Registered No. 3877786 SIT-UP LIMITED Annual Report For the year ended 31 December 2007 SIT-UP LIMITED Annual report for the year ended 31 December 2007 Pages Directors’ report 1-3 Statement of directors’ responsibilities 4 Report of the independent auditor to the member of sit-up Limited 5 Profit and loss account 6 Balance sheet 7 Cash flow statement 8 Notes to financial statements 9-18 SIT-UP LIMITED Directors’ report for the year ended 31 December 2007 The directors present their report and the audited financial statements of the company for the year ended 31 December 2007. Ownership Following the merger of the NTL and Telewest Groups on 3 March 2006 sit-up is now a wholly owned subsidiary undertaking of Virgin Media Inc. which changed its name from NTL Incorporated on 6 February 2007. Principal activity The principal activity of the company during the year was and will continue to be, television and online home shopping. Review of business and future developments The results for the year are set out in the profit and loss account on page 6. The directors consider that the company has traded satisfactorily in a competitive UK retail market. Turnover increased by 5.3% to £237.1 million (2006 - £225.2 million) and the profit before tax and exceptional items, as a consequence improved to £4.6 million (2006 - £2.6 million). The directors expect further tightening of the general UK retail climate in 2008 but believe that sit-up’s strength as a value retailer will protect the business in the event of a slow down in the economy. The company’s two major brands are price-drop tv and bid tv which are two live interactive television and internet channels which drop prices until everything is sold. The channels are available in 21.7 million homes in the UK on Sky Digital, Virgin Media and Freeview, as well as on the internet at www.price-drop.tv and www.bid.tv. The third channel, speed auction tv, which broadcasts rising price auctions was launched in July 2005. This channel is available on Sky Digital, Virgin Media and on the internet at www.speedauction.tv . The format of this channel has changed in 2008 to falling price. There was a decrease in the average number of staff employed from 732 to 680 as sit-up outsourced some of its contact centre operations. As a result employment costs as a percentage of turnover have reduced to 8.3% (2006 – 8.7%). The net assets of the company increased by £6.1 million, to £47.0 million (2006 - £1.8 million) as at 31 December 2007. The increase was wholly due to the retained profit for the year. The satisfactory trading performance enabled the company to maintain a positive cash balance throughout the year and the cash balance as at 31 December 2007 was £28.1 million (2006 - £24.1 million). During the year ended 31 December 2005 the company classified 500,000 preference shares issued for £6.1 million as debt in accordance with FRS25. These shares were redeemed on 18 September 2007 at £1.4 million. The resulting gain of £4.7 million has been treated as an exceptional item in the profit and loss account and a corresponding transfer of £6.1 million has been made from the profit and loss reserve to share premium. Financial risk management The company’s operations expose it to a variety of financial risks that include the effects of changes in credit risk, liquidity risk and interest rate risk. Credit risk The nature of the company’s business is such that significantly all transactions require settlement at point of shipment of goods to the customer. It is not practical to instigate credit checks on all potential customers and reliance is placed on major credit/debit card company prompt settlements, however the exposure is limited due to the high level of relatively low value transactions and high number of customers. 1 SIT-UP LIMITED Directors' report for the year ended 31 December 2007 (continued) Liquidity risk The Virgin Media group manages its financial risk via secure, long-dated and cost-effective funding for the group’s operations in order to minimise the adverse effects of fluctuations in the financial markets on the value of its financial assets and liabilities, profitability and cash flows. The Virgin Media group’s external debt is used to satisfy the funding requirements of group undertakings via inter-company loans on terms which generally match those of the external debt. In addition, working capital is managed centrally within the Virgin Media group creating further inter- company trading balances, on terms which are generally interest free. Interest rate risk The company is subject to financial risks where interest rates are not fixed. The Virgin Media group’s policy is to manage its interest cost using a mix of fixed and variable rate financial instruments denominated in sterling and foreign currencies and to hedge all or part of the exposure to interest rate or foreign currency risk. However the group’s policy is not to hedge against interest rate or foreign currency risk in respect of inter-company debt. The company primarily has interest bearing assets, which comprise cash balances and a loan to parent undertaking. The interest rates are not fixed and so are subject to fluctuation. The company does not use derivative financial instruments to manage interest rate costs. The directors will revisit the appropriateness of these policies should the company’s operations change in size or nature. Results and dividends The profit for the financial year of £6,126,000 (2006 - £1,820,000) was transferred to reserves. The directors have not recommended a dividend. Directors On 8 June 2006, it was announced that the Founder Directors, Ashley Faull and John Egan and the Managing Director, Christopher Manson, had decided to reduce their involvement with sit-up and would leave the business in June 2007. They remained as Board Directors until the date of their departure. Ian Percival became Chief Executive Officer on 8 June 2006 and took over the day-to- day running of the business. 2 SIT-UP LIMITED Directors' report for the year ended 31 December 2007 (continued) The directors of the company who held office during the year and thereafter were as follows: J P Egan Resigned 7 June 2007 A C Faull Resigned 7 June 2007 C J Manson Resigned 10 June 2007 I C Percival N R Smith Resigned 28 February 2007 M R Wall S R Holmes Appointed 28 February 2007 Director interests The directors’ beneficial interests in the shares of the company at 1 January 2007 and 31 December 2007 were as follows: 4% cumulative preference shares of 1p each 1 January 2007 31 December 2007 J P Egan 200,000 - A C Faull 200,000 - C J Manson 100,000 - On 18 September 2007, the preference shareholders exercised their put option to redeem their preference shares with sit-up Limited. Employees Consultation with employees or their representatives 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. Communication with all employees continues through periodic briefings and the in-house intranet. The annual report is available on the company internet site. 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 the appropriate training is arranged. It is the policy of the company that the training, career development and promotion of a disabled person should, as far as possible, be identical to that of a person who does not suffer from a disability. Creditor payment policy The company’s policy concerning the payment of trade creditors is to settle the terms of payment with suppliers when agreeing the terms of each transaction. Creditors are paid in accordance with the company’s contractual and other legal obligations. Trade creditors, at the year-end, represented 45 days (2006 - 46 days) of purchases. Statement as to disclosure of information to auditors At the date of approving this report: • so far as the directors are aware, there is no relevant audit information of which the company's auditors are unaware; and • the directors confirm that they have taken all necessary steps that they ought to have taken as directors to make themselves aware of any relevant audit information and to establish that the company's auditors are aware of that information. Auditor Ernst & Young LLP will be re-appointed as the company’s auditor in accordance with the elective resolution passed by the company under Section 386 of the Companies Act 1985. By order of the Board I C Percival Chief Executive Officer 11 June 2008 3 SIT-UP LIMITED Statement of Directors’ Responsibilities for the year ended 31 December 2007 The directors are responsible for preparing the Annual Report and the 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 the United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the company and of the profit and loss of the company for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable UK 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 and The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and the detection of fraud and other irregularities. These financial statements are available on the company website. The maintenance and integrity of the website is the responsibility of the directors, and it should be noted that UK legislation governing preparation and dissemination of financial statements may differ from that in other jurisdictions. 4 SIT-UP LIMITED Report of the independent auditor to the member of sit-up Limited We have audited the company’s financial statements for the year ended 31 December 2007 which comprise the profit and loss account, the balance sheet, the cash flow statement, and the related notes 1 to 24. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the company's member in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's member those matters we are required to state to it in an auditors' 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 member, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors’ responsibilities for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the directors' report is consistent with the financial statements. In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed. We read the directors’ report and consider the implications for our report if we become aware of any apparent misstatements within it. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion: the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the company's affairs as at 31 December 2007 and of its profit for the year then ended; the financial statements have been properly prepared in accordance with the Companies Act 1985; and the information given in the directors' report is consistent with the financial statements. Ernst & Young LLP Registered Auditor, London 12 June 2008 5 SIT-UP LIMITED Profit and loss account for the year ended 31 December 2007 Before exceptional Exceptional Notes items items Total 2007 2007 2007 2006 £’000 £’000 £’000 £’000 Turnover 2 237,142 - 237,142 225,218 Other operating income 3 1,433 - 1,433 1,143 238,575 - 238,575 226,361 Cost of sales (177,690) - (177,690) (170,437) Gross profit 60,885 - 60,885 55,924 Administrative expenses 4 (59,596) (2,825) (62,421) (58,150) Gain on extinguishment of debt 4 - 4,703 4,703 - Operating profit/(loss) 5 1,289 1,878 3,167 (2,226) Interest payable and similar 9 (81) - (81) (18) charges Interest receivable and other 10 3,367 - 3,367 2,965 similar income Profit on ordinary activities 4,575 1,878 6,453 721 before taxation Taxation 11 (327) 1,099 Profit on ordinary activities 19 6,126 1,820 after taxation The above results relate to the continuing operations of the company. There was an exceptional charge in 2006 of £1,878,000. Statement of Total Recognised Gains and Losses: There are no recognised gains and losses other than the profit of £6,126,000 attributable to the shareholder for the year ended 31 December 2007 (2006 - £1,820,000). 6 SIT-UP LIMITED Balance sheet as at 31 December 2007 Notes 2007 2006 £’000 £’000 Fixed assets Tangible fixed assets 12 6,101 6,221 Current assets Stock 13 11,786 12,988 Deferred tax asset 11 2,003 2,330 Debtors 14 43,469 43,617 Cash at bank and in hand 28,122 24,115 85,380 83,050 Creditors: amounts falling due within one year 15 (44,087) (48,238) Net current assets 41,293 34,812 Total assets less current liabilities 47,394 41,033 Provision for liabilities 16 (392) (157) Net assets 47,002 40,876 Capital and reserves Called up share capital 17 126 126 Share premium account 18 26,235 20,143 Capital redemption reserve 18 5 - Profit and loss account 18 20,636 20,607 Total shareholders’ funds 19 47,002 40,876 The financial statements on pages 6 to 18 were approved by the board of directors on 11 June 2008 and signed on its behalf by: I C Percival Chief Executive Officer 7 SIT-UP LIMITED Cash flow statement for the year ended 31 December 2007 Notes 2007 2006 £’000 £’000 Net cash inflow from operations 20 4,362 5,127 Returns on investment and servicing of finance Interest received 3,367 3,815 Interest paid (34) (1) Net cash inflow from returns on investments and servicing of 3,333 3,814 finance Capital expenditure and financial investment Purchase of tangible fixed assets (2,294) (2,121) Net cash outflow from capital expenditure and financial investment (2,294) (2,121) Net cash inflow before financing 5,401 6,820 Financing Founders redemption of preference shares (1,394) - Net cash outflow from financing (1,394) - Increase in cash in the year 21 4,007 6,820 8 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 1. Accounting policies Basis of accounting These financial statements have been prepared under the historical cost convention in accordance with the Companies Act 1985 and applicable accounting standards in the United Kingdom. Accounting policies for all material transactions have been applied consistently, unless otherwise stated, and are set out below. Turnover Turnover, which excludes Value Added Tax and discounts given, represents the invoiced value of goods and services supplied, less actual and expected returns, refunds and credit card charge- backs. Turnover is recognised in the profit and loss account upon despatch of the goods to the customer. Other operating income Other operating income is recognised when the service to which the income relates has been satisfactorily performed in accordance with the relevant contract. Interest revenue Revenue is recognised as interest accrues using the effective interest method. Pension scheme arrangements The company facilitates payments of pension contributions by its employees into a stakeholder pension scheme that is separately administered by an independent company. It also makes contributions to certain employees’ personal defined contribution pension schemes. These pension costs are charged to the profit and loss account as contributions become payable. Foreign currencies Foreign currency transactions are translated to sterling at the rate of exchange on the day of the transaction. Monetary assets or liabilities held in foreign currencies at the balance sheet date are translated to sterling at the year-end rate and any exchange differences are taken to the profit and loss account. Taxation The charge for tax is based on the profit and loss account for the year. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exceptions: • provision is made for deferred tax on gains arising from the revaluation (and similar fair value adjustments) of fixed assets, and gains on disposal of fixed assets that have been rolled over into replacement assets, only to the extent that, at the balance sheet date, there is a binding agreement to dispose of the assets concerned. However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold; • deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. Tangible fixed assets The cost of tangible fixed assets is their purchase cost, together with any incidental costs of acquisition. Incremental internal and external staff costs are capitalised where they relate to clearly defined software development projects. The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. 9 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 (continued) 1. Accounting policies (continued) Tangible fixed assets (continued) Depreciation is calculated so as to write off the cost of tangible fixed assets, less their estimated residual values, on a straight-line basis over the expected useful economic lives of the assets concerned. The principal annual terms used for this purpose are: Short leasehold properties over length of the lease IT and studio equipment 3 – 5 years Fixtures and fittings 3 – 5 years Studio set 1 year Stock Stock is stated at the lower of cost and net realisable value. In general, cost is determined on a first in first out basis. Where necessary, provision is made for obsolete, slow moving and defective stock. Provisions for liabilities A provision is recognised when the company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. Operating leases Rentals applicable to operating leases, where substantially all of the benefits of ownership remain with the lessor, are charged against profits on a straight-line basis over the period of the lease. Share-based payments The company has no share-based compensation plans. Certain of the company's employees participate in the Virgin Media Inc. Stock Incentive Plan, which is described in Virgin Media Inc.'s Annual Report and summarised in note 7 below. Employees (including directors) of the group receive an element of their remuneration in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised over the vesting period which ends on the date on which the relevant employees become fully entitled to the award. The fair value of share options is determined using the Black-Scholes option pricing model. The cumulative expense recognised for equity settled transactions at each reporting date reflects the extent to which the vesting period has expired and management’s estimate of the number of awards that will ultimately vest. No expense is recognised for awards that do not ultimately vest. To the extent that the expense for share-based payments is recharged by the ultimate parent company which issues the shares, no expense is separately identifiable in reserves as it is included within inter-company debt. Preference Shares The company’s 4% cumulative redeemable preference shares have been classified as debt in accordance with FRS 25. On 18 September 2007, these shares were redeemed. 2. Turnover The company’s profit and turnover arises principally in the United Kingdom where its assets are located, and in one class of business. 3. Other operating income Other operating income arises primarily from the commissions from the introductions of customers to third parties and also from the sale of customer lists. 10 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 (continued) 4. Exceptional items Included in administrative expenses are exceptional costs of £2,825,000 (2006 - £1,878,000). These costs, relate to an on-going legal claim made by sit-up against a third party for misappropriation of trade secrets and breach of contract. On 18 September 2007 the Founder Directors redeemed 500,000 preference shares for £1.4 million. The resulting gain of £4.7 million has been treated as an exceptional item in the profit and loss account and a corresponding transfer for £6.1 million made from the profit and loss reserve to share premium. 5. Operating profit 2007 2006 £’000 £’000 The operating profit is stated after charging/(crediting): Depreciation on tangible fixed assets: - Owned assets 2,577 2,414 Auditors’ Remuneration - Audit services 65 65 Operating lease charges - Plant and machinery 26 28 - Land and buildings 798 806 Auditor's remuneration disclosed above represents costs allocated to the company by the fellow group undertakings that pay all auditors’ remuneration on behalf of the Virgin Media group. The company is exempt from disclosing additional information regarding non-audit services, as the disclosures required under Regulation 4 (1) (b) of Section 390B of Companies Act 1985, are made in the group accounts of Virgin Media Finance PLC on a consolidated basis. 6. Directors remuneration 2007 2006 £’000 £’000 Aggregate emoluments (including benefits in kind) 320 532 Company contributions to personal pension schemes 28 52 348 584 Highest paid director Aggregate emoluments (including benefits in kind) 262 198 Company contributions to defined contribution scheme 23 20 One of the directors was granted, but did not exercise, any share options under schemes operated by the ultimate parent company. MR Wall and S R Holmes did not receive any emoluments for their services as directors of the company. Although these directors provide services to a number of group companies, as well as to sit up Limited, they are not directors of any of those other group undertakings. 11 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 (continued) 7. Share-based payments The company is an indirect, wholly-owned subsidiary of Virgin Media Inc. Accordingly, the company has no share-based compensation plans of its own although certain of the company’s employees (including directors) participate in the share-based compensation plan of Virgin Media Inc., as summarised below. Share option plans The Virgin Media Inc. Stock Incentive Plan is intended to encourage Virgin Media Inc. share ownership by employees, directors and independent contractors so that they may acquire or increase their proprietary interest in the group, and to encourage such employees, directors and independent contractors to remain in the group’s employ or service and to put forth maximum efforts for the success of the business. To accomplish such purposes, the plan provides that Virgin Media Inc. may grant incentive share options, non-qualified share options, restricted shares, restricted share units and share awards. All options have a 10 year term and vest and become fully exercisable over a period of 3 to 5 years of continued employment. The company accounts for the plan under the fair value recognition provisions of Financial Reporting Standard 20 “Share-based Payment” (FRS 20). The fair value for these options was estimated at the date of grant using the Black-Scholes option- pricing model with the following weighted average assumptions: Year ended 31 December 2007 2006 Risk-free Interest Rate 4.62% 4.98% Expected Dividend Yield 1% 0% Expected Volatility 28.50% 26.97% Expected Lives years 4.63 4.35 The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical realised volatility of the ultimate parent company’s share price, matched to the expected life of the option, is indicative of future trends, which may not necessarily be the actual outcome. A summary of the activity and related information of the Virgin Media Inc. Stock Incentive plan, pertaining to the employees of the company, for the years ended 31 December as follows: 2007 2006 Weighted Weighted 2007 2006 Average Average Options Options Exercise Exercise Price Price As at 1 January 2007 120,654 $25.24 - - Granted 83,405 $24.36 120,654 $25.24 Exercised (3,035) $24.74 - - Expired (2,914) $24.74 - - Forfeited (27,294) $24.96 - - As at 31 December 2007 170,816 $24.87 120,654 $25.24 Exercisable at 31 December 21,771 $25.57 - - 2007 The options exercisable at the year end had a weighted average remaining contractual term of 8.73 years (2006 – none) and the options outstanding at the year end had a weighted average remaining term of 9.02 years (2006 – 9.64 years). 12 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 (continued) 7. Share-based payments (continued) The weighted average share price at the date of exercise for the options exercised in 2007 was $25.79 (2006 – none). The weighted average fair value of options granted during the year was $7.02 (2006 - $7.74). The range of exercise prices for options outstanding at the end of the year was $24.36 to $26.42 (2006 - $24.74 to $26.42). The expense included in the financial statements of the company relating to the payment of the share-based compensation of certain of its employees is £315,160 (2006 - £120,274). There are no cash settlement alternatives. The amount recharged to the company by fellow group undertakings in respect of share-based payments was £315,160 (2006 - £nil). 8. Employees The average number of persons (including executive directors) employed by the company during the year was: 2007 2006 Number Number By Activity Administration 680 732 Staff costs (for the above persons) £’000 £’000 Wages and salaries 17,411 17,729 Social security costs 1,812 1,816 Pension costs 88 103 Share based payments 315 120 19,626 19,768 At 31 December 2007 pension contributions of £nil (2006 - £1,000) were prepaid. 9. Interest payable and similar charges 2007 2006 £’000 £’000 On bank loans, overdrafts and other loans 34 1 Unwind of discount on provision 47 17 81 18 10. Interest receivable and other similar income 2007 2006 £’000 £’000 Bank interest receivable 1,179 777 Interest on loan to parent undertaking 2,188 2,188 3,367 2,965 13 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 (continued) 11. Tax on profit on ordinary activities 2007 2006 Current tax £’000 £’000 UK Corporation tax -current - - UK Corporation tax -prior period - - Total current tax - - Deferred tax Origination and reversal of timing differences 275 (629) Adjustments in respect of change of rate 162 - Adjustments in respect of prior periods (110) (470) Total deferred tax 327 (1,099) Tax on ordinary activities 327 (1,099) The current tax charge for the year is lower than the standard rate of corporation tax in the UK (30%) The differences are explained below: 2007 2006 £’000 £’000 Profit on ordinary activities before tax 6,453 721 Tax on pre tax profit at 30% 1,936 216 Effects of: (Income not taxable)/expenses not deductible for tax purposes (1,311) 37 Accelerated capital allowances & other timing differences (295) 627 Utilisation of tax losses of fellow group undertaking (330) (880) Current tax - - Deferred Tax Asset The amount of provided and un-provided deferred tax is as follows: 2007 2006 £'000 £'000 Tax effects of timing differences because of: Excess of depreciation over capital allowances (1,612) (1,991) Short term timing differences (391) (339) (2,003) (2,330) Analysis of movement in deferred tax asset held within current assets: 2007 2006 £'000 £'000 As at 1 January (2,330) (1,231) Profit and loss account 327 (1,099) As at 31 December (2,003) (2,330) The UK Corporation tax rate will decrease from 30% to 28% from 1 April 2008. This rate change will affect the amount of future tax payments to be made by the company. The deferred tax balance has been adjusted in the current year to reflect this change. Changes to UK Capital allowances regime will also impact the capital allowances the company can claim. The full impact of these changes is still being assessed. 14 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 (continued) 12. Tangible fixed assets Short leasehold IT and studio Fixtures and properties equipment fittings Studio set Total £’000 £’000 £’000 £’000 £’000 Cost At 1 January 2007 2,307 7,384 1,133 14 10,838 Additions 24 2,255 41 137 2,457 Disposals (61) (1,613) (47) (14) (1,735) At 31 December 2007 2,270 8,026 1,127 137 11,560 Depreciation At 1 January 2007 834 3,316 459 8 4,617 Charge for the year 309 1,958 227 83 2,577 Disposals (61) (1,613) (47) (14) (1,735) At 31 December 2007 1,082 3,661 639 77 5,459 Net book Value At 31 December 2007 1,188 4,365 488 60 6,101 At 31 December 2006 1,473 4,068 674 6 6,221 13. Stock 2007 2006 £’000 £’000 Finished goods for resale 11,786 12,988 14. Debtors 2007 2006 £’000 £’000 Trade debtors 3,879 3,790 Loan to parent undertaking 34,848 35,319 Other debtors 571 1,867 Prepayments 2,221 805 Accrued income 1,950 1,836 43,469 43,617 Included in other debtors there are £135,000 (2006 - £135,000) that fall due after more than one year. 15 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 (continued) 15. Creditors: amounts falling due within one year 2007 2006 £’000 £’000 (2006 - 500,000) 4% cumulative preference shares of 1p each - 6,097 Trade creditors 32,711 32,704 Other creditors, taxation and social security costs 3,581 3,463 Accruals and deferred income 4,637 4,213 Inter-company accruals 3,158 1,761 44,087 48,238 Creditors: amounts falling due within one year 1,000,000 4% cumulative preference shares of 1p each were issued on 23 May 2005 to the three Founder directors of the company at a premium of £12,185,000. On 1 June 2006 the preference shareholders exercised put options to have 50% of their shares purchased by Screenshop Limited. These 500,000 shares registered in the name of Screenshop Limited were immediately re-designated as ordinary shares having the rights and being subject to the restrictions and obligations set out in the company’s articles of association. On 18 September 2007, the preference shareholders exercised put options to have their remaining 500,000 4% cumulative preference shares, redeemed by the company at a value of £1.4million. The redemption has resulted in an exceptional gain of £4.7million (see note 4). Loan facility: the company, cross guaranteed, along with fellow subsidiaries Virgin Media group’s £3,775 million loan facility on 3 March 2006. An additional facility of £1,500 million was subsequently drawn by the Virgin Media group during 2006 to refinance existing unsecured debt obligations. The company as a member of the new bank group has pledged its assets under the new loan facility along with fellow group subsidiaries but is not a guarantor. As at 31 December 2007, the maximum contingent liability represented by outstanding borrowings by these companies amounted to approximately £4,905 million (2006 - £5,125 million). 16. Provision for liabilities 2007 £’000 Provision for lease dilapidations At 1 January 2007 157 Arising during the year 188 Unwind of discount on provision 47 At 31 December 2007 392 sit-up has made changes to properties it leases. Provision has been made for the obligation that exists to return the properties to their original state at the end of the lease. 16 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 (continued) 17. Called up share capital 2007 2006 £’000 £’000 Authorised 17,100,000 (2006 - 17,100,000) ordinary shares of 1p each 171 171 500,000 (2006 - 500,000) preference shares of 1p each 5 5 176 176 2007 2006 £’000 £’000 Issued and fully paid 12,563,114 (2006 - 12,563,114) ordinary shares of 1p each 126 126 In 2006 financial statements, 500,000 issued preference shares (now redeemed) were classified as debt in accordance with FRS25. 18. Reserve movements Capital Profit and Share redemption loss Premium reserve account £’000 £’000 £’000 At 1 January 2007 20,143 - 20,607 Retained profit for the financial year - - 6,126 Redemption of preference shares 6,092 5 (6,097) At 31 December 2007 26,235 5 20,636 19. Reconciliation of movements in shareholders’ funds 2007 2006 £’000 £’000 Opening shareholders’ funds 40,876 32,838 Profit for the financial year 6,126 1,820 Share-based payment - 120 Conversion of preference shares - 6,098 Closing shareholders’ funds 47,002 40,876 17 SIT-UP LIMITED Notes to the financial statements for year ended 31 December 2007 (continued) 20. Reconciliation of operating profit to net cash inflow from operating activities 2007 2006 £’000 £’000 Operating profit/(loss) 3,167 (2,226) Gain on redemption of preference shares (4,703) - Share-based payment (non-cash) - 120 Depreciation on tangible fixed assets 2,577 2,414 Decrease in stock 1,202 217 Decrease in debtors 148 1,507 Increase in creditors and provisions 1,971 3,095 Net cash inflow from operating activities 4,362 5,127 21. Reconciliation of movement in net funds As at 1 As at 31 January Cash flow December 2007 2007 £’000 £’000 £’000 Cash at bank and in hand 24,115 4,007 28,122 24,115 4,007 28,122 22. Financial commitments At 31 December the company had annual commitments under non-cancellable operating leases and long-term contracts as follows: Land and buildings Other 2007 2006 2007 2006 £’000 £’000 £’000 £’000 Expiring within one year 476 - 520 28 Expiring in two to five years 229 705 364 881 Expiring in over five years 198 198 - - 903 903 884 909 The company has no capital commitments at the end of 2007 (2006 - £nil). 23. Related party transactions The company has taken advantage of the exemption under FRS 8 not to disclose transactions with group undertakings as it is a subsidiary undertaking which is at least 90% controlled by the ultimate parent undertaking. 24. Parent undertaking and controlling party The company’s immediate parent undertaking is Screenshop Limited. The company’s results are included in the group accounts of Virgin Media Finance PLC. The company’s ultimate parent company and controlling party as at 31 December 2007 was Virgin Media Inc. which is incorporated in Delaware, USA. Copies of all sets of group accounts which include the results of the company are available from the Secretary, Virgin Media, 160 Great Portland Street, London, W1W 5QA. 18
"SIT-UP LIMITED Annual Report For the year ended 31 December 2007"