29th Sep 2009 07:00
29 September 2009
THE WORKS MEDIA GROUP PLC
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2009
The Works Media Group Plc ("The Works Media Group" or "the Group") whose principal activity is the international sale and UK distribution of feature films announces today its interim results for the six months ended 30 June 2009.
Financial Highlights
Turnover for the period decreased by 10% to £1,234,000 (2008:£1,384,000)
Gross margin increases from 43% to 48%
Loss before taxation of £365,000 (2008 loss £340,000)
Cash available to the Group of £309,000 (2008: £411,000)
Corporate Highlights
Successful execution of strategy to transform business.
Fundraising underway.
Film Distribution - The Works UK Distribution
4 films released in cinemas and 4 on DVD during the six months.
Universal Pictures released all titles on DVD under output agreement.
Multi-media rights to 36 titles acquired to date on 20 year licences.
"Mongol" on course to be most successful film ever released by The Works.
Film Sales - The Works International
Servicing arrangement with Quickfire Films to finance substantial increase in future revenues.
Films contracted for sale in 2010.
Critical acclaim for The Cove and "Anvil! The Story of Anvil"
Costa Theo, non-executive Chairman of The Works Media Group said: -
"Although the immediate outlook remains challenging, change is underway at The Works Media Group. New revenue streams are being targeted in UK Distribution and a fundamental repositioning of The Works International has begun. The Group is well positioned for future growth but needs to be refinanced in order to take advantage of the obvious opportunities. "
For further information, please contact:
The Works Media Group plc 020 7612 0030
Norman Humphrey, CEO
Dowgate Capital Advisers Limited 020 7492 4777
Lindsay Mair/Antony Legge
These interim results are also available on the Group's web site: www.theworksmediagroup.com
CHAIRMAN'S STATEMENT
OVERVIEW
The first half of 2009 has seen a continuation in performance at The Works Media Group. Though the Group is yet to be profitable, the loss for the period, £365,000, was not as severe as expected by the management at the outset of the year. This is due mainly to the excellent performance of The Works UK Distribution's 2008 title "Mongol", which continues to sell well on DVD and has improved revenue from that division's rights library.
The UK film distribution market, probably the second largest in the world, has continued to be competitive in 2009. Well capitalised UK distribution companies are competing fiercely for quality titles, which is keeping acquisition costs high. Marketing costs also remain high making it costly to achieve visibility in a crowded market and against many films' large advertising budgets. The Works UK Distribution continued its strategy of reducing the number of films it releases in order to preserve cash until this frenetic activity in the UK market settles. In the first half of 2009 we released four films as opposed to the desired rate of one per month. As our UK division is currently responsible for approximately 85% of the Group's turnover, this reduced activity continues to impact on Group turnover which was £1,234,000 in the first half of this year as compared to £1,384,000 in the first half of 2008. On a positive note, competition between our larger competitors is very costly for them and the recent modest improvement of the sterling dollar exchange rate has meant that acquisition has become marginally easier, at least for US content.
I am pleased to report the transformation of The Works International continues apace. The new managing director of the subsidiary, Carl Clifton, has scaled up the division's sales performance, selling in excess of $1,000,000 worth of rights at the Cannes Film Festival in May, the benefit of which should be experienced over the next eighteen months. This result is considerably better than the company's sales activity at the Cannes Film Festival of 2008. Carl has also begun the difficult task of altering the brand's perception in the marketplace and the company is beginning to be perceived as a purveyor of commercial art films and documentaries such as The Cove, as opposed to strictly art house. I expect in the next six months, Carl will progress this transformation further so that The Works International is perceived as a sales company of quality, commercial films.
FUND RAISING
As mentioned in my previous note, the board recognises that if the Group is to take advantage of the considerable opportunity presented by its vertical integration and market positioning, it will require further funding going forward. To this end, our CEO, Norman Humphrey has continued and expanded upon his discussions with potential funding sources and we are confident that his endeavours will conclude in a positive outcome. I also feel that as the global "credit crunch" appears to be receding, we are well positioned to take advantage of investors returning to the market.
BOARD CHANGES
I am sorry to announce the resignation of Crispin Barker from the board of directors. Crispin has departed to pursue other opportunities and his experience and business acumen will be missed.
CURRENT OUTLOOK AND FUTURE PROSPECTS
Market conditions continue to be demanding for the Group. This has not been unexpected by the board, and we have continued to fight to preserve our position, mainly by continuing to look for opportunities to reduce Group overhead.
The executives are continually looking for ways to expand the business into other areas. For example, Mick Southworth, the UK's managing director, has spearheaded a drive to become involved in films from script stage, and this has resulted in the impending production of the film "4321" which the Works UK will distribute in the UK. However, the most opportune way of increasing capacity at the Works is through a capital injection.
The Works International expects to see further growth in the latter half of 2009 as new titles such as "Beautiful Kate" begin their sales cycle at the Toronto Film Festival and the American Film Market. The relationship with Quickfire has developed and this is reflected in the acquisition of titles such as "Glorious 39","The Cove" and "Prima Linea".
There are good indications that the Group will emerge from the financial crisis in a better condition than it was before and will be in a position to capitalise on any opportunities which arise from the improved economic marketplace.
Costa Theo
30 September 2009
CHIEF EXECUTIVE'S REPORT
OVERVIEW
Trading conditions are difficult. Global film production remains depressed and competition, scarcity and exchange rate movements align to increase the cost of rights acquisition. The Works has temporarily reduced the scale of its distribution activity to "ride out the storm", but I believe the Group is well positioned for the inevitable economic recovery.
PERFORMANCE
Consolidated turnover during the six months to 30 June 2009 was £1,234,000, 10% lower than the £1,384,000 achieved during the first half of 2008. The decrease in turnover is a direct consequence of a deliberate policy introduced during the second half of 2008 to reduce distribution activity and preserve cash. Fortunately our assessment of the speed of general economic recovery is better today than it was when we made our Interim Statement in 2008. We have therefore been less aggressive determining the carrying value of our catalogue and a fall in provisions has increased the gross margin percentage from 43% in the first half of 2008 to 48% in 2009. The decline in turnover equals the fall in cost of sales and the gross margin at £597,000 is almost identical to the £599,000 achieved in 2008.
Turnover at The Works International is unchanged from the first half of 2008; however overheads increased following the appointment of Carl Clifton as managing director of the subsidiary on 5th January 2009. The rise in overheads at The Works International explains the increase in the consolidated loss on ordinary activities to £356,000 from £341,000 in the first half of 2008.
DISTRIBUTION ACTIVITY
The Works UK Distribution released only four films during the first half of 2008, whereas six titles were released during the comparable period in 2008. It is our intention to rebuild distribution activity once funding and economic conditions allow.
The highlights of the first six months of 2009 include the cinematic release of a documentary about the world's least successful heavy metal band, "Anvil: The Story of Anvil", and continuing strong DVD sales of the epic "Mongol: The Rise To Power of Genghis Khan". "Anvil" may be Oscar nominated later this year and is another solid addition to The Works catalogue.
Our sub-licensing arrangements with Universal Pictures, Virgin Media and BT Vision position the company well for future growth but the subsidiary's potential is impeded by a lack of access to funds.
INTERNATIONAL SALES
It is our objective to broaden the range of films sold by The Works International, to represent bigger budgeted pictures and to increase volume. Transformation is underway, but it will take time. The appointment of Carl Clifton as managing director of the subsidiary in January 2009 has changed trade perception of the sales agency and will enable the company to represent more commercial pictures. However, the lead time between our appointment as sales agent, which occurs before a film goes into production and our recognition of commission on sale of the completed picture, can be as long as a year. The benefit of changes introduced in the first half of 2009, will therefore not be felt until 2010.
International trading activity during the first half of 2009 was modest. The commercial highlight was the Belgium thriller, "Loft". Production volumes in the UK and most other territories continue to be depressed but The Works International already has a number of new films in the pipeline. Commissions are anticipated in the second half of 2009 on Rachel Ward's drama, "Beautiful Kate", Sarah Watt's comedy "My Year Without Sex", Italian thriller "Prima Linea" and Stephen Poliakoff's "Glorious 39".
CURRENT OUTLOOK & FUTURE PROSPECTS
Although the immediate outlook is challenging, change is underway at The Works Media Group. The repositioning of The Works International is expected to deliver medium term growth and the development of new and complementary revenue streams at The Works UK Distribution will broaden its offering. Our future prospects are dependent upon access to finance and the executives are actively investigating potential sources in the order to drive the business forward.
Norman Humphrey
29 September 2009
GROUP INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2009
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6 Months Ended
30 June 2009
Unaudited
|
6 Months Ended
30 June 2008
Unaudited
|
12 Months
Ended
31 Dec 2008 Audited
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|
Notes
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£000
|
£000
|
£000
|
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|||
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Turnover
|
3
|
1,234
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1,384
|
2,605
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Cost of sales
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(637)
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(785)
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(1,464)
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Gross profit
|
|
597
|
599
|
1,141
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Operating Expenses
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(953)
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(940)
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(1,766)
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Loss on Ordinary Activities
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(356)
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(341)
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(625)
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Interest Receivable
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-
|
1
|
2
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Interest Payable
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(9)
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-
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(2)
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Loss before taxation
|
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(365)
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(340)
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(625)
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UK Corporation Tax
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|
-
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-
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-
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||||
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Loss for the period attributable to equity share holders
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|
(365)
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(340)
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(625)
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Earnings per share
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Basic (pence)
|
4
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(0.19)
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(0.18)
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(0.33)
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Diluted
|
4
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(0.19)
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(0.18)
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(0.33)
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Dividend
|
|
|
-
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-
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GROUP BALANCE SHEET AS AT 30 JUNE 2009
|
As at 30 June 2009 Unaudited |
As at 30 June 2008 Unaudited |
As at 31 Dec 2008 Audited |
||
|
Notes |
£000 |
£000 |
£000 |
|
|
Non Current Assets |
||||
|
Goodwill and intangible fixed assets |
- |
- |
- |
|
|
Property, Plant and Equipment |
17 |
24 |
21 |
|
|
Investments |
11 |
25 |
11 |
|
|
28 |
49 |
32 |
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|
Current assets |
||||
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Work in progress |
1,985 |
1,790 |
1,976 |
|
|
Trade and other receivables |
658 |
933 |
797 |
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Cash and cash equivalents |
449 |
545 |
549 |
|
|
3,092 |
3,268 |
3,322 |
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Total assets |
3,120 |
3,317 |
3,354 |
|
|
Current liabilities |
||||
|
Trade and other payables |
(784) |
(1,080) |
(819) |
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|
Accruals |
(162) |
(145) |
(104) |
|
|
Deferred Income |
(52) |
(70) |
(194) |
|
|
(998) |
(1,295) |
(1,117) |
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|
Non current liabilities |
(750) |
- |
(500) |
|
|
Total liabilities |
(1,748) |
(1,295) |
(1,617) |
|
|
Net assets |
1,372 |
2,022 |
1,737 |
|
|
Shareholders' equity |
||||
|
Called up share capital |
4,394 |
4,394 |
4,394 |
|
|
Share premium account |
8,688 |
8,688 |
8,688 |
|
|
Retained earnings |
(11,548) |
(10,898) |
(11,183) |
|
|
Minority interest |
(162) |
(162) |
(162) |
|
|
Equity Shareholders' funds |
1,372 |
2,022 |
1,737 |
|
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2009
|
6 Months Ended 30 June 2009 Unaudited |
6 Months Ended 30 June 2008 Unaudited |
12 Months Ended 31 Dec 2008 Audited |
||
|
£000 |
£000 |
£000 |
||
|
Cash flows from operating activities: |
||||
|
Operating loss |
(356) |
(341) |
(625) |
|
|
Non-Recurring charges |
- |
75 |
88 |
|
|
Depreciation |
6 |
2 |
10 |
|
|
(Increase)/Decrease in inventory |
(9) |
(97) |
(283) |
|
|
(Increase)/Decrease in debtors |
139 |
234 |
370 |
|
|
Increase/(Decrease) in creditors |
(119) |
(282) |
(460) |
|
|
Net cash generated by operating activities |
(339) |
(409) |
(900) |
|
|
Cash flows from investing activities |
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Interest received |
- |
1 |
2 |
|
|
Purchase of non current assets |
(2) |
(11) |
(15) |
|
|
Net cash generated by investing activities |
(2) |
(10) |
(13) |
|
|
Cash inflow/(outflow) before financing |
(341) |
(419) |
(913) |
|
|
Cash flows from financing activities |
||||
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Interest paid |
(9) |
- |
(2) |
|
|
Loan Finance |
250 |
- |
500 |
|
|
Issue of ordinary share capital |
- |
- |
- |
|
|
Net cash received/(used) by financing activities |
241 |
- |
498 |
|
|
Net (decrease)/ increase in cash and cash equivalents |
(100) |
(419) |
(415) |
|
|
Cash and cash equivalent at beginning of period |
549 |
964 |
964 |
|
|
Cash and cash equivalent at the end of period |
449 |
545 |
549 |
|
|
Less: Production and Development funds held on trust for third parties. |
(140) |
(134) |
(139) |
|
|
Available cash at bank and in hand |
309 |
411 |
410 |
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2009
|
Number of shares |
Share capital |
Share premium |
Minority interest |
Retained earnings |
Total share holders' funds |
|
|
£000's |
£ 000's |
£ 000's |
£ 000's |
£ 000's |
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|
Group |
||||||
|
At 1 January 2009 |
147,502,437 |
4,394 |
8,688 |
(162) |
(11,183) |
1,737 |
|
Retained loss for the period |
- |
- |
- |
- |
(365) |
(365) |
|
Share capital issued |
- |
- |
- |
- |
- |
- |
|
At 30 June 2009 |
147,502,437 |
4,394 |
8,688 |
(162) |
(11,548) |
1,372 |
The accompanying accounting policies and notes form an integral part of these financial statements.
NOTES TO THE GROUP INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2009
1. Basis of Preparation
The condensed consolidated financial statements for the six-month period to 30 June 2009 are unaudited. The comparative figures for the 12 month period ended on 31 December 2008 are extracts from the published accounts for that year and do not constitute full statutory accounts. A copy of the full accounts for that period, on which the auditors have issued an unqualified report, has been delivered to the Registrar of Companies.
2. Accounting Policies
The condensed consolidated financial statements have been prepared on the historical cost basis in accordance with IFRS adopted by the EU using the same accounting policies as were used in the annual financial statements for the year ended 31 December 2008. The condensed half-yearly financial statements do not include all the information required for full annual financial statements and hence cannot be construed as in full compliance with IFRS.
3. Turnover
Turnover of the Group for the period has been derived from its principal activity, the management of development, financing, production and distribution of 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 attributed to equity share holders of £(365,000). The weighted average number of shares in issue during the six month period ended 30 June 2009 was 190,401,645, being 147,502,437 ordinary shares of 0.1p and 42,899,208 deferred shares of 9.9p.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends and interest on the assumed conversion of all dilutive options and other dilutive potential ordinary shares.
5. Publication of Non-Statutory Accounts
The financial information set out in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The figures for the year ended 31 December 2008 have been extracted from the statutory financial statements that have been filed with the Registrar of Companies. The auditors' report on those financial statements was unqualified and did not contain a statement under Section 237(2) of the Companies Act 1985.
6. AIM Rule Compliance Report
The Works Media Group plc is quoted on AIM and as such under AIM Rule 31 the Company is required to:
1. have in place sufficient procedures, resources and controls to enable its compliance with the AIM Rules;
2. seek advice from its nominated adviser ("Nomad") regarding its compliance with the AIM Rules;
3. provide the company's Nomad with any information it requests in order for the Nomad to carry out its responsibilities under the AIM Rules for Companies and the AIM Rules for Nominated Advisors;
4. ensure that each of the Company's Directors accepts full responsibility, collectively and individually, for compliance with the AIM Rules; and
5. ensure that each director discloses without delay all information which the Company needs in order to comply with AIM Rule 17 (Disclosures of Miscellaneous Information) insofar as that information is known to the director or could with reasonable diligence be ascertained by the director.
In order to ensure that these obligations are being discharged, the Board has established a committee of the Board (the "AIM Committee"), chaired by Costa Theo, a non-executive director of the Company.
Having reviewed relevant Board papers and met with the Company's Executive Board and the Nomad to ensure that such is the case, the AIM Committee is satisfied that the Company's obligations under AIM Rule 31 have been satisfied during the period under review.
END
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