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 (2007:�810,000)
* 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 6 Months Ended 12 Months
30 June 2008 30 June 2007 Ended
Unaudited Unaudited 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 (340) (134) (139)
attributable to equity share
holders
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 As at As at
30 June 30 June 31 Dec
2008 2007 2007
Unaudite Unaudit Audited
d ed
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 6 Months Ended 12 Months
30 June 2008 30 June 2007 Ended
Unaudited Unaudited 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 - - (1)
assets
Amortisation of goodwill - - -
(Increase)/Decrease in stocks (97) (553) (399)
(Increase)/Decrease in debtors 234 (90) (278)
Increase/(Decrease) in (282) (377) (834)
creditors
Net cash generated by (409) (1,159) (1,642)
operating activities
Cash flows from investing
activities
Interest received 1 15 17
Purchase of non current assets (11) (3) (13)
Sale proceeds on sale of non - - 1
current assets
Net cash generated by (10) 12 5
investing activities
Cash inflow/(outflow) before (419) (1,147) (1,637)
financing
Cash flows from financing
activities
Interest paid - - -
Issue of ordinary share - 500 1263
capital
Share issue costs - (5) (5)
Net cash received/(used) by - 495 1,258
financing activities
Net (decrease)/ increase in (419) (652) (379)
cash and cash equivalents
Cash and cash equivalent at 964 1,343 1,343
beginning of period
Cash and cash equivalent at 545
the end of period 691 964
Less: Production and (134) (145) (141)
Development funds held on
trust for third parties.
Available cash at bank and in 411 546 823
hand
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 JUNE 2008
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.
This information is provided by RNS
The company news service from the London Stock Exchange
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