Final Results

RNS Number : 2203S

Forbidden Technologies PLC

14 May 2009

 



Forbidden Technologies plc

Forbidden Technologies plc (AIM: FBT, 'Forbidden', www.forbidden.co.uk) develops and markets a powerful internet video platform, which is used by broadcasters, in professional web video, in education and by consumers. Forbidden's video post production platform, FORscene, is one of the world's most advanced browser-based applications.

  * Sales increase of 71% to £121,199 (2007: £70,848)

  * Operating loss for the year cut by 59% to £284,994 (2007: £689,494)

  * Drawdown from £1 million loan facility at year end: £635,000 (2007: £335,000)

  * Major cost savings successfully implemented

  * Main markets are broadcast television and professional web video

  * Expansion into US continues

  Vic Steel, Chairman, Forbidden Technologies, commented:

'The company is enthusiastic and optimistic of a bright future.

Sales continued to grow in the first quarter of 2009 and at the end of March unaudited sales exceeded the full year numbers for 2007. The company is expecting that the growth rate in 2009 will exceed the growth rate experienced in 2008.

Forbidden is fortunate in having a high calibre and loyal team of R&D and sales professionals who have produced technologies which were developed ahead of the markets for which they were intended but which we now believe are coming into alignment to produce an exciting business future.'

  Enquiries:

  Forbidden Technologies plc                020 8879 7245

  Stephen Streater, Chief Executive

  Greg Hirst, Business Development Director

  Brewin Dolphin Limited                     0845 270 8612

  Nominated Advisor

  Neil Baldwin

Chairman's statement

I am pleased to present this, the tenth annual report to shareholders of Forbidden Technologies since its flotation on the AIM market of the London Stock Exchange in February 2000.

Profit and Loss Account and Balance Sheet

In the year to 31 December 2008, the company recorded sales of £121,199 compared to £70,848 in the previous year, an increase of 71%. Administrative expenses in the year to 31 December 2008 at £406,193 were £354,149 lower than the £760,342 in the previous year, a reduction of 46.6%. Consequently, the operating loss of £284,994 for the year to 31 December 2008 was £404,500 less than the £689,494 for the year to 31 December 2007.

The balance sheet shows net liabilities of £514,124 at 31 December 2008, compared with £245,461 at 31 December 2007. The company continues as a going concern following the creation, at the beginning of June 2007, of a £1 million loan facility by two of the directors (Stephen Streater and Vic Steel). At 31 December 2008, £635,000 of this facility had been drawn down. The company has written off all R&D costs each year since its formation.

Throughout the 2008 year, Forbidden has continued to contain the cost base for the administration of the business through a combination of permanent cost savings and the conversion of fixed costs into variable costs, with the continued support and co-operation of all staff. As sales growth has begun to accelerate, cost control will continue, but there will be associated cost increases in those areas which are variable with sales.

It is gratifying to report that throughout 2008 the company has experienced a high level of repeat business from existing customers, and also an increase in the number of potential customers approaching the company to discuss possible relationships. This trend continues in the current year to date.

Market Place and Strategy

The current credit crisis and recessionary environment combined with rapid growth of the web as the mass medium for advertising and entertainment are creating conditions that the directors believe are favourable to Forbidden Technologies.

Broadcasters and post-production companies are being encouraged to adopt new web-based workflows. Customers say FORscene 'saves time and money'. This is an attractive benefit when costs are under a great deal of pressure.

The changing market place has led the company to refine its strategy. We now define four market opportunities:

• Broadcast (including all post-production companies);

• Professional web-video;

• In-house video;

• Serious hobbyists.

Whereas broadcast is well defined and established as a market, professional web-video is a new and fast growing market worldwide, with the potential to overtake broadcast TV in size. Both audience and advertising are moving from TV and print to the web, creating an explosion in demand for high quality video for media websites. Journalists are being asked to add video production and post-production to their varied skill sets, aiming to meet the low-production cost requirements. FORscene, the directors believe, will prove to be the most attractive toolset to produce the necessary professional quality output. Forbidden expects this new market to grow rapidly.

In House Video

Smaller companies will need to populate their websites with video, which many will make themselves to save cost - a long tail which over time should become very large.  

Serious Hobbyists

This is the market appropriate to Clesh. As user-generated video (UGV) grows with the speed of broadband and the proliferation of high-quality camera phones, the need to edit content before distribution to websites and to friends and family will increase. Clesh has been designed to be the practical user-friendly tool integrating upload from camera, editing, publishing and distribution.

Of the four market opportunities describe, the focus of the company throughout 2008 has been in the broadcast and professional web video markets. This will continue during 2009.

We are experiencing increased interest and take-up of FORscene in the broadcast market, and we expect sales to continue to grow as more customers bring repeat business and as our reputation spreads by word of mouth. 

The company is achieving considerable success in the professional web video market, particularly in the USA. The partnership with BIM established at the end of 2008 has resulted in FORscene being used in 53 TV station web sites across North America, and is producing a significant monthly income flow. The recent announcement of the partnership with Chyron in the USA could provide similar widespread use in broadcast during the coming months and years.

Throughout 2008 and continuing into 2009 the company has participated in a number of key events and has been invited to take part in seminars. The London Stock Exchange chose Forbidden Technologies as one of a handful of companies to be subject to its new independent analyst research reports. Stephen Streater has made two TV appearances before investor communities and took part in an investor seminar in 2009. Forbidden was active at IBC in September 2008 and at the NAB convention in April 2009 where the partnership with Chyron was announced and created much interest with existing Chyron customers. We are convinced that these participations increase our visibility significantly.

Outlook

The company is enthusiastic and optimistic of a bright future.

Sales continued to grow in the first quarter of 2009 and at the end of March unaudited sales exceeded the full year numbers for 2007. The company is expecting that growth rate in 2009 will exceed the growth rate experienced in 2008.

Forbidden is fortunate in having a high calibre and loyal team of R&D and sales professionals who have produced technologies which were developed ahead of the markets for which they were intended but which we now believe are coming into alignment to produce an exciting business future.

Vic J Steel

Chairman

Chief Executive's review

Introduction

Forbidden is a world leader in providing video post-production services over the internet, through its professional FORscene system and its consumer version Clesh. As a technology leader, our services are regularly encompassed by the latest buzz words. The newly relevant term is 'The Cloud'. Essentially, with FORscene, video content is sent into the Cloud (a symbolic word to represent somewhere accessible over the Internet whose position or internal structure is not that relevant to a user), from where it can be readily accessed by customers from anywhere.

During 2008, both the capabilities of the FORscene service and its markets have come sharply into focus. We have refined many features, and dramatically increased our capacity and user base. Forbidden's website (http://www.forbidden.co.uk/) has been enhanced as an information resource by the inclusion of strategy papers and workflow diagrams.

Markets

The Chairman's statement covers the commercial side of our main markets. The product side is covered here.

In broadcast, FORscene is used for review, logging, shot selection and rough cut. The advances outlined below have improved customer experience in all these areas.

In our professional web video sector, BIM's FORscene accounts provide immediate access to all recent content broadcast on over 50 TV stations. To enable this rate of content assimilation, we have released a new product for customers to install at their main sites: FORscene Server. Just as FORscene's editing client automatically increases the capacity of the FORscene system every time someone logs on through their web browser, every new FORscene Server increases the capacity of FORscene's distributed central server.

Our Canadian distributor has started to tweak the long tail market for businesses making their own videos - an ideal market for the FORscene system, though one which will be hard to penetrate cost effectively until we are better known.

We used the Master Investor Show 2008 to illustrate FORscene DV - ideal for news gathering. Web versions of the broadcast quality output are at http://clesh.com/videos/list/mi2008.

User Generated Video (UGV) is a route to keeping costs down on professional sites. With its easy web accessibility and camera phone integration, Clesh provides an elegant solution - as you can see from Forbidden's opportunistic exclusive interview with Boris Johnson, now Mayor of London: http://clesh.com/videos/view/BorisJoh-1207808863.can/ .

Development

FORscene was launched in 2004, so many of its capabilities are well established. However, FORscene is a dynamic system, with continuous improvements. The three main developmental themes of 2008 are: major FORscene capacity upgrades; new fine-cut editing features; and integration with third party systems, both in broadcast and professional Web.

The news section of the website http://www.forbidden.co.uk/news/ contains details.

Server upgrades

The FORscene Server product allows high volume users to supplement the capacity of the central FORscene servers as they join the system. For other users, who typically have up to a thousand hours of material each, we have increased the capacity of the central server system:

    FORscene has seven new server computers on the Internet backbone;

    server disk storage has been increased by a multiple, as disks have grown in capacity;

    improved software has multiplied the number of concurrent users supported by each server;

    a second site on the Internet backbone has increased overall reliability; and

    new FORscene software is turning the server network into a single distributed machine

Codec - Blackbird 5 and Impala

For strategic reasons, Forbidden owns and controls its own video and audio compression technology. The Blackbird 5 video codec, released in 2008, provides improved quality at a lower data rate and while using less CPU and memory. You can hear the (also improved) Impala audio codec on this example recording: http://clesh.com/videos/view/Schubert-1202327990.can/. 

Other upgrades

The other FORscene components upgraded this year are: native compression / upload software for Linux, Windows and Mac OS; the Web browser editing interface; video publishing; the Forbidden Web player; and the Clesh Showreel.

Partners

Forbidden's North American sales have grown rapidly, and the US is featuring increasingly in Forbidden's world view. Given our current resources, we generally supply and support these sales through local companies and contacts. BIM sells FORscene as an integral component of its own services to television clients for Web output; and since the year end we have formed a partnership with Chyron, a large and established supplier to the broadcast market. FORscene's integration into Chyron's Axis system has begun, with single sign on and import of graphics already supported.

Restructuring

Forbidden embarked on a major transformation, which started in the summer of 2007 and which continued into 2008, exemplified by the move into our new office. The changes have proved a success, with R&D's continued ground breaking progress supporting a dramatic increase in sales - even while costs have fallen markedly. I here express appreciation to all our staff for their assistance in implementing this plan.

Outlook

The technological base underlying FORscene continues to advance rapidly: faster Internet, bigger disks, faster computers. At the same time, FORscene is starting to benefit from economies of scale, both technically and through customer awareness and confidence. FORscene has advanced rapidly since its inception and it shows every sign of continuing to do so now that it is increasingly gaining traction.

Stephen B Streater

Chief Executive

Profit and loss account for the year ended 31 December 2008

		2008	2007
	Note	£	£
Turnover		121,199	70,848
Administrative expenses before FRS 20 employee share option cost FRS 20 employee share option cost		(420,473) 14,280	(716,273) (44,069)
Administrative expenses		(406,193)	(760,342)
Operating loss		(284,994)	(689,494)
Interest payable		(5,292)	-
Interest receivable and similar income		1,583	4,873
Loss on ordinary activities before taxation		(288,703)	(684,621)
Tax on loss on ordinary activities		34,320	36,297
Loss for the financial year		(254,383)	(648,324)
Basic and diluted loss per ordinary 0.8p share	2, 3	(0.33p)	(0.85p)

The results stated above are all derived from continuing operations.

Balance sheet as at 31 December 2008

		2008	2008	2007	2007
	Note	£	£	£	£
Fixed assets
Tangible assets			19,746		2,175
Current assets
Debtors		149,103		104,829
Cash at bank and in hand		51,424		59,657
		200,527		164,486
Creditors: amounts falling due within one year		(99,397)		(77,122)
Net current assets			101,130		87,364
Total assets less current liabilities			120,876		89,539
Creditors: amounts falling due after more than one year			(635,000)		(335,000)
Net liabilities			(514,124)		(245,461)
Capital and reserves
Called up share capital	2, 3		609,300		609,300
Share premium account			2,996,375		2,996,375
Capital contribution reserve			125,000		125,000
Profit and loss account			(4,244,799)		(3,976,136)
Equity shareholders' funds			(514,124)		(245,461)

Cashflow statement for the year ended 31 December 2008

		2008	2007
		£	£
Reconciliation of operating loss to net cash outflow from operating activities
Operating loss		(284,994)	(689,494)
Add back FRS 20 employee share option cost		(14,280)	44,069
Depreciation charges		9,244	7,238
(Increase)/decrease in debtors		(46,251)	(14,125)
(Decrease)/increase in creditors		16,983	(24,685)
Net cash outflow from operating activities		(319,298)	(676,997)
Cash flow statement
Cash flow from operating activities		(319,298)	(676,997)
Returns on investments and servicing of finance		1,583	4,873
Taxation		36,297	40,505
Capital expenditure		(26,815)	(4,350)
Cash outflow before management of liquid resources		(308,233)	(635,969)
Management of liquid resources		-	-
Financing		300,000	335,000
Increase/(decrease) in cash in the year		(8,233)	(300,969)
Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash in the year		(8,233)	(300,969)
Movement in net funds in the year		(8,233)	(300,969)
Net funds at the start of the year		59,657	360,626
Net funds at the end of the year		51,424	59,657

Reconciliation of movements in shareholders' funds for the year ended 31 December 2008

	2008	2007
	£	£
Loss for the financial year	(254,383)	(648,324)
Add back FRS 20 employee share option cost	(14,280)	44,069
Net reduction in shareholders' funds	(268,663)	(604,255)
Opening shareholders' funds	(245,461)	358,794
Closing shareholders' funds	(514,124)	(245,461)

1.         Basis of preparation

The preliminary announcement has been prepared using accounting policies consistent with those set out in the financial statements for the year ended 31 December 2007.

The financial information in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 December 2007 or 2008. The financial information for the year ended 31 December 2007 is derived from the statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and have been delivered to the registrar of companies. The report of the auditors was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2008 have not yet been reported on by the Company's auditors and are expected to be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies following the Company's annual general meeting.

The preliminary announcement for the year ended 31 December 2008 was approved by the directors on 13 May 2009.

2.         Earnings per share

Diluted earnings per share has not been presented, as including all potential ordinary shares in the calculation would be anti-dilutive.

3.         Basic earnings per share

The weighted average number of shares in issue during the year is 76,162,500 (2007:  76,162,500 ). 

 

END

 

 

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