Network Distributing Ltd - Limited company accounts 11.4

REGISTERED NUMBER: 01476436 (England and Wales)

Strategic Report, Report of the Director and

Audited Financial Statements for the Year Ended 31 March 2014

for

Network Distributing Ltd

Page

Company Information

1

Strategic Report

2

Report of the Director

3

Report of the Independent Auditors

5

Profit and Loss Account

6

Balance Sheet

7

Cash Flow Statement

8

Notes to the Cash Flow Statement

9

Notes to the Financial Statements

11

DIRECTOR:

T A Beddows

REGISTERED OFFICE:

F.A.O Omar Shidane

19-20 Berghem Mews

Blythe Road

London

W14 0HN

REGISTERED NUMBER:

01476436 (England and Wales)

AUDITORS:

Pure Audit Limited

5 Castle Street

Canterbury

Kent

CT1 2FG

The director presents his strategic report for the year ended 31 March 2014.

REVIEW OF BUSINESS

The Network catalogue of titles has continued to expand during the year. The company published more than 100 DVD titles for retail

resale during the year which remains its core business and generates the majority of its income. Demand for its products was weaker

than the previous year caused mainly by the current retail and economic conditions. Margins are up 16% on the previous year, the

previous year's margin down 16% on 2012 mostly due to the write off of advance royalties where sales performance is weaker than

forecast on certain titles. The company has invested in a new multimedia online platform to take advantage of the marketplace moving

towards mobile devices and on demand viewing and this is now operational with the focus on increasing the size of the catalogue

available for download and viewing.

Financial performance and key performance indicators

Turnover of £6,145,751 (2013: £6,523,059) decreased by 6% over the previous year. Company gross margin for the year was 39%,

which was 16% higher than the previous year. The increase in gross margin has been explained in the paragraph above. The company

operating profit before interest and tax is £706,311 (2013: loss of £657,725).

PRINCIPAL RISKS AND UNCERTAINTIES

Although the general outlook for DVD publishing shows continued decline, the business model that the company has adopted allows

them to continue to publish cost effectively with little risk. Additionally they have no shortage of product to release into the market

especially after the signing in November 2013 of a ten year contract extending the distribution rights of the main content library which

forms 70% of the company's turnover and which also gave the company non-exclusive digital distribution rights of the whole library as

well.

ON BEHALF OF THE BOARD:

T A Beddows - Director

16 December 2014

The director presents his report with the financial statements of the company for the year ended 31 March 2014.

PRINCIPAL ACTIVITY

The principal activity of the company in the year under review was that of a wholesaler of DVDs.

DIVIDENDS

Profit after tax of £367,614 (2013: loss of £850,467) is stated after preference dividends of £nil (2013:

£52,500).

DIRECTORS

T A Beddows has held office during the whole of the period from 1 April 2013 to the date of this report.

Other changes in directors holding office are as follows:

Miss C De Antoni - appointed 21 June 2013 - resigned 29 November 2013

Mrs C R Stent - resigned 21 June 2013

STATEMENT OF DIRECTOR'S RESPONSIBILITIES

The director is responsible for preparing the Report of the Director and the financial statements in accordance with applicable law and

regulations.

Company law requires the director to prepare financial statements for each financial year. Under that law the director has elected to

prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom

Accounting Standards and applicable law). Under company law the director must not approve the financial statements unless he is

satisfied that they 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 director is required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The director is 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 enable him to ensure that the financial

statements comply with the Companies Act 2006. He is 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 director is aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the

company's 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 company's auditors are aware of that information.

The director who held office at the date of approval of this directors' report confirm that, so far as he is aware, there is no relevant audit

information of which the company's auditors are unaware; and the director has taken all the steps that he ought to have taken as a director

to make himself aware of any relevant audit information and to establish that the company's auditors are aware of that information.

AUDITORS

Pursuant to Section 487 of the Companies Act 2006, the auditors will be deemed to be reappointed and Pure Audit Limited will therefore

continue in office.

BY ORDER OF THE BOARD:

T A Beddows - Director

16 December 2014

We have audited the financial statements of Network Distributing Ltd for the year ended 31 March 2014 on pages six to eighteen. 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 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 a

Report of the Auditors 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.

Respective responsibilities of director and auditors

As explained more fully in the Statement of Director's Responsibilities set out on page three, the director is 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 Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the FRC's website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion the financial statements:

-	give a true and fair view of the state of the company's affairs as at 31 March 2014 and of its profit for the year then ended;

-	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 matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic Report and the Report of the Director for the financial year for which the financial

statements are prepared is consistent with the financial statements.

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, or returns adequate for our audit have not been received from branches not visited by us; or

-	the financial statements are not in agreement with the accounting records and returns; or

-	certain disclosures of director's remuneration specified by law are not made; or

-	we have not received all the information and explanations we require for our audit.

Alan Davidson (Senior Statutory Auditor)

for and on behalf of Pure Audit Limited

5 Castle Street

Canterbury

Kent

CT1 2FG

17 December 2014

TURNOVER

6,145,751

6,523,059

Cost of sales

3,731,224

5,054,846

GROSS PROFIT

2,414,527

1,468,213

Distribution costs

269,543

285,519

Administrative expenses

1,471,031

1,840,419

1,740,574

2,125,938

673,953

(657,725

)

Other operating income

2

32,358

-

OPERATING PROFIT/(LOSS)

4

706,311

(657,725

)

Income from participating interests

(111,443

)

-

594,868

(657,725

)

Interest payable and similar charges

5

227,254

378,820

PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION

367,614

(1,036,545

)

Tax on profit/(loss) on ordinary activities

6

-

(186,078

)

PROFIT/(LOSS) FOR THE FINANCIAL YEAR

367,614

(850,467

)

CONTINUING OPERATIONS

None of the company's activities were acquired or discontinued during the current year or previous year.

TOTAL RECOGNISED GAINS AND LOSSES

The company has no recognised gains or losses other than the profit for the current year and the loss for the previous year.

FIXED ASSETS

Tangible assets

7

163,730

227,120

Investments

8

188,557

210,000

352,287

437,120

CURRENT ASSETS

Stocks

9

3,532,419

3,278,788

Debtors

10

5,880,961

5,072,522

Cash in hand

100

381

9,413,480

8,351,691

CREDITORS

Amounts falling due within one year

11

4,161,935

12,396,876

NET CURRENT ASSETS/(LIABILITIES)

5,251,545

(4,045,185

)

TOTAL ASSETS LESS CURRENT LIABILITIES

5,603,832

(3,608,065

)

CREDITORS

Amounts falling due after more than one year

12

1,350,000

-

NET ASSETS/(LIABILITIES)

4,253,832

(3,608,065

)

CAPITAL AND RESERVES

Called up share capital

16

410,001

410,000

Share premium

17

7,494,282

-

Profit and loss account

17

(3,650,451

)

(4,018,065

)

SHAREHOLDERS' FUNDS

22

4,253,832

(3,608,065

)

These financial statements were approved by the director on 16 December 2014 and were signed by:

T A Beddows - Director

Net cash (outflow)/inflow

from operating activities

1

(256,462

)

1,131,406

Returns on investments and

servicing of finance

2

(227,254

)

(326,320

)

Taxation

-

(8

)

Capital expenditure

and financial investment

2

(101,636

)

(283,330

)

(585,352

)

521,748

Financing

2

1,600,000

-

Increase in cash in the period

1,014,648

521,748

Reconciliation of net cash flow

to movement in net debt

3

Increase

in cash in the period

1,014,648

521,748

Cash inflow

from increase in debt

(1,600,000

)

-

Change in net debt resulting

from cash flows

(585,352

)

521,748

Movement in net debt in the period

(585,352

)

521,748

Net debt at 1 April

(1,788,479

)

(2,310,227

)

Net debt at 31 March

(2,373,831

)

(1,788,479

)

1.	RECONCILIATION OF OPERATING PROFIT/(LOSS) TO NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES

31.3.14

31.3.13

£

£

Operating profit/(loss)

706,311

(657,725

)

Depreciation charges

75,026

74,482

Increase in stocks

(253,631

)

(97,273

)

(Increase)/decrease in debtors

(808,439

)

1,044,277

Increase in creditors

24,271

767,645

Net cash (outflow)/inflow from operating activities

(256,462

)

1,131,406

2.	ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT

31.3.14

31.3.13

£

£

Returns on investments and servicing of finance

Interest paid

(227,254

)

(326,320

)

Net cash outflow for returns on investments and servicing of finance

(227,254

)

(326,320

)

Capital expenditure and financial investment

Purchase of tangible fixed assets

(11,636

)

(73,330

)

Purchase of fixed asset investments

(90,000

)

(210,000

)

Net cash outflow for capital expenditure and financial investment

(101,636

)

(283,330

)

Financing

New loans in year

1,600,000

-

Net cash inflow from financing

1,600,000

-

3.	ANALYSIS OF CHANGES IN NET DEBT

At

At 1.4.13

Cash flow

31.3.14

£

£

£

Net cash:

Cash at bank and in hand

381

(281

)

100

Bank overdraft

(1,088,860

)

1,014,929

(73,931

)

(1,088,479

)

1,014,648

(73,831

)

Debt:

Debts falling due

within one year

(700,000

)

(250,000

)

(950,000

)

Debts falling due

after one year

-

(1,350,000

)

(1,350,000

)

(700,000

)

(1,600,000

)

(2,300,000

)

Total

(1,788,479

)

(585,352

)

(2,373,831

)

4.	MAJOR NON-CASH TRANSACTIONS

On 29 November 2013, the company has issued 1 ordinary share to Virgin Management Ltd in return for settlement of loans

totalling £7,494,283 due to Virgin group companies.

1.	ACCOUNTING POLICIES

Basis of preparing the financial statements

The financial statements have been prepared in accordance with UK applicable accounting standards and under the historical

cost accounting rules.

Accounting convention

The financial statements have been prepared under the historical cost convention and are in accordance with applicable

accounting standards.

Turnover

Turnover represents the amounts (excluding value added tax) derived from the provision of goods and services to third party

customers. Turnover is recognised when goods are delivered to customers or the provision of services is complete.

Tangible fixed assets

Depreciation is provided to write off the cost less the estimated residual value of tangible fixed assets by equal instalments over

their estimated useful economic lives as follows:

Plant and machinery - 4 years

Fixtures, fittings, tools and equipment - 2 - 5 years

Website development - 5 years

Stocks

Stocks are stated at the lower of cost and net realisable value. The company elected to include in stocks costs directly incurred

in the production of DVD's which had previously been expensed. Costs are amortised against budgeted sales.

Taxation

The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences

between the treatment of certain items for taxation and accounting purposes.

Deferred tax is recognised, without discounting, in respect of timing differences between the treatment of certain items for

taxation and accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by

FRS 19. Where the realisation of potential deferred tax assets via the utilisation of brought forward tax losses cannot be foreseen

with reasonable certainty, an asset is not recognised.

Foreign currencies

Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets

and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the

gains or losses on translation are included in the profit and loss account.

Hire purchase and leasing commitments

Assets held under finance leases are capitalised and included in tangible fixed assets at fair value. Each asset is depreciated over

the shorter of the lease term or its useful life. The obligations related to finance leases, net of finance charges in respect of

future years, are included as appropriate under creditors within, or due after, one year. The interest element of the rental

obligation is allocated to accounting years during the lease term to reflect a constant rate of interest on the remaining balance of

the obligation for each accounting year. Rentals under operating leases are charged to the profit and loss account as incurred.

Pension

The company contributes to a defined contribution group personal pension plans on behalf of its employees. The pension cost

charge represents contributions payable by the company to the fund.

Classification of financial instruments issued by the company

Financial instruments issued by the Company are treated as equity (i.e. forming part of shareholders' funds) only to the extent

that they meet the following two conditions:

a) they include no contractual obligations upon the Company to deliver cash or other financial assets or to exchange financial

assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company; and

b) where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that

includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be

settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity

instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so

classified takes the legal form of the Company's own shares, the amounts presented in these financial statements for called up

share capital and share premium account exclude amounts in relation to those shares. Finance payments associated with

financial liabilities are dealt with as part of interest payable and similar charges. Finance payments associated with financial

instruments that are classified as part of shareholders' funds are dealt with as appropriations in the reconciliation of movements

in shareholders' funds.

Impairment

The company evaluates its fixed assets for financial impairment where events or circumstances indicate that the carrying amount

of such assets may not be fully recoverable. When such evaluations indicate that the carrying value of an asset exceeds its

recoverable value, an impairment in value is recorded.

Investments

Investments in subsidiary undertakings, associates and joint ventures are stated at cost less amounts written off.

2.	OTHER OPERATING INCOME

31.3.14

31.3.13

£

£

Other income

32,358

-

3.	STAFF COSTS

31.3.14

31.3.13

£

£

Wages and salaries

593,630

628,389

Social security costs

79,753

72,665

Other pension costs

16,272

14,839

689,655

715,893

The average monthly number of employees during the year was as follows:

31.3.14

31.3.13

Administration and management

6

6

Distribution, production and marketing

20

19

26

25

4.	OPERATING PROFIT/(LOSS)

The operating profit (2013 - operating loss) is stated after charging:

31.3.14

31.3.13

£

£

Other operating leases

185,848

93,455

Depreciation - owned assets

75,026

74,482

Auditors' remuneration

14,053

36,000

Foreign exchange differences

2,606

3,360

Directors' remuneration

153,000

198,400

5.

INTEREST PAYABLE AND SIMILAR CHARGES

31.3.14

31.3.13

£

£

Bank and other loan interest

227,254

326,320

Preference dividends

-

52,500

227,254

378,820

6.

TAXATION

Analysis of the tax credit

The tax credit on the profit on ordinary activities for the year was as follows:

31.3.14

31.3.13

£

£

Current tax:

UK corporation tax

-

(186,078

)

Tax on profit/(loss) on ordinary activities

-

(186,078

)

Factors affecting the tax credit

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained below:

31.3.14

31.3.13

£

£

Profit/(loss) on ordinary activities before tax

367,614

(1,036,545

)

Profit/(loss) on ordinary activities

multiplied by the standard rate of corporation tax

in the UK of 23% (2013 - 24%)

84,551

(248,771

)

Effects of:

Expenses not deductible for tax purposes

43,696

79,064

Income not taxable for tax purposes

25,633

-

Capital allowances in excess of depreciation

-

(16,371

)

Depreciation in excess of capital allowances

1,450

-

Utilisation of tax losses

(155,330

)

-

Current tax credit

-

(186,078

)

Factors that may affect future tax charges

Details of the company's total unrecognised deferred tax assets at the year end (and prior year end) are shown below. The

company has no recognised deferred tax assets or liabilities.

Unrecognised deferred tax

2014

2013

Capital allowances in excess of depreciation

£22,947

£45,662

Deferred tax asset arising from tax losses

£20,995

£nil

A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can

be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying

timing difference can be deducted.

A reduction in the rate from 23% to 21% (effective from 1 April 2014) was substantively enacted during the year. A rate of 21%

has been used within the deferred tax calculations within these financial statements.

7.	TANGIBLE FIXED ASSETS

Fixtures

Plant and

and

machinery

fittings

Totals

£

£

£

COST

At 1 April 2013

59,278

1,142,568

1,201,846

Additions

-

11,636

11,636

At 31 March 2014

59,278

1,154,204

1,213,482

DEPRECIATION

At 1 April 2013

59,278

915,448

974,726

Charge for year

-

75,026

75,026

At 31 March 2014

59,278

990,474

1,049,752

NET BOOK VALUE

At 31 March 2014

-

163,730

163,730

At 31 March 2013

-

227,120

227,120

8.	FIXED ASSET INVESTMENTS

Interest

in

associate

£

COST

At 1 April 2013

210,000

Additions

90,000

Share of profit/(loss)

(111,443

)

At 31 March 2014

188,557

NET BOOK VALUE

At 31 March 2014

188,557

At 31 March 2013

210,000

The company's investments at the balance sheet date in the share capital of companies include the following:

Associated company

Secret Country Films Limited

Nature of business: Film production

%

Class of shares:

holding

Ordinary

44.50

31.3.14

31.3.13

£

£

Aggregate capital and reserves

47,707

(1,859

)

Loss for the year

(250,434

)

(1,899

)

This investment was established and acquired for £300,000 (2013: £210,000) for the purposes of the Utopia film production to

which the company has all UK distribution rights.

9.

STOCKS

31.3.14

31.3.13

£

£

Consumables

33,382

22,241

Product development

2,824,645

2,696,651

Finished goods

674,392

559,896

3,532,419

3,278,788

10.

DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

31.3.14

31.3.13

£

£

Trade debtors

1,396,123

1,289,143

Amounts owed by group undertakings

-

71,570

Other debtors

201,583

169,225

Prepayments and accrued income

4,283,255

3,542,584

5,880,961

5,072,522