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Works Media Grp(The) (WKS)

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Monday 29 September, 2008

Works Media Grp(The)

Interim Results

RNS Number : 4938E
Works Media Group (The) PLC
29 September 2008
 






THE WORKS MEDIA GROUP PLC INTERIM RESULTS 

FOR THE SIX MONTHS ENDED 30 JUNE 2008



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 2008.




Financial Highlights


  • Turnover for the period increased by 71% to £1,384,000 (2007810,000)

  • Turnover at UK Distribution subsidiary rises 142%

  • Loss of £340,000 after non recurring provisions of £75,000 (2007 loss £130,000)

  • Cash reserves of £545,000 (2007: £691,000)



Corporate Highlights


  • Successful execution of strategy to transform business


  • Film Distribution - The Works UK Distribution

    • 6 films released in cinemas and 8 on DVD during the six months.

    • Universal Pictures released all titles on DVD under output agreement.

    • Multi-media rights to 30 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 seeded for expansion in 2009.

    • Critical acclaim for Man on Wire and Somers Town



Costa Theo, non-executive Chairman of The Works Media Group said: -


'These results reflect two things.   Firstly, that the Group is doing the right things in terms of business development and growth strategy, for example, with the setting up of sensible funding structures for both areas of the business.   However, secondly, it shows that the market is becoming more competitive which is also affecting the business.   Importantly the Group has established a fine track record and reputation in a specific part of this market where I believe it has a competitive advantage. On this basis, I look to the future with confidence.'


For further information, please contact:


The Works Media Group plc                               020 7612 0030

Norman Humphrey, CEO


Dowgate Capital Advisers Limited                    020 7492 4777
James Caithie


ICIS                                                                        020 7651 8688

Tom Moriarty, Caroline Evans-Jones



  


CHAIRMAN'S STATEMENT



OVERVIEW

With regards to the development of the business we have continued to make progress in the period under review. Turnover for the period has increased by 71% to £1,384,000 (compared to £810,000 for the first six months of 2007) and we have been able to put in place funding structures that enable us to better execute on our business plan without detrimentally affecting our balance sheet.   However, we are operating in a rapidly changing market place. The level of competition is increasing dramatically having benefitted from significant outside funding. This in turn has driven up the acquisition cost of titles for release through our UK division. Our International division has also suffered a drop in revenue caused mainly by the international marketplace's demand for more commercial, U.S. product as opposed to the UK 'art-house' content, which our International division specialises in. As a result of this changing environment the cost of sales has increased dramatically to £785,000 compared to £96,000 for the first half of 2007.


As ever, it is extremely important that we react to the changing market conditions and focus on our strengths.   Whilst there are financial constraints on the size and scale of business with which we can become involved, our track record in being able to leverage, in particular UK 'art-house' content will continue to support out growth. 



FUND RAISING

The Works International has began to service by sale and delivery a multi-million pound fund raised by Quickfire Films which should allow it to sell worldwide rights on bigger, more commercial product. The board acknowledges the Group has an operational funding requirement for 2009 and is in the final stages of negotiation with Milcoz Films Limited for a £750,000 loan facility.



FINANCIALREVIEW

During the 6 months to 30th June 2008, The Works Media Group made a retained loss before and after tax of £340,000.  The headline operating loss, before charging £75,000 compensation for loss of office by the former Chairman Crispin Barker, is £265,000 which compares unfavourably with the loss of £134,000 suffered during the comparable period in 2007.   Increased cost of sales in the UK has had a negative impact.   Turnover at the Works UK Distribution rose by 142%.   There was a 40% decrease in turnover at The Works International reflecting a reduction in the volume of films for sale.


The Group had cash of £545,000 as at 30th June 2008 (2007 £691,000).



OUTLOOK

The outlook is cautiously optimistic.   Though there is a general consensus that the world economy is in a down turn, the film industry as a whole tends to perform well in recessionary environments and it is expected that this will be reflected by the Group's performance.   For example, The Works UK Distribution has had its biggest hit to date, Mongol (released in June 2008), which grossed in excess of £800,000 at the box office and there is an expectation that the title will do well across the other formats such as DVD and TV.   With access to the Quickfire Films fund, it is expected that the Works International will be able to acquire world-wide rights on commercial product, substantially increasing its sales commissions from 2009 onwards.




Costa Theo

26 September 2008

  


CHIEF EXECUTIVE'S REPORT



OVERVIEW


Having repositioned itself effectively, the directors believe the Group is reasonably well positioned for the current economic climate. However, there are indications the UK home entertainment market is experiencing a downturn and it is therefore appropriate for us to look beyond our domestic distribution business for growth in the short-term.  During the next couple of years, the most significant development is likely to occur at our sales agency, The Works International.



INTERNATIONAL SALES


It remains our ambition to expand the activity of the sales agency, The Works International. As a first step, we have this year began providing sales and technical services to Quickfire, an agency run by James Atherton, who is also a non-executive director of The Works Media Group. It is intended The Works will sell many of the feature films acquired by Quickfire in the next two or three years.


The relationship with Quickfire will increase the number of films sold by The Works International, although because of the lead time between film investment and sale of the completed picture, the impact of the trading relationship will not be felt until 2009.


In the meantime, films being sold by The Works International continue to attract significant critical acclaim, particularly Shane Meadows drama Somers Town and James Marsh's documentary, Man on Wire. At the recent Edinburgh Film Festival for example, The Works swept the board; winning the Best Performance Award (Summer), the Best New British Film award (Somers Town), the New Directors Award (Good Dick) and the audience appreciation award (Man on Wire).


A number of new films are now in the pipeline for sale in 2009, of which the most advanced are Rachel Ward's drama, Beautiful Kate and Sarah Watt's comedy My Year Without Sex.



DISTRIBUTION ACTIVITY


There are indications the DVD market for independent (i.e. non-US studio) product is experiencing a downturn as a consequence of the fast deteriorating economic conditions in the retail sector. DVD sales achieved by Universal Pictures, our contracted sub-licensee for home entertainment, have fallen in recent months and whilst it is too early to predict the extent or duration of the down-turn, I believe it prudent to reassess the carrying value of our catalogue in the short-term. A cautionary provision of £100,000 has therefore been charged to cost of sales in the period. Further provisions may be appropriate during the second half of the year, however if conditions improve, it may be possible to reverse them in subsequent periods.


The Works UK Distribution released six films theatrically during the first half of 2008.  However, the theatrical market is hardening and the acquisition of rights becoming more difficult. It is therefore unlikely the release rate can be continued during the second half of the year. 


In June we released nationwide the Oscar nominated Mongol: The Rise To Power of Genghis Khan. The film is already the most successful ever distributed by The Works and during the next few months, its performance on DVD, Video On Demand and Pay Per View formats is likely to determine the overall Group result for 2008.


Media windows for pay and free television are now opening for the older titles in The Works catalogue and in order to maximise value at a time when potentially TV broadcasters are reducing expenditure on original programming, we have appointed TV sales specialist Alchemy TV to represent our interests. As an example of early success in television, Mongol has recently been sold to both the BBC and Sky for transmission in 2009.


As more media windows open on The Works catalogue, turnover per film is increasing.   The Works UK Distribution sales were £1,210k in the first half of 2008, compared with £501k in 2007.  Another positive trend is the general increase in Video on Demand revenues, a consequence of the output arrangements which The Works now has in place with both Virgin Media and BT Vision.


The distribution highlight for the second half of the year is likely to be our release of the first horror title ever to be screened on the new high-tech RealD format, Scar 3D. The film premieres on Halloween and opens around the country on 7th November.



OUTLOOK


Like most consumer businesses, The Works will have to weather the economic downturn.  At this time the reinvigoration of our international sales agency business offers the least risky opportunity for business development at The Works and it will therefore be the focus of our attention in the short-term.


I remain optimistic about the medium and long term prospects for this business.



Norman Humphrey

26 September 2008



  



GROUP INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2008







6 Months Ended 

30 June 2008

Unaudited

6 Months Ended 

30 June 2007

Unaudited

12 Months

 Ended 

31 Dec 2007 Audited


Notes

£000

£000

£000
















Turnover

3

1,384

810

3,312






Cost of sales


(785)

(96)

(1,476)






Gross profit


599

714

1,836






Operating Expenses


(865)

(863)

(1,992)






Headline Operating loss 


(266)

(149)

(156)






Non recurring items

4

(75)

-

-






Loss on Ordinary Activities 


(341)

(149)

(156)






Interest Receivable


1

15

17






Interest Payable


-

-

-






Loss before taxation


(340)

(134)

(139)






UK Corporation Tax


-

-

-






Loss for the period attributable to equity share holders


(340)

(134)

(139)
















Earnings per share





Basic (pence)

5

(0.18)

(0.09)

(0.09)

Diluted

5

(0.18)

(0.09)

(0.09)

Dividend


-

-

-













  



GROUP BALANCE SHEET AS AT 30 JUNE 2008





As at 

30 June 2008

Unaudited

As at 

30 June 2007

Unaudited

As at

31 Dec 2007

Audited


Notes

£000

£000

£000











Non Current Assets





Goodwill and intangible fixed assets


-

2,262

-

Property, Plant and Equipment


24

20

15

Investments

4

25

100

100



49

2,382

115






Current assets





Work in progress


1,790

1,846

1,693

Trade and other receivables


933

980

1,167

Cash and cash equivalents


545

691

964



3,268

3,517

3,824






Total assets


3,317

5,899

3,939











Current liabilities





Trade and other payables


(1,080)

(1,057)

(965)

Accruals


(145)

(105)

(296)

Deferred Income


(70)

(871)

(316)



(1,295)

(2,033)

(1,577)






Non current liabilities


-

-

-






Total liabilities


(1,295)

(2,033)

(1,577)











Net assets


2,022

3,866

2,362
















Shareholders' equity





Called up share capital


4,394

4,369

4,394

Share premium account


8,688

7,950

8,688

Retained earnings


(10,898)

(8,291)

(10,558)

Minority interest


(162)

(162)

(162)






Equity Shareholders' funds


2,022

3,866

2,362








  


GROUP CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2008    







6 Months Ended 

30 June 2008

Unaudited

6 Months Ended 

30 June 2007

Unaudited

12 Months

 Ended 

31 Dec 2007

Audited



£000

£000

£000






Cash flows from operating activities:










Operating loss


(266)

(149)

(156)






Depreciation


2

10

26

Loss on disposal of fixed assets


-

-

(1)

Amortisation of goodwill


-

-

-

(Increase)/Decrease in stocks


(97)

(553)

(399)

(Increase)/Decrease in debtors


234

(90)

(278)

Increase/(Decrease) in creditors


(282)

(377)

(834)






Net cash generated by operating activities


(409)

(1,159)

(1,642)






Cash flows from investing activities










Interest received


1

15

17

Purchase of non current assets


(11)

(3)

(13)

Sale proceeds on sale of non current assets


-

-

1






Net cash generated by investing activities


(10)

12

5






Cash inflow/(outflow) before financing


(419)

(1,147)

(1,637)






Cash flows from financing activities










Interest paid


-

-

-

Issue of ordinary share capital


-

500

1263

Share issue costs


-

(5)

(5)






Net cash received/(used) by financing activities


-

495

1,258






Net (decrease)/ increase in cash and cash equivalents  


(419)

(652)

(379)






Cash and cash equivalent at beginning of period


964

1,343

1,343






Cash and cash equivalent at the end of period


545


691


964






Less: Production and Development funds held on trust for third parties.


(134)

(145)

(141)






Available cash at bank and in hand


411

546

823









STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2008





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








Group







At 1 January 2008

147,502,437

4,394

8,688

(162)

(10,558)

2,362

Retained loss for the period

-

-

-

-

(340)

(340)

Share capital issued 

-

-

-

-

-

-

Share issue costs

-

-

-

-

-

-

At 30 June 2008

147,502,437

4,394

8,688

(162)

(10,898)

2,022




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 JUN2008



1.    Basis of Preparation


The condensed consolidated financial statements for the six-month period to 30 June 2008 are unaudited. The comparative figures for the 12 month period ended on 31 December 2007 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 2007. 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.       Non Recurring Items


The £75,000 non-recurring charge is compensation to our former Chairman Crispin Barker for loss of office.


5.       Earnings per share


The calculation of basic earnings per ordinary share is based on earnings attributed to equity share holders of £ (340,000)  The weighted average number of shares in issue during the six month period ended 30 June 2008 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.


6.       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 2007 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.


7.       AIM Rule Compliance Report

 

          1.   The Works Media Group plc is quoted on AIM and as such under AIM Rule 31 the 
                Company is required to:

 

           2.   have in place sufficient procedures, resources and controls to enable its compliance with
                 the AIM Rules;

 

           3.   seek advice from its nominated adviser ('Nomad') regarding its compliance with the AIM 
                 Rules;

 

           4.   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;

 

           5.   ensure that each of the Company's Directors accepts full responsibility, collectively and
                 individually, for compliance with the AIM Rules; and 

 

           6.   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.









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