RNS Number:7932P
Entertainment Rights PLC
16 September 2003
16 September, 2003
ENTERTAINMENT RIGHTS PLC
Interim Results for the Half-Year ended 30 June, 2003
Strongest ever release schedule to underpin sustained growth
Business Highlights
* All divisions exceeding targets giving confidence for the full year
* Group turnover increased by 7% to a record #12.4m (2002: #11.6m)
* EBITDA before exceptionals #2.0m (2002: #2.4m) reflects anticipated first
half increase in third party revenue streams
* Strong progress in wholly owned higher margin properties with investment
increased by almost 100% to #2.5m (2002: #1.3m)
Strongest ever release schedule for second half of 2003 and beyond
* Broadcaster response to owned properties exceeds expectations
* A further 26 episodes of Basil Brush commissioned by the BBC for 2004
and 2005; already sold to 12 territories and in advanced negotiations
with major European broadcaster
* New Postman Pat direct to video special due for release Autumn 2003;
new series on the BBC in 2004
* Launch of Little Red Tractor on the BBC brought forward to January
2004 and major US broadcaster commission targeted for 2004/2005
* Significant retail opportunities in second half of 2003 and 2004
* Group properties (excluding Barbie licensing) expected to generate
#50m at retail in UK in 2003, up from #42m in 2002
* 22 licences in place for Basil Brush toys and games for major
Christmas selling period; November release of debut single featured on
BBC TV
* New Postman Pat licensing and merchandising campaign for 2004 with 50
licences already in place
* Little Red Tractor licensing and merchandising programme in place for
2004. Major master toy licence with Corgi
* Significant opportunities from third party brands
* Agreement with Mattel to represent third Barbie animation film Barbie
of Swan Lake - strong Christmas sales expected
* Transformers Armada - strong international TV sales and video/DVD
success and relationship with Hasbro developing
Commenting on the interim results, Rod Bransgrove, Chairman of Entertainment
Rights said;
"Significant sales from third party brands in the first half of 2003 saw the
anticipated reduction in our group margin. We expect a stronger second half
performance from our owned higher margin brands in the more lucrative third and
fourth quarters of 2003. Indeed, the second half of 2003 will see the strongest
release schedule of owned and third party brands to date from Entertainment
Rights.
Supported by increasing revenues from our owned properties and strong broadcast
commitment in the UK and internationally, prospects for 2004 and 2005 are good
and we expect to deliver both strong and sustainable growth. We continue to
consolidate our position as one of the leading children's and family
entertainment exploitation businesses."
2003 2002
Turnover #12.4m #11.6m
Business Performance
EBITDA before exceptionals #2.0m #2.4m
Operating profit* #0.6m #1.0m
Profit before tax* #0.2m #0.5m
Underlying earnings per share 0.07p 0.19p
Operating cash flow #1.3m #2.6m
Investment in programming #2.5m #1.3m
Statutory Results
Operating loss (#0.8m) (#0.0m)
Loss before tax (#1.2m) (#0.5m)
Basic loss per share (0.44p) (0.19p)
*pre-exceptionals and goodwill
Note to Editors
Photographs for the media are available at Visual Media Online -
www.vismedia.co.uk. Tel: 020 7287 4646
Enquiries:
Mike Heap, Chief Executive
Elizabeth Gaines, Finance Director
Entertainment Rights Plc Tel: 020 8762 6200
Michelle Morton/Tim Spratt
Financial Dynamics Tel: 020 7831 3113
CHAIRMAN'S STATEMENT - SEPTEMBER 2003
Overview of Trading
This has been a busy first half which will show clear benefits in the second
half of 2003 and into next year and beyond. Importantly, these results
demonstrate our ability to generate growth from our broad portfolio of rights
across all our operating divisions. The underlying business of wholly-owned
higher margin properties is making excellent progress and our ongoing investment
in these properties will bring real future benefits for shareholders.
Our balanced portfolio approach between wholly owned and third party properties
underpins the Company's success and is the bedrock that enables the development
of our own brands, such as Basil Brush, Postman Pat, and Little Red Tractor.
The broadcaster commitment to all three owned brands in the second half of 2003
and into 2004 continues to exceed our expectations. This bodes well for future
retail sales from which we will receive significant royalties. We expect that
the Group's properties (excluding Barbie licensing) will generate #50m at retail
in the UK alone in 2003 (up from #42m in 2002).
The first half of 2003 saw the anticipated reduction in our Group margin as we
generated significant sales from third party brands. We expect a stronger second
half performance from our owned higher margin brands in the more lucrative third
and fourth quarters of 2003. Indeed, we believe the second half of 2003 will see
the strongest release schedule of owned and third party brands to-date from
Entertainment Rights.
Financial Summary
Turnover for the six months ended 30 June 2003 increased by 7% to a record
#12.4m. (2002: #11.6m.), with all divisions exceeding targets.
Earnings before interest, tax, depreciation and amortisation (EBITDA) and
exceptionals for the half year was #2m (2002: #2.4m). Operating profit
(excluding goodwill and exceptionals) was #0.6m (2002: #1m). This performance
fully reflects the anticipated impact on the Company's gross margin from the
sales of third party brands achieved in the first half. The release schedules
for our owned higher margin brands are weighted to the stronger second half of
the year and into 2004. Operating loss for the period was #0.8m (2002: #0.0m).
Exceptionals for the period predominantly relate to third party costs on an
aborted acquisition.
Half year cash inflow from operating activities was #1.3m (2002: #2.6m). The
Company has greatly increased its investment in wholly-owned proven brands and
as such programme investment in the period has increased by almost 100% to #2.5m
up from #1.3m. The full benefit of this investment will be seen in future years.
The amortisation charge attributable to intangible assets including the Group's
extensive library of programmes was #2.2m (2002: #2.2m).
During March 2003, the Group entered into a new banking arrangement giving total
facilities of #20m.
The Directors are not recommending an interim dividend. The Company seeks to
reinvest in programming which continues to strengthen the Group's prospects.
OWNED BRANDS
Basil Brush
There has been a strong audience and retail response to the return of Basil
Brush to our television screens. The show on BBC1 achieved excellent ratings,
making the series number one in its timeslot with a 42% audience share. Since
its launch, the show has enjoyed numerous repeats on BBC1 and digital CBBC. The
new series has already sold to 12 countries including Canada, South Africa and
Australia. In the second half we expect to announce the outcome of advanced
discussions with a major European broadcaster.
Production of the second 13 episodes due for broadcast on BBC this Autumn is now
complete and we look forward with confidence to The Basil Brush Show continuing
to increase its fan base across its core demographic of 4 - 12 year olds. To
coincide with the new series, we will be releasing videos and DVDs. Basil has
also recorded a new single, which will be released in November. In addition,
Basil's new licensing and merchandising lines will be in retail outlets for the
key Christmas market, with 22 licences already in place covering toys and games,
food and beverage, household goods, clothing and gifts.
Looking ahead, work has begun on a further 26 episodes of The Basil Brush Show -
already commissioned by the BBC for broadcast in 2004 and 2005 ensuring
continued prominence for the foreseeable future.
Postman Pat
Revenues have increased by some 120% in the first half. Since winning the new
commission with the BBC, we are well underway with the production of a 26 x 15
minute series and 4 x half hour specials, the first new Postman Pat production
since 1996. The new series will launch in Autumn 2004.
As with Basil Brush, we have been active in developing ancillary revenue streams
which will kick-in in the second half 2003 and 2004. The new Postman Pat special
- "Pat's Magical Christmas" - is scheduled for video and DVD release on our home
entertainment label, Right Entertainment, this Autumn. Postman Pat has sold in
excess of 2.5m videos in the UK since inception and we fully expect this success
will continue. A brand new Postman Pat licensing and merchandising campaign for
2004 has been developed, with some 50 licences already in place, covering key
categories such as toys, books and stationery.
Little Red Tractor
The brand has sold some 300,000 videos and 500,000 books to date. Originally
commissioned by the BBC for transmission from Autumn 2004, the broadcast has now
been brought forward to January 2004, allowing us to accelerate our
international roll-out. The series has already pre-sold to 13 countries and a
strong licensing and merchandising programme is in place with licences covering
toys, publishing and interactive games now due for launch in early 2004 - all of
which bodes well for next year's results.
We expect to secure a major US broadcaster and US master toy licence for Little
Red Tractor during 2004/2005 and negotiations have commenced earlier than
expected. Our ability and confidence to secure US distribution is evidenced by
the recent announcement of a major US video/DVD distribution deal for
Transformers Armada with Rhino, a division of Warner Bros. and the securing of
a broadcast of award winning Hamilton Mattress on HBO.
THIRD PARTY BRANDS
Barbie (TV and Home Entertainment)
We currently have long-term television and home entertainment contracts for all
three Barbie animated feature length films: Barbie in the Nutcracker, Barbie as
Rapunzel and Barbie of Swan Lake. We have sold television rights to over 90
countries to date and all key broadcasters are already contracted for the third
film, Barbie of Swan Lake.
Worldwide (excluding North America) home entertainment sales for Barbie in the
Nutcracker and Barbie as Rapunzel have now topped 5 million units. With Barbie
of Swan Lake due for release in the second half, we anticipate another strong
Barbie Christmas.
Barbie (Licensing)
As previously announced, the Barbie (non-doll) licensing contract, covering
merchandise and publications in the UK, will not be renewed beyond 31 December
2003. As a consequence we will receive a significant compensation payment from
Mattel in the first half of 2004.
Transformers Armada/Hasbro
Since November 2002, we have controlled all international television
distribution rights (excluding North America) and all worldwide video/DVD rights
(including North America) to the 52 x half hour Transformers Armada series. Our
sales team has achieved sales in excess of #3.2m, selling the series to 70
countries, including prime broadcast slots on GMTV and Sky in the UK.
Following the success we have had with Transformers Armada, we have continued
to develop our relationship with Hasbro and are confident of securing additional
key long term distribution rights to entertainment properties in the future.
Clifford The Big Red Dog
Working in partnership with the major US publisher Scholastic, Entertainment
Rights represents home entertainment and consumer products in the UK. The 65
episode series has been sold to the BBC, with some 150,000 video units already
having been sold to date in the UK.
Further video and DVD releases are scheduled throughout 2003 and 2004. There are
over 30 licencees in place including a master toy licence with Character
Options, and licences for magazines, clothing, stationery and toiletries.
Clifford The Big Red Dog currently features in the top 10 selling characters in
Woolworths.
Following the initial success of Clifford The Big Red Dog, we are currently in
advanced discussions to extend our licensing arrangement with Scholastic to 31
December 2006.
OPERATIONAL OVERVIEW
Operationally, we remain focused upon driving sales through three main
divisions: Television and Production; Consumer Products and Home Entertainment.
Television and Production
In television and production we increased first half revenues by 79% and our
1,200 hour library of high quality children's and family programming is now
selling in over 90 countries. Importantly, we are carefully co-ordinating the
broadcast positioning of our wholly-owned properties to maximise their exposure
and drive home entertainment and retail revenues.
Siriol, our animation studio, continues the production of Fireman Sam for S4C
and HIT Entertainment. It is currently producing the fourth series of Hilltop
Hospital for ITV, France 3 and ZDF and has begun work on the second series of 15
x 10 minute episodes of Bobinogs for the BBC.
Consumer Products
We have seen strong interest in our wholly-owned properties, with over 50 new
licencees signed for Basil Brush, Postman Pat and Little Red Tractor in advance
of their TV launches in the second half of 2003 and 2004. Our portfolio is
achieving an ever increasing retail presence and is well established with the
likes of WH Smith, Tesco, Woolworths, Toys R Us and Early Learning Centre.
Home Entertainment
In home entertainment, we are particularly excited about the upcoming Autumn
release schedule on Right Entertainment. As already described, there are strong
video and DVD release schedules for Basil Brush, Postman Pat and Barbie in the
second half and into 2004.
BOARD CHANGES
With immediate effect, Claire Derry will be stepping down from her role as
Executive Director and will remain on the Board as a Non-Executive Director. We
look forward to working with Claire in her new role.
CURRENT TRADING AND PROSPECTS
Current trading remains fully in line with our expectations and with a strong
second half we remain confident of another successful year for the Group.
Supported by increasing revenues from our owned properties and strong broadcast
commitment in the UK and internationally, prospects for 2004 and 2005 are also
good and we expect to deliver both strong and sustainable growth. With our
strongest ever owned and third party release schedule, we have clear earnings
visibility for the foreseeable future.
Our strategy of a continued focus on exploiting a balanced portfolio of rights
across all our revenue generating divisions is a proven one and continues to
consolidate our position as one of the leading children's and family
entertainment exploitation businesses.
CONSOLIDATED UNAUDITED PROFIT AND LOSS ACCOUNT
FOR THE 6 MONTHS TO 30 JUNE 2003
Restated
Notes Unaudited Unaudited Audited
6 months 6 months Year
to 30 June to 30 June to 31 Dec
2003 2002 2002
#'000 #'000 #'000
Turnover 12,397 11,559 25,560
Cost of sales (8,793) (7,697) (17,266)
Gross profit 3,604 3,862 8,294
Administrative expenses (4,375) (3,874) (8,194)
Operating (loss)/profit
Operating profit (excluding goodwill & exceptionals) 573 980 2,084
Exceptionals 2 (352) - -
Goodwill amortisation (992) (992) (1,984)
(771) (12) 100
Net interest payable and similar charges (401) (479) (1,021)
Loss on ordinary activities before taxation (1,172) (491) (921)
Taxation on loss on ordinary activities 3 - - 31
Loss on ordinary activities after taxation and
retained loss for the period (1,172) (491) (890)
(Loss)/earnings per ordinary share (pence)
Basic loss per ordinary share 4 (0.44p) (0.19p) (0.34p)
Underlying earnings per ordinary share* 4 0.07p 0.19p 0.42p
* Underlying EPS is calculated on earnings excluding goodwill amortisation and
exceptional items.
The Group has no recognised gains or losses during the current or previous
period other than those set out above, and therefore no separate statement of
total recognised gains and losses has been presented.
CONSOLIDATED UNAUDITED BALANCE SHEET AS AT 30 JUNE 2003
Restated Restated
Unaudited Unaudited Audited
6 months 6 months Year
to 30 June to 30 June to 31 Dec
2003 2002 2002
#'000 #'000 #'000
Fixed assets
Intangible assets 51,733 48,555 47,659
Tangible assets 1,883 1,815 1,977
53,616 50,370 49,636
Current assets
Programme development costs 689 1,225 2,166
Debtors 7,932 6,053 9,135
Cash at bank and in hand 1,389 3,066 861
10,010 10,344 12,162
Creditors: amounts falling due within one year (15,928) (11,131) (13,269)
Net current liabilities (5,918) (787) (1,107)
Total assets less current liabilities 47,698 49,583 48,529
Creditors: amounts falling due after more than one
year (9,596) (9,710) (9,055)
Provisions for liabilities and charges (1,031) (1,231) (1,231)
Net assets 37,071 38,642 38,243
Capital and reserves
Called up share capital 13,117 13,117 13,117
Share premium account 24,355 24,355 24,355
Merger reserve 16,470 16,470 16,470
Profit and loss account (16,871) (15,300) (15,699)
Equity shareholders' funds 37,071 38,642 38,243
CONSOLIDATED UNAUDITED CASH FLOW STATEMENT
FOR THE 6 MONTHS ENDED 30 JUNE 2003
Restated
Unaudited Unaudited Audited
6 months 6 months Year
to 30 June to 30 June to 31 Dec
Notes 2003 2002 2002
#000 #000 #000
Net cash inflow from operating activities 6 1,336 2,619 4,333
Returns on investments and servicing of
finance
Net interest paid (355) (238) (687)
Net cash outflow from investments and servicing
of finance (355) (238) (687)
Taxation
UK corporation tax credit - - 31
Capital expenditure and financial investment
Payments to acquire intangible fixed assets (2,496) (1,323) (5,001)
Payments to acquire tangible fixed assets (61) (73) (223)
Receipts from sale of tangible fixed assets - - 18
Net cash outflow from investing activities (2,557) (1,396) (5,206)
Net cash (outflow)/inflow before management
of liquid resources and financing (1,576) 985 (1,529)
Financing
Term loan draw down 1,446 6,422 9,464
Loan note redemption - (6,422) (9,361)
New finance leases - - 269
Capital element of finance lease rental payments (72) (9) (103)
Repayment of borrowings (22) (15) (43)
Net cash inflow/(outflow) from financing 1,352 (24) 226
(Decrease)/increase in cash 7 (224) 961 (1,303)
NOTES TO THE INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2003
1. Basis Of Preparation
The financial information relating to the half-years ended 30 June 2003 and 30
June 2002 is unaudited and does not constitute the statutory accounts. The
comparative figures for the financial year ended 31 December 2002 are not the
Company's statutory accounts for that financial year. Those accounts have been
reported on by KPMG Audit Plc and delivered to the Registrar of Companies. The
report of the auditors was unqualified and did not contain a statement under
section 237 (2) or (3) of the Companies Act 1985.
The interim financial statements have been prepared under the historic cost
convention and on the basis of the accounting policies set out in the Company's
2002 statutory accounts.
In accordance with the principles of FRS18 Accounting policies, the Directors
have reviewed their accounting policies and implemented those most appropriate
to the Group's operations. In December 2002, the Company has revised its policy
in relation to the recognition of advances for significant long-term contracts
for rights not held in perpetuity. As a result, for the six months ended 30
June 2002, cost of sales is #195,000 higher and profit for the financial period
is #195,000 lower than previously reported. At 30 June 2002, accrued
liabilities have increased by #1,223,000.
The deferred tax provisions as at 30 June 2002 and 31 December 2002 have been
re-classified on the balance sheet to provisions for liabilities and charges.
Copies of the Interim Report will be sent to all shareholders and further copies
of these and the 2002 Statutory Accounts may be obtained from the Company's
registered office, 58-60 Berners Street, London, W1T 3JS.
The Interim Report was approved by the Directors on 15 September, 2003.
2. Exceptionals
Unaudited Restated Audited
6 months to June 2003 Unaudited Year
6 months to 31 Dec
to 30 June 2002 2002
#'000 #'000 #'000
Aborted acquisition costs 298 - -
Lease surrender fees 54 - -
352 - -
3. Taxation
Unaudited Restated Audited
6 months to June 2003 Unaudited Year
6 months to 31 Dec
to 30 June 2002 2002
Analysis of taxation charged in the period #'000 #'000 #'000
Current tax:
Prior year charge / (credit) 200 - (31)
Total current tax 200 - (31)
Deferred tax:
Prior year differences (200) - -
Total deferred tax (200) - -
Taxation on loss on ordinary activities - - (31)
The Company has #6.2 million (2002 - #7.7 million) of tax losses which may
be available for relief against future trading profits.
4. (Loss)/earnings per ordinary share
The calculation of basic earnings per ordinary share is based on the
consolidated loss after tax for the period of #1,172,000 (June 2002
restated - #491,000 loss) and on 262,345,389 (June 2002 - 262,345,389),
being the weighted average number of ordinary shares in issue during the
period.
In view of the loss for the period, the share options are anti-dilutive, and
therefore a diluted earnings per share is not presented.
Reconciliation of the earnings and weighted average number of shares used in
the calculations are set out below:
Restated
Unaudited Unaudited Audited
6 months 6 months Year
to 30 June to 30 June to 31 Dec
2003 2002 2002
#000 #000 #000
Basic loss on ordinary activities after taxation (1,172) (491) (890)
Exceptionals 352 - -
Amortisation of goodwill 992 992 1,984
Underlying earnings 172 501 1,094
Weighted average number of shares in issue 262,345,389 262,345,389 262,345,389
Basic loss per share (pence) (0.44p) (0.19p) (0.34p)
Exceptional cost per share 0.13p - -
Goodwill amortisation per share 0.38p 0.38p 0.76p
Underlying earnings per share (pence) 0.07p 0.19p 0.42p
5. Bank Loans
During the period, the Group agreed an extension of #5 million to its existing
#12.5 million term loan facility, giving total committed borrowing facilities of
#20 million, comprising #17.5 million term loan facility and #2.5 million
revolving credit facility. In addition, the repayment terms of the term loan
facility were extended from September 2006 to September 2009. In the period, the
Group drew down on #1.5 million of this additional facility. The repayment terms
of the revised #20 million facilities are as follows:
Revolving
Term loan facility Total
#'000 #'000 #'000
Within 1 year 1,687 500 2,187
Greater than 1 but not more than 2 years 1,750 600 2,350
Between 2 and 5 years 8,225 1,400 9,625
Greater than 5 years 5,838 - 5,838
17,500 2,500 20,000
The interest rate on the existing #12.5 million term loan and revolving credit
facility remains at floating LIBOR + 1.75%, the interest rate on the new #5
million tranche is floating LIBOR + 2%. On 30 June 2003, the Group entered into
a 4-year swap agreement on #9 million of the term loan facility at a fixed rate
of 3.99%.
6. Reconciliation of operating (loss)/profit to net cash inflow from operating
activities
Restated
Unaudited Unaudited Audited
6 months 6 months Year
to 30 June to 30 June to 31 Dec
2003 2002 2002
#000 #000 #000
Operating (loss)/profit (771) (12) 100
Depreciation and amortisation:
- tangible fixed assets 155 125 285
- intangible fixed assets 2,222 2,249 4,624
Loss on disposal of tangible fixed assets 4 - 3
Net unrealised loss on foreign exchange - 175 -
Increase in programme development costs (8) (539) (1,843)
Decrease / (increase) in debtors 264 1,397 (2,183)
(Decrease) / increase in creditors (530) (776) 3,347
1,336 2,619 4,333
7. Analysis of changes in net debt
At 1 January Non-Cash Foreign At 30 June
2003 Changes Exchange Cashflow 2003
#'000 #'000 #'000 #'000 #'000
Cash at bank and in hand 861 - (22) 550 1,389
Bank overdrafts (126) - - (774) (900)
735 - (22) (224) 489
Loan notes payable (2,894) (9) --- - (2,903)
Term loan (9,464) (1) - (1,446) (10,911)
Mortgage payments due (360) - - 22 (338)
Finance leases (257) (11) - 72 (196)
(12,240) (21) (22) (1,576) (13,859)
This information is provided by RNS
The company news service from the London Stock Exchange
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