Registered number:
01191228
MOVING PICTURE COMPANY LIMITED (THE)
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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MOVING PICTURE COMPANY LIMITED (THE)
CONTENTS
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Directors' responsibilities statement
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Independent auditor's report
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Statement of changes in equity
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Notes to the financial statements
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MOVING PICTURE COMPANY LIMITED (THE)
COMPANY INFORMATION
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Chartered Accountants and Statutory Auditor
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MOVING PICTURE COMPANY LIMITED (THE)
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
The directors present their strategic report of The Moving Picture Company Limited (“the company”) for the year ended 31 December 2019.
Introduction
The directors, in preparing the strategic report, have complied with section 414C of the Companies Act 2006.
The principal activity of the company is the provision of post production and digital visual effects services for the advertising, television and film industries.
The company produces digital visual effects and computer animation for the feature film, advertising, music, and television industries. The company also provides such services as film and tape duplication, and colour grading.
Results and review of the business
The Moving Picture Company Limited is one of the leading visual effects and production company in the world. Implicit in this is the production of creative output to the highest calibre, of a class that not just follows world standard, but which drives expectations and sets new global benchmarks.
The company forms part of the Production Services division, of Technicolor S A, which is one of the Group’s reportable operating segments.
The directors consider the company's trading results and financial position to be satisfactory. The directors do not foresee that there will be any change in the company's activities for the foreseeable future and as such the company has adopted the going concern basis for its financial statements.
The results of the company show a pre-tax loss of £4,225,000 (2018: profit of £8,107,000) and revenues of £142,280,000 (2018: £133,774,000). Revenues have increased by 6% on prior year. The company recognises performance is contingent upon maintaining good rapport with clients. To this end the company is committed to developing and building strong, long term client relationships and producing creative output of the highest calibre.
Gross profit decreased by 138%, whilst the gross profit margin decreased to (3.2)% (2018: 9.0%).
We regularly review revenue, cost of sales, administrative expenses and operating profits as these are good indicators of relative business performance. Cost of sales primarily comprises salaries, the cost of freelance contractors, third party costs and depreciation of plant and machinery. Administrative expenses mainly comprise administrative salaries, occupancy costs and other overheads.
A key non-financial measure gauging the overall performance of the company is through entering work for judging by industry subject matter experts. In relation to 2019, the company was nominated for several awards, a total of 92 nominations, with 52 of those winning an award. Some of the wins include VES for John Lewis 'The Boy and The Piano' – VFX and Volkswagen 'Born Confident' - Animated Character. MPC won the CICLOPE VFX Company of The Year for the third year running, as well as dominating the Visual Effects category and receiving the top award in the Colour Grading category.
The company also won LIA awards in the Visual Effects and CGI Animation categories for John Lewis ‘The Boy and The Piano’ received the Gold award in both the Visual Effects and CGI Animation categories, and Hennessy ‘The Seven Worlds’ received the Silver award in the CGI Animation category, and was a finalist in the Visual Effects category.
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MOVING PICTURE COMPANY LIMITED (THE)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Principal risks and uncertainties facing the company
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Operating within a technology-driven industry, the company must keep up to date with any such advances and keep abreast of developments within the media industry so as to meet changing client needs. The company makes a significant investment in researching and developing new production techniques and acquiring the infrastructure to support these activities.
Our employees are our most important asset: staff retention and recruitment are crucial to our continued success. The company remains focused on providing a stimulating and safe environment for all its employees and offering both competitive remuneration and a rewarding career path in order to safeguard this asset.
As the visual effects industry is a relatively small global industry, the company is affected by international issues including foreign currency fluctuations and tax legislation changes. Remaining up to date with such changes is imperative. While competition remains high, projects need to be closely assessed against constrained margins.
Critically, creative output must remain of the highest standard.
Credit risk
All companies who wish to trade on credit terms are subject to credit verification procedures. Receivable balances are monitored on an ongoing basis and provision is made for doubtful debts where necessary.
Liquidity risk
The Group manages its cash and borrowing requirements centrally to maximise interest income and minimise interest expense, whilst ensuring that the Group has sufficient liquid resources to meet the operating needs of its business.
Foreign currency risk
The Group's principal foreign currency exposures arise from trading operations in overseas companies. Group policy permits but does not demand that these exposures may be hedged in order to fix the cost in sterling. This hedging activity involves the use of foreign exchange forward contracts.
Interest rate risk
The Group is exposed to fair value interest rate risk on its fixed rate borrowings and cash flow interest rate risk on floating rate deposits, bank overdrafts and loans. The Group uses interest rate derivatives to manage the mix of fixed and variable rate debt so as to reduce its exposure to changes in interest rates. There is no local impact in the company's accounts as a result of this.
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MOVING PICTURE COMPANY LIMITED (THE)
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Statement by the directors on performance of their statutory duties in accordance with s.172 (1) Companies Act 2006
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The Directors of The Moving Picture Company Limited must act in accordance with a set of general duties. These duties are detailed in the Companies Act 2006 and include in Section 172(1) the requirement that a director must act in the way they consider, in good faith, would most likely promote the success of the company for the benefit of its stakeholders. In doing so, the directors must have regard (amongst other matters) to:
• the likely consequences of any decision in the long term;
• the interests of the company's employees;
• the need to foster the company's business relationships with suppliers, customers and others;
• the impact of the company's operations on the community and the environment;
• the desirability of the company maintaining a reputation for high standards of business conduct; and
• the need to act fairly as between members of the company.
The Board fully understands its duty under section 172(1) of the Companies Act 2006 to ensure they promote the success of the company for the benefit of its members. The Board is aware of all stakeholder interests, and as such takes a long-term view in making key decisions, and when such decisions are taken, the board acts in the interests of the stakeholders and ensures all stakeholders are treated fairly.
Decisions made by the company’s directors are in line with Technicolor SA group’s strategic priorities and Technicolor SA group’s code of conduct. The key decisions made at the company level include approving the annual financial statements and dividend distribution during the board meetings.
Our employees
The company is committed to creating ground-breaking visual effects, and the success of our employees is an important part of our vision. We want to attract people that are visionary and want to be part of a team that imagine, invent and amaze.
We strive to make every employee feel valued and respected for who they are and the unique contributions they make. The company values the involvement of its employees through group communications, regular leadership announcements of strategy and performance, employee surveys and Town Hall sessions which are run across the Group.
Our partners and customers
The company upholds the highest standards in our relationship with customers, suppliers, and stakeholders. Our Code of Ethics governs our business decisions and actions and displays the fundamental values we practice in our day-to-day activities. A relationship of service and trust with our customers is vital to our success as a company. We must provide quality products and services to our customers, in a continuing process. Further, we must accurately represent our products and services in all our marketing, advertising, and sales contacts.
Future developments
The directors expect the general level and focus of activity of the company to remain consistent with 2019 in the forthcoming year.
This report was approved by the board
and signed on its behalf.
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MOVING PICTURE COMPANY LIMITED (THE)
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
The directors present their report and the financial statements for the year ended 31 December 2019.
The loss for the year, after taxation, amounted to £
4,225
,000
(2018 -
profit
£
6,789,000
).
No dividends were paid during the year and the directors do not recommend the payment of a dividend for the year (2018: Nil).
The directors who served during the year were:
Matters covered in the strategic report
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The information that fulfils the Companies Act requirements of the business review is included within the strategic report. This includes a review of the development of the business, financial risk management and likely future developments within the business.
Disabled employees
Applications for employment by disabled persons are always fully considered, bearing in mind the respective aptitudes and abilities of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the company continues and appropriate training is arranged. It is the policy of the company that the training, career development and promotion of a disabled person, as far as possible, be identical to that of the person who does not suffer from a disability.
Consultation with employees has continued at all levels, with the aim of ensuring that their views are taken into account when decisions are made that are likely to affect their interests and that all employees are aware of the financial and economic performance of the company.
Disclosure of information to auditor
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Each of the persons who are
directors at the time when this directors' report is approved has confirmed that:
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so far as the director is aware, there is no relevant audit information of which the company's auditor is unaware, and
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the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the company's auditor is aware of that information.
The confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Reappointment of auditor
The auditor, Constantin, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
Approval of reduced disclosure
The company, as a qualifying entity, has taken advantage of the disclosure exemptions in FRS 102 paragraph 1.12.
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MOVING PICTURE COMPANY LIMITED (THE)
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Going concern
The financial statements have been prepared on the going concern basis of accounting. The company currently meets its day to day working capital requirements from positive cash flow which is forecast to continue and from intercompany balances receivable from Technicolor S A which are repayable on demand. In assessing whether the going concern basis is appropriate, the directors take into account all available information about the future, which is at least, but is not limited to, 12 months from the date of signing these financial statements. At the date of the approval of these financial statements the directors believe that the company will continue to operate successfully for the foreseeable future and be able to meet its liabilities as and when they fall due.
Post balance sheet events
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The company along with the Group is closely monitoring the evolution of the COVID-19 pandemic, and due to the unprecedent nature of COVID-19 crisis and the uncertainty of its consequences, this is not yet possible for the company to disclose any financial impact. Restrictions imposed to prevent the spread of the virus currently limit our operations in several markets including the United Kingdom.
COVID-19 has impacted almost all businesses around the world. The effect on the company has been significant even if the company has been able to add the technical capacity necessary to support secure remote working conditions wherever possible for a large percentage of employees.
Intangible assets of £2.4m relating to applicable software costs held on the balance sheet as asset under construction was written down on the 30 June 2020, as the related projects will now not be completed.
Exceptional discretionary bonus accruals of £1.5m linked to the company performance of 2019 and which was included in the financial statements for the year ended 31 December 2019, was subsequently released during Q1 2020. Management concluded and decided not to pay this bonus in 2020 as the company performance was adversely impacted, compounded by the COVID-19 crisis.
The company purchased on 10 July 2020 the whole issued capital of The Mill (Facility) Limited.
This report was approved by the board and signed on its behalf.
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MOVING PICTURE COMPANY LIMITED (THE)
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
The directors are responsible for preparing the annual report and the audited
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 Accounting Standards and applicable law (United Kingdom Generally Accepted Accounting Practice) including FRS102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they 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:
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select suitable accounting policies for the company's financial statements and then apply them consistently;
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make judgements and accounting estimates that are reasonable and prudent;
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state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
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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 adequate accounting records that are sufficient to show and explain the company's transactions and 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 2006. 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.
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MOVING PICTURE COMPANY LIMITED (THE)
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MOVING PICTURE COMPANY LIMITED (THE)
FOR THE YEAR ENDED 31 DECEMBER 2019
In our opinion the financial statements of The Moving Picture Company Limited (the 'company'):
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give a true and fair view of the state of the company's affairs as at 31 December 2019 and of its loss for the year then ended;
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have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
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have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
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the profit and loss account;
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the balance sheet;
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the statement of changes in equity; and
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the related notes 1 to 24.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report.
We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
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We are required by ISAs (UK) to report in respect of the following matters where:
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the directors
' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
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the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
We have nothing to report in respect of these matters.
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MOVING PICTURE COMPANY LIMITED (THE)
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MOVING PICTURE COMPANY LIMITED (THE) (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement on page 6, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
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MOVING PICTURE COMPANY LIMITED (THE)
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MOVING PICTURE COMPANY LIMITED (THE) (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2019
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
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the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
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the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
Under the Companies Act 2006 we are required to report in respect of the following matters if, in our opinion:
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adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
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the financial statements are not in agreement with the accounting records and returns; or
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certain disclosures of directors’ remuneration specified by law are not made; or
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we have not received all the information and explanations we require for our audit.
We have nothing to report in respect of these matters.
Use of our report
This report is made solely to the company's 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 company's members those matters we are required to state to them in an auditor's 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 audit work, for this report, or for the opinions we have formed.
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Peter Smith FCA
(Senior Statutory Auditor)
for and on behalf of
Constantin
Chartered Accountants and Statutory Auditor
25 Hosier Lane
London
EC1A 9LQ
Date:
7 January 2021
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MOVING PICTURE COMPANY LIMITED (THE)
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2019
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Operating (loss)/profit before exceptional items
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(Loss)/profit after exceptional items
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Interest payable and similar expenses
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(Loss)/profit before taxation
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(Loss)/profit for the financial year
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There are no other items of Comprehensive Income for either this year or the prior year other than the (loss)/profit for the year. Accordingly, no Statement of Other Comprehensive Income has been presented.
All items are related to continuing operations.
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The notes on pages 14 to 32 form part of these financial statements.
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REGISTERED NUMBER:
01191228
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MOVING PICTURE COMPANY LIMITED (THE)
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BALANCE SHEET
AS AT
31 DECEMBER 2019
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Creditors: amounts falling due after more than one year
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Provisions for liabilities
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The financial statements of Moving Picture Company Ltd (The) were approved and authorised for issue by the board and were signed on its behalf by
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The notes on pages 14 to 32 form part of these financial statements.
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MOVING PICTURE COMPANY LIMITED (THE)
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED
31 DECEMBER 2019
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Comprehensive income for the year
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Total comprehensive income for the year
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Comprehensive income for the year
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Total comprehensive income for the year
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The notes on pages 14 to 32 form part of these financial statements.
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MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1.
Accounting policies
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Basis of preparation of financial statements
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Moving Picture Company Ltd (The) principal activity is the provision of post production and digital visual effects services for the advertising, television and film industries.
The company is itself a subsidiary company and is exempt from the requirement to prepare group financial statements by virtue of section 400 of the Companies Act 2006. These financial statements therefore present information about the company as an individual undertaking and not about its group.
The company is incorporated and domiciled in England. Its principal place of business is 127 Wardour Street, London, W1F 0NL.
The financial statements are presented in Sterling (£). Monetary amounts in these financial statements have been rounded to the nearest £000.
The financial statements have been prepared under the historical cost convention and in accordance with Financial Reporting Standard 102 ("FRS 102"), the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland and the Companies Act 2006. These accounting standards have been consistently applied throughout the current and preceding year.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions or estimates are significant to the financial statements, are disclosed in note 2.
The company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permitted by the FRS 102:
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exemption from the requirement to present a statement of cash flows; and
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exemption from the requirement to disclose key management personnel compensation.
The company has also taken advantage of the following disclosure exemption in preparing these financial statements as permitted by FRS 102 on the basis that equivalent information is included in the consolidated financial statements may be obtained from 8-10 Rue du Renard, Paris 75004, France.
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exemption from certain disclosures relating to financial instruments required by Section 11.
The company has taken advantage of the exemption contained in FRS 102 section 33 "Related Party Disclosures" from disclosing transactions with entities which are wholly owned part of the Group.
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MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1.
Accounting policies (continued)
The company has net current assets of £83,000 as at 31 December 2019 and made a loss for the financial year then ended of £4,225,000.
The company currently meets its day-to-day working capital requirements from positive cash flow which is forecast to continue and from intercompany balances receivable from Technicolor S A which are repayable on demand.
In assessing whether the going concern basis is appropriate, the directors take into account all available information about the future, which is at least, but is not limited to, twelve months from the date of signing these financial statements.
The financial statements have been prepared on the going concern basis, which the directors believe to be appropriate.
The directors continue to monitor the company's funding strategy and have prepared forecasts which underpin the going concern basis for the company.
On the basis of these forecasts, Technicolor S A has confirmed to the directors its intention to keep providing the necessary support for at least the next twelve months from the date of approval of these financial statements to enable the company to continue to settle its liabilities as they fall due.
At the date of approval of these financial statements the directors believe that the company will continue to operate successfully for the foreseeable future and be able to meet its liabilities as and when they fall due.
The directors have assessed the impact of Covid-19 on the business. This included best estimates to assess the impact thereof on the company's ability to collect receivables and pay liabilities, generate future revenue, the impact of potential decline in contracts and access and restrictions to financing. In conclusion the directors expect to be able to continue the business without any major impact to operations, to the number of active employees and to the value of assets & liabilities.
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 as the fair value of the
consideration received or receivable, excluding value added tax.
Post production and digital visual effects services
Revenue is measured at fair value being contract price net of discounts and value-added tax and is
recognised at the following points:
∙
Where facilities are being provided, revenue represents the value of the service which has
been delivered;
∙
Where a production contract exists, revenue is recognised when contracts are completed
during the year;
∙
Where a long-term contract exists, revenue represents the value of contracts work done based
on a cost completion method (see note 1.9).
The whole of the revenue is attributable to operating as a provider of digital visual effects for the
television and film industries mainly arising in the United Kingdom.
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MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1.
Accounting policies (continued)
Intangible assets are initially recognised at cost. After recognition, under the cost model, intangible assets are measured at cost less any accumulated amortisation and any accumulated impairment losses.
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
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Tangible fixed assets and depreciation
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Tangible fixed assets are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
At each reporting date the company assesses whether there is any indication of impairment. If such an indication exists, the recoverable amount of the asset is determined as the higher of its fair value less costs to sell and its value in use. An impairment loss is recognised where the carrying value exceeds the recoverable amount.
The company adds to the carrying amount of an item of fixed assets the cost of replacing part of such an item when that cost is incurred, if the replacement part is expected to provide incremental future benefits to the company. The carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to profit or loss during the period in which they are incurred.
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method. Assets under construction are not depreciated as they are not yet in use.
Depreciation is provided on the following bases:
Leasehold improvements - 10% - 20%
Plant and machinery - 20% - 33%
Fixtures and fittings - 20% - 33%
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within administrative expenses in the profit and loss account.
Rentals paid under operating leases are charged to the profit or loss on a straight-line basis over the period of the lease.
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MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1.
Accounting policies (continued)
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Impairment of non-financial assets
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At each balance sheet date non-financial assets not carried at fair value are assessed to determine whether there is an indication that the asset may be impaired. If there is such an indication the recoverable amount of the asset is compared to the carrying amount of the asset.
The recoverable amount of the asset is the higher of the fair value less costs to sell and value in use. Value in use is defined as the present value of the future cash flows before interest and tax obtainable as a result of the assets' continued use. These cash flows are discounted using the pre-tax discount rate that represents the current market risk-free rate and risks inherent in the asset.
If the recoverable amount of the asset is estimated to be lower than the carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognised in the profit and loss account.
If an impairment loss is subsequently reversed, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the revised carrying amount does not exceed the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised in prior periods. A reversal of an impairment loss is recognised in the profit and loss account.
Investments in subsidiaries held as fixed assets are shown at cost less provision for impairment.
Turnover on long-term contracts is recognised according to the stage reached in the contract with reference to the proportion of total costs incurred. A provision is made for any losses as soon as they are foreseen. The amount by which turnover exceeds invoiced work is shown under debtors as accrued income. The amount by which invoiced work exceeds turnover is shown under creditors as deferred income. The costs on long-term contracts are taken to the profit and loss account as they are incurred.
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Leased assets: the company as lessee
|
Assets obtained under hire purchase contracts and finance leases are capitalised as tangible fixed assets. Assets acquired by finance lease are depreciated over the shorter of the lease term and their useful lives. Assets acquired by hire purchase are depreciated over their useful lives. Finance leases are those where substantially all of the benefits and risks of ownership are assumed by the company. Obligations under such agreements are included in creditors net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the profit and loss account so as to produce a constant periodic rate of charge on the net obligation outstanding in each period.
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Financial assets and liabilities
|
All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value (which is normally the transaction price excluding transaction costs(, unless arrangement constitutes a financing transaction. If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.
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MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1.
Accounting policies (continued)
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Financial assets and liabilities (continued)
|
Financial assets and liabilities are only offset in the balance sheet when, and only when there exists a legally enforceable right to set off the recognised amounts and the company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Financial assets are derecognised when and only when a) the contractual rights to the cash flows from the financial asset expire or are settled, b) the company transfers to another party substantially all of the risks and rewards of ownership of the financial asset, or c) the company, despite having retained some, but not all, significant risks and rewards of ownership, has transferred control of the asset to another party.
Financial liabilities are recognised only when the obligation specified in the contract is discharged, cancelled or expires.
The Group uses forward foreign exchange contracts to mitigate exchange rate exposure. All forward exchange contracts are contracted by the parent company Technicolor SA for the benefit of several companies within the Group including The Moving Picture Company Limited. The company records accounting entries which mirror the effects of the transactions in its financial statements in accordance with FRS 102 and the Group’s accounting policies which are to record the monetary effects of all such transactions in the profit and loss account to reflect the gain/loss on hedging contracts in the period.
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Foreign currency translation
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Functional and presentation currency
The company's functional and presentational currency is Sterling (£).
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
All foreign exchange gains and losses are presented in the profit and loss account within administrative expenses.
|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1.
Accounting policies (continued)
Defined contribution pension plan
The company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate entity. Once the contributions have been paid the company has no further payments obligations.
The contributions are recognised as an expense in the profit and loss account as they become payable in accordance with the rule of the scheme. Amounts not paid are shown in accruals as a liability in the balance sheet. The assets of the plan are held separately from the company in independently administered funds.
Finance income (net) is recognised in the profit and loss account using the effective interest method.
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Provision for liabilities
|
Provisions are made where an event has taken place that gives the company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to the profit and loss account in the year that the company becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in the balance sheet.
Exceptional items are transactions that fall within the ordinary activities of the company but are presented separately due to their size or incidence.
|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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Current and deferred taxation
|
The tax expense for the year comprises current and deferred tax. Tax is recognised in the profit and loss account, except that a change attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the company operates and generates income.
Deferred balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
∙
The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙
Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
Deferred tax balances are not recognised in respect of permanent differences. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
The company and its fellow group undertakings are able to relieve their tax losses by surrendering them to other group companies within the UK where capacity to utilise those losses exists. There was an agreement between members of this tax group that losses surrendered in relation to periods of account up to 31 December 2016 would be paid for by the recipient company at 100% of the tax value. For tax losses relating to subsequent periods, this policy has ended and losses will not be paid for.
For tax losses relating to periods up to 31 December 2016, where there is reasonable certainty that taxable losses can be relieved, the group relief receivable or payable has been included in the taxation charge or credit for the period and the corresponding intercompany receivable or payable is recognised in the statement of financial position/balance sheet.
The company is entitled to claim a research and development expenditure credit ("RDEC") in respect of research and development activities carried out by its employees during the period. The RDEC is claimed as a government grant and reported within other operating income in the profit and loss account.
|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
Critical judgements in applying accounting policies and key sources of estimation uncertainty
|
Recognition of long-term contracts
FRS 102 accounting requires management judgement to determine the appropriateness of calculating the revenue and profit to be recognised. This includes estimating the total expected costs to complete each contract, the future profitability of the contract and also the percentage of completion at the balance sheet date. These judgements directly influence revenue and profit that can be recognised in relation to such contracts. Material changes in these estimates could affect the overall amounts recognised on individual contracts.
Impairment of investments
The company considers whether investments are impaired. Where an indication of impairment is identified the estimation of recoverable value requires estimation of the recoverable value of the cash generating units (CGUs). This requires estimation of the future cash flows from the CGUs and also selection of appropriate discount rates in order to calculate the net present value of those cash flows.
|
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|
An analysis of turnover by class of business is as follows:
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Post production and digital visual effects services
|
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Analysis of turnover by country of destination:
|
Turnover is stated after trade discounts, other sales taxes and net of VAT.
|
|
Research and Development expenditure
|
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MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
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|
The operating profit is stated after charging/(crediting):
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Operating lease rentals:
- plant and machinery
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Depreciation of tangible fixed assets
|
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Amortisation of intangible assets
|
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|
Research and development grant
|
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|
Fees payable to the company's auditor for the audit of the company's annual financial statements
|
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Restructuring provision (note 18)
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|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
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|
Staff costs, including directors' remuneration, were as follows:
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Cost of defined contribution scheme
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The average monthly number of employees, including the directors, during the year was as follows:
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Company contribution to defined contribution pension schemes
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During the year retirement benefits were accruing to 1 director
(2018 :
1
)
in respect of defined contribution pension schemes.
|
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The highest paid director received remuneration of £
337,000
(2018 - £
362,000
)
.
|
|
The value of the company's contributions paid to a defined contribution pension scheme in respect of the highest paid director amounted to £
NIL
(2018 - £
NIL
)
.
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Remaining directors’ emoluments for the year ended 31 December 2019 have been paid and borne by other group companies as part of group arrangements. It is impracticable to have these costs split and recharged to the company.
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MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
Interest receivable from group companies
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Finance leases and hire purchase contracts
|
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Adjustments in respect of prior periods
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Origination and reversal of timing differences
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Adjustments in respect of prior periods
|
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Impairment of deferred tax asset
|
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|
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|
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|
Total tax charge for the year
|
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|
|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
10.
Taxation (continued)
|
Factors affecting tax charge for the year
|
|
The tax assessed for the year is higher than
(2018 -lower than)
the standard rate of corporation tax in the UK of
19.00
%
(2018 -
19.00
%)
. The differences are explained below:
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(Loss)/profit before taxation
|
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|
(Loss)/profit multiplied by standard rate of corporation tax in the UK of 19.00% (2018: 19%)
|
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Disallowable expenses and non-taxable income
|
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|
Ineligible depreciation and amortisation
|
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Difference on tax rates between corporation tax and deferred tax
|
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Group relief, not paid for
|
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|
Adjustments to tax charge in respect of prior periods
|
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Impairment of deferred tax asset
|
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|
Total tax charge for the year
|
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|
Factors that may affect future tax charges
|
The deferred tax asset at 31 December 2019 remains fully impaired (at 31 December 2018: fully impaired) on the basis that profit forecasts for the company indicate that the deferred tax asset, which relates entirely to carried forward losses, will not be realised in the foreseeable future.
A reduction in the UK corporation tax rate to 17%, effective from 1 April 2020, was substantively enacted as part of the Finance (No. 2) Act 2016 on 6 September 2016. Deferred taxes at the balance sheet date have been measured using these enacted tax rates based on when the timing difference is expected to reverse and reflected in these financial statements.
In the Spring Budget 2020, the Government announced that from 1 April 2020 the corporation tax rate would remain at 19% (rather than reducing to 17%, as previously enacted). This new law was substantively enacted on 17 March 2020.
As the proposal to keep the rate at 19% had not been substantively enacted at the balance sheet date, its effects are not included in these financial statements.
The 17% rate has been used to calculate the deferred tax balance at 31 December 2019, as it is unlikely to be realised before 2021.
|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
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Transfer between asset classes
|
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|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
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|
Assets under construction
|
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Transfers between classes
|
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Charge for the year on owned assets
|
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Charge for the year on financed assets
|
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|
The net book value of assets held under finance leases or hire purchase contracts, included above, are as follows:
|
|
|
|
|
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|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
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|
At 1 January 2019 and at 31 December 2019
|
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|
The following was a subsidiary undertaking of the company:
|
|
|
|
|
|
|
MPC (Shanghai) Digital Technology Co. Ltd
|
Digital imaging & multimedia technology and services
|
|
|
|
The company is in incorporated in China and its registered office of MPC (Shanghai) Digital Technology Co. Ltd is 1/F, Building 4, No. 727 Dingxi Road, Changning District, Shanghai, China.
|
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|
Debtors: amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
Amounts owed by group undertakings
|
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|
Prepayments and accrued income
|
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|
|
|
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|
Included above are financial instruments held at amortized cost amounting to £42,222,000 (2018: £49,736,000).
|
|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash is held by Technicolor under a consolidated cash pooling agreement. This value bears interest of 1 month LIBOR plus 1.10% (2018: 1.1%) and is recorded under amounts owed by group undertakings (see note 14) and not shown under cash. As at 31 December 2019, this cash totalled an amount of £297,000
(2018: £34,330,000).
|
|
Creditors: amounts falling due within one year
|
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|
|
Amounts owed to group undertakings
|
|
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|
|
|
Taxation and social security
|
|
|
|
Obligations under finance lease and hire purchase contracts
|
|
|
|
|
|
|
|
Accruals and deferred income
|
|
|
|
|
|
|
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|
The company, together with certain other group companies, has entered into a cash pooling arrangement with Barclays Bank PLC. Funds are held with a central treasury account where Barclays Bank PLC has the right to apply positive cash balances of the company against indebtedness or liabilities of other companies named in the agreement. Treasury funds are reported as an intercompany debtor/creditor in the financial statements. This facility is guaranteed by Technicolor S A.
Included above are financial instruments held at amortized cost amounting to £27,791,000 (2018: £35,391,000).
|
|
Creditors: amounts falling due after more than one year
|
|
|
|
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|
Net obligations under finance leases
|
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|
|
|
|
|
|
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|
|
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|
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|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
|
|
Redundancy costs relating to the company's strategic plan to reduce headcount in line with expected future demands and capacity requirements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credited to profit or loss
|
|
|
|
Impairment of deferred tax asset
|
|
|
|
|
|
|
|
Net deferred tax assets is made up as follows
|
|
|
|
|
|
|
|
|
|
Accelerated capital allowance
|
|
|
|
|
|
|
|
Impairment of deferred tax asset
|
|
|
|
|
|
|
|
Net deferred tax assets expected to reverse in the following year
|
|
|
|
|
|
|
|
|
|
Accelerated capital allowances
|
|
|
|
|
|
|
|
Impairment of deferred tax asset
|
|
|
|
|
|
|
|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
|
Shares classified as equity
Allotted, called up and fully paid
|
|
|
|
|
|
|
|
|
|
200
ordinary
shares of £
1
each
|
|
|
|
All shares rank pari-passu in all respects.
|
The company offers eligible employees membership of the Technicolor UK defined contribution pension scheme. The total cost of this scheme to the company in the year ended 31 December 2019 was £1,747,000 (2018: £1,311,000). An amount of £145,000 (2018: £121,000) was included in accruals at the end of the year in respect of unpaid contribution.
|
Commitments under operating leases
|
|
At 31 December 2019 the company had future minimum lease payments under non-cancellable operating leases as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immediate and ultimate parent undertaking
|
The immediate parent undertaking is
Tech 7 SAS
, a company registered in France. The company's ultimate controlling parent and parent undertaking at the balance sheet date is
Technicolor S A
, a company registered in France.
The company's results are consolidated within the Technicolor S A group financial statements, which can be obtained from the Registered Office at 8-10 Rue du Renard, 75004 Paris, France. The company is not consolidated within any other group.
|
MOVING PICTURE COMPANY LIMITED (THE)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
|
Post balance sheet events
|
The company along with the Group is closely monitoring the evolution of the COVID-19 pandemic, and due to the unprecedent nature of COVID-19 crisis and the uncertainty of its consequences, this is not yet possible for the company to disclose any financial impact. Restrictions imposed to prevent the spread of the virus currently limit our operations in several markets including the United Kingdom.
COVID-19 has impacted almost all businesses around the world. The effect on the company has been significant even if the company has been able to add the technical capacity necessary to support secure remote working conditions wherever possible for a large percentage of employees.
Intangible assets of £2.4m relating to applicable software costs held on the balance sheet as asset under construction was written down on the 30 June 2020, as the related projects will now not be completed.
Exceptional discretionary bonus accruals of £1.5m linked to the company performance of 2019 and which was included in the financial statements for the year ended 31 December 2019, was subsequently released during Q1 2020. Management concluded and decided not to pay this bonus in 2020 as the company performance was adversely impacted, compounded by the COVID-19 crisis.
The company purchased on 10 July 2020 the whole issued capital of The Mill (Facility) Limited.
|