Content Media Corp PLC : Content Media Corporation PLC - Interim Results

22 December 2011

Content Media Corporation plc

Interim Results for the six months ended 30 September 2011

The Board of Content Media Corporation plc (AIM: CMCP), a pre-eminent owner of media rights supported by strong film, TV and digital sales divisions, today announces its unaudited interim results for the six months ended 30 September 2011.

Financial Highlights

§ Turnover of £8.5 million (2010: £6.6 million)

§ Gross profit before operating expenses of £3.8 million (2010: £3.4 million)

§ Normalised EBITDA¹ of £0.8 million (2010: £0.7 million)

§ Normalised PBT¹ profit of £0.2 million (2010: loss of £0.1 million)

§ Normalised basic EPS¹ of  0.1 pence (2010: 0.0 pence)

§ Reported loss of £0.2 million (2010:  £0.7 million)

§ Net debt of £19.2m (2010:  £20.3m). 

Operational Highlights

§ Content Television continues to trade well and Collins Avenue is growing strongly.  Visibility into the second half is reasonable and another solid year is expected

§ Content Film is having a stable year with robust library sales.  Management anticipate a stronger second half as new titles are delivered

§ Content Digital continues as a market leader in the distribution of multi-platform programming and its sales to digital platforms are continuing to grow

§ Overheads remain stable with a small increase predominantly due to Collins Avenue

"We have had a comparatively good half year result and we are well positioned for another year of revenue growth and a solid full year result.  Our investment in Collins Avenue is beginning to yield positive results for us and it is now set to become a leading US factual entertainment production company.  We hope that further growth opportunities as well as new investment opportunities will arise in this area." 

¹ - For details on definitions and calculations refer to the Financial Review below

Enquiries:

Robert Emmett
Throgmorton Street Capital	Tel: [phone]

Philip Secrett/Colin Aaronson/David Hignell
Grant Thornton Corporate Finance	Tel: [phone]

Chairman's Statement

Introduction

For the six months ended 30 September 2011, Content Media Corporation plc reports an operating profit of £0.4 million (2010: £0.2 million).  The normalised profit before interest, tax, depreciation, intangible library amortisation, share option expenses and exceptionals¹was £0.8 million (2010: £0.7 million).  The normalised profit before tax¹was a profit of £0.2 million (2010:  loss of £0.1 million).   The loss before and after tax was £0.2 million (2010: £0.7 million).

The results for this half year are up on last year predominantly due to higher revenues and profits from Collins Avenue - the Group's factual television production company jointly owned with Jeff Collins - with all other divisions recording results similar to last year.  The directors consider that these are solid results and demonstrate the ongoing stability of the Group's operations. 

¹ -  For details on definitions and calculations refer to the Financial Review below

Financial Review

The figures for Normalised EBITDA, Normalised PBT and Normalised EPS reconcile as follows:

	£m	£m	£m
	6 months	6 months	12 months
	Sep 2011	Sep 2010	Mar 2011
Operating profit/(loss)	0.4	0.2	2.6
Add back:
Intangible library amortization	0.2	0.4	0.8
Depreciation	0.0	0.0	0.0
Share based payments	0.0	0.0	0.0
Non recurring exceptional items	0.2	0.1	0.2
	-------------	-------------	-------------
Normalised EBITDA	0.8	0.7	3.6
Less:
Net finance costs (finance costs less finance income)	0.6	0.8	1.3
	-------------	-------------	-------------
Normalised PBT	0.2	(0.1)	2.3
	========	========	========

	Sep	Sep	Mar
	2011	2010	2011
Normalised PBT - £m	0.2	(0.1)	2.3

Divisional results break down as follows:

	TV	TV	Film	Film	DVD	DVD	Corp	Corp	Total	Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
	Sep	Sep	Sep	Sep	Sep	Sep	Sep	Sep	Sep	Sep
	11	10	11	10	11	10	11	10	11	10
Revenue	7.3	5.3	0.9	0.7	0.3	0.6	0.0	0.0	8.5	6.6
Less:  cost of sales	(4.4)	(2.7)	(0.1)	(0.1)	(0.2)	(0.4)	0.0	0.0	(4.7)	(3.2)
	-------	-------	-------	-------	-------	-------	-------	-------	-------	-------
Gross margin	2.9	2.6	0.8	0.6	0.1	0.2	0.0	0.0	3.8	3.4
Gross margin %	40%	49%	89%	86%	33%	33%	0%	0%	45%	52%

Results

Content Television

The television division has had a solid first half and the highlights have been:

§ Revenues were split £1.6m (2010: £2.6m)to the Fireworks library, £3.7m (2010: £2.6m)to newly acquired product and £2.0m (2010:  £0.1m) to Collins Avenue.  Newly acquired product is predominantly new television series and factual programming but also includes library acquisitions like Harmony Gold

§ The Fireworks library and the new drama library continue to sell broadly across a range of titles which includes our distribution of "The Emmys" and individual titles including "Heartland" and "Republic of Doyle"

§ Factual distribution has improved and now includes a number of awards shows alongside several natural history series like "Wild Wales" and "Secret Lives of Birds" and historical series including "Secrets of War"

§ In relation to the Group's third party managed libraries, the Harmony Gold library continues to sell well and we have also begun distributing another large episodic library series, "Highway to Heaven" starring Michael Landon

§ The digital division continues to achieve pleasing results and is leading the market in the distribution of titles made for multi-platform programming, including those we distribute from our Vuguru output deal.  Alongside sales of this library, the division is having great success in exploiting our whole library across the expanding digital platforms and representing other libraries in the digital space

§ Collins Avenue has traded well in the first half of the year.  Over the recent period, it has received orders for over 50 hours of programming and its show "Dance Moms" is a hit for Lifetime.

§ Overheads have increased due to higher overheads in Collins Avenue with other overheads in the divisions remaining stable

§ Taking account of all the above, the effect is that revenues have increased significantly whilst profits have increased marginally due to the fact that Collins Avenue has lower margins

Management are cautiously optimistic that the outlook for the division into the second half half of the year continues to be solid:

§ We have a degree of known library revenue that will be recognized in the second half

§ Most of our drama series will be delivered in the second half including the fifth season of "Heartland" and third season of "Republic of Doyle", together with the third season of BBC children's series "Young Dracula"

§ Results from our factual distribution division have been improving which we believe will continue into the second half of the year

§ Our digital sub-division continues to be a market leader in the distribution of multi-platform programming for leading producers in this area.  We are taking delivery of several digital shows including "The Millionaire Tour" and "Strictly Sexual".  Additionally, within the digital and television divisions, we have also branched out into new live event shows such as the mixed martial arts event  "BAMMA"

§ The outlook for Collins Avenue is positive with an increasing amount of production activity being undertaken in the second half based upon known broadcast commissions.  The Company is expected to continue to grow over the coming period.

§ We recently closed a deal to expand our operations into West England and Wales, through a jointly owned company called Content West to be run by previous BBC executive Tim Morley.  Initial results from this business have been encouraging with several new projects having been acquired and others being developed positively

§ Spirit digital media is performing in line with expectations and has been achieving promising levels of initial revenue without breaking out as yet.  Nevertheless the trajectory is positive and we continue to believe this business has strong future prospects.

Content Film

§ Revenues from our new films have been low and most of the revenues and profits relate to the feature film library

§ The film library continues to grow - it now numbers over 220 feature film tiles - and the revenues from this library are providing a solid base of regular revenue and cash flow for the division

§ Overhead remains steady and the division continues to run a low risk strategy in terms of product acquisition

We expect the division to continue to achieve positive results for the full year:

§ We have several titles currently in delivery including "Outpost 2: Black Sun", "The Day", "Hick" and "The Pact", the latter title having been selected for the Sundance Film Festival

§ Based on known contractual sales, these new titles will deliver higher revenues this year versus last year, albeit at lower margin levels

§ The opportunity to acquire finished films of value continues to be strong and the LA presence significantly aids this process, recent acquisitions include "Lovely Molly" and "96 Minutes"

§ Looking into next year, we have recently closed the financing on "The Numbers Station" starring John Cusack which began filming recently and will be delivered next year.  Additionally, we are working on the financing for several other higher profile films to be delivered in FY13

DVD Division:  Allumination Filmworks and Phase 4

Our Allumination library continues to deliver profits, albeit that the level of revenues and general activity in the library is tailing off.

The Group continues to hold a stake in the North American film distribution company, Phase 4 Films ("Phase 4").  We do not consolidate the results of Phase 4 as we do not exert significant influence over the operations of the company.  Further, we value our investment in Phase 4 at cost as it is not possible to accurately calculate a fair value for the company given that it is a relatively young company and is privately held. 

We have been pleased with Phase 4's development across North America and we believe it is becoming a more powerful player in its market, notwithstanding the challenges in the home entertainment space. 

Phase 4 is also experiencing an improvement in its video on demand, digital and television revenues as it builds out its business in this growing part of the market.

Overhead

Group overhead has increased marginally due to the increased overhead of Collins Avenue, whilst all other corporate and general overhead has remained stable.

Trading Outlook

Recent Fireworks library sales have been pleasing and we will take delivery of our main television series in the second half with pleasing levels of sales already contracted.  Our digital division will also have a much stronger second half based on known contracted sales.  The results for the film division this year will be heavily dependent on the timing of the sales of our films at upcoming markets but a stable result is expected.  Collins Avenue will grow strongly in the second half based on known production commissions which will drive revenue growth, albeit at lower margins. Taken as a whole, we expect another solid full year result.

Against these satisfying expectations, it is increasingly difficult to predict the macro-economic climate - particularly across Europe - and its possible effect on the Company.  If the general economic outlook does deteriorate further, it will possibly have an effect on our expected results, given our trading across European media markets. 

Debt, Cash Flow and Liquidity

The Group's senior loan facility is managed by its long term banker JPMorgan Chase Bank, the world's largest media bank.  Other banks included in our syndicate include Bank of America, IDB Bank and Manufacturers Bank.  The Group has a $US 45m five year revolving loan facility in place that commenced in July 2008. 

The loan under the facility at 30 September 2011 was £19.8m (2010: £20.8m) before capitalised financing costs of £500,000 (2010:  £680,000).  Taking account of cash on hand, net debt was £19.2m (2010:  £20.3m).  We hold our loan in $US dollars and the balance of our loan in US dollars was $32.3m (2010:  $32.7m).

The Group's working capital availability under its revolving loan facility is stable.  Based on current internal forecasts for a period in excess of 12 months, we expect to continue to have ongoing availability under the facility to provide adequate working capital for the Group to execute its strategy including product acquisitions.  

Interest expenses have fallen in this half year compared to last year and are projected to continue to fall in the remainder of this financial year.  In particular, a fixed interest rate swap has recently expired which had an interest rate above recent floating rates and our cash interest expense will be lower as a result, given current interest rates.

Carried Forward Tax Losses

The Company has not recorded a tax charge due to its significant carried forward tax losses in both the UK and the US.  As at 31 March 2011, the Group's carried forward tax losses are estimated at £47 million.

Conclusion

The first half of our current financial year has been satisfactory and stable.  We expect a stronger second half based on our current visibility and look forward to a solid full year result.

Huw Davies

Chairman

ContentFilm plc

Consolidated Interim Income Statement

For the six months ended 30 September 2011

Unaudited                Unaudited          Audited

	Six months ended 30 September 2011	Six months ended 30 September 2010	Year ended 31 March 2011
	£000	£000	£000
Revenue	8,495	6,635	20,760
Cost of sales	(4,681)	(3,256)	(11,757)
Gross profit	3,814	3,379	9,003
Operating expenses	(3,381)	(3,179)	(6,441)
Operating profit	433	200	2,562
Analysed as:
Normalised EBITDA	835	652	3,583
Intangible library amortization	(158)	(380)	(771)
Depreciation	(16)	(23)	(48)
Share-based payments	-	-	-
Non-recurring exceptional items	(228)	(49)	(202)
	433	200	2,562
Finance income	90	-	204
Finance cost	(732)	(788)	(1,512)
Amortisation of capitalised financing costs	(154)	(118)	(244)
Finance cost - preference shares	(118)	(118)	(235)
Gain on interest rate swap	268	117	377
Net finance cost	(646)	(907)	(1,410)
(Loss)/profit before taxation	(213)	(707)	1,152
Income tax charge related to deferred tax asset	-	-	165
(Loss)/profit for the period	(213)	(707)	1,317
Basic profit per ordinary share	0.0p	0.0p	0.8p
Diluted profit per ordinary share	0.0p	0.0p	0.6p

ContentFilm plc

Consolidated Interim Statement of Comprehensive Income

For the six months ended 30 September 2011

	Six months ended	Six months ended	Year ended
	30 September 2011	30 September 2010	31 March 2011
	£000	£000	£000
(Loss)/profit for the period	(213)	(707)	1,317
Other comprehensive Income Exchange difference on translating foreign operations Foreign currency	19 1,043	1,252 (1,130)	(1,847) 2,367
Total comprehensive (loss)/income for the period	849	(585)	1,837
Attributable to:
Equity shareholders of ContentFilm plc	849	(585)	1,837

ContentFilm plc

Consolidated Interim Balance Sheet

At 30 September 2011

	Six months ended 30 September 2011	Six months ended 30 September 2010	Year ended 31 March 2011
	£000	£000	£000
ASSETS
Non current assets
Property, plant and equipment	137	46	71
Goodwill	10,776	10,776	10,776
Intangible assets	9,320	9,212	7,714
Investments	1,297	1,298	1,359
Deferred tax	3,642	3,477	3,642
	25,172	24,809	23,562
Current assets

ContentFilm plc Consolidated Interim Statement of Changes in Equity

For the six months ended 30 September 2011

	Share Capital	Share Premium	Equity on Con. Debt	Shares to be issued	Merger and Warrant reserve	Foreign currency reserve	Trans. reserve	Retained earnings	Total Equity
	£000	£000	£000	£000	£000	£000	£000	£000	£000
Balance at 31 March 2010	4,282	37,438	3,100	1,119	567	(4,749)	4,875	(51,339)	(4,707)
Changes in equity for period
Exchange differences on translation of foreign operations	-	-	-	-	-	-	(1,130)	-	(1,130)
Foreign currency	-	-	-	-	-	1,252	-	-	1,252
Profit for the period	-	-	-	-	-	-	-	(707)	(707)
Total comprehensive income for the period	-	-	-	-	-	1,252	(1,130)	(707)	(585)
Adjustment of shares to be issued	-	-	-	-	-	-	-	-	-
Shares issued	-	-	-	-	-	-	-	-	-
Balance at 30 September 2010	4,282	37,438	3,100	1,119	567	(3,497)	3,745	(52,046)	(5,292)
Changes in equity for period
Exchange differences on translation of foreign operations	-	-	-	-	-	-	(717)	-	(717)
Foreign currency	-	-	-	-	-	1,115	-	-	1,115
Profit for the period	-	-	-	-	-	-	-	2,024	2,024
Total comprehensive income for the period	-	-	-	-	-	1,115	(717)	2,024	2,422
Adjustment of shares to be issued	-	-	-	-	-	-	-	-	-
Shares issued	22	31	-	-	-	-	-	-	53
Balance at 31 March 2011	4,304	37,469	3,100	1,119	567	(2,382)	3,028	(50,022)	(2,817)
Changes in equity for period
Exchange differences on translation of foreign operations	-	-	-	-	-	-	19	-	19
Foreign currency	-	-	-	-	-	1,043	-	-	1,043
Profit for the period	-	-	-	-	-	-	-	(213)	(213)
Total comprehensive income for the period	-	-	-	-	-	1,043	19	(213)	849
Adjustment of shares to be issued	-	-	-	-	-	-	-	-	-
Shares issued	-	-	-	-	-	-	-	-	-
Balance at 31 March 2011	4,304	37,469	3,100	1,119	567	(1,339)	3,047	(50,235)	(1,968)
						.	.	.	.

ContentFilm plc Consolidated Interim Cash Flow Statement

For the period ended 30 September 2011

Unaudited              Unaudited           Audited

	Six months ended 30 September 2011	Six months ended 30 September 2010	Year ended 31 March 2011
	£000	£000	£000
Cash flows from operating activities:
Profit/(loss) for the period after tax	(213)	(707)	1,317
Adjustments for:
Deferred tax asset	-	-	(165)
Depreciation	16	23	48
Amortisation of intangible film and television rights	605	1,144	5,274
Impairment of intangible film and television rights	-	-	158
Decrease/(Increase) in trade and other receivables	(264)	1,194	(2,780)
(Increase)/decrease in inventory	(3)	(6)	131
(Decrease)/increase in trade and other payables	29	167	2,348
(Decrease)/increase in other non-current liabilities	-	(142)	-
Exchange differences	976	79	(150)
Finance cost	646	907	1,410
	1,792	2,660	7,591
Interest paid	(732)	(788)	(1,512)
Net cash from operating activities	1,060	1,872	6,079
Cash flows from investing activities:
Purchase of intangible film and television rights	(2,367)	(2,875)	(5,724)
Purchase of property, plant and equipment	(82)	-	(50)
Purchase of joint venture investment	-	(103)	(164)
Net cash used in investing activities	(2,449)	(2,978)	(5,938)
Cash flows from financing activities:
Proceeds from borrowings	10,827	8,902	19,860
Repayment of borrowings	(9,230)	(8,468)	(20,827)
Net cash from financing activities	1,597	434	(967)
Net (decrease)/increase in cash	208	(672)	(826)
Cash at beginning of period	360	1,186	1,186
Cash at end of period	568	514	360

Notes to the consolidated interim financial statements

1              General Information

The interim Financial Statements for the six months ended 30 September 2011 were authorised for issue in accordance with a resolution to the Board of Directors on 21 December 2011.

The Company is a public limited company incorporated in the United Kingdom. The address of its registered office is 19 Heddon Street, London W1B 4BG.

The Company is listed on the AIM Market of the London Stock Exchange.

These interim Financial Statements do not comprise statutory accounts within the meaning of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2011 were approved by the Board of Directors on 25 July 2011 which received an unqualified auditors' report and have been delivered to the Registrar of Companies. The financial information contained in this report is unaudited.

2              Basis of Preparation

These interim Financial Statements should be read in conjunction with the annual Financial Statements for the year ended 31 March 2011, which have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union.

3              Accounting Policies

These consolidated financial statements (the interim financial statements) have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 31 March 2011.

4              Segmental analysis

The operations of the group are managed in four principle business divisions; film, television, US film and DVD distribution and Corporate.  These divisions are the basis upon which the management reports its primary segment information.

Revenues by Business Division	Six months ended	Six months ended	Twelve month ended
	30 September 2011	30 September 2010	31 March 2011
	Unaudited	Unaudited	Audited
	£000	£000	£000
Television	7,297	5,316	16,682
Film	868	711	2,988
US film and DVD distribution	307	585	1,054
Corporate	23	23	36
	8,495	6,635	20,760

5              Earnings per share

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the average number of shares in issue during the year.

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below:

	Six months ended	Six months ended	Twelve months ended
	30 September 2011	30 September 2010	31 March 2011
	Unaudited	Unaudited	Audited
(Loss)/profit  for the period (£)	(213,000)	(707,000)	1,317,000
Add: Finance cost on preference shares (£)	118,000	118,000	235,000
(Loss)/profit  attributable to ordinary shareholders (£)	(95,000)	(589,000)	1,552,00
Weighted average number of ordinary shares	176,820,670	174,698,383	174,739,084
Add:
Weighted average preference shares	34,840,269	34,840,269	34,840,269
Dilutive share options and warrants	-	-	-
Weighted average number of fully diluted shares	209,538,652	209,538,652	209,579,353
Basic (loss)/earnings per share (pence)	0.0p	0.0p	0.8p
Diluted (loss)/earnings per share (pence)	0.0p	0.0p	0.6p

Adjusted earnings per share

	Six months ended	Six months ended	Twleve months ended
	30 September 2011	30 September 2010	31 March 2011
	Unaudited	Unaudited	Audited
(Loss)/profit after tax attributable to Equity share holders of the parent (£)	(213,000)	(707,000)	1,317,000
Add back:
Intangible library amortisation	158,000	380,000	771,000
Income tax credit	-	-	(165,000)
(Gain) on interest rate swap	(268,000)	(117,000)	(377,000)
Finance cost on preference shares	118,000	118,000	235,000
Depreciation	16,000	23,000	-
Non-recurring exceptional items	228,000	49,000	202,000
Amortisation of capitalised financing costs	154,000	118,000	244,000
Adjusted profit/(loss) after tax	193,000	(136,000)	2,227,000
Adjusted basic earnings per share (pence)	0.1p	0.0p	1.3p