Final Results

18th Jun 2009 07:00



Motive Television Plc

Preliminary results for the year ended 31 December 2008

Motive Television Plc, the television production group ("Motive" or "the Group"), announces its preliminary results for the year ended 31 December 2008.

Highlights

Contact:

Motive Television plc Michael Pilsworth	020 3086 9430
Dowgate Capital Advisers Limited Liam Murray or Jo Turner	020 7492 4777

 

CHAIRMAN'S STATEMENT

I am pleased to announce the results for Motive Television PLC ("Motive" or "the Group") for the year ended 31 December 2008.

Business environment

In the first half of 2008 the television production industry looked as though it might avoid the impact of the credit crunch. However, in mid-2008 the sector suffered a vicious and unprecedented contraction in new orders from broadcasters as the recession hit the television industry. Commercial broadcasters to whom Motive supplies programmes, such as ITV, Channel 4, Channel 5, BSkyB, RTÉ and TV3, saw their advertising revenue fall by between 10% and 30% from the previous year, and this translated into immediate cuts in the commissioning of new programming. The BBC, whilst immune from pressures on advertising revenue, also announced extensive programme cutbacks averaging 5% as a result of the lower-than-expected licence-fee settlement and the sharp decline in the value of its property portfolio, which was the subject of a sale and lease-back process.

Business review and principal activities

Motive completed one corporate transaction during the period, acquiring a 50% interest in Rumble TV Productions Ltd, (trading as "Rumble TV") led by experienced producers Tony Moss and Ben Devlin. 

With the acquisition of Rumble TV, Motive Television now controls five production companies with production bases in London, Glasgow, Manchester and Dublin. This gives the Group a broad spread of regional production bases, which is of benefit as broadcasters in the UK are now required to source programming from the regions through a quota system.

It is against the background of the Business Environment set out above that the 2008 results are presented. 

Until the middle of 2008 we were cautiously optimistic about propects for the second half year. In particular, Rumble TV had a strong development slate and Scarlet Television had strong interest in two major series. 

As the business climate started to show indications of becoming more difficult our initial reaction was to invest more in development with Rumble TV, Scarlet Television and Luminous Productions all making modest increases in expenditure to strengthen their slates, targeting ideas towards the BBC. At the same time a decision was made to put any futher acquisitions on hold, and advanced-stage negotiations to make a new investment were terminated without significant costs being incurred.

Unfortunately, despite a number of promising discussions and the commissioning of a number of pilots, significant commissions were not forthcoming during the second half of 2008. Towards the end of the year, therefore, a decision was made to cut all costs targeting a 30% reduction in core overheads across the Group.

Detailed operational review

The Group's comedy production company in the UK, Brown Eyed Boy, led by Gary Reich, had a good year. "How Not To Live Your Life", starring Dan Clark, was produced and broadcast on BBC3 to critical acclaim and excellent audience figures. A second series has now been produced. "Get Rich" starring Elliot Gleave, Doc Brown and Marlon Davies was produced for MTV and is attracting a lot of attention as it was the first television comedy to be produced using only mobile telephones. E4 commissioned a road-trip sitcom, "Jesus Boy & The Goatherd", starring Nathan A. Thomas and Jack Whitehall. This was well-received and a spin-off series entitled "Team Awesome" is now in development. And MTV2 commissioned "Eleanor's Up and Coming" starring Rich Fulcher. Brown Eyed Boy also sold the format rights of "How Not To Live Your Life" to U.S. network CBS.

Luminous Productions, led by Cillian de Buitléar, co-produced (with Motive Television in Dublin) an entertainment pilot for RTE, "The Byrne Ultimatum", presented by stand-up comedian Jason Byrne, and a pilot programme for ITV2, "Natasha Hamilton: Whole Again", featuring one of the members of pop group "Atomic Kitten". Luminous also developed a pilot for a reality series for BBC3, "The Real Rooneys".

The Group's Dublin-based production company, Motive Television Ltd ("Motive Dublin"), led by Anne McLoughlin and Jamie d'Alton, was in production on "The Byrne Ultimatum", an entertainment pilot, "No Place Like Home" (a multi-cultural travel series) and "Summer in the Sun" (an observational documentary series following groups of Irish students on working holidays in the United States), all for RTÉ. In association with Asgard Media, Motive Dublin also produced 10 live Gaelic Athletic Association ("GAA") Championship matches for TV3, and produced a major history of the GAA for Setanta Sports, "Part of What We Are", which was transmitted to critical acclaim in October 2008. Motive Dublin also received a Gold Disc for retail sales of its DVD "The Sound of Sunday" in Ireland, and has released a 2-disc DVD of "Part of What We Are" in Ireland.

Rumble TV produced a special for Channel 4, "My Dad: The Serial Killer" and was in early development on a large number of new projects.

Scarlet Television had an extremely busy first half, producing almost £1m-worth of programming. Among its productions during the period were "Britain's Biggest Babies" for ITV1; "50 Greatest TV Endings", presented by Cilla Black; "50 Ways to Leave your TV Lover", presented by Fern Britton; "Britney: Speared by the Paps", all for Sky1; and "The Making of a Monster" for the Crime and Investigation Network. Since the year end Scarlet Television has concluded an agreement with the BBC to produce a Christmas Special and a 5 part series with Delia Smith to mark her 40th anniversary on television.. The Christmas Special will air in December 2009.

The Group has now established an international television sales division, Motive International, in association with the Digital Rights Group ("DRG"). Under the terms of the deal DRG will provide all of the back-office functions to Motive International and has also provided a six-figure advance against future sales.

Corporate strategy

Motive's strategy has been to seek strategic stakes in small and medium-sized television production companies, whilst at the same time attempting to establish start-up companies with successful television producers. 

The board believes that the current uncertainty and lack of visibility in the television production sector is likely to continue for some time, possibly until the end of 2010. Accordingly, the Group's strategy was reviewed in early 2009 and other potential areas of investment in the television sector, downstream from production, were identified.

One of these, the provision of distribution technology for digital terrestrial television ("DTT") is now being actively pursued and a new division, Motive Digital, has been established for this purpose.  

Agreement in principle has been reached with Leonard M. Fertig, the founder and former CEO of Central European Media Enterprises Ltd, to become the CEO of this division and to drive this strategy forward.

There are many small suppliers of DTT technology globally, and, as analogue broadcasting is being phased out (this has already happened in the USA and it will be phased out by 2012 in Europe under EU law), traditional over-the-air broadcasters are seeking ways of maximising revenue and market share using DTT. DTT has many attractive new features for broadcasters compared to analogue TV, most of which require new technical solutions. Motive Digital will be a consolidator in this fragmented market and will identify target companies engaged in the development of DTT broadcaster solutions that can benefit from second-stage investment.

The board is pleased to announce that an agreement of main terms has been reached with a DTT technology company which has products in the market and the board anticipates formalising contracts shortly. The company has invented a patented DTT solution that enables broadcasters to provide additional programming for video-on-demand, pay-per-view, catch-up TV and other revenue-generating services through a DTT channel, whilst simultaneously supplying their own channel.

Under the terms of the deal Motive Digital will exploit and commercialise this system globally whilst at the same time identifying other potential opportunities in this space. Afurther announcement will be made in due course.

Outlook

Market conditions have made it very difficult to raise cash or debt for significant acquisitions. Accordingly, we are not expecting to expand our TV Production business until market conditions return to normal, and in order to adjust to prevailing market conditions, we have introduced a programme of cost reductions with our staff and suppliers. We are planning to achieve year-on-year overhead savings of 25% for 2009, equating to a reduction of £500,000 in our budgeted expenditure. Part of this reduction will be achieved through certain of our non-executive directors waiving their fees for 2008 and 2009, and executive directors and other non-executive directors reducing their compensation by 30%. The board would like to place on record its appreciation of the Group's staff and suppliers alike for their participation in this cost-reduction process.

The board believes that the growth opportunities presented by exploitation of the DTT and other digital media distribution systems opportunities are attractive and that this strategic shift for the Group will create shareholder value.

M J Pilsworth

Chairman

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2008

	Notes		2008		2007
			£		£
Revenue			4,074,480		3,135,363
Cost of sales			(3,297,343)		(2,383,970)
Gross Profit			777,137		751,393
Administrative expenses			(2,035,706)		(1,378,306)
Goodwill impairment			(258,394)		-
Operating loss			(1,516,963)		(626,913)
Financial income			29,188		33,238
Financial costs			(3,123)		(1,903)
Finance income - net			26,065		31,335
Loss before tax			(1,490,898)		(595,578)
Tax expense			(131,609)		(6,000)
Loss for the year from continuing  Operations			(1,622,507)		(601,578)
Attributable to:
Equity holders of Parent Company			(1,622,507)		(597,284)
Minority interests			-		(4,294)
			(1,622,507)		(601,578)
Earnings per share from continuing operations
Loss per share - basic and diluted	3		(.60)p		(.51)p

CONSOLIDATED BALANCE SHEET

at 31 December 2008

			2008		2007
			£		£
Non-current assets
Goodwill			401,789		660,183
Property, plant and equipment			41,336		57,170
Deferred tax asset			32,652		164,261
Total non-current assets			475,777		881,614
Current assets
Inventories			16,215		-
Trade and other receivables			379,644		454,855
Cash and cash equivalents			784,747		1,073,237
Total current assets			1,180,606		1,528,092
Total assets			1,656,383		2,409,706
Equity
Issued share capital			1,319,958		1,172,480
Share Premium			2,110,217		1,378,913
Merger reserve			155,467		155,467
Retained Earnings			(2,672,365)		(1,113,858)
Total equity			913,277		1,593,002
Current liabilities
Trade and other payables			689,399		784,128
Bank overdraft			53,707		32,576
Total current liabilities			743,106		816,704
Total equity and liabilities			1,656,383		2,409,706

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2008

	Note			2008		2007
				£		£
Cash flows from operating activities
Cash absorbed by operations		2		(1,180,382)		(559,597)
Net interest received				26,065		31,335
Net cash absorbed by operating activities				(1,154,317)		(528,262)
Cash flows from investing activities
Payments to acquire subsidiary				-		(36,188)
Cash acquired with subsidiary				-		12,020
				-		(24,168)
Payments to acquire tangible fixed assets				(44,602)		(36,502)
Net cash used in investing activities				(44,602)		(60,670)
Cash flows from financing activities
Proceeds from issue of shares				878,782		569,899
Proceeds from disposal of tangible fixed assets				10,516		-
Net cash from financing activities				889,298		569,899
Net decrease in cash and cash equivalents				(309,621)		(19,033)
Cash and cash equivalents at beginning of year				1,040,661		1,059,694
Cash and cash equivalents at end of year				731,040		1,040,661

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2008

	Share	Share	Merger	Retained	Total	Minority
	Capital	Premium	Reserve	Earnings	Parent	Interests	Equity
					Company		Total
					Equity Holders
	£	£	£	£	£	£	£
Balance at 1 January 2007	1,086,066	895,428	155,467	(551,574)	1,585,387	-	1,585,387
Loss for year	-	-	-	(597,284)	(597,284)	(4,294)	(601,578)
Minority at date of acquisition	-	-	-	-	-	4,294	4,294
Cost of share based awards	-	-	-	35,000	35,000	-	35,000
Issue of shares for cash	86,414	483,485	-	-	569,899	-	569,899
Balance at 31 December 2007	1,172,480	1,378,913	155,467	(1,113,858)	1,593,002	-	1,593,002
Loss for year	-	-	-	(1,622,507)	(1,622,507)	-	(1,622,507)
Cost of share based awards	-	-	-	64,000	64,000	-	64,000
Issue of shares for cash	147,478	780,871	-	-	928,349	-	928,349
Transaction costs	-	(49,567)	-	-	(49,567)	-	(49,567)
Balance at 31 December 2008	1,319,958	2,110,217	155,467	(2,672,365)	913,277	-	913,277

1 GENERAL INFORMATION 

Motive Television plc and its subsidiaries are independent television programme producers.

This preliminary announcement is authorised for issue by the Board on 17 June 2009. The financial information has been prepared in accordance with International Financial Reporting Standards adopted by the European Union and applying the same accounting policies and bases of calculation and estimation as applied in the previous annual financial statements.

2 CASH ABSORBED BY OPERATIONS

	2008		2007
	£		£
Operating loss	(1,516,963)		(626,913)
Depreciation of plant and equipment	49,920		24,709
Goodwill impairment	258,394		-
Increase in inventories	(16,215)		-
Decrease (increase) in receivables	75,211		(234,192)
(Decrease) increase in payables	(94,729)		241,799
Share based payments	64,000		35,000
Net cash outflow from operations	(1,180,382)		(559,597)

3 LOSS PER SHARE

 

The loss per share is based on a loss for the year attributable to equity holders of the Parent Company of £1,622,507 (2007: £597,284) and the weighted average number of ordinary shares in issue for the year of 272,498,662 (2007: 117,865,340).

 

The exercise of the outstanding options and warrants would reduce the loss per share and hence have an anti-dilutive effect.

There are 70,874,919 (2007: 48,753,143) shares that could potentially be issued under the terms of options and warrants that will potentially reduce future earnings per share.

4 STATUS OF THIS ANNOUNCEMENT

 

The financial information is unaudited and does not constitute statutory accounts within the meaning of Section 240(5) of the Companies Act 1985 ('the Act'), but have been extracted therefrom. The financial statements for the year ended 31 December 2007, on which the auditors gave an unqualified opinion, have been filed with the Registrar of Companies and contain no statement under Sections 237(2) or (3) of the Act. The auditors have reported their opinion on the financial statements for the year ended 31 December 2008 today. The auditors gave an unqualified opinion, and contain no statement under Sections 237(2) or (3) of the Act. The auditors report included the following paragraph by way of emphasis of matter -

Emphasis of matter-going concern

In forming our opinion on the financial statements we have considered the adequacy of the disclosures made in note 3 to the financial statements concerning the dependency of certain subsidiary companies on the parent company. Unless new commissions are won in the short term there is a significant risk that the parent company will have insufficient resources to further finance the continuation of the activities of certain of the subsidiary companies. These conditions, along with the other matters explained in note 3 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the ability of certain of the subsidiary companies to continue trading. The financial statements do not include the adjustments that would result from the closure of the operations of any of the subsidiary companies.

The relevant section of note 3 referred to is reproduced below -

Liquidity risk and going concern

The ability of the operating subsidiary companies to continue trading will each depend on whether they are successful in obtaining commissions on numerous proposed programmes that are currently with commissioning editors of a number of broadcasting companies. If the companies are not successful in winning sufficient new commissions within various periods within the next twelve months then each company is likely to require the injection of further funds to finance operating overheads. The current market for new television programmes is difficult and broadcasters are both commissioning fewer new programmes and taking longer to make decisions before putting programmes into production.

The directors have carefully considered the Group working capital position and concluded that unless new commissions are won in the short term there is a significant risk that it will have insufficient resources to finance the continuation of the activities of some or all of the subsidiary companies. The situation continues to be carefully monitored and a strategy has been put in place for each operating subsidiary such that operating activities will be terminated if sufficient new commissions are not won in order to meet ongoing operating overheads.

If it were necessary to close the operations of any of the subsidiary companies provisions may be required for costs arising on closure, against the carrying value of goodwill in the Group accounts, and the carrying value of investments and subsidiary company debt in the accounts of the parent company.

The financial statements have not yet been filed with the Registrar of Companies.

Copies of the Report and Financial Statements for the year ended 31 December 2008 will be sent to shareholders by 24 June 2009, and will be available both for collection from 21-25 St Anne's Court, London, W1F 0BJ and on the Company's website www.motivetelevision.co.uk after 24 June 2009.

 

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Motive Television Plc