Exhibit 99.1
McGurk Studios Limited
Report of the Directors and
Financial Statements for the year ended 31st March 2006
McGurk Studios Limited
Contents of the Financial Statements
for the year ended 31st March 2006
Page | ||
Company Information | 1 | |
Report of the Directors | 2 | |
Report of the Independent Auditors | 4 | |
Profit and Loss Account | 5 | |
Balance Sheet | 6 | |
Notes to the Financial Statements | 7 | |
Trading and Profit and Loss Account | 12 |
McGurk Studios Limited
Company Information
for the year ended 31st March 2006
DIRECTORS: | P.E. McGurk | |||||
L. McGurk | ||||||
Ms A.L. Austin | ||||||
J.R. McCarthy | ||||||
SECRETARY: | P.E. McGurk | |||||
REGISTERED OFFICE: | 2Burleigh Street | |||||
Holderness Road | ||||||
Hull | ||||||
East Yorkshire | ||||||
HU8 8SS | ||||||
REGISTERED NUMBER: | 2560917 (England and Wales) | |||||
AUDITORS: | Sadofskys Chartered Accountants | |||||
Registered Auditors | ||||||
Princes House | ||||||
Wright Street | ||||||
Hull | ||||||
HU2 8HX | ||||||
BANKERS: | HSBC | |||||
PO Box 72 | ||||||
55 Whitefriargate | ||||||
Hull | ||||||
HU1 2HX | ||||||
SOLICITORS: | Rollits Solicitors | |||||
Wilberforce Court | ||||||
High Street | ||||||
Hull | ||||||
HU1 1YJ |
Page 1
McGurk Studios Limited
Report of the Directors
for the year ended 31st March 2006
The directors present their report with the financial statements of the company for the year ended 31st March 2006.
PRINCIPAL ACTIVITY
The principal activity of the company in the year under review was that of design, artwork and flexographic reproduction.
DIRECTORS
The directors during the year under review were:
P.E. McGurk | ||||||
L. McGurk | ||||||
S.J. Marginson FCA | - resigned 1/8/05 | |||||
Ms A.L. Austin | ||||||
J.R. McCarthy |
The beneficial interests of the directors holding office on 31st March 2006 in the issued share capital of the company were as follows:
31/3/06 | 1/4/05 | |||
Ordinary £1 shares | ||||
P.E. McGurk | 70,000 | 70,000 | ||
L. McGurk | 10,000 | 10,000 | ||
Ms A.L. Austin | 10,000 | 5,000 | ||
J.R. McCarthy | 10,000 | 5,000 |
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period, In preparing these financial statements, the directors are required to
• | select suitable accounting policies and then apply them consistently; |
• | make judgements and estimates that are reasonable and prudent; |
• | prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. |
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
So far as the directors are aware, there is no relevant audit information (as defined by Section 234ZA of the Companies Act 1985) of which the company’s auditors are unaware, and each director 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 company’s auditors are aware of that information.
AUDITORS
The auditors, Sadofskys Chartered Accountants, will be proposed for re-appointment in accordance with Section 385 of the Companies Act 1985.
Page 2
McGurk Studios Limited
Report of the Directors
for the year ended 31st March 2006
This report has been prepared in accordance with the special provisions of Part VII of the Companies Act 1985 relating to small companies.
ON BEHALF OF THE BOARD:
P.E. McGurk - Secretary
4th July 2006
Page 3
Report to the Shareholders of
McGurk Studios Limited
We have examined the financial statements of McGurk Studios Limited for the year ended 31st March 2006 on pages five to eleven. These financial statements have been prepared in accordance with the accounting policies set out therein and the requirements of the Financial Reporting Standard for Smaller Entities (effective January 2005).
This report is made solely to the company’s members, as a body. Our work has been undertaken so that we might state to the company’s 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 company’s members as a body, for our work, for this report, or for the opinions we have formed.
Respective responsibilities
The directors’ responsibilities for preparing the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out on page two.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Report of the Directors is consistent with the financial statements.
In addition, we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our work, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.
We read the Report of the Directors and consider the implications for our report if we become aware of any apparent misstatements within it.
Basis of opinion
We conducted our work in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board other than as referred to below. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company’s circumstances, consistently applied and adequately disclosed. The scope of our work was limited in that it was based primarily upon enquiry, analytical procedures and assessing accounting policies in accordance with Generally Accepted Accounting Practice in the UK and the Financial Reporting Standard for Smaller Entities. We also carried out detailed verification work on individual balance sheet and profit and loss items and disclosures in the financial statements to ensure that there was no risk of material misstatement. We have not evaluated the company’s control procedures.
Subject to the above, we planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion:
• | the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice applicable to Smaller Entities, of the state of the company’s affairs as at 31st March 2006 and of its loss for the year then ended; |
• | the financial statements have been properly prepared in accordance with the Companies Act 1985; and |
• | the information given in the Report of the Directors is consistent with the financial statements. |
Emphasis of matter
Without qualifying our opinion, we draw your attention to the inability of your systems to produce a detailed breakdown of work in progress at the year end. As a result of this, we were unable to perform any examination of evidence relevant to this area of the accounts and can not, therefore, form any opinion as to its accuracy.
We would further draw attention to the items set out on page 13.
Sadofskys Chartered Accountants |
Registered Auditors |
Princes House |
Wright Street |
Hull |
5th February 2007
Page 4
McGurk Studios Limited
Profit and Loss Account
for the year ended 31st March 2006
31/3/06 | 31/3/05 | |||||||||
Notes | £ | £ | ||||||||
TURNOVER | 5,260,799 | 4,995,545 | ||||||||
Cost of sales | 3,000,388 | 2,776,566 | ||||||||
GROSS PROFIT | 2,260,411 | 2,218,979 | ||||||||
Administrative expenses | 2,043,230 | 2,025,661 | ||||||||
217,181 | 193,318 | |||||||||
Other operating income | 478 | 213 | ||||||||
OPERATING PROFIT | 2 | 217,659 | 193,531 | |||||||
Interest receivable and similar income | 2,589 | 85 | ||||||||
220,248 | 193,616 | |||||||||
Interest payable and similar charges | 145,375 | 135,621 | ||||||||
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION | 74,873 | 57,995 | ||||||||
Tax on profit on ordinary activities | 3 | 105,336 | (34,029 | ) | ||||||
(LOSS)/PROFIT FOR THE FINANCIAL YEAR AFTER TAXATION | (30,463 | ) | 92,024 | |||||||
Retained profit brought forward | 753,576 | 661,552 | ||||||||
RETAINED PROFIT CARRIED FORWARD | £ | 723,113 | £ | 753,576 | ||||||
The notes form part of these financial statements
Page 5
McGurk Studios Limited
Balance Sheet 31st March 2006
31/3/06 | 31/3/05 | |||||||||||||
Notes | £ | £ | £ | £ | ||||||||||
FIXED ASSETS: | ||||||||||||||
Tangible assets | 4 | 1,408,740 | 1,468,997 | |||||||||||
CURRENT ASSETS: | ||||||||||||||
Stocks | 190,104 | 242,233 | ||||||||||||
Debtors | 5 | 1,717,707 | 1,713,470 | |||||||||||
Cash at bank and in hand | 101,978 | 974 | ||||||||||||
2,009,789 | 1,956,677 | |||||||||||||
CREDITORS: Amounts falling due within one year | 6 | 2,211,328 | 2,108,850 | |||||||||||
NET CURRENT LIABILITIES: | (201,539 | ) | (152,173 | ) | ||||||||||
TOTAL ASSETS LESS CURRENT LIABILITIES: | 1,207,201 | 1,316,824 | ||||||||||||
CREDITORS: Amounts falling due after more than one year | 7 | (156,146 | ) | (266,409 | ) | |||||||||
PROVISIONS FOR LIABILITIES: | 9 | (227,942 | ) | (196,839 | ) | |||||||||
£ | 823,113 | £ | 853,576 | |||||||||||
CAPITAL AND RESERVES: | ||||||||||||||
Called up share capital | 10 | 100,000 | 100,000 | |||||||||||
Profit and loss account | 723,113 | 753,576 | ||||||||||||
SHAREHOLDERS’ FUNDS: | £ | 823,113 | £ | 853,576 | ||||||||||
These financial statements have been prepared in accordance with the special provisions of Part VII of the Companies Act 1985 relating to small companies and with the Financial Reporting Standard for Smaller Entities (effective January 2005).
The financial statements were approved by the Board of Directors on 4th July 2006 and were signed on its behalf by:
P.E. McGurk – Director
The notes form part of these financial statements
Page 6
McGurk Studios Limited
Notes to the Financial Statements
for the year ended 31st March 2006
1. | ACCOUNTING POLICIES |
Accounting convention
The financial statements have been prepared under the historical cost convention and in accordance with the Financial Reporting Standard for Smaller Entities (effective January 2005).
Turnover
Turnover represents net invoiced sales of goods, excluding value added tax.
Tangible fixed assets
Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.
Plant and machinery etc | - 25% on reducing balance, | |
12.5% on reducing balance, 10% on reducing balance and 2% on cost |
Stocks
Stock and work in progress are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.
Cost includes all direct expenditure and an appropriate proportion of fixed and variable overheads.
Deferred tax
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.
Hire purchase and leasing commitments
Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet. Those held under hire purchase contracts are depreciated over their estimated useful lives. Those held under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the shorter.
The interest element of these obligations is charged to the profit and loss account over the relevant period. The capital element of the future payments is treated as a liability.
Pensions
The company operates a defined contribution pension scheme. Contributions payable for the year are charged in the profit and loss account.
2. | OPERATING PROFIT |
The operating profit is stated after charging:
31/3/06 | 31/3/05 | |||
£ | £ | |||
Depreciation - owned assets | 128,642 | 126,768 | ||
Depreciation - assets on hire purchase contracts | 42,202 | 42,258 | ||
Loss on disposal of fixed assets | 15,168 | — | ||
Pension costs | 32,349 | 27,466 | ||
Directors’ emoluments and other benefits etc | 241,255 | 181,911 | ||
Page 7
McGurk Studios Limited
Notes to the Financial Statements
for the year ended 31st March 2006
3. | TAXATION |
Analysis of the tax charge/(credit)
The tax charge/(credit) on the profit on ordinary activities for the year was as follows:
31/3/06 | 31/3/05 | ||||
£ | £ | ||||
Current tax: | |||||
UK corporation tax | 38,770 | — | |||
Taxation adjustment for prior years | 35,463 | (34,029 | ) | ||
Total current tax | 74,233 | (34,029 | ) | ||
Deferred taxation | 31,103 | — | |||
Tax on profit on ordinary activities | 105,336 | (34.029 | ) | ||
4. | TANGIBLE FIXED ASSETS |
Plant and machinery etc | |||
£ | |||
COST: | |||
At 1st April 2005 | 4,049,545 | ||
Additions | 150,755 | ||
Disposals | (58,984 | ) | |
At 31st March 2006 | 4,141,316 | ||
DEPRECIATION: | |||
At 1st April 2005 | 2,580,548 | ||
Charge for year | 170,844 | ||
Eliminated on disposals | (18,816 | ) | |
At 31st March 2006 | 2,732,576 | ||
NET BOOK VALUE: | |||
At 31st March 2006 | 1,408,740 | ||
At 31st March 2005 | 1,468,997 | ||
The net book value of tangible fixed assets includes £336,948 (2005 - £282,442) in respect of assets held under hire purchase contracts.
Page 8
McGurk Studios Limited
Notes to the Financial Statements
for the year ended 31st March 2006
5. | DEBTORS: AMOUNTS FALLING |
DUE WITHIN ONE YEAR
31/3/06 | 31/3/05 | |||
£ | £ | |||
Trade debtors | 1,157,236 | 1,199,418 | ||
Other debtors | 434,197 | 419,975 | ||
Prepayments | 126,274 | 94,077 | ||
1,717,707 | 1,713,470 | |||
6. | CREDITORS: AMOUNTS FALLING |
DUE WITHIN ONE YEAR
31/3/06 | 31/3/05 | |||
£ | £ | |||
Bank loans and overdrafts | 69,250 | 356,873 | ||
Hire purchase contracts | 138,270 | 125,692 | ||
Trade creditors | 783,676 | 637,831 | ||
Directors current accounts | 5,273 | 6,092 | ||
Other creditors | — | 706 | ||
Factoring account | 833,665 | 671,000 | ||
Social security & other taxes | 169,947 | 183,253 | ||
Taxation | 48,770 | 21,311 | ||
Accrued expenses | 162,477 | 106,092 | ||
2,211,328 | 2,108,850 | |||
7. | CREDITORS: AMOUNTS FALLING |
DUE AFTER MORE THAN ONE YEAR
31/3/06 | 31/3/05 | |||
£ | £ | |||
Bank loans | 45,017 | 101,313 | ||
Hire purchase contracts | 111,129 | 165,096 | ||
156,146 | 266,409 | |||
8. | SECURED DEBTS |
The following secured debts are included within creditors:
31/3/06 | 31/3/05 | |||
£ | £ | |||
Bank loan | 12,500 | 30,500 | ||
9. | PROVISIONS FOR LIABILITIES |
31/3/06 | 31/3/05 | |||
£ | £ | |||
Deferred tax | 227,942 | 196,839 | ||
Page 9
McGurk Studios Limited
Notes to the Financial Statements
for the year ended 31st March 2006
9. | PROVISIONS FOR LIABILITIES - continued |
Deferred tax | ||||
£ | ||||
Balance at 1st April 2005 | 196,839 | |||
Provision in year | 31,103 | |||
Balance at 31st March 2006 | 227,942 | |||
Deferred tax provision | ||||
31/3/06 | 31/3/05 | |||
£ | £ | |||
Accelerated capital allowances | 227,942 | 196,839 | ||
227,942 | 196,839 | |||
10. | CALLED UP SHARE CAPITAL |
Authorised, allotted, issued and fully paid:
Number: | Class: | Nominal | 31/3/06 | 31/3/05 | |||||||
value: | £ | £ | |||||||||
100,000 | Ordinary | £ | 1 | 100,000 | 100,000 | ||||||
11. | CONTROL |
During this and the previous period, the company was controlled by P. E. McGurk.
Page 10
McGurk Studios Limited
Notes to the Financial Statements
for the year ended 31st March 2006
12. | RELATED PARTY TRANSACTIONS |
During the period, the company entered into transactions with related parties as stated below:
Sales | £ | |||||||
Thames McGurk | 103,408 | |||||||
McGurk Labels | 90,596 | |||||||
Stephenson McGurk | 15,403 | |||||||
McGurk Group | 2,236 | |||||||
McGurk Properties | 1,784 | |||||||
McGurk Logistics | 379 | |||||||
Purchases | ||||||||
McGurk Labels | 6,467 | |||||||
McGurk Group | 59,791 | |||||||
McGurk Logistics | 62,850 | |||||||
McGurk Properties | 37,310 | |||||||
Thames McGurk | 2,597 |
At the balance sheet date the following balances were outstanding :
Sales Ledger | Purchase Ledger | Other Debtors | ||||
Thames McGurk | 61,523 | 1,035 | ||||
McGurk Group | 53,320 | 10,434 | ||||
McGurk Properties | 10,661 | |||||
Astutia | 16,390 | |||||
McGurk Logistics | 28,352 | |||||
McGurk Labels | 7,500 | |||||
Stephenson McGurk | 21,325 |
Page 11
McGurk Studios Limited
Trading and Profit and Loss Account
for the year ended 31st March 2006
31/3/06 | 31/3/05 | |||||||||
£ | £ | £ | £ | |||||||
Sales | 5,260,799 | 4,995,545 | ||||||||
Cost of sales: | ||||||||||
Purchases | 2,018,881 | 1,914,443 | ||||||||
Production repairs & renewals | 123,621 | 98,408 | ||||||||
Wages & contributions | 857,886 | 763,715 | ||||||||
3,000,388 | 2,776,566 | |||||||||
GROSS PROFIT | 2,260,411 | 2,218,979 | ||||||||
Other income: | ||||||||||
Admin charges received | 478 | 213 | ||||||||
Deposit account interest | 1,796 | 85 | ||||||||
Other interest received | 793 | — | ||||||||
3,067 | 298 | |||||||||
2,263,478 | 2,219,277 | |||||||||
Expenditure: | ||||||||||
Directors’ remuneration | 233,149 | 176,352 | ||||||||
Social security | 27,264 | 19,537 | ||||||||
Pension contributions | 32,349 | 27,466 | ||||||||
Wages & contributions | 665,620 | 525,643 | ||||||||
Telephone | 41,934 | 55,059 | ||||||||
Postage & stationery | 23,461 | 26,911 | ||||||||
Advertising | 3,374 | 36,771 | ||||||||
Motor & travelling expenses | 157,622 | 181,287 | ||||||||
Insurance | 33,277 | 26,465 | ||||||||
Other operating leases | 104,718 | 30,431 | ||||||||
Hire of equipment | 17,025 | 25,956 | ||||||||
Repairs & renewals | 75,979 | 141,844 | ||||||||
Sundry expenses | 37,647 | 53,695 | ||||||||
Accountancy | 8,500 | 16,500 | ||||||||
Legal & professional fees | 28,015 | 10,996 | ||||||||
Management charges | 67,000 | 379,397 | ||||||||
Medical scheme contributions | 24,269 | 13,278 | ||||||||
Bad debts | 177,471 | — | ||||||||
Rent & rates | 69,336 | 78,488 | ||||||||
Light & heat | 26,900 | 22,439 | ||||||||
Bank interest | 23,977 | 20,264 | ||||||||
Factoring charges | 79,702 | 84,301 | ||||||||
Hire purchase interest | 41,696 | 31,056 | ||||||||
Bank charges | 2,08 | 8,121 | ||||||||
Depreciation of tangible fixed assets | 170,844 | 169,025 | ||||||||
Loss on disposal of fixed assets | 15,168 | — | ||||||||
2,188,605 | 2,161,282 | |||||||||
NET PROFIT | £ | 74,873 | £ | 57,995 | ||||||
This page does not form part of the statutory financial statements
Page 12
McGurk Studios Limited
Summary of potential adjustments not reflected in the accounts on pages 5 to 12
Details | Profit Effect | ||
£ | |||
Additional depreciation charge | (32,509 | ) | |
Wages to capitalize re MAPS project | 43,022 | ||
Cut off error | (3,844 | ) | |
Rebate calculation error | 2,520 | ||
Obsolete stock adjustment | (1,409 | ) | |
Sales credit notes raised post year end | (11,470 | ) | |
Amcor rebate for February and March, 2006 | (40.803 | ) | |
Total profit effect | (44,493 | ) | |
Other items for consideration | |||
Details | |||
Related company balances (due to be cleared as part of sale process) | (52,242 | ) | |
VAT creditor potentially not repayable | 63.195 | ||
10,953 | |||
This page does not form part of the statutory financial statements
Page 13