TIDMWKS
RNS Number : 5845R
Works Media Group (The) PLC
01 May 2009
THE WORKS MEDIA GROUP PLC
PRELIMINARY RESULTS
FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2008
The Works Media Group plc ("The Works" or the "Group") a leading independent UK
film distributor and international film sales agent, today announces its
preliminary results for the twelve months ended 31 December 2008.
Corporate Highlights
* Board Changes
* Experienced executive appointed MD at The Works International and main board
executive director.
* Film Distribution - The Works UK Distribution
* Best performing title to date, Oscar nominated Mongol: The Rise to Power of
Genghis Khan.
* Multi-media rights to 33 titles acquired to date on long licences.
* Release frequency halved to preserve cash.
* Film Sales - The Works International
* Services agreement with Quickfire will enhance product supply.
* Several new films in the pipeline for sale in 2009.
* Our title Man on Wire won an Oscar for the best documentary.
Financial Highlights
* Business adversely affected by market conditions and the credit crunch.
* Overheads reduced by GBP0.3 million.
* Group retained loss rises to GBP0.62 million from GBP0.14 million in 2007.
* Group turnover falls to GBP2.6 million from GBP3.3 million in 2007.
* Cash reserves of GBP0.4 million (2007: GBP0.8 million).
Fundraising
* GBP0.75 million revolving facility secured from the largest shareholder, Milcoz
Films.
Costa Theo, non-executive Chairman of The Works Media Group said:
"2008 was a difficult year for The Works Media Group. Market and economic
conditions have slowed the pace of distribution and restricted our access to
credit. However, underlying structural improvements at The Works International
should speed our recovery and the Group is very well positioned for expansion
once circumstances improve."
For further information, please contact:
The Works Media Group plc 020 7612 0030
Norman Humphrey, CEO
Dowgate Capital Advisers Limited020 7492 4777
James Caithie
CHAIRMAN'S STATEMENT
OVERVIEW
The expectation at the start of 2008 was that the positive growth achieved by
the Group in 2007 would be continued throughout the year. However, an
increase in competition in the UK combined with the downturn in the world
economy, in particular the weakness of Sterling, has interrupted our forward
momentum, and The Works Media Group has recorded a loss of GBP625,000 for the
year.
The UK film distribution market, one of the largest in the world, was
particularly competitive in 2008. Capital injections by multi-national media
groups into UK distribution subsidiaries ahead of the recession propelled the
cost of rights acquisition in this territory. Marketing costs also rose making
it more costly to achieve visibility in a crowded market and against many films'
vast advertising budgets. Our response has been to reduce the number of films
released and preserve cash whilst the storm blows over. In the second half of
2008, our release rate dropped from a film a month to one every two months. As
our UK division is currently responsible for approximately 85% of Group
turnover, the reduction in its activity had a material impact on Group turnover,
which dropped from GBP3,312,000 in 2007 to GBP2,605,000 in 2008. There are
strong indications that the battle between our larger competitors has been
painful and we expect the cost of rights acquisition to fall materially in 2009.
The global economic downturn has not affected demand for films, because to some
extent the film business is counter-cyclical. However the weakening of sterling
against the US dollar in the latter half of the year has increased cost of
rights acquisition by approximately 25%. It is to be hoped that Sterling will
strengthen as the economy improves and that acquisition costs will accordingly
revert to more realistic levels.
On a positive note, I am pleased to report that The Works UK Distribution had
its most successful film to date in 2008. The film Mongol: The Rise To Power
of Genghis Khan achieved box office receipts of GBP850,000 and had sold 119,000
DVD units by the year end. I am also pleased to report that we have begun a
transformation of the Works International which should drastically improve that
division's performance moving forward. The first step was to develop a trading
relationship with Quickfire Films, a fund which should provide The Works
International with a steady stream of highly marketable films moving forward.
The second step was to coax Carl Clifton, who until the end of 2008 was the COO
at one of our competitors, Handmade Films Plc, to become managing director of
The Works International. I expect Carl to reinvigorate our brand and scale our
trade in the foreign sales market.
FUND RAISING
The Group concluded a GBP750,000, two year, revolving credit facility with
Milcoz Films Limited, of which I am a director. The purpose of the loan was to
provide The Works UK Distribution with some modest funds for the acquisition and
marketing of new titles.
The board recognises that if the Group is to take advantage of the considerable
opportunity presented by its vertical integration and market positioning, it
will require further funding going forward. To this end we have begun a series
of preliminary discussion with potential funding sources, which will be advanced
and hopefully reach a positive conclusion in 2009. Whilst acknowledging that
the middle of a global "credit crunch" is not the most opportune time to be fund
raising, the board is cautiously optimistic that funding sources will be
attracted to the unique proposition offered by The Works Media Group.
FINANCIAL REVIEW
The Works Media Group held an Extraordinary General Meeting of its shareholders
on November 28, 2008 for the following reasons:
1. To propose a special resolution to approve a number of amendments to the Works
Media Group Plc's articles of association to reflect the provisions of the
Companies Act 2006 as so far enacted. The special resolution was accepted
unanimously by the Group's shareholders. Further amendments to the articles of
association may be needed when the balance of the Act comes into force.
2. Section 142 of the Companies Act 1985 requires that a public company convene an
EGM where its net assets are half or less than its called up share capital to
discuss whether any action is appropriate in these circumstances. The
shareholders voted unanimously that no further action was necessary. The main
reason the Group found itself in this position was because at the time of the
introduction of International Financial Reporting Standards (IFRS) in 2007, it
wrote-off over GBP2,000,000 of consolidated goodwill.
DIVIDEND
The Directors do not recommend the payment of a dividend in respect of 2008
(2007 GBPnil).
BOARD CHANGES
I am pleased to welcome Carl Clifton to the Group's board of directors and as
managing director of our subsidiary, The Works International. I believe Carl to
be the ideal candidate to reinvigorate the sales agency and expect him to focus
on the acquisition of more mainstream, films with known cast, marketable
elements and larger budgets. Our intention is to move the division's core
business away from "art-house" films for which there is a limited niche demand
amongst distributors world-wide. Carl's background as Chief Operating
Officer at Handmade Films and before that as Senior Vice President and Head of
International Sales at Universal Pictures, Polygram Filmed Entertainment, and
Head of International at Film Four International, provides the necessary
experience to achieve this goal.
CURRENT OUTLOOK AND FUTURE PROSPECTS
It has been a demanding year for the Works Media Group Plc. We expected at the
beginning of the year to grow the business, but found instead we were forced,
mainly due to the global financial crisis, to fight to preserve our position.
As previously noted, this was achieved by cutting the Group overhead, and
through conserving cash by reducing the number of films released by The Works UK
The Works UK may find itself in a challenging position in 2009 without further
capital to drive its expansion. If this turns out to be the case, the division
will adapt its business model and expand its operations in other areas. For
example, the division's management is working towards releasing third party
films on a fee basis as opposed to acquiring the distribution rights.
Additionally it is positioning itself to screen non-traditional content, such as
music concerts, in cinemas.
The Works International expects to see growth in its activity and revenue in
2009 as the reinvigorated business model becomes effective and I believe The
Works will come out of this recession in somewhat better condition than it went
into it.
Costa Theo
1 May 2009
CHIEF EXECUTIVE'S REPORT
OVERVIEW
In many respects, 2008 was a difficult year for The Works Media Group. We are
not the first company to release poor trading results during a recession but it
is frustrating having made such progress restructuring the business in prior
years to have that development impeded by matters largely beyond our control.
Fortunately, certain aspects of this business are more resilient to economic
downturn than others. Cinema attendances and DVD sales are often regarded as
counter-cyclical as customers look for escapism and cheap home entertainment.
Our UK business has nevertheless been affected by the recession in three ways: -
* Our better capitalised competitors are investing heavily in rights acquisition
to take advantage of markets which have shown resilience in the recession. This
has reduced the availability of rights for smaller distributors such as
ourselves and driven up the cost of films.
* Most films are priced in US dollars and the collapse of sterling has increased
acquisition costs by approximately 25%.
* The downturn in domestic television advertising has reduced the budgets of UK
broadcasters who currently have less money to spend buying television rights.
Unfortunately, at a time when our costs are rising, there is no real opportunity
to raise working capital on the stock market as investors divert their attention
away from AIM. In order to preserve cash, we currently have little alternative
but to reduce the number of films released by our capital intensive UK
distribution business. The combination of increasing rights acquisition costs
and falling turnover explain the Group's poor performance in 2008.
PERFORMANCE
Unfortunately, the business has not performed in line with expectations.
Turnover has fallen at all business units, in aggregate from GBP3,312,000 in
2007 to GBP2,606,000 in 2008. At The Works UK Distribution ("UK Distribution"),
the decrease arises substantially from a deliberate reduction in the number of
films released in order to preserve cash. At fellow subsidiary The Works
International ("International"), fewer rights were sold than had been
anticipated, not only because of changing global economic conditions but because
structural changes at the Company took longer than anticipated to implement.
The Group recognised the impact difficulties in the UK domestic television
market and a softening of DVD sales had on its catalogue value, and made a
cautionary provision of GBP100,000 against the ongoing carrying value. The
provision, which I hope will be reversed in subsequent periods as the economy
improves, is one reason for the fall in the gross margin percentage from 55% to
44%. Another is the decrease in turnover at The Works International, where the
cost of sales is negligible and the margin correspondingly high.
Administrative costs include GBP88,000 compensation for loss of office by the
former Chairman, Crispin Barker. That aside, the Group reduced its overheads by
more than GBP300,000 during the year, the impact of which has been borne largely
by central administration in an attempt to keep the individual business units
operating effectively. Further cuts may be necessary in 2009 if there is no sign
of recovery.
DISTRIBUTION ACTIVITY
UK Distribution released nine films in cinemas, twelve on DVD and twelve on
video on demand (VOD) during 2008. It had been releasing films at the rate of
one a month until June 2008, when the rate of release was deliberately halved to
conserve working capital. The lower frequency has continued into 2009 but is
likely to be reversed once economic conditions allow.
The best performing title of the year was the Oscar nominated Mongol: The Rise
To Power of Genghis Khan. Mongol is already our most successful DVD title to
date achieving in three months what the second best performer in our catalogue
Three achieved in three years. I expect Mongol to make a material contribution
in 2009. Other titles released in the year include the epic River Queen staring
Keifer Sutherland and the first new generation 3D horror movie, Scar 3D.
Our sub-licensing arrangements with Universal Pictures for DVD, Virgin Media and
BT Vision for VOD continue to work well and we are well-positioned for evolution
in the market and the inevitable upturn.
INTERNATIONAL SALES
I announced last year our intention to reinvigorate International and am happy
with progress to date. Our objective is to broaden the range of films sold, to
represent bigger budget films and to increase volume. As a first step towards
these objectives, in 2008 we started providing sale and technical services to
Quickfire Films, an independent fund which should deliver a steady flow of new
films; the first three of which will be completed and ready for sale in 2009.
Our second step was to appoint a managing director of The Works International
and the arrival of Carl Clifton from Handmade Films in January 2009 should allow
us to represent larger more overtly commercial material moving forwards.
The commercial highlights of 2008 were James Marsh's Man on Wire which won an
Oscar for best documentary and Shane Meadows drama Somerstown. Turnover fell
despite these successes, and I hope that 2008 will prove a low-point for
International. Trading conditions proved difficult as British production
volumes took a tumble battered by changes to the UK tax regime and a tightening
of credit. I expect with new management a more international perspective and a
steady supply of product from Quickfire that our market position will improve in
2009 whatever happens to the economy.
New films already in the pipeline for sale in 2009 include Rachel Ward's drama,
Beautiful Kate, Sarah Watt's comedy My Year Without Sex, rock-documentary Anvil!
The Story of Anvil, Italian thriller The Front Line, the dolphin conservation
crowd-pleaser The Cove and Stephen Poliakoff's thriller Glorious 39.
CURRENT OUTLOOK & FUTURE PROSPECTS
The Works Media Group is in better shape than may appear from the 2008 results.
The re-invigoration of International, itself part of a repositioning of the
Group away from production and into distribution and sales, is at last well
underway.
Economic conditions in the UK may remain challenging for a year or two but parts
of our business are counter-cyclical and our relationship with core customers
such as Universal Pictures, Virgin Media and BT remain strong. The market for TV
rights will eventually improve and by slowing down the frequency of our
cinematic releases we preserve cash at a time when credit is almost non-existent
for small companies.
Norman Humphrey
1 May 2009
Consolidated Income Statement
For the year ended 31 December 2008
+----------------------------------------+--------+---------+---------+
| | Notes | 2008 | 2007 |
+----------------------------------------+--------+---------+---------+
| | | GBP | GBP |
| | | 000's | 000's |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Revenue | 1 | 2,605 | 3,312 |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Cost of sales | | (1,464) | (1,476) |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Gross Profit | | 1,141 | 1,836 |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Selling and distribution costs | | (44) | (46) |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Administrative costs | 4 | (1,722) | (1,946) |
+----------------------------------------+--------+---------+---------+
| Operating loss | | (625) | (156) |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Investment income | | 2 | 17 |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Finance costs | | (2) | - |
+----------------------------------------+--------+---------+---------+
| Loss before taxation | | (625) | (139) |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| UK corporation tax | | - | - |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Loss for the period attributable to | | (625) | (139) |
| equity shareholders | | | |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Earnings per share | | | |
+----------------------------------------+--------+---------+---------+
| | | | |
+----------------------------------------+--------+---------+---------+
| Basic (pence) | 3 | (0.33) | (0.09) |
+----------------------------------------+--------+---------+---------+
| Diluted | 3 | (0.33) | (0.09) |
+----------------------------------------+--------+---------+---------+
| Dividend | | - | - |
+----------------------------------------+--------+---------+---------+
Consolidated Balance Sheet
As at 31 December 2008
+--------------------------------------+-------+----------+----------+
| |Notes | As at | As at |
| | | 31 Dec | 31 Dec |
| | | 2008 | 2007 |
| | | | |
+--------------------------------------+-------+----------+----------+
| | | GBP000 | GBP000 |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| Non Current Assets | | | |
+--------------------------------------+-------+----------+----------+
| Property, Plant and Equipment | | 21 | 15 |
+--------------------------------------+-------+----------+----------+
| Investments | | 11 | 100 |
+--------------------------------------+-------+----------+----------+
| | | 32 | 115 |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| Current assets | | | |
+--------------------------------------+-------+----------+----------+
| Inventory | | 1,976 | 1,693 |
+--------------------------------------+-------+----------+----------+
| Receivables | | 797 | 1,167 |
+--------------------------------------+-------+----------+----------+
| Cash and cash equivalents | 2 | 549 | 964 |
+--------------------------------------+-------+----------+----------+
| | | 3,322 | 3,824 |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| Total assets | | 3,354 | 3,939 |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| Current liabilities | | | |
+--------------------------------------+-------+----------+----------+
| Payables | | (819) | (965) |
+--------------------------------------+-------+----------+----------+
| Accruals | | (104) | (296) |
+--------------------------------------+-------+----------+----------+
| Deferred Revenue | | (194) | (316) |
+--------------------------------------+-------+----------+----------+
| | | (1,117) | (1,577) |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| Non current liabilities | | | |
+--------------------------------------+-------+----------+----------+
| Revolving Loan | 5 | (500) | - |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| Total liabilities | | (1,617) | (1,577) |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| Net assets | | 1,737 | 2,362 |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| Shareholders' equity | | | |
+--------------------------------------+-------+----------+----------+
| Called up share capital | | 4,394 | 4,394 |
+--------------------------------------+-------+----------+----------+
| Share premium account | | 8,688 | 8,688 |
+--------------------------------------+-------+----------+----------+
| Retained earnings | | (11,183) | (10,558) |
+--------------------------------------+-------+----------+----------+
| Minority interest | | (162) | (162) |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
| Equity Shareholders' funds | | 1,737 | 2,362 |
+--------------------------------------+-------+----------+----------+
| | | | |
+--------------------------------------+-------+----------+----------+
Consolidated Cash Flow Statement
For the year ended 31 December 2008
+--------------------------------------+-------+--------------+---------------+
| |Notes | 12 Months | 12 Months |
| | | Ended | Ended |
| | | 31 Dec 2008 | 31 Dec 2007 |
+--------------------------------------+-------+--------------+---------------+
| | | GBP000 | GBP000 |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Cash flows from operating | | | |
| activities: | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Operating loss | | (537) | (156) |
+--------------------------------------+-------+--------------+---------------+
| Depreciation | | 10 | 26 |
+--------------------------------------+-------+--------------+---------------+
| Profit on disposal of non current | | - | (1) |
| assets | | | |
+--------------------------------------+-------+--------------+---------------+
| (Increase)/Decrease in inventory | | (283) | (399) |
+--------------------------------------+-------+--------------+---------------+
| (Increase)/Decrease in debtors | | 370 | (278) |
+--------------------------------------+-------+--------------+---------------+
| Increase/(Decrease) in creditors | | (460) | (834) |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Net cash generated by operating | | (900) | (1,642) |
| activities | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Cash flows from investing activities | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Interest received | | 2 | 17 |
+--------------------------------------+-------+--------------+---------------+
| Purchase of non current assets | | (15) | (13) |
+--------------------------------------+-------+--------------+---------------+
| Sale proceeds on disposal of non | | - | 1 |
| current assets | | | |
+--------------------------------------+-------+--------------+---------------+
| Net cash generated by investing | | (13) | 5 |
| activities | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Cash inflow/(outflow) before | | (913) | (1,637) |
| financing | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Cash flows from financing activities | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Interest paid | | (2) | - |
+--------------------------------------+-------+--------------+---------------+
| Loan finance | | 500 | - |
+--------------------------------------+-------+--------------+---------------+
| Issue of ordinary share capital | | - | 1,263 |
+--------------------------------------+-------+--------------+---------------+
| Share issue costs | | - | (5) |
+--------------------------------------+-------+--------------+---------------+
| Net cash received from financing | | 498 | 1,258 |
| activities | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Net (decrease)/ increase in cash and | | (415) | (379) |
| cash equivalents | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Cash and cash equivalent at | | 964 | 1,343 |
| beginning of year | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Cash and cash equivalent at the end | 2 | 549 | 964 |
| of year | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Less: Production and Development | | (139) | (141) |
| funds held on trust for third | | | |
| parties. | | | |
+--------------------------------------+-------+--------------+---------------+
| | | | |
+--------------------------------------+-------+--------------+---------------+
| Available cash at bank and in hand | | 410 | 823 |
+--------------------------------------+-------+--------------+---------------+
Statement of Changes in Equity
For the year ended 31 December 2008
+----------------+-------------+----------+---------+----------+----------+---------+
| | Number of | Share | Share |Minority |Retained | Total |
| | shares | capital |premium |interest |earnings | |
+----------------+-------------+----------+---------+----------+----------+---------+
| | | GBP 000 | GBP 000 | GBP 000 | GBP 000 | GBP 000 |
+----------------+-------------+----------+---------+----------+----------+---------+
| | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| Group | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| At 1 January |147,502,437 | 4,394 | 8,688 | (162) |(10,558) | 2,362 |
| 2008 | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| Share capital | - | - | - | - | - | - |
| issued | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| Share issue | - | - | - | - | - | - |
| costs | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| Retained loss | - | - | - | - | (625) | (625) |
| for the year | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| Minority | - | - | - | - | - | - |
| interest in | | | | | | |
| loss for the | | | | | | |
| year | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| At 31 December |147,502,437 | 4,394 | 8,688 | (162) |(11,183) | 1,737 |
| 2008 | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
| | | | | | | |
+----------------+-------------+----------+---------+----------+----------+---------+
NOTES
1. Basis of preparation
Accounting convention
These financial statements have been prepared in accordance with the historical
cost convention, using accounting policies that have been consistently applied
during the year.
The Group's policies on revenue recognition and inventory are set out below:
Revenue
Revenue of the Group for the period has been derived from its principal
activities; the distribution of feature films in the United Kingdom, the
international sale of film rights and the management of development, financing
and production of feature films.
UK distribution revenue is recognised on individual licensed rights as follows:
* Theatrically as films are exhibited in cinemas.
* DVD, Pay Television and Free to Air Television upon contract and satisfaction of
conditions precedent.
* Video On Demand and Pay Per View upon receipt of licensees periodic report of
unit retail sales.
Commission derived from the international sale of film rights is recognised when
payable by licensees; on signature of contract and on delivery of materials.
Film development and executive production fees arising from production
management are recognised when contractually payable, in stages during the
production process.
Development
Development costs are written off in the period of expenditure except when
recoverability can be assessed with reasonable certainty and there is a clearly
defined project. Amounts carried forward are shown in Inventory.
Inventory
Inventory, which is stated at the lower of cost and net realisable value,
represents acquired rights, capitalised print and advertising expenditure, and
film development and production costs.
Film acquisition costs and royalty advances are expensed to cost of sales in
line with income recognition throughout the licence period, at rates determined
by individual distribution agreements. Film acquisition costs, royalty advances
and print and advertising expenditure are carried forward only to the extent
that predicted future revenue streams anticipate recoupment.
Film development, and production expenditure is carried forward as inventory
only when, in the opinion of the directors, there is a clearly defined project,
and the recovery of these costs can reasonably be expected. Where production
expenditure has been financed by non-recourse loans, the company makes provision
in full against such 'ring fenced' expenditure as it is incurred. The
non-recourse loans are only repayable to the extent revenues are generated from
the exploitation of the asset to which they relate. Accordingly, full matching
provision is made in respect of these liabilities, with no overall net effect on
the Income Statement. Any revenues subsequently received are recognised on
receipt, and a corresponding release of both the rights and loan provisions made
to the Income Statement.
2. Cash and cash equivalents
+---------------------------------------------------+--------+--------+
| | 2008 | 2007 |
+---------------------------------------------------+--------+--------+
| | GBP | GBP |
| | 000's | 000's |
+---------------------------------------------------+--------+--------+
| | | |
+---------------------------------------------------+--------+--------+
| Cash and bank balances | 549 | 964 |
+---------------------------------------------------+--------+--------+
| Bank overdraft | - | - |
+---------------------------------------------------+--------+--------+
| | | |
+---------------------------------------------------+--------+--------+
| Cash and cash equivalents in a disposal group | - | - |
| held for sale | | |
+---------------------------------------------------+--------+--------+
| | | |
+---------------------------------------------------+--------+--------+
| Cash and cash equivalent at the end of year | 549 | 964 |
+---------------------------------------------------+--------+--------+
| | | |
+---------------------------------------------------+--------+--------+
| Less: Production and Development funds held on | (139) | (141) |
| trust for third parties | | |
+---------------------------------------------------+--------+--------+
| Available cash at bank and in hand | 410 | 823 |
+---------------------------------------------------+--------+--------+
3. Earnings per share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number of
shares in issue during the year.
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.
Reconciliation of the earnings and weighted average number of shares used in the
calculations is set out below:
+--------------+-----------+-----------+----------+-----------+-----------+----------+
| | 2008 | 2007 |
+--------------+----------------------------------+----------------------------------+
| | Earnings | Weighted |Earnings | Earnings | Weighted |Earnings |
| | | average | per | | average | per |
| | |number of | share | |number of | share |
| | | shares | | | shares | |
+--------------+-----------+-----------+----------+-----------+-----------+----------+
| |GBP'000's | Thousands | Pence |GBP'000's | Thousands | Pence |
+--------------+-----------+-----------+----------+-----------+-----------+----------+
| | | | | | | |
+--------------+-----------+-----------+----------+-----------+-----------+----------+
| Basic | (625) | 190,402 | (0.33) | (139) | 157,947 | (0.09) |
| earnings | | | | | | |
| per share | | | | | | |
| - Earnings | | | | | | |
| attributable | | | | | | |
| to ordinary | | | | | | |
| shareholders | | | | | | |
+--------------+-----------+-----------+----------+-----------+-----------+----------+
| Dilutive | - | - | - | - | - | - |
| effect of | | | | | | |
| options | | | | | | |
+--------------+-----------+-----------+----------+-----------+-----------+----------+
| Diluted | (625) | 190,402 | (0.33) | (139) | 157,947 | (0.09) |
| Earnings | | | | | | |
| Per Share | | | | | | |
+--------------+-----------+-----------+----------+-----------+-----------+----------+
4. Administrative Costs
Administrative costs include a GBP88,000 non-recurring charge for compensation
to our former Chairman Crispin Barker for loss of office.
5. Long Term Liabilities
The Long Term Liability is a revolving loan facility with Milcoz Films up to
GBP750,000. The loan is repayable 3 years from the date of draw down and
accrues interest compounded quarterly at the Bank of England Base Rate plus 3%.
To 31 December 2008, GBP500,000 of the loan facility was drawn down.
6. Publication of non-statutory accounts
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
The summarised balance sheet at 31 December 2008 and the summarised Income
statement, summarised cash flow statement, statement of changes in equity and
associated notes for the year then ended have been extracted from the Group's
draft financial statements. Those financial statements have not yet been
delivered to the Registrar, nor have the auditors reported on them. There is
the distinct possibility of that report referring to an "Emphasis of Matter",
reflecting current uncertainties in the market place consistent with the reports
of both the Chairman and Chief Executive above. The ability of the Group to
exploit its catalogue of film titles depends on its ability to receive, in full,
and on a timely basis the payments included in its cash flow projections or to
obtain alternative financial arrangements. The financial statements do not
include any adjustments that would result from a failure of the Group to achieve
its projections or obtain alternative financing.
The financial information for the year ended 31 December 2007 is an extract of
the statutory accounts to that date as delivered to the Registrar of Companies
restated under IFRS. Those accounts included an audit report which was
unqualified and that did not contain a statement under Section 237 (2) or (3) of
the Companies Act 1985.
7. Availability of Accounts
Copies of the Report and Accounts for the year ended 31 December 2008 are being
sent to shareholders in due course. Further copies will be available from the
Company's registered office, 4th Floor, Portland House, 4 Great Portland Street,
London, W1W 8QJ.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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