28th Sep 2006 07:02
Works Media Group (The) PLC28 September 2006 THE WORKS MEDIA GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 28 September 2006 The Works Media Group Plc, whose principal activity is the international saleand UK distribution of feature films, announces today its interim results forthe six months ended 30 June 2006. Highlights include: • Film Distribution - The Works UK Distribution • Business development ahead of management expectations. • DVD and internet output deal signed with Universal Pictures. • Terrestrial VOD output deal signed with NTL/Telewest's "FilmFlex". • PayTV deal signed with Sky. • Six new titles acquired and sub-licensed to Universal demonstrate sustainability and scalability of the business model. • Operating profit before central management charges achieved despite early position in the cycle of rights exploitation. • Film Sales - The Works International • Unit continues to represent critically acclaimed material. • Acquisition fund under construction. • Financials • Half year loss of £0.17 million is better than management expectations. • Turnover 5% ahead of interim 2005. Crispin Barker, non-executive Chairman of The Works Media Group Plc said: - "I am pleased to report the refocus and expansion of the business is wellunderway. Our steady acquisition of UK rights and the contracting of downstreamsub-licensing arrangements with Universal Pictures, FilmFlex and Sky, shouldensure the scalability of the distribution activity in the years ahead. Ourinternational sales agency continues to represent films of the highest calibreand The Works, which is the UK's only vertically integrated and quoted filmcompany, is now very well positioned in the marketplace." For further information, please contact: The Works Media Group 020 7612 0030Crispin Barker / Chris Auty / Norman Humphrey CHAIRMAN'S STATEMENT Since my last report in May this year on the 2005 results, the Company hascontinued to consolidate the progress of the UK Distribution division which itlaunched a year ago. By year's end the subsidiary will have released six titlesinto the cinemas; initial results from the Universal home entertainment dealwhich was struck at the beginning of the year are very promising; and we havelined up a pipeline of new products for release in 2007. Additionally, it should be understood that the company has been laying downsignificant stock for future revenue generation: as individual rights (Cinema,Video on Demand (VOD) Pay Per View (PPV), DVD, Pay TV, Free TV), are releasedsequentially over time, it will be the end of 2007 before the company is finallyexploiting the entirety of rights within titles first acquired during 2005. Forexample, as the company moves forward into 2007 the distribution business willrealise income streams from the VOD and PPV "windows" (using output arrangementsrecently contracted with FilmFlex and Sky). It can also look forward to revenuesbeginning to come on stream from free and pay television, for rights acquired in2005-2006. This two year build-up to full multi-media rights exploitation is anunderstandable and acceptable consequence of starting a distribution businessfrom scratch, rather than expending considerable sums on the acquisition of apre-existing business. The UK Distribution business is now in a position where it can be scaled byacquiring and releasing increased amounts of product within the existingoverhead structure. The same is also true for our International Sales business,which continues to attract good quality films for sale. We intend to expand thisactivity by offering modest minimum guarantees thereby attracting more productfor sale. During the six months to 30th June 2006 The Works Media Group made a retainedloss of £175,000 on slightly increased turnover of £756,000. Administrationexpenses grew by £68,000 reflecting our move into UK Distribution. The 2006Interim result is better than management's expectations. The Group had £493,000 of cash as at 30th September 2006, after investing some£655,000 in the acquisition of UK rights during the period. This significantinvestment in film rights for future revenue generation is reflected in stockand work in progress on the balance sheet. As disclosed in previous statements, the company has been evaluating a move intoUK Exhibition (cinema ownership and operations). Although we came very close torealising this objective on two separate occasions in the first half we have nowdecided to close off any further costs in this area and concentrate on our twocore businesses. In the first half of 2006 the one-off exploratory cost of thisactivity accounted for approximately half of the net loss in the period. Crispin Barker28 September 2006 MANAGING DIRECTOR'S STATEMENT OVERVIEW I'm pleased to report continuing progress on the development of the distributionbusiness and a stable performance, despite difficult market conditions, in ourinternational sales activity during the period. Both UK distribution andinternational sales delivered profitable underlying performance in the periodprior to central management charges, and we continue to focus on increasing thethrough-put within both divisions - an outcome which can be achieved without anyshort-term increase in fixed costs. The distribution led strategy has also ledus to look into the UK cinemas market, where consolidation in the sector and OFTrequirements forcing the divestment of certain sites from the main cinemacircuits appeared to throw up an opportunity. However, in the period it becameclear that entry into the market required very significant capital investmentand accordingly we do not intend to pursue this activity further. Theexploratory cost accounts for approximately half of the net loss in the period. UK DISTRIBUTION ACTIVITY We are confident that the business model is on target and that the originaldecision to move upstream into UK distribution was well timed. Our cinemareleases during the period include the children's film "Greyfriar's Bobby", thethriller "Three" and the drama "Innocent Voices". The initial outcomes of thehome entertainment deal struck with Universal at the beginning of the year arenow coming through and we are pleased to report that our initial titles releasedon video/DVD ("Heidi", "Greyfriar's Bobby", "Three") are already matching orexceeding their targets. The product input pipeline for the year ahead looksstrong with titles such as "Shortbus", "The Upside of Anger", "Havoc", "RiverQueen", "The Truth About Love and "Ten Canoes" (the Australian submission forBest Foreign Film Oscar) all scheduled for release in the coming months. On theoutput pipeline, in addition to the successful development of the Universal homeentertainment contract, we are pleased to report that we have now closedsignificant deals with Sky for pay per view, and with Filmflex for terrestrialvideo on demand (which will see the first two titles, being "Heidi" and"Greyfriar's Bobby" launched on the Filmflex service this October half-term).The continuing acquisition of rights is reflected in the increased stock line onthe balance sheet, and we look forward to a successful 2007, by which time thecompany will be securing revenues from cinema, video, DVD, PPV, VOD and paytelevision exploitation as the titles become available for exploitation in thosesequential media. INTERNATIONAL SALES AND PRODUCTION The highlight of the first half was the presentation of "The Road to Guantanamo"at the Berlin Film Festival. As well as securing the prestigious Silver Bearprize, the film generated some $2m in gross sales and reinforced the company'sposition as a leading supplier of quality products. Existing films, including "ACock and Bull Story", "The Proposition" and "Wah-Wah" were released in the UKand the US and were critically extremely well received. The Works is currentlyconcluding a multi-territory rights sale on remaining territories for "TheProposition" to a major US company. At the Cannes Film Festival the companypresented three new films ("Free Jimmy", "Scenes of a Sexual Nature" and"Congorama"). During the late spring, a further three films were added to thefuture product pipeline. Sarah Gavron's adaptation of the Monica Ali bestseller"Brick Lane", John Pilger's controversial documentary "The War on Democracy" andOliver Parker's comedy "I Really Hate My Job" (starring Neve Campbell, AnnaMaxwell-Martin and Danny Huston) are all in the latter stages of production forlaunch in early 2007. Shortly after the end of the period the companysuccessfully launched two recently completed films at the Toronto market: "Thisis England" directed by Shane Meadows, and "Venus" directed by Roger Michell("Notting Hill") and starring Peter O'Toole and Leslie Philips. Both werecritically acclaimed, and the latter film, which opens in the US through Miramaxin December is being tipped by trade publications and magazines such as Newsweekfor Oscar consideration. Market conditions continue to be difficult but initialindications from Toronto are promising. Additionally, during the early summerthe company carried out a full review and recataloguing of its film libraryassets in preparation for its first-time attendance at the Autumn MIPCOM market- the premier worldwide television rights market - at which we shall belaunching our catalogue of TV availabilities. Chris Auty28 September 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE SIX MONTHS ENDED 30 JUNE 2006 12 Months 6 Months Ended 6 Months Ended Ended 30 June 2006 30 June 2005 31 Dec 2005 Unaudited Unaudited Audited --------- --------- -------- Notes £000 £000 £000 Turnover 3Continuing operations 756 719 3,959 Cost of sales (88) (36) (3,305) --------- --------- --------Gross profit 668 683 654 Administrative expenses (839) (771) (1,919) Selling and distributionexpenses (21) (34) (65) --------- --------- --------Operating lossContinuing operations (192) (122) (1,330) Net interest 17 26 46 --------- --------- --------Loss on ordinary activitiesbefore taxation (175) (96) (1,284) Taxation - - - --------- --------- --------Loss on ordinary activitiesafter taxation (175) (96) (1,284) Equity minority interests - - - --------- --------- --------Retained loss (175) (96) (1,284) --------- --------- --------Earnings per shareBasic (pence) 4 (0.41) (0.23) (3.00) --------- --------- -------- CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2006 As at As at As at 30 June 30 June 31 Dec 2006 2005 2005 Unaudited Unaudited Audited --------- --------- -------- Notes £000 £000 £000 Fixed assetsGoodwill 2,262 2,367 2,262Tangible assets 35 28 40Investments 100 - 100 --------- --------- -------- 2,397 2,395 2,402 Current assetsStocks 686 31 31Debtors 1,012 1,083 697Cash at bank and in hand 6 732 2,268 1,542 --------- --------- -------- 2,430 3,382 2,270 Creditors: amounts falling duewithin one year (1,845) (1,300) (1,473) --------- --------- --------Net current assets 585 2,082 797 --------- --------- --------Total assets less currentliabilities 2,982 4,477 3,199 Creditors: amounts falling dueafter more than one year (130) (263) (172) Provision for liabilities & charges - - - --------- --------- --------Shareholders' funds 2,852 4,214 3,027 --------- --------- --------Capital and reservesShare capital 4,290 4,289 4,290Share premium account 6,458 6,458 6,458Profit and loss account (7,734) (6,371) (7,559) --------- --------- -------- 3,014 4,376 3,189 Minority interest (162) (162) (162) --------- --------- --------Shareholders' funds 2,852 4,214 3,027 --------- --------- -------- The accompanying accounting policies and notes form an integral part of thesefinancial statements. CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2006 12 Months 6 Months Ended 6 Months Ended Ended 30 June 2006 30 June 2004 31 Dec 2005 Unaudited Unaudited Audited --------- --------- -------- Notes £000 £000 £000 Net cash (outflow)/inflowfrom operating activities 5 (821) 1,621 (967) Return on investments andservicing of finance 17 20 46 Taxation - - - --------- --------- --------Operating cash flow aftertaxation and finance costs (804) 1,641 (921) Capital expenditurePurchase of tangible fixedassets (6) (1) (29)Purchase of investment - - (100) Acquisitions and disposals - - - Equity dividends paid - - - Financing Issue of shares - - 68 --------- --------- --------(Decrease)/increase in cashduring the period 6 (810) 1,640 (982) --------- --------- -------- NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2006 1. Basis of Preparation The interim figures for the six-month period to 30 June 2006 are unaudited. Thecomparative figures for the 12 month period ended on 31 December 2005 areextracts from the published accounts for that year and do not constitute fullstatutory accounts. A copy of the full accounts for that period, on which theauditors have issued an unqualified report, has been delivered to the Registrarof Companies. 2. Accounting Policies The financial statements have been prepared in accordance with applicable UnitedKingdom accounting standards and under the historical cost convention. The principal accounting policies of the Group have remained unchanged from theprevious year. 3. Turnover Turnover of the Group for the period has been derived from its principalactivity, the management of development, financing, production and distributionof feature films and the international sale of film rights. 4. Earnings per share The calculation of basic earnings per ordinary share is based on earnings of £(175,000). The weighted average number of ordinary shares in issue during thesix month period ended 30 June 2006 was 42,899,208 ordinary shares for basicearnings per ordinary share. Diluted earnings per share are not materiallydifferent from basic earnings per share. 5. Net cash inflow from operating activities 6 Months Ended 6 Months Ended 12 Months 30 June 2006 30 June 2005 Ended Unaudited Unaudited 31 Dec 2005 Audited --------- --------- -------- £000 £000 £000 Operating loss (192) (122) (1,330) Depreciation 11 8 22Loss on disposal of fixed assets - - -Amortisation of goodwill - 105 210(Increase)/Decrease in stocks (655) - -(Increase)/Decrease in debtors (315) 257 643Increase/(Decrease) in creditors 330 (594) (512) --------- --------- --------Operating cash flow (821) (346) (967) --------- --------- -------- 6. Reconciliation of net cashflow to movement in net fund 6 Months Ended 6 Months Ended 12 Months 30 June 2006 30 June 2005 Ended Unaudited Unaudited 31 Dec 2005 Audited --------- --------- -------- £000 £000 £000 Decrease in cash in the periodand change in net fundsresulting from cash flows. (810) (256) (982) Net funds at 1 January 2006 1,542 2,524 2,524 --------- --------- --------Net funds at 30 June 2006 732 2,268 1,542 Less: Production andDevelopment funds held on trustfor third parties. (239) (292) (264) --------- --------- --------Available cash at bank and inhand 493 1,976 1,278 --------- --------- -------- 7. Publication of Non-Statutory Accounts The financial information set out in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. Thefigures for the year ended 31 December 2005 have been extracted from thestatutory financial statements that have been filed with the Registrar ofCompanies. The auditors' report on those financial statements was unqualifiedand did not contain a statement under Section 237(2) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Winking Studios