Final Results

RNS Number : 7681H

Forbidden Technologies PLC

15 March 2018

 

15 March 2018

Forbidden Technologies plc

("Forbidden" or the "Company")

Full year Results for the year ended 31 December 2017

Forbidden Technologies plc (AIM: FBT), the developer and seller of cloud video platform technology using its patented Blackbird technology, announces its audited full year results for the year ended 31 December 2017.

Financial Summary

·     Invoiced sales of £714,903 (2016: £1,007,074)

·     Revenue of £758,835 (2016: £774,825)

·     Deferred revenue of £146,389 (2016: £270,321)

·     Year-on-year operational spend, including capital expenditure, of £2,705,663 (2016: £2,746,452)

·     EBITDA loss of £1,844,436 (2016: £1,787,406)

·     Net loss of £2,336,000 (2016: £2,340,464)

·     The Company remains debt free with cash and cash equivalents of £1,752,349 (2016: £3,711,033)

Operational Highlights

·     Recurring infrastructure sales increased from 28% in 2016 to 48% in 2017, in line with new strategy

·     Restructuring of sales team to be a more specialist and experienced sales team

·     Appointment of Ian McDonough as CEO, the first externally appointed CEO in Forbidden's history

·     Appointment of a Head of Sales, with significant experience in selling cloud-based infrastructure solutions

·     Rebranding and simplification of market offering to Blackbird®

Post period Highlights

·     Q1 2018 has evidenced return to growth

·     Financial opportunity per client now much higher, through shift to focussing on recurring revenue (subscription) sales

Ian McDonough, CEO of Forbidden Technologies plc commented:-

"The Company is having a good first quarter with significant double-digit growth to date in invoiced sales over the same period last year. We are in dialogue with a number of interesting opportunities in the live sports, eSports, news and post production sectors.  In addition, we are in discussions with multi-channel networks and social media publishers who are often building their media supply chain from scratch, and who see Blackbird as an end to end SaaS solution instead of investing in numerous pieces of specific hardware. A key area of interest is also in integrating Blackbird with OEM solution providers in the US where our technology can be deployed quickly and at scale."

"We have changed our sales stragegy to focus on getting Blackbird adopted as an integral component of our client's technology infrastructure and this approach is paying dividends."

Enquiries:

Forbidden Technologies plc

Ian McDonough, CEO

Jonathan Lees, Finance Director

Tel: [phone]

Allenby Capital Limited (Nominated Adviser and Broker)

Nick Naylor

John Depasquale

Katrina Perez

Tel: [phone]

About Forbidden Technologies plc

Forbidden Technologies plc (AIM: FBT, www.forbidden.co.uk) floated in February 2000.

Forbidden develops, markets and licenses a powerful cloud video platform using our patented Blackbird technology. The technology underpins multiple applications which are used by rights holders, broadcasters, sports and news video specialists, post-production houses, other mass market digital video channels and corporations.

The Blackbird technology allows full visibility on multi-location digital content, improves time to market for live content such as video clips and highlights for social media distribution, and results in much more effective monetisation.

Blackbird® is a registered trademark of Forbidden Technologies plc.

Websites:

www.forbidden.co.uk

www.forscene.com

Social media:

https://twitter.com/forbiddentech
https://www.linkedin.com/company/116180/
https://www.facebook.com/ForbiddenTechnologies
 

https://twitter.com/forscenepro
www.linkedin.com/company/forscene
www.facebook.com/FORscene
www.youtube.com/user/ForsceneTraining

Chairman's statement

Executive summary

We began 2017 with the ambition to accelerate our growth having started to build sales traction in 2016.  This ambition was interrupted in February 2017 with the resignation of our CEO and the Board's decision to run a formal process to find a new CEO - the first time in the Company's history that it has looked to appoint an external candidate for this position. As a result, the business was without a full time CEO for six crucial months. At the time of his departure, our CEO was fulfilling the roles of both CEO and sales director and the impact on our growth prospects in the short term was significant.

Ian McDonough, our new CEO, joined the Company in September 2017, leaving little time to make a significant difference to the sales performance of the business prior to the end of the year.

As a result of this disruption, the Company experienced a small decline of 2% in recorded revenue from £774,825 in 2016 to £758,835.  This relatively flat level of recorded revenue was despite a 29% reduction in invoiced sales from £1,007,074 in 2016 to £714,903. The resulting EBITDA loss for the year was £1,844,436 versus a loss of £1,787,406 in 2016.  Against this performance, progress was made to increase the percentage of total invoiced sales from recurring infrastructure sales from 28% in 2016 to 48% in 2017.

Over the year we expanded our presence in the North American sports market with a minimum two-year deal through Deltatre for one of their major North American clients, increased business at Madison Square Garden and a paid for pilot with a major North American broadcaster and sports franchise, which is still ongoing.   Also, during the year, we made progress with our live editing solution by breaking into the eSports market with Gfinity plc, a leading eSports content producer. In addition, we launched our patent pending Blackbird 9 codec and have made the strategic move to start adding JavaScript applications to our platform. With this new JavaScript capability, we can execute on a strategy to focus on opportunities where Forscene is part of an overall video production solution, allowing the revenue base to be increasingly subscription focused. This sales focus does have longer sales cycles, but the financial opportunity per client is much higher. This strategy plays to the unique benefits of our platform.

Ian McDonough, our new CEO, has quickly started to make key adjustments to the team, including sales and marketing team members, our US commercial presence and our product management team. He is engaging directly with prospects and resellers across North America and the UK. He has increased the focus on selling against the benefits of our core patented technology, Blackbird. To this end, he is also in the process of simplifying the branding of our technology and solutions under the Blackbird brand.

The Board believes the Company now has strong commercial leadership and combined with strengthening the sales and marketing team are starting to build an order book once more. Evidence of our return to growth is already being seen in this first quarter of 2018.

Introduction

Forbidden Technologies plc is the AIM quoted creator, owner and developer of Forscene (which will soon be rebranded under the Blackbird brand). Forscene is a cloud-based video post-production and publishing platform, which has helped its users convert over 7 million hours of professionally shot video content into edited videos for broadcast and digital distribution. The platform and its applications are based around Forbidden's flexible and light-weight Blackbird video codec. 

The Company's platform applications help customers to increase audience engagement and the value of time-sensitive content by improving time-to-market, and to save time and money through the efficiency and scalability benefits of the Forscene cloud-based platform. Specific applications include:

·   Enabling sports broadcasters and rights holders to engage more effectively digitally with their viewers by allowing them to provide clips and highlights packages during the event, faster than ever before.

·   Enabling production houses and post production houses to remotely capture, log, edit and review their content, speeding up the post production process and saving time and money.

·   Enabling sports franchises, or any brand with large numbers of consumers, to improve their fan/consumer engagement with a unique combination of tools.

Consolidated income statement and consolidated statement of financial position

In the year ended 31 December 2017, the Group recorded revenue of £758,835 (£774,825 in 2016), which represented a decline of 2% year on year. Revenue, for income statement purposes, is derived from invoiced sales of £714,903 down 29% from £1,007,074 in 2016, Deferred revenues declined year on year by 46% to £146,389 from £270,321 in 2016; however, after adjusting for an £80,000 reduction in 2016 deferred revenues relating to the full provision for an amount contracted in 2016, the comparable decline is 23%.  This £80,000 provision relates to a contract with Atos against which we made a 50% provision in the interim results and have now made a full provision due to continued uncertainty over the realisability of the contract.

Operating costs during the year to 31 December 2017 were £2,452,158 compared to £2,441,441 in the corresponding period in 2016. Operating costs for income statement purposes are net of capitalised development costs which reduced to £206,810 from £281,466 in 2016. The loss before interest, taxation, depreciation and amortisation was £1,844,436 (2016: £1,787,406). The net loss for the year of £2,336,000 compares to a loss of £2,340,464 in 2016.

The Group is debt free and had cash and cash equivalents at 31 December 2017 of £1,752,349 in comparison to a balance as at 31 December 2016 of £3,711,033.

Following the cash savings achieved in 2016 over prior years the Company has continued to keep operating costs at this reduced level. Net cash outflow from operating activities and investing activities were £1,955,272 compared to £1,971,763 in 2016.

Management changes

During the year, there were a few critical management changes.  The primary change was the replacement of our CEO, which as noted before resulted in a six-month period without full time leadership.  Ian McDonough, CEO, has brought significant media experience to the business through his time at Turner, BBC Worldwide, A&E Europe, and Viacom Asia. 

In addition to a new CEO, a new sales director, Rachel Darcy, was hired to lead the sales team.  Most recently with Redcentric plc, Rachel brings over ten years' experience within the IT services industry with particular knowledge in selling cloud-based infrastructure solutions.

Forscene platform

In August 2017, Forbidden announced the launch of a JavaScript video viewing application. This was the first application linked to the core strategy of moving our video applications to JavaScript.  JavaScript runs on 'out of the box' devices and as such has no requirement for installation or configuration, much like Java had a number of years ago.  JavaScript is increasingly requested as a requirement by prospective customers.  We have subsequently made available a clipping tool.  We will continue to convert existing applications to JavaScript as well as develop new ones.

During the year, we also released our 'patent pending' Blackbird 9 video codec.  Blackbird lies at the heart of all our applications.  We continuously develop our Blackbird codec to ensure that with all our applications we can outperform our competitors in speed to market of live video and the performance of our remote viewing and editing capabilities.

Cash management

Cash management is a constant focus of the executive management team. Our use of cash has been focused on increasing the balance of spend towards sales and marketing to drive growth in sales and reduce cash burn. We are vigilant in ensuring additional investment in research and development is targeted on projects where there is identifiable commercial benefit. We ended the year with a cash balance of £1,752,349.

Going concern

The Company incurred a loss after tax for the year of £2,336,000 (2016: loss of £2,340,464). The Company's sales activities are now clearly focused on driving recurring infrastructure sales versus the traditional project-based revenue generated from a large number of production companies and post houses in the UK broadcast post market. This change in sales strategy should result in more predictable and recurring longer-term subscription-based revenue streams with fewer customers and larger contract values. The percentage of total invoiced sales from recurring infrastructure sales in 2017 was 48% versus 28% in 2016.

With the arrival of a new CEO in September, and a refocus of our strategy to infrastructure clients, the Directors are confident that the leadership team is in place again to resume a growth path for the business. The Directors have prepared a budget for reasonable growth and have also prepared a contingent more cautious and prudent profit and loss and cash-flow forecast and business plan reflecting an adjusted cost base and reduced cash burn. Both plans ensure managements' ability to progress the growth of the business, but, with different rates of growth. 

The internal sales forecasts are based on forecast of three types of sales - recurring infrastructure sales from existing customers, repeat and new projects from existing customers and new sales from new customers.  There are varying risks of achievement of these forecasts by sales type, however the Directors believe that the combination of these forecasts, potential cost management actions, 1^st quarter 2018 performance to date and sales pipeline growth demonstrate the business is operationally capable of meeting its obligations as they fall due and are confident they have plans in place to ensure the continuity of the business for at least twelve months.

Therefore, the Directors consider that the preparation of the Group financial statements on the going concern basis is appropriate.

Current trading and prospects

We start the year, with lower combined order book and deferred revenue versus last year; however, a stronger focus and capability to build new business and grow our existing client base.

This quarter, we are on track to beat our 1^st quarter invoiced sales figure recorded in 2017 and expect to build on this growth momentum as the year develops.

Finally, the Board and management team are confident that we are building the right team and have the platform and focus in place to grow our business. 

David Main

Chairman

CEO's review

Summary

Six months into the role of CEO at Forbidden, I have overseen a myriad of changes, and what I believe is the start of sustainable momentum evolving from our new strategic direction. The direction, selling our solutions as a core part of a company's video capabilities, focuses on where Forbidden has a competitive advantage - the ingenious Blackbird codec - and through a microservices philosophy, building production and publishing tools around this. With our cloud-based solution this allows the Company to build a renewable subscription-based business.

The recent N.Y. Emmy nomination for technical achievement for our fast turnaround workflow co-designed with MSG (Madison Square Garden) Networks is a huge endorsement of our technology's abilities as a leading infrastructure platform. It serves to highlight the speed and accuracy with which content can be edited, and closed captions and other meta data added, where time is critical.

As a result of this direction, Blackbird is being elevated to be the master brand at Forbidden, subsuming Forscene. All products will be sub-branded within the overall Blackbird brand. We will be officially launching Blackbird branding and its clear, easy to understand, market-focused product set at the NAB show (National Association of Broadcasters) in Las Vegas next month.

Early adopter customers have already understood the power, speed and quality of Blackbird and we invariably now see it being adopted as an integral component of their technology infrastructure. Both Deltatre and IMG are great examples of our capability to be part of a large, international media supply chain. Both of these customers have recently renewed their contracts with us and we continue to increase the volume and variety of work we are undertaking with them. Another example of this is in the burgeoning genre of eSports where we are a key partner to Gfinity plc. Blackbird is a fundamental part of Gfinity's live arena infrastructure and allows live logging, instant replays and tournament wrap up videos.

More recently, we have grown the number of infrastructure targeted trials that we are working on and hope to convert a portion of these into growing clients.

The first of these this year is the Practising Law Institute based in New York who will use Blackbird as a vital part of their infrastructure on an ongoing basis, to live clip seminar content for a wide variety of purposes including education.

This approach to the market is a marked change for the business. The combined use of the Blackbird 9 codec and our JavaScript applications enables our technology to be a fundamental component to our clients' infrastructure and makes Forbidden a valued and key partner to their business.

We are also focusing on our traditional core business in post-production and have some impressive new wins including Two Four productions who use Blackbird as the live logging tool on a fixed camera rig production, and the platform allows the production team to access footage immediately in the cloud whether on location, at head office or elsewhere.   This is our first production win on fixed camera rigs for some years and, with the benefits of our product advances, could potentially transform how fixed camera rig shows are produced.

Geographically we have also looked more to North America as our biggest opportunity for growth. Traditionally, North American media-based companies have been faster to adopt new technologies than their counterparts in Europe. In addition, the legal requirement for all US broadcast or digital output to carry closed captions makes the market very attractive. As a result, we are growing our sales capacity in North America. This includes taking on one new salesperson on the West Coast and we are also looking to add additional reseller sales capacity in the same region.

2017 results

Whilst the 2017 results were disappointing, as noted in the Chairman's statement, this can be attributed almost entirely to the disruption in leadership. With the appointment of Rachel Darcy as Sales Director and myself as CEO this leadership issue has been addressed. In addition, along with our JavaScript and Blackbird 9 development, 2017 did provide the business with the opportunity to correctly reset its strategy and focus on its points of differentiation and specific market segments that should help us drive growth going forward.

Strategy and market focus

-     In late 2017, we locked in our strategy to:-

o  Focus on business where we would be an integral part of the infrastructure of a video solution. As a cloud-based platform, this means a core part of our business being renewable subscription-based business

o  Emphasise 'live' solutions where we can outperform on both speed to market and remote use; although, not neglecting our base business in remote post production-based solutions

o  Shift our platform to include JavaScript based applications

o  Maintain our superior performance-based codec Blackbird

o  Elevate Blackbird to be the Master Brand

-     3 core segments of business

o  Live digital solutions for production companies including but not restricted to editing, closed captions, logging, metadata exchange and graphics. Customers include, IMG, Deltatre and the Practising Law Institute. 

o  Sports stadium and arena-based solutions, where live digital media solutions are also key, such as Madison Square Garden Networks, Gfinity in eSports, and the Buffalo Sabres, an NHL hockey franchise.

o  Post production non-live companies such as ENVY, Two Four, and Studio Lambert.

-     Geographical Market

o  An increased emphasis on the North American market with a senior commercial appointment in Barry Nulman.

o  The engagement of F2 as a reseller in Canada, and the retention of Bridge Digital in the US.

Products and solutions

The Blackbird codec and our edge computing technology are the key drivers of differentiation. Together with our comprehensive suite of tools we can provide frame accurate visibility, editing, addition of closed captions, graphics and metadata fast, remotely and under very low bandwidth conditions.  We are committed to ensure that we continually improve the Blackbird codec even further. Blackbird 9 is already of high enough quality to publish directly to social media in its proxy version. Blackbird 10, due for release next year, is expected to extend the flexibility of Blackbird 9, and provide a further doubling of resolution. Our overall Blackbird solution also provides media companies with the critical cloud-based capabilities (speed, remote use, collaboration, control and scalability) without having to rebuild their core media supply chain capabilities. Within the suite of tools will be an entry level visibility and clipping tool as well as the full Blackbird suite of tools allowing professional editing and addition of closed captions.

Sales and marketing

Our shift towards a recurring revenue infrastructure sales model has led to a reappraisal of the frontline sales team. We have moved away from transactional sales to consultative long-term partnership selling. This has resulted in fewer sales people, but at a more senior level. In North America, as well as the additional sales and reseller capacity we added in 2017, post year-end we have made further increases in our North American sales capacity by appointing Barry Nulman, a highly respected executive with a proven track record. Barry has held senior management positions with several leading post production facilities and technology companies including Picture Head LLC and Avid Technologies.

Current trading and prospects

The Company is having a good first quarter with significant double-digit growth to date in invoiced sales over the same period last year. We are in dialogue with a number of interesting opportunities in the live sports, esports, news and post production sectors.  In addition, we are in discussions with multi-channel networks and social media publishers who are often building their media supply chain from scratch, and who see Blackbird as an end to end SaaS solution instead of investing in numerous pieces of specific hardware. A key area of interest is also in integrating Blackbird with OEM solution providers in the US where our technology can be deployed quickly and at scale.

Ian McDonough

Chief Executive Officer

Consolidated income statement and statements of comprehensive income for the year ended 31 December 2017

					2017	2016
					£	£
CONTINUING OPERATIONS
Revenue					758,835	774,825
Cost of Sales					(151,113)	(120,790)
GROSS PROFIT					607,722	654,035
Operating costs					(2,452,158)	(2,441,441)
EARNINGS BEFORE INTEREST, TAXATION, DEPRECIATION, AMORTISATION AND EMPLOYEE SHARE OPTION COSTS					(1,844,436)	(1,787,406)
Depreciation					(47,091)	(50,053)

    Amortisation                                                                                                                      (512,549)                (456,298)

    Employee share option costs                                                                                                42,137                (73,250)

                                                                                                                                        (517,503)             (579,601)

OPERATING LOSS					(2,361,939)	(2,367,007)
Finance income					671	3,014

LOSS BEFORE INCOME TAX					(2,361,268)	(2,363,993)
Income tax					25,268	23,529
LOSS FOR THE YEAR					(2,336,000)	(2,340,464)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR					(2,336,000)	(2,340,464)

  Earnings per share expressed in pence per share

  Basic - continuing and total operations                                                                                   (1.29p)                 (1.63p)

Consolidated and company statements of financial position for the year ended 31 December 2017

			Group			Company
			2017	2016		2017	2016
			£	£		£	£
ASSETS
NON-CURRENT ASSETS
Other intangible assets			1,038,095	1,343,834		1,038,095	1,343,834
Property, plant and equipment			59,750	48,448		59,750	48,448
Investments			-	-		641	641
			1,097,845	1,392,282		1,098,486	1,392,923
CURRENT ASSETS
Trade and other receivables			221,095	418,774		226,748	417,272
Current tax assets			25,268	23,529		25,268	23,529
Cash and bank balances			1,752,349	3,711,033		1,746,113	3,710,927
			1,998,712	4,153,336		1,998,129	4,151,728
TOTAL ASSETS			3,096,557	5,545,618		3,096,615	5,544,651
EQUITY AND LIABILITES
CAPITAL AND RESERVES
Issued share capital			1,443,890	1,443,890		1,443,890	1,443,890
Share premium			16,935,301	16,935,301		16,935,301	16,935,301
Capital contribution reserve			125,000	125,000		125,000	125,000
Retained earnings			(15,833,053)	(13,454,916)		(15,832,255)	(13,455,073)
TOTAL EQUITY			2,671,138	5,049,275		2,671,936	5,049,118
CURRENT LIABILITIES
Trade and other payables			425,419	496,343		424,679	495,533
TOTAL LIABILITIES			425,419	496,343		424,679	495,533
TOTAL EQUITY AND LIABILITIES			3,096,557	5,545,618		3,096,615	5,544,651

Consolidated statement of changes in equity for the year ended 31 December 2017

		Issued share capital		Retained earnings		Share premium		Capital contribution reserve		Total equity
		£		£		£		£		£
Balance at 1 January 2016		1,054,518		(11,187,702)		13,317,572		125,000		3,309,388
Changes in equity
Issue of share capital (net of expenses)		389,372		-		3,617,729		-		4,007,101
Share based payment		-		73,250		-		-		73,250
Total comprehensive income for the year		-		(2,340,464)		-		-		(2,340,464)
Balance at 31 December 2016		1,443,890		(13,454,916)		16,935,301		125,000		5,049,275
Changes in equity
Share based payment		-		(42,137)		-		-		(42,137)
Total comprehensive income for the year		-		(2,336,000)		-		-		(2,336,000)
Balance at 31 December 2017		1,443,890		(15,833,053)		16,935,301		125,000		2,671,138

Consolidated and company statements of cash flows for the year ended 31 December 2017

			Group			Company
			2017	2016		2017	2016
	Notes	£		£		£	£
Cash flows from operating activities
Cash used in operations	A	(1,725,967)		(1,748,825)		(1,732,097)	(1,747,873)
Tax received		23,529		79,059		23,529	79,059
Net cash from operating activities		(1,702,438)		(1,669,766)		(1,708,568)	(1,668,814)
Cash flows from investing activities
Payments for intangible fixed assets		(206,810)		(281,466)		(206,810)	(281,466)
Payments for property, plant and equipment		(46,695)		(23,545)		(46,695)	(23,545)
Interest received		671		3,014		671	3,014
Net cash from investing activities		(252,834)		(301,997)		(252,834)	(301,997)
Cash flows from financing activities
Share issue (net of expenses)		-		4,007,101		-	4,007,101
Repayment of finance leases		(3,412)		-		(3,412)	-
Net cash from financing activities		(3,412)		4,007,101		(3,412)	4,007,101
(Decrease)/increase in cash and cash equivalents		(1,958,684)		2,035,338		(1,964,814)	2,036,290
-
Cash and cash equivalents at beginning of year		3,711,033		1,675,695		3,710,927	1,674,637
Cash and cash equivalents at end of year		1,752,349		3,711,033		1,746,113	3,710,927

A.        Reconciliation of loss before income tax to cash (used in)/generated from operations

		Group			Company
		2017	2016		2017	2016
		£	£		£	£
Loss before income tax		(2,361,268)	(2,363,993)		(2,360,313)	(2,364,115)
Depreciation		47,091	50,053		47,091	50,053
Amortisation charges		512,549	456,298		512,549	456,298
Employee share option costs		(42,137)	73,250		(42,137)	73,250
Finance income		(671)	(3,014)		(671)	(3,014)
Earnings before interest, taxation, depreciation and amortisation		(1,844,436)	(1,787,406)		(1,843,481)	(1,787,528)
Movements in working capital:
Decrease/(increase) in trade and other receivables		197,679	(184,929)		190,524	(184,061)
(Decrease)/increase in trade and other payables		(79,210)	223,510		(79,140)	223,716
Cash (used in)/generated from operations		(1,725,967)	(1,748,825)		(1,732,097)	(1,747,873)

 

END

 

 

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