RNS Number:7928M
BKN International AG
28 November 2006
Press Release 28 November 2006
BKN International AG
("BKN" or "the Company")
Final Results
BKN International AG, a global animation company engaged in the distribution and
marketing of animated children's television programmes and related consumer
products, today reports Final Results for the year ended 30 September 2006.
For the second straight year, the Company reports record net income.
Highlights
* Turnover increased 16% to Euro13.9 million (2005: Euro12 million). In addition, a sum of Euro0.3
million was phased into fiscal 2007 due to delivery of the films in October 2006 versus the
planned September 2006
* Total expenses increased 4% to Euro9.2 million in part based on lower amortisation due to strong
current and forecast library sales as per company policy (2005: Euro8.8 million)
* Earnings or Profit before tax increased 39% to Euro4.1 million (2005: Euro3.0 million)
* Underlying Net Income (before deferred tax gains) increased 37% to Euro4.1 million (2005: Euro3.0
million)
* Net Income increased 5% to Euro4.5 million (2005: Euro4.3 million)
* Underlying EPS (before deferred tax gains) increased 37% to Euro0.26 (2005: Euro0.19)
* EPS increased 4% to Euro0.29 (2005: Euro0.28)
* Programming rights asset value increased to Euro36.6 million (2005: Euro23.6 million)
* Net Cash Generated by Operating Activities increased 15% to Euro6.9 million (2005: Euro6.0 million)
* The Annual General Meeting will be held on Thursday 22 February 2007 in Cologne, Germany
Commenting on the Results, Allen Bohbot, Chairman & Chief Executive Officer of
BKN International AG, said: "We are delighted to report record net income for
the second year in a row. The Company has a valuable portfolio of programming
rights which will further drive BKN's growth over the next financial year.
"We are optimistic about the prospects for video steaming over the internet.
BKN holds the worldwide copyrights to its portfolio of animated properties in
perpetuity and accordingly, we are in a unique position to expand into this
market when we feel the timing is right to do so.
"The Company reports a positive outlook for 2007 based on continued growth in
key segments of the business and good receipt of new product in the market
place."
- Ends -
A conference call for financial analysts and investors will be held today at
15.00 p.m. GMT (16.00 p.m. CET and 10:00 a.m. EST).
Dial-in number +44 (0) 207 070 5500 (UK)
+1 866 432 7186 (US)
+49 (0) 307 261 67 180 (Germany)
Conference password 680873
Enquiries:
BKN International AG
Allen Bohbot, Chief Executive Officer Tel:+44 (0) 20 7269 8683
allen.bohbot@bknkids.com
Wayne Mowat, Chief Financial Officer Tel:+44 (0) 20 7269 8687
wayne.mowat@bknkids.com
Sascha Ziemann, Finance Manager Tel:+49 221 55 40 5 - 190
sascha.ziemann@bknkids.com www.bknkids.com
Broker/Designated Sponsor:
Panmure Gordon in the UK
Aubrey Powell / Stuart Gledhill Tel:+44 (0) 20 7459 3605
stuart.gledhill@panmure.com
Seydler AG in Germany
Rene Parmantier Tel:+49 69 92054 130
rene.parmantier@seydler.de
Media Enquiries:
Abchurch for UK corporate and financial press
Chris Lane / Franziska Bohnke Tel:+44 (0) 20 7398 7700
chris.lane@abchurch-group.com www.abchurch-group.com
SSA Public Relations for trade & industry press
Karine Fouchet Tel:+44 (0) 20 7849 5689
kfouchet@ssapr.com
GFD - Finanzkommunikation for German corporate and financial press
Dr. Georg F. Oehm Tel:+49 69 971 247 32
oehm@gfd-finanzkommunikation.de
For a full version of the final results please go to our website www.bknkids.com
Notes to editors:
BKN International AG is a global animation company engaged in the distribution
and marketing of animated children's television programmes and the marketing of
related consumer products (licensing and merchandising) in all forms. BKN has
worked on numerous successful animation projects.
The Company is currently listed on the Deutsche Bourse and AiM and it operates
all over the world. BKN has successfully negotiated distribution deals in over
95 countries and territories in the children's programming market.
The Company's Film Library includes:
* Legend of the Dragon
* Robin Hood
* Kong - The Animated Series
* Zorro: Generation Z
* Kong - King of Atlantis
* Roswell Conspiracies
* Kong - Return to the Jungle
* Dork Hunters from Outer Space
* A Christmas Carol
* Jungle Book
Consolidated Management Report & Chairman and Chief Executive Statement
We are pleased to present the financial results of BKN International AG, a
global animation production and distribution company ("BKN" or the "Company")
that is listed on the Frankfurt and London Stock Exchanges. We license our
product in approximately 95 countries and dub in about 30 languages. This
Consolidated Report of the Management Board will cover audited financial
statements under IAS accounting rules for the period ended 30 September 2006 and
compared to the similar period in fiscal 2005.
The Company had a very strong year during which we have launched new products
and increased our client base, successfully expanded into the United States and
Europe especially in our Home Entertainment segment, increased our profitability
and significantly strengthened our balance sheet.
A. Group Structure
* The Group consists of BKN International AG, the parent company in Germany, with active operating
trading subsidiaries in the United Kingdom ("BKN New Media Ltd" and "BKN Home Entertainment Ltd"),
the United States ("BKN New Media Inc." and "BKN Home Entertainment Inc.") and Spain ("BKN New
Media SL").
* The Group creates, produces, distributes and markets animated properties for television and DVD
distribution, as well as licenses its characters for licensing and merchandising and the internet.
* The Company reports in Euro and trades in Euro, UK Sterling, Singapore Dollars and US Dollars.
* The Company is listed on the General Standard of the Frankfurt Stock Exchange (March 2000) and on
the Alternative Investment Market of the London Stock Exchange (December 2003).
B. Film Catalogue and New Properties
* We have successfully expanded the Company's film catalogue, at 30 September 2006, to 76 titles and
1,909 episodes compared to 65 titles and 1,770 episodes as published in our 2005 Annual Report.
BKN now owns the 6th largest film library of global animation which was recently appraised
(discounted cash flow methodology) at Euro107.9 million versus the Euro36.6 million as reflected on the
balance sheet. The appraisal does not include any forecast for the internet or new media
activities as those are too difficult to predict. Clearly, this increased appraisal reflects in
part the quality and quantity of our assets but also the enhanced state of the market for family
entertainment overall.
* The Company expanded the property entitled Legend of the Dragon this year by delivering an
additional 13 episodes and expanding total sales by Euro2.5 million to Euro9.1 million to date to exceed
management's expectations.
* The Kong franchise continues to expand with our recent delivery of the Kong -Return to the Jungle
film in state of the art 3D animation. In fiscal 2006, we added another Euro1.8 million in sales from
this important franchise.
* One of our most exciting new developments and series is Dork Hunters from Outer Space (26
episodes), a new action based comedy. We have high expectations for this property globally and the
response from the customers has been strong for autumn 2007 initial release for TV, DVD and
Licensing sales.
* Another key product is Zorro - Generation Z (26 or 39 episodes). This iconic property should
result in very strong TV, DVD and licensing sales in 2007 and 2008.
* We now have a slate of 8 feature films (7 have been produced in state of the art 3D animation) for
direct-to-DVD release. Legend of the Dragon launched on 23 October 2006, Kong-Return to the Jungle
on 13 November 2006 and A Christmas Carol on 20 November 2006. It is our plan to release one title
monthly in 2007.
* The film catalogue continues to deliver strong earnings on a steady pace as the Company finds new
markets for its products.
* We now have our own DVD label in the UK and Ireland and DVD distributors in major markets
worldwide. We expect to achieve high growth in our DVD segment in 2007.
C. Financial Highlights
* Turnover increased 16% to Euro13.9 million (2005: Euro12 million). In addition, a sum of Euro0.3 million
was phased into fiscal 2007 due to delivery of the films in October 2006 versus the planned
September 2006.
* Total expenses increased 4% to Euro9.2 million in part based on lower amortization due to strong
current and forecast library sales as per company policy (2005: Euro8.8 million)
* Earnings or Profit before tax increased 39% to Euro4.1 million (2005: Euro3.0 million)
* Underlying Net Income (before deferred tax gains) increased 37% to Euro4.1 million (2005: Euro3.0
million)
* Net Income increased 5% to Euro4.5 million (2005: Euro4.3 million)
* Underlying EPS (before deferred tax gains) increased 37% to Euro0.26 (2005: Euro0.19)
* EPS increased 4% to Euro0.29 (2005: Euro0.28)
* Cash in hand totals Euro1.6 million versus Euro384,000 last year.
* Programming rights asset value increased to Euro36.6 million from Euro23.6 million in 2005.
* The Company employs at the year end 36 full-time employees and consultants versus 25 at the end of
2004. The Company estimates that approximately 400 people work on the production of its shows at
various locations and for various vendors.
D. Business & Operating Environment
The children's market sector has experienced a number of changes in the last
five years. In 2002 and 2003, most content suppliers struggled as broadcasters
experienced reduced advertising income and therefore cut their acquisition
budgets. A modest rebound was experienced in 2004 and 2005 and it seems likely
the current environment is more buoyant. While prices for animation have not
increased, and in most cases remain flat, there are a number of dedicated
24-hour animation channels in the world (by some estimates, as many as 700) that
require children's content, both from catalogues as well as new productions.
Good examples include recent and upcoming launches in Germany of both the
Nickelodeon and Cartoon Network channels and the new children's digital channel
in the UK in February 2006 by ITV. The larger suppliers of global content are
experiencing success as the key to children's entertainment is global content,
not locally produced animation.
E. Internet and New Media
In this past fiscal year, the value of the internet for video streaming has
truly expanded. BKN has a philosophy of not entering into licenses for such
valuable rights until the market matures as this value is likely to increase
substantially. Unlike many of our local competitors who own selected rights and
therefore do not often control the internet streaming rights, BKN does hold
these rights in perpetuity to all of its key titles like Zorro - Generation Z,
Dork Hunters from Outer Space, Legend of the Dragon, Kong - The Animated Series,
UBOS, Roswell Conspiracies, Extreme Dinosaurs, Pocket Dragon Adventures,
SkySurfer Strike Force, Starla and the Jewel Riders, our entire film titles,
etc.
Successful US-based kids websites are delivering strong audiences traditionally
reserved for TV viewing as follows (the Rating is a percentage of total kids
6-11 and the Impressions reflects the actual total audience):
K6-11 K6-11
Television Rating Impressions
Nickelodeon 4.9 1,189,230
Cartoon Network 2.7 655,290
Kids WB! 2.0 485,400
ABC 1.5 364,050
Disney Channel 1.5 364,050
Fox Kids 1.3 315,510
DIC Kids 1.3 315,510
CBS 0.7 169,890
NBC 0.6 142,620
Toon Disney/Jetix 0.4 97,080
Source: NTI (Nielsen Television Index, 2005/2006 (Season)
K6-11 K6-11
Internet Rating Impressions
Disney Online 11.9 2,886,000
Nickelodeon Online 10.0 2,424,000
Disney Channel.com 8.9 2,171,000
Cartoon Network.com 6.5 1,589,000
Yahooligans 3.0 718,000
Nick Jr. 1.8 442,000
EA Online 1.6 393,000
PBS Kids 1.5 365,000
Playhouse Disney 1.5 356,000
Kids AOL 1.4 346,000
Source: Nielsen NetRatings Inc.
F. Financial Position
The Company is generating good cash flow from operations and investing further
into its long-term assets as the market for its products is strong. The Company
is in a strong tax position, with tax losses available for future use in some of
its operating territories.
Following the completion of a standard tax audit in Germany which covered the
years 2000 to 2004, the tax losses as reported by the company to the German tax
authorities have been finally assessed. This therefore secures the use of such
losses as off-settable against future taxable profits and underpins the deferred
tax asset the Company carries on its balance sheet.
G. Convertible Notes and Stock Options
In fiscal 2006, we issued several Notes totalling Euro8.7 million to US investors
allowing them to convert into shares of the Company at varying prices as agreed.
These Notes are due in 2010 although some monthly payments begin as early as
March 2007 as planned in our cash flow forecasts. At the end of fiscal 2006,
the potential shares, which can be converted including warrants, equals
approximately 3.6 million at an average share price of approximately Euro4.20.
The Management Board holds a combined 725,000 stock options at Euro3.90 strike
price due to convert in spring 2008 and there are 8,500 options issued several
years ago to employees at a Euro3.86 strike price.
As we expand further in 2007, it is likely that the stock option plan will be
made available to a greater amount of executives to ensure key staff retention
and to incentivize delivery of stronger Company performance.
The Company did not have any capital increases in fiscal year 2006.
H. The Management and Supervisory Boards, Key Talent
* The management team is well experienced and seasoned in the industry. Allen Bohbot (CEO) and Wayne
Mowat (CFO) make up the Management Board and oversee the Company on a daily basis. Ben Heng is no
longer with the Company due to the closing of the Singapore office.
* Nicola Andrews is Director - Sales and Marketing for the US, UK/Ireland, Australia/New Zealand as
well as French and German speaking territories and Pan-territory deals.
* Laura Tapias is Managing Director for Spanish, Portuguese and Italian-speaking markets.
* Matthew Graham-Clare is Managing Director of all Home Entertainment activities.
* Richard Ungar is Executive Producer on all titles.
* There are three seasoned non-executive Directors that comprise the Supervisory Board including Karl
Benetz as Chairman with Robert Paff and Michael Jack Kugler.
I. Corporate Governance
* The Company strives to achieve the highest level of corporate governance and transparency in order
to assure that the financial accounts stand up to the greatest scrutiny.
* The Company is in good standing with the Frankfurt and London Stock Exchanges and complies with all
rules and regulations.
* The Company has met all of the recommendations of the German Corporate Governance Code of Good
Conduct, with regards to a company our size and complexity, with the exception of incentive based
compensation for the Supervisory Board members who earn a flat annual compensation.
* The Management and Supervisory Boards met either in person or telephonically on nine separate
occasions during the fiscal year and in addition, numerous telephone conversations took place
between members of both boards to ensure full and accurate communication. The Management Board
supplied the Supervisory Board with sufficient and comprehensive information throughout the year.
In addition, there is an audit committee of directors to ensure proper transparency and control of
the companies' activities. The Boards cooperated closely for the benefit of the enterprise.
* The Company has no borrowing or lending relationship with any of its Directors.
J. Business Risks
As with any business, there are variable risks such as:
* At this time, the Company does not hedge against currency fluctuation. While we report in Euro and
maintain accounts in Euro, Sterling, Singapore Dollars and US Dollars, a majority of our sales are
in US Dollars and this is matched by a majority of our costs. The Company engages vendors
throughout the world for its productions (Los Angeles, China, India, Manila) and such contracts are
typically in US Dollars. The Company believes that it is properly managing this currency
fluctuation and has no need at this time to create hedging instruments whose cost would outweigh
the benefit. The 2006 exchange position was a net gain of Euro55,000.
* Historically, we have not been dependent on DVD sales as this has been a small part of our
turnover. Recently, we have dramatically expanded this activity and business segment. Although the
DVD market is not growing as rapidly, it is still a huge market and BKN can claim a more lucrative
share.
* Our major suppliers, as noted above, are in foreign locations as typical of the animation industry.
We believe that all are credible, well funded and professional. The global nature of the
industry allows the Company to source the best producers in cost and quality regardless of
territory. We have not experienced any significant delays in production but this is always
possible.
* We are expanding at a rapid pace. We believe that our creative and production staffs are well in
control of all productions and budgets with local control at all locations.
* The children's market has historically been cyclical. At various points in the past two decades,
the market has been over-supplied and at other points, it has been starved for intellectual
content. While we believe that the market is in a good place at this time, and will be for the
near term, this is likely to change but only over the longer term. Although delivery platforms are
expanding from solely TV and DVD towards the internet, BKN as an IP owner is well positioned to
transition accordingly.
* Prices for children's content have been mostly flat in the last few years and it is not expected
that the industry has any real pricing power. This is mitigated by the expansion of new channels
dedicated to the sector.
* There are a number of producers, primarily in France and Canada, that have access to government
subsidies and the broadcasters in those markets favor local producers. The Company does not
receive any subsidies from any source although some of our partners may. It does not appear that
other jurisdictions will expand government involvement in the sector and this seems in hand at this
time. BKN's lack of dependence on governmental subsidies means that we have full control of the
quality of our products which assures delivery of global rather than local content in all forms and
venues.
* We trade in multiple jurisdictions throughout the world and the possibility of litigation to
protect our assets and rights is increased by the increased turnover. We always protect our
properties with filings with the US Copyright and Trademark Office and the European Union Trademark
Office, but there is always a chance that vendors and/or licensees cause us to litigate to protect
our assets.
K. Annual General Meeting
The next meeting is set for Thursday, 22 February 2007 in Cologne.
L. Outlook
The markets look healthy for children's animation in the near term with hundreds
of dedicated animated children's channels operating throughout the world. The
Company is strategically well placed to take advantage with our London office
handling Continental Europe and Asia via our Melbourne, Australia presence, our
New York office handling North America and our Barcelona office handling the
important markets of Spain, Portugal, Italy and Latin America.
Due to an extensive effort to expand on the DVD and traditional licensing and
merchandising, we believe that our income streams will be more diversified in
2007 and beyond. We expect major revenue contributors in 2007 to come from
Zorro - Generation Z, Dork Hunters from Outer Space, Legend of the Dragon, the
feature film titles and the film catalogue. We are expecting a well balanced
revenue structure and contribution from several major projects.
We delivered record net earnings for the Company in fiscal 2006 of Euro4.5 million
(Euro0.29 EPS) even without the benefit of a major deferred tax credit in 2005, and
we feel that fiscal 2007 will reflect further expansion on both turnover and
earnings in the range of 20-30% and that the outlook for the Company is strong.
Cologne, November 2006
The Management Board
Allen J. Bohbot Wayne Mowat
Chairman & CEO Chief Financial Officer
Consolidated Balance Sheets for Fiscal 2006
(in thousands of Euro)
ASSETS
30 Sep 2006 Prior Year
TEuro TEuro TEuro
A. Fixed and Intangible assets
1. Intangible Assets 36,591 23,602
2. Fixed Assets 127 69
36,718 23,671
B. Other Long term assets
1. Other Assets 223 220
2. Deferred Tax Asset 2,209 1,502
3. Deferred Financing Costs 738 188
3,170 1,910
C. Current Assets
1. Accounts receivable, trade 1,496 2,048
2. Other current assets 789 1,272
3. Cash and cash equivalents 1,648 384
3,933 3,704
43,821 29,285
LIABILITIES
A. Shareholders Equity
1. Common Stock 15,718 15,718
2. Additional paid in capital 8,286 8,161
3. Other comprehensive income 136 197
4. Retained earnings 4,495 0
28,635 24,076
B. Long term liabilities
1. Bonds 12,604 3,851
2. Deferred tax liability 441 172
3. Deferred long term liabilities 14 22
13,059 4,045
C. Short term liabilities
1. Accrued expenses 961 903
2. Accounts payable, trade 1,166 261
2,127 1,164
43,821 29,285
Consolidated Statements of Operations for Fiscal 2006
(in thousands of Euro - except shared data and number of employees)
Year to date
30 Sep 2006 30 Sep 2005
Revenues
Television - Catalogue 5,740 5,481
Consumer Brands - Catalogue 6,870 5,617
Production/Other 1,283 869
Total Sales Revenues 13,893 11,967
Expenses
Depreciation and amortisation 1,430 2,679
Producer fees and other direct 985 232
operating costs
Salaries and employee benefits 2,993 2,099
Other Expenses 3,742 3,761
Total expenses 9,150 8,771
Other Expenses
Interest costs 625 225
Income before income tax 4,118 2,971
Provision for income tax (377) (1,318)
Net income current year 4,495 4,289
earnings per share 28.6 28.1
diluted eps 26.0 27.9
basic number of shares 15,717,566 15,250,095
diluted no of shares 19,875,809 16,183,960
Number of employees including directors at the 36 25
end of the year
The retained earnings statement is included as a separate paragraph in the notes to
the consolidated statements
Consolidated Statements of Cash flows for Fiscal 2006
(in thousands of Euro)
30.09.2006 30.09.2005
TEuro TEuro
Cash Flow from Operations
Net Income 4,495 4,289
Depreciation and Amortisation 1,430 2,679
Deferred Taxes (438) (1,130)
5,487 5,638
Changes in operating assets and liabilities
Accounts receivable, trade 552 (178)
Other Current Assets 483 466
Other Long Term Assets (3) (2)
Deferred Financing costs (550) 154
Accounts payable, trade 905 60
Accruals 58 (108)
Others (69) 72
Net cash generated from operating activities 6,863 6,102
Cash Flow from Investing activities
Intangible Assets/Programme rights (14,370) (10,206)
Fixed Assets (107) (19)
Net cash used in investing activities (14,477) (10,225)
Cash Flow from Financing activities
- Convertible Bond 8,753 (1,149)
Proceeds from issuance of share capital 125 3,436
Net cash provided by financing activities 8,878 2,287
Net Increase/(decrease) in cash and cash equivalents 1,264 (1,836)
Cash and cash equivalents at beginning of period 384 2,220
Cash and cash equivalents at end of period 1,648 384
Consolidated Statements of Stockholder's Equity for Fiscal 2006
(in thousands of Euro)
Common Additional Retained/ Other Total
Stock Paid-In Earnings/ Comprehensive Stockholders'
Capital (Accumulated Income/(Loss) Equity
Deficit)
Balance at 30 September 2005 15,718 8,161 0 197 24,076
Net profit for the period from 1 4,495 4,495
October to 30 September 2006
Convertible Bond Warrant proceed 125 125
Foreign Currency Translation (61) (61)
Adjustment
Balance at 30 September 2006 15,718 8,286 4,495 136 28,635
-Ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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