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VTR plc

VTR plc acquires Machine Effects Limited

VTR continue to grow their capabilities

VTR plc is pleased to announce the acquisition of Machine Effects Limited, the visual effects company founded by John Lockwood and Steve Street, for a total consideration of £2,050,000 (the “Acquisition”). The Acquisition strengthens VTR’s offer in the UK visual effects market and underpins the continued international expansion of the Prime Focus Group of companies.

Machine Effects Limited is a leading visual effects business offering a full range of services to film and broadcast. Its impressive list of credits includes Fred Claus, Elizabeth: The Golden Age and Harry Potter and the Prisoner of Azkaban. Both John Lockwood and Steve Street will remain with the business and continue to work with VTR plc.

The total consideration for the Acquisition of £2,050,000 constitutes a payment in cash of £1,025,000 (the “Cash Consideration”) and the issue of 1,025,000 new ordinary shares in VTR (the “Consideration Shares”) to John Lockwood and Steve Street, the vendors of Machine Effects Limited (the “Vendors”).

Each of the Vendors has undertaken not to sell any of the Consideration Shares for the first 12 months after completion of the Acquisition and to sell no more than 50% of the Consideration Shares in the two years following completion of the Acquisition.

The Cash Consideration for the Acquisition has been funded by an inter-group loan from Prime Focus Limited (“PFL”), which is a majority shareholder in VTR. VTR and PFL entered into a loan agreement on 21st January 2008 which made available a £1,000,000 credit facility to VTR (the “Loan”). Interest will accrue on the Loan at a rate of 8% per annum.

The Loan will be satisfied by the issue of 2,020, 202 new ordinary shares in VTR to PFL, conditional upon obtaining the requisite shareholder approvals to allot. Failure to obtain such shareholder approvals will require VTR to repay the Loan in cash within 18 months of the date of the loan agreement.

With the exception of any director involved in the arrangements set out above as a related party (as defined in the AIM rules), the directors of VTR consider, having consulted with Charles Stanley Securities, that the terms of the Loan are fair and reasonable insofar as the shareholders of VTR are concerned.

PFL has separately guaranteed to the Vendors that the Consideration Shares will have a closing bid price of not less than 100 pence per share after a period of 30 months from completion of the Acquisition has elapsed (the “Guarantee”). Should the closing bid price be less than 100 pence per share after this 30-month period, PFL will, without recourse to VTR, pay the difference to the Vendors. VTR will, in return for the Guarantee, and subject to obtaining the requisite shareholder approvals to allot, issue 505,050 new ordinary shares in VTR to PFL.

Application has been made for the Consideration Shares to be admitted to trading on AIM and it is anticipated that admission will become effective and that dealings will commence on 29 January 2008. The Consideration Shares will rank pari passu with the existing shares of the Company. Following this allotment, the total issued share capital of the Company will increase to 30,106,276 ordinary shares.

Namit Malhotra, Chairman of VTR plc and Prime Focus Group, said: “This acquisition adds to the group’s global breadth, strengthening our visual effects capabilities and helping to grow our offer. Machine Effects is a strong brand with an impressive track record in the industry and I am pleased that it will be joining VTR plc and in turn part of the growing group of companies in the Prime Focus Group.”

Neil Lane, Managing Director, VTR plc said: “Steve and John are experts in the visual effects market and will compliment Prime Focus London’s existing capabilities in that area. We are excited to have them joining our team and look forward to working together.”

John Lockwood said of the acquisition: “Machine Effects integration into the group will allow us to concentrate on what we do best whilst participating in the future success of VTR plc.”

And Steve Street added: “We are thrilled to be joining the Prime Focus Group of companies and to have access to its global resources in London, India, Canada and the United States.”

Further information on Machine Effects Limited

Detailed below is the financial performance of the business during the year to 31 March 2007 and the seven months to 31 October 2007.

The figures for the year to 31 March 2007 are unaudited as the company is exempt from an audit under s249A(1) of the Companies Act 1985.

The figures for the seven months to 31 October 2007 are the unaudited management accounts for the company to that date.

The figures have been prepared under UK Generally Accepted Accounting Principles using the historical cost convention and in accordance with the Financial Reporting Standards for Smaller Entities (effective June 2022).

Profit and Loss Account	7 months ending	Year ending
	31 October 2007	31 March 2007
	unaudited	unaudited
	£	£
Turnover	854,457	392,005
Cost of Sales	(314,928)	(7,308)
Gross Profit	539,529	384,697
Administrative expenses	(156,493)	(199,858)
Operating profit	383,036	184,839
Bank interest - net	2,833	0
Profit after interest	385,869	184,839
Tax on profit on ordinary activities	77,174	(36,038)
Profit for the financial year	308,695	148,801
Dividends	0	(78,500)
Retained profit for the financial year	308,695	70,301

Balance Sheet	As at	As at
	31 October 2007	31 March 2007
	£	£
Fixed Assets	98,248	70,301
Current assets
Debtors	69,737	32,000
Cash at bank and in hand	469,907	15,063
	539,644	47,063
Creditor: amounts falling due within one year	(219,129)	(47,063)
Net current assets	320,515	0
Net assets	418,763	70,301
Capital and reserves
Share capital	100	0
Other reserves	39,667	0
Profit and loss account	378,996	70,301
	-	-
	418,763	70,301

ENDS

Machine Effects Limited offers a full range of visual effects services and supervision for feature films and broadcast work: script breakdown and budgeting, pre-production, pre-visualisation and design, vfx supervision (on-set and digital), 3D animation (character and fx), compositing, matte paintings, digital grading, title design.

VTR plc (Prime Focus UK) is the holding company of the Prime Focus UK Group, one of Europe’s leading high-end media services groups. Based in Soho, London, the main divisions – Prime Focus London and blue post production – cover between them every aspect of professional post-production, and each company has established an international reputation in its chosen field.

The Prime Focus UK Group produces work of the highest quality across all areas of the post-production industry, including: high-end visual effects and digital intermediate (DI) for cinema releases; television commercials; long-form and short-form broadcast projects; CGI animation; design and motion graphics; pop promos; sound design, mixing and composition; and film and video restoration.

In addition the group designs, builds and implements online interactive communication tools for a wide variety of clients. Its portfolio includes digital asset management systems, state-of-the-art encoding services, website design and hosting, mobile content encoding and delivery, and professional DVD authoring facilities.

VTR plc’s (Prime Focus UK) majority shareholder is Prime Focus Limited, India’s foremost integrated end-to-end post-production and visual effects services facility. As the largest Autodesk Fire / Smoke site in the world, the largest site for Thomson Spirit in the Asia-Pacific region, and with its recent acquisitions in London, Prime Focus Limited has emerged as a major force in the international post-production industry.

Contacts
Ryszard Bublik Catriona McDermott	Parys Communications	020 7622 9951
Neil Lane	VTR plc, Managing director	020 7437 0026
Philip Davies (Nominated Adviser)	Charles Stanley Securities	020 7149 6000

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