporation tax Prior year adjustments Total current corporation tax Deferred tax: Origination and reversal of timing differences Total tax charge Tax relating to items charged or credited to equity Deferred tax: Deferred tax (credit)/charge reported in equity on cash flow hedges Deferred tax credit reported in equity on share-based payments Tax (credit)/charge in the statement of changes in equity (b) Factors affecting current tax charge for the year:
2010 000 2009 000
(52) (52)
(78) (24) (102)
24 24
Accounting profit before corporation tax Profit on ordinary activities multiplied by UK rate of 28% (2008: 28.5%) Non-deductible expenses Non-taxable amounts Group relief claimed Corporation tax expense reported in the income statement
455 127 7 64 (250) (52)
1,359 381 56 (156) (281)
101
6. Investments
000
Cost: At 31 December 2009 and 31 December 2010 32,705
Details of the investments in which the Group and the Company (unless indicated) holds 20% or more of the nominal value of any class of share capital or Joint Venture interests are as follows:
Name of company Holding Proportion of voting rights or shares held Nature of business
Subsidiary undertakings Pinewood Studios Limited* Shepperton Studios Limited* Pinewood-Shepperton Studios Limited Pinewood Malaysia Limited * Pinewood Germany Limited* Studiolink Limited Teddington Studios Limited The Studio Broadcasting Company Limited** Baltray No.1 Limited* Baltray No.2 Limited* Shepperton Management Limited* Sauls Farm and Stables Limited Sauls Farm Limited Pinewood Dominican Republic Limited* Pinewood USA Inc* Pinewood Film Production Studios Canada Inc* Shepperton Studios Property Partnership* Shepperton Studios (General Partner) Limited*
*Held by Pinewood-Shepperton Studios Limited **Held by Teddington Studios Limited
Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% 50%
Media Service Provider Media Service Provider Media Service Provider Media Service Provider Media Service Provider Media Service Provider Media Service Provider Media Service Provider Limited Partner Formerly General Partner Asset Manager Asset Manager Asset Manager Asset Manager Media Service Provider Media Service Provider Lessor General Partner
The Company accounts for its investments in subsidiaries using the cost model.
102
7. Dividends
2010 000 2009 000
Final dividend for 2008 paid at 2.30p per share Interim dividend for 2009 paid at 1.05p per share Final dividend for 2009 paid at 2.40p per share Interim dividend for 2010 paid at 1.10p per share
1,110 509 1,619
1,057 484 1,541
The Board is recommending a final dividend of 2.50p per ordinary share for approval at the Annual General Meeting and, based on the shares in issue at the date the Board approved the Company financial statements, this would amount to a total dividend payment of 1,155,800. This has not been recognised as a liability at 31 December 2010.
8. Long-term asset
Toronto sales and marketing agreement transaction costs
2010 000
2009 000
94
The Group signed a 10 year sales and marketing agreement with Pinewood Toronto Studios on 26 May 2009. Transaction costs of 94,000 in relation to this agreement have been recognised as a long-term asset and are being amortised over the term of the agreement.
9. Debtors
Due from subsidiary undertakings Deferred tax Prepayments and accrued income
2010 000
2009 000
63,463 154 522 64,139
57,751 614 58,365
Amounts falling due after more than one year included above are: Due from subsidiary undertakings The above amounts due from subsidiary undertakings are due after one year.
2010 000
2009 000
63,463
57,751
10. Creditors: amounts falling due within one year

Amounts due to subsidiary undertakings Other creditors Asset financing Bank overdraft
2010 000
2009 000
9,446 883 503 5,274 16,106
6,814 416 132 7,362
103
11. Creditors: amounts falling due after more than one year
2010 2009
Revolving credit facility Pre-let development facility Secured bank loan arrangement costs Asset financing Fair value of cash flow hedge Amounts falling due: in more than one year but not more than two years in more than two years but not more than five years
6,000 22,500 (777) 1,338 1,624 30,685 503 30,182 30,685
6,000 26,000 (1,063) 791 1,287 33,015 132 32,883 33,015
Banking facilities The Group has agreements with a syndicate of banks, which provides facilities as follows: Overdraft A 5,000,000 (2009: 5,000,000) overdraft facility to support the future operating activities of the business, secured by a floating charge over the Groups assets. This facility is in place until August 2013 and is subject to annual review with interest charged at 225 basis points over bank base rate. Revolving credit facility A revolving credit facility of up to 35,000,000 to support the operating activities of the business, secured by a floating charge over the Groups assets. Interest is charged at LIBOR plus a variable margin of between 175 and 275 basis points based on specific covenant levels. This facility is in place until August 2013. Pre-let development facility A pre-let development facility of up to 30,000,000 to support the pre-let Media Park development strategy. Interest is charged at LIBOR plus a variable margin of between 175 and 225 basis points based on the status of the pre-let development. This facility is in place until August 2013. Long-term loan facilities become repayable on demand following a change in control of the Group. The overdraft, revolving credit facility and pre-let development facility are secured by a floating charge over the assets of the Group. Covenants The banking agreements contain a range of covenants appropriate for the revolving credit facility, pre-let development facility and overdraft facility. The Group was covenant compliant at 31 December 2009. Cash flow hedge At 31 December 2010, the Group held interest rate swaps designated as hedges against drawn debt obligations amounting to 22,500,000 (2009: 22,500,000). Asset financing facility The asset financing facility is a 1,841,000 (2009: 923,000) chattel mortgage facility over a fixed term with fixed monthly payments and is secured over identifiable assets of an equal value. These assets are classified as Fixtures, fittings and equipment within Property, plant and equipment on the statement of financial position.
104
11. Creditors: amounts falling due after more than one year continued
Cash flow hedge The Company borrows in sterling at floating rate and uses interest rate swap agreements to manage the exposure to interest rate fluctuations. The interest rate swap is monitored to ensure its continued effectiveness. The fair value of the interest rate swap contracts are determined by reference to market values for similar instruments. At 31 December, the Group had the following interest rate swaps in place to minimise the volatility in cash flows from a change in LIBOR:
Cash flow hedge Cash flow hedge
2.89% + variable margin 1 July 2013 5.195% + variable margin 1 July 2013
7,500 15,000 22,500
7,500 15,000 22,500
The interest rate swaps held are determined to be effective hedges and the interest swap finance costs are charged to the income statement when they are payable. These are payable on a quarterly basis in March, June, September and December.
12. Share capital

Authorised
2010 000 2009 000
Ordinary shares of 10p each
7,000 7,000
7,000 7,000
Issued, called up and fully paid

2010 No. 000 No. 2009 000
Ordinary shares of 10p each Shares issued under the Pinewood Shepperton plc Sharesave scheme: 10p ordinary shares issued on 14 September 2009 10p ordinary shares issued on 30 October 2009 10p ordinary shares issued on 31 March 2010
46,104,906
4,610
45,944,791
4,594
127,100 46,232,006
13 4,623
101,990 58,125 46,104,906
10 6 4,610
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the general meetings of the Company.
105
Company Sharesave Scheme (SAYE) The Group has an SAYE under which options to subscribe for the Groups shares have been granted to employees wishing to participate in the scheme. Options have been granted at a discount of 20% to the market value on the date of grant. The contractual lives of options are three and a half and five and a half years. The options are equity-settled and there are no cash settlement alternatives. The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, SAYE options during the year.
2010 No. 2010 WAEP 2009 No. 2009 WAEP
12. Share capital continued
Outstanding at the beginning of the year Granted during the year Lapsed during the year Cancelled during the year Forfeited during the year Outstanding at the end of the year
356,679 73,238 (26,293) (50,543) (183) 352,898
120.0p 108.4p 195.8p 115.5p 208.8p 112.6p
223,918 276,024 (143,263) 356,679
200.7p 96.4p 178.4p 120.0p
The weighted average remaining contractual life for the SAYE options outstanding as at 31 December 2010 is 2.23 years (2009: 2.94 years). The weighted average fair value of the options granted during the year was 47.6p (2009: 56.0p). The range of exercise prices for options outstanding at the end of the year was 96.4p 208.8p (2009: 96.4p 208.8p). The fair value of equity-settled options granted is estimated as at the date of grant using a binomial model taking into account the terms and conditions upon which the options were granted. Company Long-Term Incentive Plan (LTIP) The Group has an LTIP under which Executive Directors and senior managers may be granted annual equity awards up to a maximum value of 250%, and 100% respectively, of basic salary. Please see the Directors report on pages 18 to 22 for additional information. Awards issued will vest subject to performance criteria, being based 50% on Total Shareholder Return and 50% on annual average Return on capital employed and minimum performance criteria. The contractual life of each award is ten years. The awards are equity-settled and there are no cash settlement alternatives. The following table illustrates the number (No.), and movements in, LTIP awards during the year.
2010 No. 2009 No.
Outstanding at the beginning of the year Forfeited during the year Exercised during the year Granted during the year Outstanding at the end of the year
1,299,461 (662,641) 1,245,628 1,882,448
1,902,651 (443,075) (160,115) 1,299,461
The weighted average remaining contractual life for the LTIP awards outstanding as at 31 December 2010 is 8.59 years (2009: 7.85 years). The weighted average fair value of the awards granted during the year was 110.0p (200p: nil).
106
12. Share capital continued
The fair value of equity-settled options and grants are estimated as at the date of grant using binomial and Monte Carlo models taking into account the terms and conditions upon which the options or grants were awarded. The following table lists the inputs to the model used for the years ended 31 December 2010 and 31 December 2009.
SAYE 2010 Scheme LTIP 2010 Scheme SAYE 2009 Scheme LTIP 2008 Scheme LTIP 2007 Scheme SAYE 2007 Scheme SAYE 2006 Scheme
Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life (years) Weighted average share price
2.40 34.60 1.84 3.95 142.5p
2.29 33.00 1.83 3.00 150.6p
2.35 38.25 2.22 4.05 142.5p
1.50 31.71 4.65 3.00 240.0p
1.15 32.00 5.45 3.00 229.0p
1.08 33.00 4.97 3.79 208.8p
1.10 31.00 4.80 4.10 204.5p
The expected life of the options and awards is based on the Groups best estimate and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.
13. Reconciliation of shareholders funds and movements on reserves

Share capital 000 Share premium 000 Capital redemption reserve 000 Merger reserve 000
Fair value of cash flow hedge reserve 000
Retained earnings 000
Total equity 000
At 1 January 2009 Profit for the year Dividend paid (Note 7) New shares issued Fair value of cash flow hedges Share-based payment At 31 December 2009 Profit for the year Dividend paid (Note 7) New shares issued Fair value of cash flow hedges Share-based payment Share options awarded to employees of subsidiaries At 31 December 2010
4,594 16 4,610 13 4,623
43,692 43,692 43,692
135 135 135
348 348 348
(988) 61 (927) (259) (1,186)
3,882 1,356 (1,541) (85) 3,612 455 (1,619) (13) (14) 114 2,535
51,663 1,356 (1,541) 16 61 (85) 51,470 455 (1,619) (259) (14) 114 50,147
107
Included within the cash capital account are the costs of Pinewood Shepperton plc shares purchased in the market and held by the Employee Benefit Trust to satisfy future exercise of awards under the Company share option scheme. As at 31 December 2010 the Company held 127,100 (2009: nil) of its own shares at an average cost of 10p per share. The market value of these shares at 31 December 2010 was 187,473 (2009: nil).
14. Own shares
15. Related party disclosures
The Company has taken the exemption available to it under FRS 8: Related party disclosures not to disclose its transactions with related parties as the disclosures are included in the financial statements of the consolidated Group.
108
Company information
Company Secretary A M Smith Head Office, Registered office and Directors address Pinewood Shepperton plc Pinewood Road Iver Heath Buckinghamshire SL0 0NH Company registration number 3889552 Investor relations website available at www.pinewoodshepperton.com Corporate Broker J.P. Morgan Cazenove Limited 20 Moorgate London EC2R 6DA Legal Advisers to the Company Travers Smith LLP 10 Snow Hill London EC1A 2AL
Auditors Ernst & Young LLP 1 More London Place London SE1 2AF Registrars and Receiving Agents Equiniti Limited Apsect House Spencer Road Lancing West Sussex BN99 6DA Principal Bankers The Royal Bank of Scotland plc 135 Bishopsgate London EC2M 3UR Lloyds TSB Bank plc 25 Gresham Street London EC2V 7HN Allied Irish Banks, p.l.c. St Helens 1 Undershaft London EC3A 8AB
Annual General Meeting
The notice convening the Annual General Meeting of the Company, to be held at J.P. Morgan Cazenove Limited, 20 Moorgate, London EC2R 6DA, at 10.30 am on 31 May 2011, together with an explanation of the resolutions to be proposed at the meeting, is contained in a circular to shareholders enclosed with this Annual Report.
Designed and produced by Radley Yeldar (London) www.ry.com This report is printed on Core Silk which is FSC certified virgin fibre and vegetable oil based inks were used. The printer is FSC and ISO 14001 certified. FSC Forest Stewardship Council. This ensures that there is an audited chain of custody from the tree in the well-managed forest through to the finished document in the printing factory. ISO 14001 A pattern of control for an environmental management system against which an organisation can be accredited by a third party.
Pinewood Shepperton plc Pinewood Road Iver Heath Buckinghamshire SL0 0NH United Kingdom Registered number: 3889552 tel: +44 (0) 1753 651700 fax: +44 (0) 1753 656936 www.pinewoodshepperton.com

Pinewood Shepperton PLC Annual Report 2010

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Pinewood Shepperton PLC Annual Report 2010

Uploaded by

Copyright:

Available Formats

Pinewood Shepperton plc Annual Report & Accounts 2010

Pinewood Shepperton plc Annual Report & Accounts 2010

Pinewood Shepperton plc Annual Report & Accounts 2010

Pinewood Shepperton plc Annual Report & Accounts 2010

Lord Grade of Yarmouth, CBE Chairman 7 March 2011

Pinewood Shepperton plc Annual Report & Accounts 2010

Pinewood Shepperton plc Annual Report & Accounts 2010

Pinewood Shepperton plc Annual Report & Accounts 2010

Patrick Garner FCA Finance Director 7 March 2011

Pinewood Shepperton plc Annual Report & Accounts 2010

Pinewood Shepperton plc Annual Report & Accounts 2010

Principal activities, business review and future developments

Results and dividend

Directors and their interests

Acquired during the year

620,486 1,266,458 208,822 25,196 66,660 18,289 10,000

620,486 1,286,458 208,822 25,196 66,660 18,289 10,000

Directors and their interests continued

Annual General Meeting

12,930,861 12,318,000 4,577,500 3,410,148 2,175,000 1,643,602

27.97 26.64 9.90 7.38 4.70 3.56

Share capital continued

Creditor payment policy

Principal risks and analysis of Key Performance Indicators

Directors statement as to disclosure of information to auditors

Statement of Directors responsibilities

Andrew M. Smith Company Secretary 7 March 2011

Pinewood Shepperton plc Annual Report & Accounts 2010

Key business risks

Importance of key customers and big budget films

Delay in the recovery of the economy

Less direct and indirect control.

Increases to business rates and valuation

Health and safety, environmental and disaster recovery

Failure of key suppliers

Health risk of pandemics, acts of terrorism and natural disasters

Pinewood Shepperton plc Annual Report & Accounts 2010

Membership of the Board

Role and responsibility of the Board

Communication with institutional shareholders

Board Committees continued

Internal control continued

Andrew M. Smith Company Secretary 7 March 2011

Pinewood Shepperton plc Annual Report & Accounts 2010

Pinewood Shepperton plc Annual Report & Accounts 2010

Pinewood Shepperton plc Annual Report & Accounts 2010

Directors remuneration report

Balance between fixed and variable elements of remuneration

Ivan Dunleavy Patrick Garner Nicholas Smith

Overview of equity participation

Components of the Executive Directors Remuneration

Ivan Dunleavy Patrick Garner Nicholas Smith

290,000 200,000 170,000

290,000 200,000 170,000

nil nil nil

Components of the Executive Directors Remuneration continued

Components of the Executive Directors Remuneration continued

Executive Directors service agreements

Chairman and Non-Executive Directors service agreements and remuneration

Chairman and Non-Executive Directors service agreements and remuneration continued

Pinewood Shepperton Total Return

FTSE All Share Media Total Return