Pinewood Shepperton plc Annual Report ... - Pinewood Studios

8 Pinewood Shepperton plc Annual Report & Accounts 2010Operating review continuedFilm continuedThe Company has continued to monitor the market demand for film production in the UK. 2010 has once againdemonstrated strong growth in inward investment film production. Despite the overall growth in production, smallerbudget, UK productions, have struggled to maintain a sustainable level of output as financial markets have constrictedaccess to film finance.These smaller budget films are a valuable part of the Company’s mix of revenues. The Government offers attractive fiscalincentives for such productions. The Company’s unique offering and market standing provides the Company with theability to support productions from this segment of the market. Without unduly risking capital, the Company will targeta limited number, up to four per annum, of films, with total production budgets of circa £2m each. To that end, theCompany intends to provide facilities and co-investment of up to 20% in the equity of such small budget films.InternationalThe Pinewood brand is well recognised and highly regarded internationally. The Company’s international offering seeks tobuild on that reputation and selectively leverage its brand strength and expertise.The Company’s first sales and marketing agreement was in Canada. Pinewood Toronto Studios is proving popular with awide range of US production companies and US television networks. Film and television productions that have used thefacilities include Scott Pilgrim vs. the World (Universal), Dreamhouse (Morgan Creek), The Thing (Universal), BreakoutKings (Fox) and Battle of the Blades (CBC).Phase one construction of Pinewood Iskandar Malaysia Studios, the Company’s second international agreement, whichwill comprise 100,000 sq ft of film stages (ranging from 15,000 sq ft to 30,000 sq ft) and 24,000 sq ft of TV studios(2 x 12,000 sq ft) plus a number of offices, workshops and post production facilities is on schedule. The detailed designwork is now significantly completed and the construction phase commenced in February 2011 with a view to opening inearly 2013.In February 2010, Pinewood Studios and Studio Hamburg entered into a joint venture that allows European andinternational filmmakers to take advantage of our joint infrastructure and skills when producing feature films in Germany.The newly created entity, ‘Pinewood Studios Berlin Film Services’, offers international filmmakers a full range ofproduction service opportunities, targeting European producers. The venture is on track to host its first productionlater this year.The Company entered into a long-term agreement with the Indomina Group, an investment managed by VICINI, aleading asset management company with investments in food and beverages, retail, energy, finance, tourism and realestate in the Caribbean and Central America. This agreement is for the operation of new film and television studios to bebuilt in the Dominican Republic. Pinewood will receive annual fees for its sales and management services and an equityparticipation which accrues over time from 2013. The construction will be funded by the Indomina Group. This newventure, ‘Pinewood Indomina Studios’ is expected to commence initial operations in 2012, targeting the growing Latinofilm and television market.International revenues in 2010 of £0.6m (2009: £0.5m) are in line with the Company’s expectations. Once all fourinternational studios are fully operational they will make incremental contributions to revenue and provide access tokey expanding markets such as in the Asia Pacific and South American regions.TelevisionThe Company’s television revenues were, as expected, reduced for the year at £8.2m (2009: £11.3m). Revenues wereimpacted by ITV and BBC deciding to direct their productions to their own in-house studio facilities. The competition forproviders of smaller television studio space has increased significantly as a result. Demand for the Company’s large scaleflexible facilities is growing. This has given the Company a competitive advantage in hosting the big event televisionshows. The Company’s full service television offering and range of facilities which produce high quality, cost effectivesolutions continues to prove attractive to broadcasters and programme makers.