Pinewood Shepperton issues profits warning

Studios face uncertain future as blockbusters go east

LONDON — Shares in Pinewood Shepperton nosedived by 20% after top brass conceded the U.K.’s leading studios group would likely miss profit forecasts for 2005. The profits warning was the second issued by Pinewood in the past three months.

Operating profits for the half-year ending June 30 are expected to be £2 million ($3.6 million). The estimate excludes Teddington Studios, which Pinewood Shepperton acquired for $4.8 million in April this year. Cazenove, Pinewood’s broker, cut full-year profits forecasts by 67% to $3.2 million.

At its May AGM, the Pinewood board chaired by Michael Grade stated that the achievement of current market estimates for the full year 2005 would depend on conversion of a number of provisional film bookings into firm contracts, including at least one blockbuster. The fact that no blockbuster has been shored up since May made the profits warning inevitable.

“Since then, trading conditions have not improved,” stated a release. “This is principally due to the protracted uncertainty over future UK film fiscal policy, and the adverse dollar/sterling exchange rate.”

Pinewood Shepperton will not pay an interim dividend, and, given the board predicts continued difficulties into the first half of 2006, it is unlikely dividends will be dished out at the end of the year.

The continued uncertainties over U.K. tax incentives makes it increasingly likely that the quintessentially British Harry Potter and James Bond franchises will decamp from their traditional U.K. production bases to Central or Eastern Europe.

Bond’s defection to the east — Prague’s Barrandov Studios is the favorite — would be a particularly bitter pill to swallow for Pinewood Shepperton and the U.K. film industry. Since 1962, 18 Bond pics have been made at Pinewood.

The amount of time it is taking the government to conduct the overhaul of film fiscal policy is concerning the Pinewood Shepperton board. “Film producers, who need to be certain about their tax status at the end of production, are concerned that if things are changed they may be disadvantaged,” said Ivan Dunleavy, Pinewood Shepperton chief exec.

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