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Photon Kathaas (PKP)

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Monday 04 April, 2011

Photon Kathaas

Year end results

RNS Number : 1842E
Photon Kathaas Productions Ltd
04 April 2011
 



Photon Kathaas Productions

 

Year end results

 

Chennai, 4 April 2011. Photon Kathaas Productions Ltd. (AIM: PKP, "PKP"), the South Indian film company, has published its results for the year to 31 December 2010.

 

Highlights

 

·              Admitted to AIM market on 4 November 2010 raising approximately US$2.4 m.

·              Photon Kathaas Music label launched in December 2010, to capitalise on the popularity of soundtracks and ring tones amongst Indian film audiences.

·              Recently released film Nadunisi Naaygal already secured significant contracted revenues.

·              Four more films in production.

 

Venkat Somasundaram, PKP Chief Executive said: 

 

"In barely a year we have laid the foundations for a studio-led film production company - positioned in one of the most vibrant cinema-going countries in the world - secured a listing of its shares in London and launched a music label business.  Our first film has also resulted in significant revenues already.

 

"With our first mover advantage and four films under production, we are well positioned to become a market leader in the South Indian film industry and are looking forward to 2011 and 2012 with increasing confidence."

 

 

Enquiries

 

Photon Kathaas


Michael Rosenberg

+ 44 (0)20 7938 4026

Venkat Somasundaram, Chief Executive

+65 6224 4991

Reshma Ghatala, Head of Marketing

+91 44 2820 2988



Seymour Pierce Limited

020 7107 8000

Nandita Sahgal/Tom Sheldon (Corporate Finance)

Laetitia MacManus (Corporate Broking)




College Hill

020 7457 2020

Adrian Duffield/Jon Davies


 

 

About Photon Kathaas Productions

 

Photon Kathaas Productions is the first film company specifically created to make and distribute films of different genres to a primarily South Indian audience, speaking the languages of Telugu, Tamil, Kannada and Malayalam.

 

PKP benefits from a special creative relationship with its chief creative officer, Gautham Vasudev Menon. Gautham is one of the leading directors and producers in South Indian cinema. He has been involved in nine films to date, not only as a director but also as a screenplay writer, an executive producer and a producer. His earlier films include: Minnale (2000), Rehna He Tera Dile Mein (2001), Kaaka Kaaka (2003), Gharshana (2004), Vettaiyadu Vellaiyadi (2006), Pachaikili Muthucharam (2007) and Vaaranam Aayiram (2008).

 

A. R. Rahman is PKP's creative adviser. He is an Indian film composer, record producer, musician and singer and is credited for totally overhauling the style in which music is made in India. A. R. Rahman has won two Academy Awards (Slumdog Millionaire), 25 Filmfare Awards, four Indian National Film Awards, a Bafta Award, two Golden Globes and two Grammy Awards.

 

 

CHAIRMAN'S STATEMENT

 

PKP was incorporated on 17 November 2009, as a Singapore registered company to produce and co-produce South Indian films primarily targeting South Indian audiences. 

 

It is the first South Indian film company specifically created to produce and co-produce South Indian language films with its shares traded on a major international stock exchange.  It produces films predominantly in the South Indian languages of Telugu, Tamil, Kannada and Malayalam. 

 

For the majority of 2010, PKP was an unlisted company.  It was admitted to AIM on 4 November 2010, having raised approximately US$ 2.4m.  The financial results for the year 2010, therefore, reflect in the main the costs of the listing process with relatively small revenues arising from the production of films. Administration expenses have been deliberately kept at a very low level, a policy which will continue through 2011.

 

Despite the considerable management time invested in the listing process, the Company successfully initiated a number of projects and had a number of films in pre-production prior to the year end.  The full impact of those productions will be realised during the financial year ending 2011.

 

The Accounts for the year, show revenues of US$ 200,176, cost of sales of US$ 166,670 and administrative costs of US$ 337,956, resulting in a loss before tax of US$ 304,450.

 

Production Schedule

 

At the time of listing PKP had five films under production.  The first one of these, "Nadunisi Naaygal", which is a small budget Tamil film, with total production costs of approximately US$ 0.9m and directed by Gautham Vasudev Menon, was released on 18 February 2011.

 

The TV rights for this project were sold prior to release at a price of approximately $422,000. The other four films ("Veppam", "Azhagar Samiyin Kuthirai", "Thanga Meengal" and the Hindi remake of "Vinnay Thaandi Vaarivaya") are in various stages of production, all are expected to be released in the first half of this financial year.

 

Launch of Photon Kathaas Music

 

During the year, PKP also launched its own music label "Photon Kathaas Music" ("PKM") primarily to promote its own movies' soundtracks and associated products (such as ring tones), but also to acquire and market music properties from other productions.  The creation of PKM is in line with the Company's strategy of capturing revenue opportunities at multiple points across the entire value chain associated with film production, from the box office to music rights and merchandising.

 

It enables PKP to capitalise on the popularity of soundtracks and ring tones amongst Indian film audiences and also to have much greater involvement in the music marketing process which is a key component in the commercial success of PKP's films.

 

Industry outlook

 

In 2009, 60% of the total films produced in India were in the South Indian languages and about half of the country's cinema screens were located in South India. The Directors believe that, even though the South Indian Film Industry was valued at approximately US$ 374m (INR 17.3bn) in 2009, the South Indian Film Industry remains fragmented with inefficient processes and less than effective exploitation of Intellectual Property Rights.

 

Between 2009 and 2013, the total Indian film industry is expected to grow at a CAGR of 11.6% to US$ 4.0bn (INR 185bn) by 2013. The Directors believe that growth in the South Indian Film Industry will follow similar patterns over the same period.

 

By launching South India's first studio-led corporate model, the Board believes the Company is well positioned to become a market leader in the South Indian Film Industry.   PKP will not only benefit from the expected growth in the South Indian Film Industry, but by creating a brand synonymous with high quality film content it will act as a "magnet" for consolidating and attracting talent across the industry, which will lead to the better exploitation of its films' intellectual property rights.

 

 

STRATEGIC OVERVIEW

 

First mover advantage in a fragmented but large and growing market

 

South Indian films play a significant role in the Indian film industry, accounting for 60% of the total 1,300 films produced in India in 2009, with South India accounting for around 50% of the total number of cinema screens in the country.

 

PKP is the first South Indian film company specifically created to produce and co-produce South Indian language films to be traded on a major international stock exchange.  It is also the first South Indian film company to adopt a studio-led corporate model, which provides the Company with significant first mover advantage which will enable PKP to become a market leader. 

 

The business aims to use this studio approach to consolidate and capture the growth of the fragmented South Indian film industry, to attract industry talent and to create a brand synonymous with high quality content.

 

Focus on content production and ownership

 

By producing a diverse portfolio of movies across different genres, languages and budgets, PKP will build a proprietary library of film content based on a diverse portfolio of movies of different languages, genres and budgets.

 

As the Group possesses its own content library, PKP will be able to secure more favorable marketing and distribution arrangements and to have greater control over exploitation of its Intellectual Property Rights.  This will provide PKP with more constant returns and improved margins on second window sales i.e. subsequent revenues after the initial release of a film.

 

Scope for efficiency gains and intellectual property profit opportunities

 

PKP expects to achieve operational efficiencies as a result of the simultaneous production of bilingual films (and resultant economies of scale), through entering partnership agreements with distributors and equipment providers, and by securing talent agreements with key members of cast and crew and through obtaining competitive terms from service providers.

 

The management will seek to exploit the intellectual property rights of its movie portfolio across a wide range of revenue streams including mobile ringtones, ring-back tones, wallpapers, clips, trailers, SMS-based interactivity, pay-per-view, video on demand and film merchandise. A strategy evidenced with the launch of PKP's own music label Photon Kathaas Music in December 2010.

 

 

OPERATING REVIEW

 

Films released since the reporting date

 

Nadunisi Naaygal

 

This is a small budget Tamil film directed by Gautham Vasudev Menon and co-produced by PKP together with R. S. Infotainment and Escape Artistes.  It is a psychological thriller film and stars Sameera Reddy.   The film was released on 18 February 2011, at a total cost of approximately US$ 900,000 and has already recouped a significant percentage of its cost from sales to date. 

 

TV rights have been sold for approximately US$ 422,000, international theatrical rights for US$ 60,000 and dubbing rights (in other Indian languages) for a further US$ 70,000.

 

Films under production

 

Veppam

 

A small budget Tamil film with a total cost of approximately US$ 600,000 was directed by Anjana Ali Khan and co-produced by PKP, together with R. S. Infotainment and Escape Artistes.  This film is now complete, and its release is scheduled for early May 2011.

 

In advance of the release of Veppam, PKP has invested in a major promotional campaign which included the launch of an official trailer, soundtrack and a music video directed by Gautham on 31 December 2010. This was followed up with a preview of the music video being shown at leading multiplexes in Chennai during the Tamil holiday week of 14-21 January 2011.

 

TV rights for Veppam have already been sold for US$ 180,000 and Telugu dubbing rights for US$ 55,000.

 

Azhagar Samiyin Kuthurai

 

A small budget Tamil film directed by Susindran in co-production with Escape Artistes. The film is nearing completion and is expected to be released mid-April with a total production cost of approximately US$ 1.0 m. PKP is a minority investor in this project.

 

Thanga Meengal

 

This is a small budget Tamil film directed by Ram and is a solo production of PKP with a total production cost of US$ 520,000. The first schedule of the production is complete with the movie expected to be ready for release by June/July 2011.

 

Vinnai Thaandi Vauuvaayaa

 

Pre-production of this Hindi co-production together with Fox Star India is complete and three songs have been composed by A. R. Rahman.  Production is to commence from 4 April 2011. This is a remake in Hindi of a Tamil/Telugu film (directed by Gautham Vasudev Menon) and is expected to be ready for release in September 2011.  This will be a larger production with total production cost of this film expected to be approximately US$ 4.0 m.

 

Future pipeline

 

A number of other projects are at various stages of discussion including a Tamil/Telugu bilingual film to be directed by Gautham Vasudev Menon, a small budget Tamil film by Priva V and a medium budget Tamil/Telugu bilingual.  

 

Music Label

 

In December 2010, PKP launched its own music label - Photon Kathaas Music - to capitalise on the popularity of soundtracks and ring tones amongst Indian film audiences. 

 

Soundtracks and their associated specially-made videos are an important ingredient in the marketing and commercial success of Indian films. Apart from soundtrack sales on CDs, new audio products such as downloads, caller tunes and ring tones can generate substantial revenues for producers.

 

PKP's chief creative officer, the film director Gautham Vasudev Menon, is noted for his use of high-quality music across his films. PKP's creative adviser, A.R. Rahman, is the double-Oscar winning composer of the Slumdog Millionaire soundtrack. 

 

Through PKM, PKP aims to widen the scope of its pioneering studio model devoted to the commercial and critical success of South Indian language films and their associated revenue lines.

 

PKP has acquired the music rights of a Tamil film titled Kandhein and has tied up with Hungama - the leading mobile content delivery platform - to deliver its music across new media and mobile delivery channels.

 

The soundtrack for Veppam, composed by Joshua Sridhar, is being distributed by PKM in association with Sony Music. PKP has launched a campaign to promote both the soundtrack and the movie, including screening of the trailer and audio promos across theatres, radio campaigns, and appearances by the cast and musicians at leading music stores and joint promotion along with Nadunisi Naigal.

 

OUTLOOK

 

PKP with its first mover advantage of a studio-led corporate model is well positioned to become a market leader in the South Indian Film Industry.

 

Projects that were in production as at the reporting date are being completed, and are due for release in the first half of 2011. The Company has a number of new projects at various stages of pre-production which should ensure that 2011 be a year of growth for the Company.

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2010

 


Notes

31 December 2010

For the period ended 31 December 2009



US $

US $

CONTINUING OPERATIONS




Revenue


200,176

 

-





Cost of sales


(166,670)

-





Gross profit


33,506

-

Administrative expenses   


             (337,956)

 

(1,981)





Loss before tax

 

4

           (304,450)

 

(1,981)

Income tax expense

 

 

(226)


Loss for the period attributable to the owners of the parent


           (304,676)

 

(1,981)

Other comprehensive income




Foreign exchange translation differences


(39,419)

 

-





Total comprehensive loss for the period attributable to the owners of the parent


          (344,095)

 

(1,981)





Loss per share




(a) Basic

 

5

(0.031)

 

(0.020)

(b) Diluted

 

5

(0.031)

 

(0.020)

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 DECEMBER 2010

 


Notes

31 December 2010

31 December 2009



US $

US $

ASSETS




Non-current assets




Property, plant and equipment


2,608

-

Intangible assets


11,655

-

Other non-current assets


22,897

-

Total non-current assets


37,160

-





Current assets




Trade  receivables


             38,512

-

Other current assets


16,350

-

Inventories


            473,948

-

Cash and cash equivalents


1,116,254

100

Total current assets


1,645,064

100





    Total Assets


1,682,224

100





LIABILITIES AND EQUITY








SHAREHOLDERS' EQUITY




Share capital

2,3

 1,345,306

 

100

Retained earnings


     (306,657)

(1,981)

Foreign exchange reserve


(39,419)

-

Other reserves


2,632

-

Total Shareholders' equity


 1,001,862

(1,881)





LIABILITIES




Non-current liabilities




Deferred tax liability


226

-



226

-

Current liabilities




Trade and other payables


680,136

1,981



680,136

1,981





Total Liabilities


680,362

1,981





Total Equity and Liabilities


1,682,224

100

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2010

 

 




Foreign


Total


Share

Retained

exchange

Other

Shareholders'


capital

earnings

reserve

reserves

equity


US $

US $

US $

US $

US $

Date of incorporation

17 November 2009

-

-

 

-

 

-

-

Loss for the period

                    -  

     (1,981)

 

-

 

-

     (1,981)

Other comprehensive income for the period

                 

  - 

                

   - 

 

-

 

-

                 

Total comprehensive income for the period

                    - 

     (1,981)

 

-

 

-

     (1,981)







Initial issue of share capital

100

-

 

-

 

-

100

Balance at 1 January 2010

                100

           (1,981)

 

-

 

-

           (1,881)

Loss for the year

                    -  

     (304,676)

 

-

 

-

     (304,676)

Other comprehensive income for the year

                 

  - 

 

-                   

 

(39,419) 

 

-

                 

(39,419) 

Total  comprehensive income for the year

                    - 

     (304,676)

 

(39,419)

 

-

     (344,095)







Issue of share capital

       2,414,509

-

-

-

   2,414,509

Share issue expenses

(1,069,303)

-

-

-

(1,069,303)

Share based payments - options

-

-

-

 

2,632

2,632

Balance at 31 December 2010

      1,345,306

    (306,657)

 

(39,419)

 

2,632

         1,001,862

 

 

 

CONSOLIDATED STATEMENT OF CASHFLOWS

FOR THE YEAR ENDED 31 DECEMBER 2010

 

 



For the period ended


31 December 2010

31 December 2009


US $

US $

Cashflows from operating activities



Loss before tax

        (304,450)

(1,981)

Adjustments for:



Foreign exchange gain

(20,673)


Depreciation of property, plant and equipment

75

-

Amortisation of intangible assets

1,655

-

Share based payment expense

2,632

-

Increase in receivables

              (39,870)

-

Increase in inventory

           (501,160)

-

Increase in trade and other payables

            702,450

1,981

Increase in prepayments and advances

(16,350)

-

Increase in other non-current assets

            (24,468)

-

Net cash used in operating activities

(200,159)

-




Cash flow from investing activities



Purchase of Intangible assets

            (13,310)

-

Purchase of property, plant and equipment

(2,683)

-

Net cash used in investing activities

            (15,993)

-




Cash flow from financing activities



Proceeds from issue of capital

         2,414,509

100

Share issue expenses

(1,069,303)

-

Net proceeds from financing activities

1,345,206

100




Net increase in cash and cash equivalents

1,129,054

100

Cash and cash equivalents at the beginning of the period

100

-

Effect of foreign exchange rate changes

(12,900)

-

Cash and cash equivalents at the end of the period

1,116,254

100

 

 

 

NOTES TO THE ACCOUNTS

 

 

1.      profile and BAsis of preparation

 

Photon Kathaas Productions Limited ("PKP" or "the Company") is a Singapore registered company. The Company's registered office is situated at 31, Cantonment Road, Singapore 089747.

 

The principal activities of the Company and its subsidiaries (the "Group") are those relating to the business of production and co-production of films primarily targeted at the South Indian audience of varying genre, language and budget.

 

The financial information for the periods ended 31 December 2010 and 31 December 2009 have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial information set out herein is based on the transactions of the Group which consists of the Company and its subsidiaries, Photon Kathaas Production Private Limited, India and Photon Kathaas International Productions Limited, Singapore.

 

The preliminary announcement for the year ended 31 December 2010 were approved and authorised for issue by the board of directors on 1 April 2011. The financial information set out in this preliminary announcement does not constitute audited financial statements for the year ended 31 December 2010 but is derived from those statements upon which the Company's auditors have given an unqualified report.

 

 

2.      Share Capital

 

PKP which is incorporated in Singapore is not required to have authorised share capital under the national jurisdiction. There is also no concept of a par value for the shares. For all matters submitted to vote in the shareholders meeting, every holder of the equity shares, as reflected in the records of the company on the date of the shareholders meeting has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of companies.

 

On 4 November 2010, the shares of the company were listed on the AIM market of the London Stock Exchange. The listing price was at US$ 0.49 per share. A total of 4,894,301 shares were offered to public comprising of 23% of the extended equity base. Out of this, the promoters also contributed to 207,640 shares constituting 1% of the extended equity base.  

 

Issued, paid up and allotted Share Capital:

 

Issued, allotted and fully paid

Number of shares

US $

Subscribers shares

10,000

100

Allotment of shares on 26 April 2010

1,088,900

10,889

Allotment of shares on 17 September 2010

401,800

4,018

Allotment of shares on 17 September 2010

139,409

1,394


1,640,109

16,401

Split ratio of 10:1 on 17 September 2010

16,401,090

16,401

Allotment of shares on 4 November 2010

4,894,301

2,398,208

As at 31 December 2010  

21,295,391

         2,414,609

 

 

The Company on 2 November 2010 approved an Employee Stock Option Plan (ESOP). The scheme is monitored by the company based on the recommendations of the Remuneration Committee. The ESOP pool is 10% of the enhanced share capital post the listing. Accordingly, the total number of options under the pool is 2,129,539.  

 

 

3.      SHARE ISSUE EXPENSES

 

Share issue expenses amounting to US$ 1,069,303 were incurred in respect of the placing of the ordinary shares of the company onthe Alternative Investment Market (AIM) and include professional advisors fees and other costs. This includes US$ 74,931 payable towards commission on the funds raised, against which US$ 35,431 is settled against issue of ordinary shares at the IPO listing price of US$ 0.49 per share (72,308 ordinary shares) and the balance US$ 39,500 is paid by cash.

 

 

4.      Loss before tax

 

Loss before tax for the period has been arrived at after charging / (crediting):

 

 

Group

Group

 

31 December 2010

31 December 2009

 

US$

US$

Depreciation of property, plant and equipment

75

-

Amortisation of intangible assets

1,655

-

Net foreign exchange gains

(20,673)

-

 

 

5.      LOSS PER SHARE

 

(a)  Basic

Basic loss per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year.

 

 

31 December 2010

31 December 2009

 

US$

US$

Loss attributable to equity holders of the company

(304,676)

 

(1,981)

 

 

 

Weighted average number of ordinary shares in issue

9,907,674

100,000

 

(b)  Diluted

Diluted loss earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has dilutive potential ordinary shares in the form of stock options. 

 

 

31 December 2010

31 December 2009

 

US$

US$

Loss attributable to equity holders of the company

(304,676)

 

(1,981)

 

 

 

Weighted average number of ordinary shares in issue

9,907,674

100,000

 

 

The 2009 weighted average number of ordinary shares in issue has been retrospectively stated for the share split in 2010 (note 2).

 

The Group has made a loss in the year, so the share options outstanding are anti-dilutive. As a result, the Group's dilutive Loss Per Share (LPS) is the same as the basic LPS.

 

 

6.      EVENTS AFTER THE REPORTING PERIOD DATE

 

Pursuant to the Company's listing arrangements and as stated in the Admission Document dated 3 November 2010 a total of 68,071 new Ordinary Shares were issued on 17 February 2011 by the Company to Michael Rosenberg, Non-executive Chairman, Ramanujam TST, Chief Financial Officer and Nathalie Schwarz, Non-executive Director. In accordance with the terms of their service contracts, Michael Rosenberg, Ramanujam TST and Nathalie Schwarz have agreed to take new Ordinary Shares in the Company in lieu of cash against Director's fees payable to them, as set out in the Admission Document. These Ordinary Shares have been allotted to them at an issue price of US$0.49 per share. Following the above issue of shares, Michael Rosenberg was allotted a total of 24,257 Ordinary Shares, Ramanujam TST was allotted a total of 34,920 Ordinary Shares and Nathalie Schwarz was allotted a total of 8,894 Ordinary Shares. Post the issues, the Company has a total of 21,363,462 (31 December 2010 - 21,295,391) Ordinary Shares in issue.

 

 

7.      Annual General Meeting ('AGM') and Posting of Annual Report 

 

Copies of the Annual Report & Accounts together with the Notice and Notes of the 2010 AGM will be issued to all shareholders in due course.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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