Notes to the Accounts (3-7)

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3 Activity analysis

	2004 £m	Profit before interest and tax 2003 £m	2004 £m	Turnover 2003 £m	2004 £m	Net assets Restated 2003 £m⁽³⁾
3.1 Class of business
Broadcast Systems	3.9	3.9	86.9	81.9	38.2	35.9
Photographic	12.3	13.9	68.7	61.5	26.3
Broadcast Services	1.6	-	29.8	27.0	12.3
	17.8	17.8	185.4	170.4	76.8	81.0
Goodwill amortisation and impairment ⁽¹⁾	(1.8)	(3.4)
Exceptional items ⁽²⁾	(2.1)	(1.9)
	13.9	12.5	185.4	170.4	76.8	81.0
Discontinued operation ⁽³⁾		(3.0)		22.4
	13.9	9.5	185.4	192.8	192.8	81.0
Group net liabilities ⁽⁴⁾					(20.1)	(21.2)
					56.7	59.8

⁽¹⁾ Goodwill amortisation relates to Broadcast Systems - £0.8 million (2003: £0.7 million), Photographic - £0.2 million (2003: £0.1 million) and Broadcast Services - £0.4 million (2003: £0.5 million). Impairment losses of £0.4 million (2003: £nil) relate to Broadcast Systems and £nil (2003: £2.1 million) relate to Broadcast Services.

The net book value of goodwill relates to Broadcast Systems - £3.3 million (2003: £4.6 million), Photographic - £2.6 million (2003: £1.8 million) and Broadcast Services - £2.0 million (2003: £3.2 million).

⁽²⁾ Exceptional items relate to restructuring costs in Broadcast Systems (primarily severence in connection with the actions taken to enable the business to operate in a more integrated manner) - £2.2 million (2003: £1.9 million) and a gain in Photographic relating to restructuring - £0.1 million (2003: £nil).

⁽³⁾ The discontinued operation relates to the Retail Display business which was sold on 30 December 2003.

⁽⁴⁾ Group net liabilities include net borrowings, capitalised goodwill, Group dividends payable and central creditors and provisions.

⁽⁵⁾ Net assets have been restated to show the investment held in respect of grants under share option schemes as a reduction from shareholders’ funds (see Note 1).

	2004 £m	Profit before interest and tax 2003 £m	2004 £m	Turnover 2003 £m	2004 £m	Net assets Restated 2003 £m⁽⁵⁾
3.2 Geographic area by origin
United Kingdom	(2.9)	(2.8)	40.5	31.0	17.6	14.6
The rest of Europe	12.7	13.7	66.8	56.4	26.6	29.2
The Americas	7.8	6.7	78.1	83.0	31.5	35.9
Asia and Australasia	0.2	0.2	-	-	1.1	1.3
	17.8	17.8	185.4	170.4	76.8	81.0
Goodwill amortisation and impairment ⁽¹⁾	(1.8)	(3.4)
Exceptional items ⁽²⁾	(2.1)	(1.9)
	13.9	12.5	185.4	170.4	76.8	81.0
Discontinued operation ⁽³⁾		(3.0)		22.4		-
	13.9	9.5	185.4	192.8	76.8	81.0
Group net liabilities ⁽⁴⁾					(20.1)	(21.2)
					56.7	59.8

⁽¹⁾ Goodwill amortisation relates to the United Kingdom - £0.3 million (2003: £0.3 million ), The rest of Europe - £0.2 million (2003: £0.1 million) and The Americas - £0.9 million (2003: £0.9 million) and impairment losses relate to the United Kingdom - £0.4 million (2003: £nil) and The Americas - £nil (2003: £2.1 million).

The net book value of goodwill relates to the United Kingdom - £2.0 million (2003: £2.7 million), The rest of Europe - £2.5 million (2003: £1.8 million) and The Americas - £3.4 million (2003: £5.1 million).

⁽²⁾ Exceptional items relate to United Kingdom - £0.7 million (2003: £1.9 million), The rest of Europe - £0.5 million (2003: £nil) and The Americas - £0.9 million (2003: £nil).

⁽³⁾ The discontinued operation is the Retail Display business which was sold on 30 December 2003. Operating profit, Turnover and Net assets in the Retail Display business relate principally to The rest of Europe and The Americas.

⁽⁴⁾ Group net liabilities include net borrowings, capitalised goodwill, Group dividends payable and central creditors and provisions.

⁽⁵⁾ Net assets have been restated to show the investment held in respect of grants under share option schemes as a reduction from shareholders’ funds (see Note 1).

	2004 £m	Turnover 2003 £m
3.3 Turnover by destination
United Kingdom	9.9	9.1
The rest of Europe	52.6	44.7
The Americas	94.3	91.1
Asia and Australasia	22.9	21.5
Africa and Middle East	5.7	4.0
	185.4	170.4
Discontinued operation ⁽¹⁾		22.4
	185.4	192.8

⁽¹⁾ The discontinued operation relates to the Retail Display business which was sold on 30 December 2003. In 2003, Turnover in this business related to the United Kingdom - £1.2 million, The rest of Europe - £8.0 million, The Americas - £11.9 million, Asia and Australasia - £0.8 million and Africa and Middle East - £0.5 million.

4 Cost of sales and operating expenses

	2004 Total £m	Continuing £m	Discontinued £m	2003 Total £m
Cost of sales	108.9	96.1	15.3	111.4
Gross profit	76.5	74.3	7.1	81.4
Analysis of operating expenses
Distribution costs
– marketing, selling and distribution costs	26.3	27.5	3.0	30.5
– research, development and engineering costs	7.9	8.0	0.8	8.8
– amortisation of capitalised reasearch & development expenditure	0.2	0.2	-	0.2
	34.4	35.7	3.8	39.5
Administrative expenses
– unsuccessful acquisition costs relating to EVS Broadcast Systems	-	0.9	-	0.9
– exceptional restructuring costs	2.1	1.0	-	1.0
– goodwill amortisation and impairment	1.8	3.4	-	3.4
– other administrative expenses	24.3	20.8	3.3	24.1
	28.2	26.1	3.3	29.4
Operating expenses	62.6	61.8	7.1	68.9

5 Exceptional items

Exceptional items included in profit on ordinary activities before interest of £2.2 million relate primarily to severance in connection with actions taken to enable the Camera Support and Communications businesses to operate in a more integrated manner within the Broadcast Systems Division, and £0.1 million of profit relating to restructuring plans in Photographic. A tax credit of £0.9 million was recognised on these costs.

Prior year exceptional items included in profit on ordinary activities before interest were £1.0 million relating to the closure of Radamec Broadcast Systems’ manufacturing factory at Chertsey, UK and £0.9 million of costs relating to the unsuccessful acquisition of EVS Broadcast Systems. No related tax credit was recognised on these costs.

6 Operating profit

	2004 £m	2003 £m
The following items are included in operating profit
Operating lease rental income on owned broadcast equipment	21.0	17.8
Goodwill amortisation and impairment	1.8	3.4
Depreciation	10.2	11.3
Profit on sale of fixed assets	(1.0)	(1.2)
Operating lease rental expense
Plant, machinery and vehicles	-	0.1
Property	3.5	4.6
Auditors’ remuneration
Audit fees (company £0.2 million - 2003: £0.1 million)	0.3	0.4
Other fees paid to the auditors and its associates	0.5	1.6
Other fees paid to the auditors comprise tax advice £0.3 million (2003: £0.5 million); due diligence assistance on acquisitions £0.1 million (2003: £0.4 million); acting as the Group’s reporting accountant £nil 2003: £0.4 million) and other (including a review of the interim accounts) £0.1 million (2003: £0.3 million)

Reconciliation of operating profit to net cash flow from operating activities

	2004 £m	2003 £m
The following items are included in operating profit
Operating profit	13.9	12.5
Development costs amortisation	0.2	0.2
Goodwill amortisation and impairment	1.8	3.4
Depreciation	10.2	11.3
Profit on sale of fixed assets	(1.0)	(1.2)
Increase in stocks	(0.1)	(3.4)
Increase in debtors	(0.1)	(0.4)
(Decrease)/increase in creditors	(1.2)	7.8
Decrease in provisions	(1.2)	(1.5)
Net cash inflow from operating activities	22.5	28.7

7 Employees

	2004 Total £m	Continuing £m	Discontinued £m	2003 Total £m
Aggregate remuneration of all employees during the year
Wages and salaries	42.7	43.1	3.7	46.8
Employers’ social security costs	6.1	5.9	0.6	6.5
Employers’ pension costs	2.3	1.9	0.1	2.0
	51.1	50.9	4.4	55.3

	2004 Total	Continuing	Discontinued	2003 Restated Total ⁽¹⁾
Average number of employees during the year
Broadcast Systems	734	748	-	748
Photographic	639	609	-	609
Broadcast Services	165	156	-	156
Head office	12	12	-	12
Discontinued business - Retail Display	-	-	121	121
	1,550	1,525	121	1,646

⁽¹⁾ The average number of employees for 2003 have been restated to include temporary workers in Photographic.

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Information correct at 13/04/05