Final Results and Annual Report

MediaZest Plc ("MediaZest", the "Company" or "Group"; AIM: MDZ) Final Results for the Year Ended 31 March 2014 CHAIRMAN'S STATEMENT Introduction The results for MediaZest plc (the "Group") for the year ended 31 March 2014incorporate the results of its subsidiary, which is wholly owned. Results for the year and Key Performance Indicators Turnover for the year was £2,944,000 (2013: £1,850,000), cost of sales was £1,978,000 (2013: £941,000) and the Group made a loss for the year, aftertaxation, of £653,000 (2013: £551,000) after finance costs of £128,000 (2013: £138,000) and having paid administrative expenses of £1,513,000 (2013: £1,322,000). The basic loss and diluted loss per share was 0.09p (2013: 0.15p). The Grouphad cash in hand of £268,000 (2013: £1,000) and a bank overdraft of £nil (2013:£92,000) at the year end and an invoice discounting facility over the debtorsof Touch Vision Limited of which £342,000 (2013: £108,000) was in use at 31March 2014. As at 31 March 2014, the Group had a current maximum limit of £350,000 (2013: £350,000) under the existing invoice discounting facility whichwas increased to £500,000 on 14 April 2014. As at 31 March 2014, the Group also had loans from shareholders of £200,000(2013: £530,000) and interest on those loans outstanding of £2,000 (2013: £153,000). Business overview The Group operates two trading divisions through its wholly owned subsidiaryTouch Vision Limited: Touch Vision (TV) and MediaZest Ventures (MV). TV tradesas an Audio Visual supply and installation company across Education, PublicSector, Retail and Corporate markets, whilst MV operates as a `digital out ofhome' creative agency predominantly in the Retail Sector. The year was one of positives and negatives: in terms of revenue the Groupperformed well during the year with substantial growth of 59% and progress onthe operational side. In addition, the £865,000 fund raising in January 2014enabled the Group to strengthen and degear its balance sheet by redeeming some£300,000 worth of debt. The securing of the high profile FIFA World Cup TrophyTour contract with Coca-Cola, complemented by a large Education and a CorporateSector project, gave the Company a platform to build upon. Set against that,the loss of the Group's largest service and maintenance contract as aconsequence of HMV's entry into administration in January 2013 had a direct andimmediate impact on Q4 operating margins. These factors coupled with the highcost of servicing some £500,000 worth of debt had an impact on the Group'sfinancial results. Notwithstanding, the Board has also embarked upon asubstantial investment in sales and marketing to grow the business for thefuture. This is showing benefits in the financial year ending 31 March 2015,but was a contributory factor in the increase in losses in the financial yearended 31 March 2014. Fundraising and strengthening of the balance sheet On 31 December 2013, the Company announced a placing of 247,142,800 shares at0.35p per share to raise £865,000 before expenses, and an issue of 47,479,714new shares through the conversion of loan interest amounting to £166,179 at aprice of 0.35p per share. The shares were admitted to AIM in January 2014. Previous to this, on 8 July 2013, the Company completed a placing of143,200,000 shares at 0.25p per share to raise £358,000. These gross proceedsincluded conversion of £50,000 of loan interest at the placing price. Net cashproceeds were £288,000 (of which £200,000 was used to pay down debt). Thecombined effect of this has been to improve the balance sheet significantlyand, despite the ongoing losses, to improve the Company's cash position at 31March 2014. Revenues and margins The results for the period reflect a significant improvement in revenuecompared to recent years and the Group's best top line performance since 2008.There were three particularly important large projects delivered during thisfinancial year. First, Coca-Cola provided the Company with the biggest of these by way of acontract to supply large scale audio-visual installations for the FIFA WorldCupTM Trophy Tour presented by Coca-Cola. This took the Company to 48 countriesover the 8 month tour and involved working closely with brand experiencepioneers, Ignition Inc. The Company also worked with Coca-Cola's head officeteam in Atlanta, USA, to deliver the project and provided engineering supportand installation team leadership at all 48 events with a 100% success ratedespite intense time pressure and delivery challenges at each location. Thecontract was completed in May 2014 and based on its successful delivery, theGroup hopes to work with both parties again in the future whilst acknowledgingthat, by their nature, projects such as this only come along every few years. Second, a large University installation project was delivered predominantly inthe first half of 2014. This project involved the Company's entire engineeringworkforce at various points during delivery and in total generated revenue forthe Company in excess of £400,000. Some of these revenues will be recognised inthe coming financial year due to delays in the building process outside ofMediaZest's control affecting timing of delivery. Finally, the Company completed two substantial Corporate sector projects in theperiod; especially pleasing following the creation of and investment in a newCorporate sales department during the first half of the year. One of theseprojects was a high end multi-media presentation system for a Private Equityclient and the second a highly advanced video wall solution for a buildingrefurbishment project at Bevis Marks, in the City of London. The growth in revenue was achieved through the large contract wins detailedabove along with additional work with existing customers such as Samsung, O2,Kuoni and JD Sports and the University of Essex, plus new customers such asPfizer who the Company also worked with on a multi-national basis. The gross profit margin as a percentage of revenue was 33% (2013: 49%) mainlyreflecting a number of low margin equipment supply-only contracts with clientsin the Education sector. In addition, the reduced level of service andmaintenance work provided for HMV following its administration in January 2013had an impact. Finally, the average margin on the large Coca-Cola contract ofapproximately 36% had a one off impact in lowering gross margins in this year.Based on current business wins, the Board expects this trend to reverse in theyear ending 31 March 2015. Cost base Administrative expenses increased in the year predominantly due to much largerinvestment in the sales and marketing process than has been possible in recentyears. In May 2013, the Group took on an experienced Corporate Sales Consultant andthis was followed by further investment in a new Sales/marketing Executive andan additional Sales Consultant in the autumn of 2013. The Group also investedin a showroom in London to demonstrate its unique technology offering. Theseactions have placed the Company in an improved position to grow revenues butinvolve short term investment to build pipeline and bring opportunities tofruition. The single largest example of investment in the marketing process has been theCompany's attendance at a global trade-show, Euroshop, in partnership with SFDLtd. SFD Ltd provide shop mannequin, shop fit and visual merchandising servicesto many large retailers and fashion brands on a global basis. This partnership,whilst relatively informal, has already shown promise with small window displayprojects already delivered for Marks & Spencer and H&M, both existing SFDclients. The work for Marks & Spencer has been shortlisted for a Retail WeekInteriors Award in the "Best Use of Design with Technology in-store" category. MediaZest's Board considered this partnership to be an important and fruitfulstep in the future development of the Company. Interest costs continued to be high until the end of calendar 2013, when,following the successful second placing, the Group paid down a largerproportion of outstanding debt. This mitigated interest costs in the year ended31 March 2014 and will lead to significant reductions in interest paymentsgoing forward. Product development The Board highlighted three specific areas in which it was developing uniqueproducts in the announcement of December 13 2013 as a means to improve anddevelop recurring revenues in order to provide the Group with a unique point ofdifference to other companies that operate in similar markets. The Group has concentrated on the development of the audience measurement andhologram systems based on extremely positive feedback from potential customers. MediaZest `soft' launched the first version of the audience measurement service"MediaZest Retail Analytics" in the first week of July to a wide potentialcustomer base at a Samsung marketing event and expects trial deployments tobegin shortly, with negotiations to do so ongoing with several potential retailcustomers. The Group already has a large number of enquirors expressinginterest in this product from demonstrating the Beta version in its showroomduring client meetings. The Board believes this product to be particularlyattractive to retailers on an ongoing basis and that it will assist in movingrevenue streams onto a more consistent basis. Designs for the hologram unit are now finalised, with a test build nowscheduled for autumn 2014 with a launch anticipated shortly thereafter. Outlook The Group has made good progress in the last 12 months, and this has enabled itto complete two placings to institutional and other investors to raise £1,223,000 (before expenses and including conversion of interest). Theseplacings have allowed MediaZest to invest in the strategies highlighted todrive additional business in the future and develop new products for which theBoard believes there are substantial markets. There has been a large amount of time expended upon the development of theRetail Analytics product in the latter part of the Financial Year ending 31March 2014 and the first quarter of the new Financial Year ending 31 March2015.Further time and resource has been taken up by the final project deliveryfor Coca-Cola between September 2013 and May 2014. This has not improvedperformance in the first quarter of the Financial Year ending 31 March 2015.However, the second quarter is showing substantial improvement with severalimportant business wins announced on 8 August 2014 and more expected prior tothe end of the half year as a direct result of the changes made during the lasttwelve months. The core strategy continues to be the transition of the Group's revenue basetowards more ongoing, contractual-type business, and away from dependency onlarge scale projects which are difficult to predict and suffer the vagaries oftiming. As such, efforts are being focussed on larger scale roll-outopportunities which naturally take longer to consummate than short termcampaigns. The Directors believe this strategy is starting to pay dividends inthe current quarter with the future pipeline in FY 2015 and beyond looking muchimproved. Lance O'Neill Chairman Enquiries: Geoff Robertson Chief Executive Officer MediaZest Plc 020 7724 5680 Gavin Burnell / Edward Hutton Nominated Adviser Northland Capital Partners Limited 020 7382 1100 Claire Noyce / William Lynne / NiallPearson Broker Hybridan LLP 020 3713 4581 / 4582/ 4583 Notes to Editors: About MediaZest MediaZest is a creative audio visual company that specialises in providinginnovative marketing solutions to leading retailers, brand owners andcorporations, but also works in the public sector in both the NHS and Educationmarkets. The Group supplies an integrated service from content creation andsystem design to installation, technical support and maintenance. MediaZest wasadmitted to the London Stock Exchange's AIM market in February 2005. For moreinformation, please visit www.mediazest.com CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2014 Note 2014 2013 £'000 £'000 Continuing operations Revenue 2,944 1,850 Cost of sales (1,978) (941) Gross profit 966 909 Administrative expenses (1,513) (1,322) Operating loss 2 (547) (413) Finance costs (128) (138) Loss on ordinary activities before taxation (675) (551) Tax on loss on ordinary activities 22 - Loss for the year and total comprehensive (653) (551)loss for the year attributable to the ownersof the parent Loss per ordinary 0.1p share Basic 3 (0.09p) (0.15p) Diluted 3 (0.09p) (0.15p) CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2014 2014 2013 £'000 £'000 Non-current assets Goodwill 2,772 2,772 Property, plant and machinery 60 63 Total non-current assets 2,832 2,835 Current assets Inventories 95 123 Trade and other receivables 766 515 Cash and cash equivalents 268 1 Total current assets 1,129 639 Current liabilities Trade and other payables (1,522) (1,155) Financial liabilities (200) (707) Total current liabilities (1,722) (1,862) Net current liabilities (593) (1,223) Non-current liabilities Financial liabilities - - Total non-current liabilities - - Net assets 2,239 1,612 Equity Share capital 3,174 2,736 Share premium account 4,871 4,029 Share options reserve 7 7 Retained earnings (5,813) (5,160) Total equity 2,239 1,612 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2014 Share Share Share Retained Total Options Capital Premium Reserve Earnings Equity £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2012 2,587 4,004 7 (4,609) 1,989 Loss for the year - - - (551) (551) Total comprehensive income for the - - - (551) (551)year Issue of share capital 149 30 - - 179 Share issue costs - (5) - - (5) Balance at 31 March 2013 2,736 4,029 7 (5,160) 1,612 Loss for the year - - - (653) (653) Total comprehensive income for the - - - (653) (653)year Issue of share capital 438 951 - - 1,389 Share issue costs - (109) - - (109) Balance at 31 March 2014 3,174 4,871 7 (5,813) 2,239 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2014 Note 2014 2013 £'000 £'000 Net cash used in operating activities (418) (385) Taxation 22 - Cash flows used in investing activities Purchase of plant and machinery (36) (16) Disposal of plant and machinery 3 3 Purchase of leasehold improvements (3) - Net cash used in investing activities (36) (13) Cash flow from financing activities Repayment of bank borrowings (8) (17) Other loans (77) 77 Shareholder repayments (330) - Interest paid (128) (39) Proceeds of share issue 1,389 179 Interest repaid with equity (169) - Loans repaid with equity (11) - Share issue costs (109) (5) Net cash generated from financing activities 557 195 Net increase/(decrease) in cash and cash 125 (203)equivalents Cash and cash equivalents at beginning of year (199) 4 Cash and cash equivalents at end of the year 4 (74) (199) NOTES TO THE FINANCIAL INFORMATION 1. BASIS OF PREPARATION The financial information set out above does not constitute the Company'sstatutory financial statements for the years ended 31 March 2013 and 31 March2014 within the meaning of section 434 of the Companies Act 2006. Statutory financial statements for the year ended 31 March 2013 have beendelivered to the Registrar of Companies and those for the year ended 31 March2014 will be delivered in due course. The auditors have reported on the financial statements for the year ended 31March 2013; their report was unqualified and did not include references to anymatters to which the auditors drew attention by way of emphasis withoutqualifying their report, and did not contain a statement under section 498(2)or (3) of the Companies Act 2006. The auditors have reported on the statutory financial statements for the yearended 31 March 2014; their report was unqualified, and did not includereferences to any matters to which the auditors drew attention by way ofemphasis without qualifying their report, and did not contain a statement undersection 498 (2) or (3) of the Companies Act 2006. The statutory financial statements for the year ended 31 March 2014, from whichthe financial information included in this announcement is extracted, have beenprepared in accordance with International Financial Reporting Standards (IFRS)as adopted by the European Union. Going concern The directors have carefully considered the going concern assumption on thebasis of financial projections and the factors outlined below. The directors have considered financial projections based upon known futureinvoicing, existing contracts, pipeline of new business and the increasingnumber of opportunities it is currently working on, particularly in the retailsector. In addition, these forecasts have been considered in light of the ongoingeconomic difficulties in the UK and global economy, previous experience of themarkets in which the company operates and the seasonal nature of those markets,as well as the likely impact of ongoing reductions to public sector spending.These forecasts indicate that the company will generate sufficient cashresources to meet its liabilities as they fall due over the 12 month periodfrom the date of the approval of the accounts. The directors have obtained a letter of support from a shareholder who hasprovided a loan to the Group totalling £200,000 at 31 March 2014 (2013: £530,000) stating that they will not call for repayment of the loan within the12 months from the date of approval of these financial statements or, ifearlier, until the Group has sufficient funds to do so. As a result the directors consider that it is appropriate to draw up theaccounts on a going concern basis. Accordingly, no adjustments have been madeto reflect any write downs or provisions that would be necessary should theGroup prove not to be a going concern, including further provisions forimpairment to goodwill and investments in Group companies. 2. OPERATING LOSS 2014 2013 £'000 £'000 This is stated after charging/(crediting): Depreciation of owned assets 39 47 Pension contributions 5 5 Operating lease rentals paid: - land and buildings 38 75 - other 11 17 3. LOSS PER ORDINARY SHARE 2014 2013 £'000 £'000 Losses Losses for the purposes of basic and diluted 653 551earnings per share being net loss attributable toequity shareholders 2014 2013 Number of shares Number Number Weighted average number of ordinary shares for the 700,199,072 367,675,618purposes of basic earnings per share Number of dilutive shares under option or warrant - - Weighted average number of ordinary shares for the 700,199,072 367,675,618purposes of dilutive loss per share Basic loss per share is calculated by dividing the loss attributed to ordinaryshareholders of £653,000 (2013: £551,000) by the weighted average number ofshares during the year of 700,199,072 (2013: 367,675,618). The diluted loss per share is identical to that used for basic loss per shareas the exercise of warrants and options would have the effect of reducing theloss per share and therefore is not dilutive. 4. CASH AND CASH EQUIVALENTS The Group The Group The Company The Company 2014 2013 2014 2013 £'000 £'000 £'000 £'000 Cash held at bank 268 1 9 1 Bank overdraft - (92) - - Invoice discounting (342) (108) - -facility (74) (199) 9 1 5. AVAILABILITY OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS The Report and Financial statements for the year ended 31 March 2014 areavailable on the Company's website: www.mediazest.com and will shortly beposted to shareholders.