RNS Number:5931J
Entertainment Rights PLC
26 April 2000
ENTERTAINMENT RIGHTS PLC
Preliminary Announcement of Results for the year ended 31
December 1999
Entertainment Rights is a leading global integrated media
group based on the creation, development and acquisition of
intellectual property rights and their subsequent
exploitation.
* Substantial increase in turnover to #1.8 million
* Losses reduced from #6.8m to #2.8 million in line with
forecast made at time of fundraising in November
* Intellectual property rights to Basil Brush acquired
#2.3 million in an all-share transaction
* Carrington Productions International acquired for #14
million in shares, doubling library of programming
* Distribution division established; now far more pro-
active in promoting group's properties
* Long-standing litigation settled on Budgie - The Little
Helicopter in USA
* Sales highlights of the year include
* Meeow! to CITV
* Lavender Castle to CITV
* Budgie - The Little Helicopter to Nickelodeon
* Potsworth & Co to the BBC
* Transylvania Pet Shop to Nickelodeon
* The Tidings to the Cartoon Network Europe.
* Zorro to the BBC
* The Ugly Ducking to Channel 5
* The Snow Queen to CITV
* The Snow Queen's Revenge to Channel 5
* Budgie - The Little Helicopter to Fox Family Channel
USA
Rod Bransgrove, Chairman of Entertainment Rights commented:
'The group is now poised to be far more pro-active in
maximising the return from its enhanced catalogue of
properties. We have taken considerable strides to ensure
that the building blocks are in place for your Company to
pursue its strategic objectives. The board will continue to
identify and diligently appraise further opportunities to
develop and enhance our business by acquisition, merger,
joint venture or strategic alliance. We continue into the
new millennium with the Company in good shape and I look to
the future with considerable confidence.'
Enquiries:
Entertainment Rights Tel: 020 7243 4499
Rod Bransgrove / Mike Heap
College Hill Tel: 020 7457 2020
Richard Pearson
CHAIRMAN'S STATEMENT
This Company's stated objective is to become a leading
global integrated media group based on the creation,
development and acquisition of intellectual property rights
and their subsequent exploitation.
I am pleased to report that enormous progress was made
during 1999 towards the achievement of this objective.
Significant trading improvements
1999 performance was in line with the forecast made at the
time of the company's fund-raising last November. Turnover
of #1.8 million showed a significant increase on 1998's
#156,000, due in part to the rigorous re-selling of the
existing catalogue of properties. The loss on ordinary
activities before taxation was #2.8 million (1998 - #6.8
million), having taken account of fund raising and deal
costs of #1.2 million and #782,000 of amortisation of
intellectual property rights, in compliance with current
reporting standard FRS10.
Your directors do not recommend a dividend (1998 - nil).
Important acquisitions
Boom Boom Limited, which owns, in perpetuity, the exclusive
license to exploit the intellectual property rights to one
of the UK's best loved characters, Basil Brush, was acquired
for #2.3 million in an all-share transaction.
Children's intellectual property rights owner, Carrington
Productions International (CPI), was acquired in December
1999 for a consideration of #14 million, satisfied by the
issue of 56 million ordinary shares. As a result of the
acquisition of CPI the group's library of programming was
doubled, providing over 100 hours of high quality children's
animation, which will produce a healthy income stream.
Strengthening of board and fund raising
I was delighted to welcome CPI's Chief Executive, Craig
Hemmings, to the board, where he is already making a strong
contribution as Executive Director with responsibility for
acquisitions and production.
Following the acquisition of CPI, a heavily oversubscribed
Placing and Open Offer raised #13.2 million. This money
will fund further library acquisitions, corporate
acquisitions and new productions as and when appropriate
opportunities arise.
Legal Affairs
In May 1999 we settled a long-standing and complex
litigation with Launey Hachmann & Harris Inc, a US based
marketing agency. This settlement was of particular
significance in that it enabled us to re-launch Budgie - The
Little Helicopter in the USA.
Future plans
The group is now poised to be far more proactive in
maximising the return from its enhanced catalogue of
properties. We have taken considerable strides to ensure
that the building blocks are in place for your Company to
pursue its strategic objectives. Further details of these
activities will follow in the Chief Executive's Review.
The board will continue to identify and diligently appraise
further opportunities to develop and enhance our business by
acquisition, merger, joint venture or strategic alliance.
We continue into the new millennium with the Company in good
shape and I look to the future with considerable confidence.
Rod Bransgrove
Chairman
CHIEF EXECUTIVE'S REPORT
As described by our Chairman, 1999 has been a period of
positive change and a major re-focusing of your company.
Before joining your board in an executive capacity in
January 1999, I had spent some 25 years in the entertainment
industry.
During this time I have witnessed the significant
technological advances made in both the record industry and
the film industry. These technological advances, brought
about by the development of Compact Disc (CD) and Digital
Versatile Disc (DVD), gave rights' owners the opportunity to
resell their libraries. Record and Film catalogues were
rejuvenated giving their owners brand new revenue streams.
The television industry has similar opportunities as a
result of the introduction of digital television and
distribution systems such as the Internet.
Our focus at Entertainment Rights is the ownership and
exploitation of intellectual copyrights across all global
media. As part of this focus Entertainment Rights owns and
exploits children's programme rights, in particular
animation programming which not only has a truly global
appeal but benefits from a new children's audience every two
to three years. We aim to maximise sales of our current
library and cost effectively develop new properties to join
our global rights catalogue. Product succession is also
important. Without a new flow of product to help invigorate
and further develop our existing catalogue, revenue streams
will become harder to maintain. This was evident from the
state of the business in 1998, when new products had been
slow to flow through to the sales team and catalogue
programming had therefore been difficult to exploit.
Consequently, revenue streams diminished.
In order to address these issues, we immediately commenced:
* stimulating catalogue sales.
* improving the flow of creative ideas and new
programming.
* enhancing our portfolio of well-known characters.
* building-up our library of rights to enable us to
strengthen our sales and distribution infrastructure.
We achieved all of our 1999 operational goals in a
competitive market in a relatively short space of time. In
particular:
* the majority of our wholly owned programmes are
currently on TV in the UK, USA and other international
territories.
* following the acquisition of Siriol (Musical Tunes
Limited), our Cardiff-based animation studio, we have
significantly increased the flow of creative ideas.
* in July 1999, we acquired the rights to the well-known
family character, Basil Brush.
* with the acquisition of the CPI library we obtained 50
hours of high quality children's animation, which is
entirely synergistic with our library. This library
includes such classics as The Fantastic Voyages of
Sinbad the Sailor, the legendary character, Zorro and
Gerry Anderson's, Lavender Castle.
In December 1999, our financial year culminated with a fund
raising exercise, which was warmly received by existing and
new investors and was heavily oversubscribed.
During this period, we changed the name of your company to
Entertainment Rights plc. I know, from the calls I have
received from many of you, that our name-change has been
very well received. 'Entertainment Rights' better explains
the business we are in.
In order to achieve our mission statement:
'To build a leading global integrated media group based on
the creation, development and acquisition of intellectual
property rights and their subsequent exploitation'
we have begun diversification into a number of business
divisions that are run as separate profit centres but, as a
whole, will help to build up our ownership and subsequent
exploitation of intellectual property rights.
Creative and Production
We believe in the importance of encouraging creativity - but
within sensible economic parameters. To ensure we achieve a
sustained flow of programme ideas our creative executives
are working on the development, commissioning, production
and acquisition of new programming. They work alongside our
team of international sales executives who analyse the
commercial potential of each project.
Through our ownership of Siriol animation studios and its
stewardship by its founder, BAFTA award winning writer and
producer, Robin Lyons, we are able to develop test animation
and pitch documents and sales literature of new programming
in a cost effective manner.
During the year Siriol has produced a 26 part animation
series, Meeow!, for Children's ITV (CITV) and begun work on
a 26 part animation series, Sali Mali, for Welsh
broadcaster, S4C.
Additionally, we have been busy working on the return of one
of our lead characters, Basil Brush. Basil is currently 'in
the country' planning his return to our TV screens.
Sales and Distribution
Worldwide TV distribution has performed well during 1999
focusing on repackaging and reinvigorating our library.
I am pleased to tell you about the success we have had in
putting a number of our shows into prime time children's TV
in the UK and internationally. Some of the sales and
distribution highlights of the year have been
* Meeow! to CITV
* Lavender Castle to CITV
* Budgie - The Little Helicopter to Nickelodeon
* Potsworth to the BBC
* Transylvania Pet Shop to Nickelodeon
* The Tidings to the Cartoon Network Europe.
* Zorro to the BBC
* The Ugly Ducking to Channel 5
* The Snow Queen to CITV
* The Snow Queen's Revenge to Channel 5
Importantly we have set in place the restructuring of our
sales and distribution division under the guidance of Jane
Smith. Jane is considered one of the television industry's
leading sales, distribution and co-production experts.
New Programming
Meeow!, a 26 part pre-school animated series, produced by
Siriol is a wholly owned property, in perpetuity, worldwide.
It is being screened on CITV from January 2000 where it has
received ratings of over 65%.
The series is based upon the best selling character Maisie
MacKenzie, created by Aileen Paterson. The books have sold
over 2 million copies to date.
The international launch of the series was at MIPCOM in
October 1999 and we look forward to revenue in 2000 and
beyond.
Consumer Products
Consumer products will play an increasingly important role
in the development of the company as we begin to see the
benefit of increased character awareness via television,
video and publishing exposure for our brands.
This means the licensing to third parties of character
rights such as Budgie - The Little Helicopter for a wide
range of consumer products such as video, toys, books and
clothing. This is designed to give a strong revenue flow
and reinforces the consumer awareness of these characters on
a global basis.
New Media
We at Entertainment Rights are very aware and equally well
positioned to capitalise on new media. Internet service
providers, broadband distributors and digital TV channels
need content. We have content, wholly owned and readily
available for distribution.
As we begin to establish our characters and programmes on
air, we will further develop our internet strategy to
communicate direct to the consumer. We will use this medium
to build brand awareness and loyalty, exposing the consumer
to more than just the programme content but also to a whole
myriad of e-commerce opportunities.
Where practical, we will use web-sites as a valuable
research and development facility showing test animation,
programme ideas and character concepts, encouraging feedback
at the earliest possible stage.
For those of you already familiar with 'surfing the net'
please visit our web site on www.entertainmentrights.com and
view our library of programming.
Current Trading and Future Prospects
1999 has indeed been a period of change and growth. We have
taken enormous strides in building revenues and cutting
losses. There continues to be growth in international TV
distribution and new media opportunities.
We are pleased to tell you that Budgie - The Little
Helicopter is back on US TV, giving Budgie access to 74
million homes via the Fox Family Channel.
We have recently announced the signing of a 26 part series -
Cubeez. The Cubeez is a state of the art computer generated
animation series featuring four loveable magical cubes. The
series will debut on GMTV in July 2000. Entertainment
Rights owns in perpetuity all intellectual property
exploitation rights.
Beany and Cecil, a 78 part animated series, created by Bob
Clampett who is one of the founding fathers of the classic
Warner Brothers cartoons creating Looney Tunes, Tweety Bird
and Porky Pig, becomes part of our international library of
programming.
We have strong management and experienced executives in all
our business sectors. Therefore we believe your company is
extremely well positioned to exploit characters, character
brands and programming rights, and to grow both organically
and by acquisitions.
I hope that having read my review you feel - as I do -
encouraged by the future prospects for your company.
Mike Heap
Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 1999
1999 1998
audited audited
Notes # #
TURNOVER 1,817,242 156,420
Cost of sales
(1,087,823) -
GROSS PROFIT 729,419 156,420
Administrative expenses (3,628,799) (6,966,629)
OPERATING LOSS (2,899,380) (6,810,209)
Operating loss before exceptional (2,204,296) (2,064,722)
goodwill amortisation
Exceptional goodwill amortisation (695,084) (4,745,487)
Exceptional item - profit on sale of 79,033 -
fixed asset investment
Interest receivable and similar 37,727 827
income
Interest payable and similar charges (64,482) (30,356)
LOSS ON ORDINARY
ACTIVITIES BEFORE TAXATION (2,847,102) (6,839,738)
Taxation - 4,165
LOSS ON ORDINARY ACTIVITIES
AFTER TAXATION (2,847,102) (6,835,573)
RETAINED LOSS FOR THE
FINANCIAL YEAR TRANSFERRED TO 4
RESERVES (2,847,102) (6,835,573)
LOSS PER ORDINARY SHARE - Basic 3 (2.82p) (22.39p)
All of the above figures are for continuing operations.
There are no recognised gains or losses other than those
reported above.
CONSOLIDATED BALANCE SHEET
as at 31 December 1999
Notes 1999 1998
audited audited
# #
FIXED ASSETS
Intangible assets 9,962,399 788,385
Tangible assets 8,976,625 363,438
Associates 22 102
18,939,046 1,151,925
CURRENT ASSETS
Programme development costs 285,319 786,070
Debtors 733,386 342,503
Cash at bank and in hand
11,199,335 20,432
12,218,040 1,149,005
CREDITORS: Amounts falling due
within one year (1,562,424)(2,520,161)
NET CURRENT ASSETS/(LIABILITIES) (10,655,616)(1,371,156)
TOTAL ASSETS LESS CURRENT 29,594,662 (219,231)
LIABILITIES
CREDITORS: Amounts falling due
after more than one year (82,669) (451,656)
29,511,993 (670,887)
CAPITAL AND RESERVES
Called up share capital 4 10,612,532 3,763,376
Share premium account 4 18,092,244 5,978,906
Merger reserve 4 14,067,488 -
Profit and loss account 4 (13,260,770)(10,413,668)
Equity shareholders' funds 29,511,494 (671,386)
Minority interest 499 499
29,511,993 (670,887)
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 1999
1999 1998
audited audited
Notes # #
NET CASH OUTFLOW FROM
OPERATING ACTIVITIES 2
(3,198,298) (702,750)
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 37,727 827
Interest paid
(64,482) (30,356)
Net cash outflow from investments
and servicing of finance
(26,755) (29,529)
TAXATION
UK corporation tax (paid)/repaid
(including ACT) (3,428) 29,414
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Payments to acquire intangible fixed (20,543) -
assets
Payments to acquire tangible fixed (256,301) -
assets
Receipts from sale of fixed asset
investment 79,113 -
Net cash outflow from investing
activities (197,731) -
ACQUISITIONS
Purchase of subsidiary undertakings -
net overdraft acquired (21,440) (84,924)
EQUITY DIVIDENDS PAID
- -
NET CASH OUTFLOW BEFORE MANAGEMENT
OF LIQUID RESOURCES AND FINANCING (3,447,652) (787,789)
MANAGEMENT OF LIQUID RESOURCES
Cash placed on fixed term deposit (10,000,000) -
account
FINANCING
Issue of shares 15,364,736 142,793
(Repayment)/Issue of loan notes (370,000) 370,000
Capital element of finance lease (16,587) -
rental payments
Repayment of borrowings (6,978) -
NET CASH INFLOW FROM FINANCING 14,971,171 512,793
INCREASE/(DECREASE) IN CASH 1,523,519 (274,996)
NOTES
1. Accounts
The financial information set out above does not constitute
the Company's statutory accounts within the meaning of
section 240 of the Companies Act 1985. Statutory accounts
for the year ended 31 December 1998 from which the 1998
information has been extracted, carried an unqualified audit
report and have been delivered to the Registrar of
Companies. Statutory accounts for the year ended 31
December 1999 which carry an unqualified audit report and
from which the 1999 information has been extracted, will be
posted to shareholders on or around 15 May 2000 and, after
adoption at the Annual General Meeting, delivered to the
Registrar of Companies. Further copies of the Statutory
Accounts may be obtained from the Company's Registered
Office, 58-60 Berners Street, London W1P 4JS.
2. Reconciliation of operating loss to net cash outflow
from operating activities
1999 1998
# #
Operating loss (2,899,380) (6,810,209)
Depreciation and amortisation 168,399 9,570
Loss on disposal of tangible fixed assets 2,361 -
Amortisation of goodwill on acquisition 695,084 4,745,487
Decrease/(increase) in programme 500,751 (87,324)
development costs
Capitalisation of own assets (596,538) -
(Increase)/decrease in debtors (337,614) 236,372
(Decrease)/increase in creditors (731,361) 626,564
Capitalisation of debt - 576,790
(3,198,298) (702,750)
3. Loss Per Ordinary Share
The calculation of loss per ordinary share is based on the
consolidated loss after tax for the year of #2,847,102 (1998
- loss #6,835,573) and on 100,828,095 (1998 - 30,534,762)
ordinary shares, being the weighted average number of
ordinary shares in issue during the year. The weighted
average numbers of shares have been calculated by taking
into account the bonus element of the rights issue during
the year. This has had the effect of increasing the weighted
average number of shares by 767,729 (1998 - 309,763).
In view of the loss for the year, the share options are anti-
dilutive and therefore a diluted earnings per share is not
presented.
4. Reconciliation of shareholders' funds and movements on
reserves
Share Share Merger Profit Total
capital premium Reserve and loss
account account
# # # # #
Group
At 1 January 3,763,376 5,978,906 - (10,413,668) (671,386)
1999
Loss for the - - - (2,847,102) (2,847,102)
year
Issues of shares 6,849,156 - - - 6,849,156
Premium arising
on issues of
shares - 12,113,338 14,067,488 - 26,180,826
At 31 December 10,612,532 18,092,244 14,067,488 (13,260,770) 29,511,494
1999
5. Analysis of changes in net (debt)/funds
At 1 Cash flow Non cash At
January changes 31
1999 December
1999
# # # #
Cash at bank and in 20,432 1,178,903 - 1,199,335
hand
Bank overdrafts (586,637) 344,616 - (242,021)
(566,205) 1,523,519 - 957,314
Cash Deposits - 10,000,000 - 10,000,000
Debt (73,890) 6,978 - (66,912)
Loans (370,000) 370,000 - -
Lease contracts
(25,411) 16,587 (30,600) (39,424)
(1,035,506) 11,917,084 (30,600) 10,850,978
5 Accounting Policies
The principal accounting policies of the group have remained
unchanged from the accounts of the previous year, expect for
the following:
a) Development expenditure and goodwill
An annual impairment test is undertaken on the group's
investment in films to ensure that the recoverable
amount has not fallen below the carrying value. This
policy replaces the previous policy where films were
assessed on an individual basis. No adjustment or
prior year adjustment results from this change.
b) Turnover
Income recognised on owned television programme series
in production, but not complete at the year-end, is now
recognised in the proportion that costs to date bear to
the estimated total programme production costs, after
assessing that programme completion can be reasonably
foreseen and is in line with the contractual
arrangements. This policy replaces the previous policy
where invoices raised on account of such productions in
progress were not reflected in turnover until such
productions were completed. No adjustment or prior
year adjustment results from this change; the prior
year policy continues to be applied to other
productions in progress.
END
FR SESSAMSSSELL
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