Final Results

 
TIDMDMG 
 
FINAL RESULTS 
FOR THE YEAR ENDED 31 DECEMBER 2010

Dori Media Group ("Dori Media", "DMG", the "Company" or the "Group"), the international media company active in the field of television, with a focus on production, distribution, broadcasting and merchandising of Telenovela and Drama, today announces its final results in accordance with International Financial Reporting Standards (IFRS) for the year ended 31 December 2010.

Full Year 2010

 
 
    -- Group Revenues US$47 million (2009: US$48.7 million) 
 
    -- Gross Profit US$11.4 million (2009: US$15.4 million) 
 
    -- EBITDA US$9.3 million (2009: US$12.2 million) 
 
    -- Positive Operating Cash flow US$7.7 million (2009: US$5.6 million) 
 
    -- Operating Loss US$3.2 million (2009: Operating Profit of US$1.6

million)

 
    -- Total Equity US$41.8 million (2009: US$46.4)

Second Half 2010

 
 
    -- Group Revenues US$20.7 million (2009: US$23.4 million) 
 
    -- Gross Profit US$3.1 million (2009: US$7.2 million) 
 
    -- EBITDA US$1.8 million (2009: US$5.8 million)

Operating Highlights

 
 
    -- 18% increase in revenues from TV channels (excluding revenues from

Israeli cable network 'HOT') to US$8.2 million (US$7.0 million);

 
    -- 7% decrease in Telenovela broadcasting and format rights to US$12.2

million (US$13.1 million) following the postponement of a major

revenue-generating production that was expected to be fully realized

in 2010 as a result of scheduling issues and now is expected to be

realized in 2011;

 
    -- Sales of new Telenovela and Drama content including the sale of 'Split'

to 78 countries since its launch; sales of popular new cross platform

24/7 reality show 'uMan' to 23 countries including 11

territories in Western Europe following its instant success in Israel;

sale of 'Champs 12', to 31 countries in total, including

France, Spain, Portugal, Italy, Greece and Turkey and sale of cross

platform Telenovela 'Amanda O' to 64 countries since its launch;

 
    -- In July 2010, Dori Media Spike (DMS) extended its agreement with 'HOT'

to operate the 'HOT' premium movie channels until 2014, preceded by

the signing in January 2011 of a three-year extension to its 'HOT'

agreement to operate the general Entertainment Channels for another 3

years from 1 January 2011 until 2014. The transaction included the

sale of a new series channel to 'YES', the leading DBS television

provider in Israel. Combined with the movie channel agreement with

'HOT' in July, the extended agreements are expected to generate total

revenues of between US$59 million and US$65 million over 3 years.

Recent Developments

 
 
    -- In February, DMG sold "uMan" to ITV Studios America in the US

in collaboration with Indiemedia. The show was launched in Turkey in

January 2011, in Italy it will be launched on the Italia 1 channel by

Endemol Italy in April 2011, and the show is also expected to be

launched in Portugal during the second half of 2011.

 
    -- The second series of "Split" has been sold to Turner Broadcasting

System Latin America Inc., a Time Warner company, for its Boomerang

channel in Latin America and Caribbean territories. Boomerang has the

right to broadcast the second series' 45 episodes in territories

including Brazil, Chile, Argentina, Colombia, Mexico and Uruguay.

 
    -- Sales totaling to approximately US$7 million have been closed during

the first three months of 2011. In addition there is a high visibility

on an additional US$33 million of revenues for 2011 which are subject

to completion of rendering of certain services by the Company.

Intended Delisting of Dori Media Group from London AIM Market

The Company also published a separate announcement today, April 14th, explaining that the Board of Directors of the Company, in a meeting held by it (the "Board Meeting") has proposed the delisting of the Company's Ordinary Shares from admission to trading on AIM. The delisting is subject to shareholder approval at the Extraordinary General Meeting ("EGM"), which is expected to be convened on May 12, 2011. The Circular covering the EGM and related materials will be delivered to all shareholders of the Company in due course and a further announcement will be made once these have been posted.

In making this decision, the Board of Directors has focused on the following key factors:

 
 
    -- in light of the limited trading in the Ordinary Shares, the tangible

costs associated with maintaining the AIM quotation are

disproportionately high when compared to the benefits and the Board of

Directors considers that these funds could be better utilised in

running the business;

 
 
    -- the management time and the legal and regulatory burden associated

with maintaining the Company's admission to trading on AIM is

disproportionate to the benefits to the Company;

 
 
    -- the Company, like many other quoted AIM companies of its size, has a

tightly held register of shareholders and suffers from a lack of

liquidity for its Ordinary Shares. In practical terms, this results in

a small free float and low trading volumes, which further reduces the

demand for the Ordinary Shares;

 
 
    -- the Company believes that the valuation placed on it by the AIM market

does not properly reflect its potential and by delisting it will be

able to negotiate better terms as and when it wishes to raise further

capital;

Consequently, the Board of Directors believes that a delisting is in the best interests of the shareholders generally (including, for these purposes, depositary interest holders) to seek Cancellation at the earliest opportunity.

On 13 April 2011, the Company received a letter from a member of the Company's controlling shareholders' group, who confirmed its intent in making a tender offer, by itself or together with other shareholders of the Company, for up to 2.7 million Ordinary Shares, if the Company's shareholders approve the Cancellation at the EGM. The price of the tender offer, if made, would be 50 pence per Ordinary Share (the "Proposed Tender Offer Price"). The Proposed Tender Offer Price reflects a premium of approximately 13.6 per cent. to the closing middle market price of Ordinary Share on AIM on 13 April 2011, (being the date the Company received such a letter) and a premium of approximately 5 per cent. to the average closing middle market price of an Ordinary Share on AIM during the three month period ending on 13 April 2011. At this stage, there is no certainty that such a tender offer will be made.

On 13 April 2011, the Company received a further indication from certain members of its board of directors and other authorised participants of the Board Meeting, on their behalf and on behalf of their respective affiliates, and who hold in the aggregate approximately 75 per cent. of the Company's existing issued share capital, of their intention not to sell their Ordinary Shares as part of the aforesaid tender offer (if made).

Chief Executive Officer's comments

Nadav Palti, President and CEO of Dori Media Group, commented: "Although we have continued to benefit from increasing activity and interest in Dori Media's programming and content, 2010 was a challenging year. A large portion of income generated from a major production that was expected to be fully realized in 2010 is now expected to be realized in 2011 as a result of scheduling issues experienced by a client. However, we are confident about our prospects for 2011, trading for the first three months of 2011 has been strong and our business operations are stable and cash generative.

"Our high quality, award winning productions which are also available across a wide variety of new media platforms continue to be in demand around the world. We recently sold "uMan" to ITV Studios America, Endemol Italy and the show was also launched in Turkey, as the flagship daily prime-time anchor program of new channel, TRT Okul. Our lucrative long-term partnerships also continued to flourish - we recently signed a three-year extension to our agreement with leading Israeli cable platform "HOT" to operate their Movie and general Entertainment Channels, generating a combined revenue between US$59 million and US$65 million over 3 years.

We are generating income from a variety of the most attractive growth markets in the world and the industry's response to our cross-format productions so far in 2011 has been positive"

Chief Executive Officer's Review

Operating Update

Excluding the impact of the 'HOT' and 'YES' movie and general entertainment channels agreement on local revenues in Israel, international sales accounted for 54.8% of total sales in 2010, compared to the 48.1% contribution towards total revenues recorded during 2009. TV channel revenues, excluding 'HOT' increased by 18% to US$8.2 million for the period. The breakdown of international sales for the period is as follows:

 
 
    -- 30.9% (26.8% in 2009) generated in Europe, representing 17% of global

sales excluding 'HOT' movie and general entertainment channels;

 
    -- 19.8% (26.6% in 2009) generated in Central and South America,

representing 10.8% of global sales excluding 'HOT' movie and general

entertainment channels;

 
    -- 49.3% generated in other territories mainly Asia (46.6% in 2009 -

mainly from the Far East) representing 27% of global sales excluding

'HOT' movie and general entertainment channels;

A growing library of quality programming

Dori Media continued to invest in new TV series during 2010 and the Company now has a library of approximately 5,250 TV hours, more than 5,000 3 minute video clips, 120 - 9 minute webisodes and around 556 1-5 minute cellular episodes of Telenovelas and daily series

'Split', a teenage show that revolves around the lives of humans and vampires, has now been sold to 78 countries. 'Split' was originally produced for Israeli cable platform HOT's VOD (Video on Demand) service. After only 3 months on-air, 'Split' episodes on HOT VOD generated a total of approximately 7,000,000 viewings. Approximately 90% of viewers watched all available episodes, reaching a record loyalty level. Furthermore, over 30% of households with VOD services watched 'Split'. Following 'Split's' success on HOT VOD, the first season of 45 episodes (30 minutes each) has been successfully aired on Israel's leading channel for children and teenage audiences, 'The Children Channel'. Following the show's huge success on HOT VOD and on-line, both HOT and "The Children Channel" have decided to invest in producing a second season of 'Split', which also contains 45 episodes, each 30 minutes in length. The 2nd season, which has been produced by Dori Media Darset, was sold to Turner Broadcasting System Latin America Inc. at the end of 2010, and will be broadcast on its Boomerang channel in Latin America and the Caribbean territories at the end of 2010. Under the terms of the deal, Boomerang will have the right to broadcast the episodes to territories which include Brazil, Chile, Argentina, Colombia, Mexico and Uruguay.

'Split' has also been sold to the Philippines, the first country in Asia to acquire the daily drama. The move into Asia comes as 'Split' continues its success in Europe, having also been sold to Russia and Spain. The original TV series will be aired on free-to-air channels in all territories.

Following the successful Israeli launch of Cellcom and Dori Media's new cross platform 24/7 reality show 'uMan' in July 2009, the show has now been sold to a total of 23 countries including Denmark, France, Italy, Germany, Greece, Norway, Spain, Sweden, and The Netherlands. 'uMan' is a reality show where every move of 8 contestants is filmed 24 hours a day for 21 days and all decisions regarding the lives of the contestants are voted for by viewers. 'uMan' became an instant success in Israel, where more than 7 million viewer votes were recorded in 21 days. During this period, out of Israel's total population of 7 million people (600,000 of whom are teenagers), the on-line show had 700,000 unique users. "uMan" was recently sold to ITV Studios America and Endemol Italy and the show was also launched in Turkey, as the flagship daily prime-time anchor program of new channel, TRT Okul. 'uMan' was also sold to 'Mega' in 2010, the number one free-to-air TV channel in Greece and the channel plans to extend the format's length to follow the show's participants for a longer period of time with viewers also able to catch up on the day's action on a daily TV show dedicated to 'uMan' on the 'Mega' channel.

"Ciega a Citas" (Date Blind), a co-production by Dori Media Contenidos and Rosstoc, won a coveted "Series and Soap Operas" "Rose d'Or" award in 2010. The "Rose d'Or" Festival, is the only global awards ceremony for television entertainment and is consequently regarded by the industry as its most prestigious award ceremony. The show has been sold to 33 countries since its launch in 2009. "Ciega a Citas" is a telenovela about a woman's quest to find love before her sister's imminent wedding, and the show also recently won the Argentores Award for best program in 2010 in Argentina. The show went on to be nominated for an International Emmy in the Telenovela category in 2010.

'Champs 12', a Football drama, which was sold to Caracol Television S.A. in Colombia even before its debut on Canal America in Argentina, has now been sold to 31 countries in total, including France, Spain, Portugal, Italy, Greece and Turkey. Exhibitions of 'Champs 12' in Italy already began to show new revenues from Ancillary business.

Dori Media's hit comedy show 'Lalola', continues to perform well and has now been sold to more than 120 countries since its debut and is also locally produced in India, Turkey, Greece, Belgium, Spain, Portugal, Philippines, Chile, Vietnam, and Russia.

Strong long-term partnerships

Dori Media is very proud to have long-term partnerships with many leading global media companies. A summary of the main partnership agreements is provided below.

In June 2009, Dori Media Darset reached an agreement with Cellcom, the leading cellular operator in Israel, to produce 'uMan' (named locally 'Megudalim' in Israel) a unique and innovative 24/7 cross-platform control game for mobile phones, internet and TV. 'uMan' has become an instant success in Israel reflecting the potential of this innovative partnership.

Cellcom, Logia Mobile and Dori New Media have together presented "First Love" - an original interactive project of 150 short movies, documenting true love stories from young people between ages 16 to 20. Negotiations are underway with several international broadcasters interested in purchasing the "First Love" format.

In July 2010, Dori Media Spike (DMS) extended its agreement with Israeli cable platform 'HOT' to operate the 'HOT' premium movie channels for another 3 years from 1st January 2011 until 2014, generating revenues of between US$45 million and US$48 million over 3 years for DMG. DMS's original agreement with 'HOT' was initiated in 2007. 'HOT' boasts subscriptions with the majority of Israeli households and under the agreement DMS retains the rights to produce and operate the existing 'HOT' premium movie channels and services. In January 2011, DMS signed a three-year extension to its general Entertainment Channels agreement with "HOT" for another 3 years from 1 January 2011 until 2014. The transaction included the sale of a new series channel to "YES", the leading DBS television provider in Israel. Combined with the movie channel agreement with 'HOT' in July, the extended agreements are expected to generate total revenues of between US$59 million and US$65 million over 3 years.

DMG is also 3 years into a 5-year output deal with Televisa to sell various titles to Televisa. Televisa is the largest media company in the Spanish world and a major player in the international entertainment business. The deal was signed for a consideration of approximately US$7.2 million with contractual options of US$2.3 million expected to increase the value of the deal to approximately US$9.5 million.

Financial Performance

Revenue

Dori Media recorded sales of US$47 million for the twelve months ended 31 December 2010, down 3% from US$48.7 million for the corresponding period of 2009.

The Group's results were supported by the strong revenues generated by DMG's TV channel businesses, which reported US$33.8 million of sales for the full year 2010, compared to US$34.4 million in 2009. The slight year on year decline reflected additional non-recurring revenues, which were generated as a result of a three year agreement with "HOT". This was offset by the strong performance of the TV Channels operated by Dori Media International ("DMI"). The channels (excluding revenue from Israeli cable network 'HOT') recorded an 18% year on year increase in sales, from US$7 million in 2009, to US$8.2 million for the full year 2010.

Telenovela broadcasting and format rights sales for the full year 2010 were down to US$12.2 million, compared to US$13.1 million in 2009, with revenues from broadcasting rights down to US$10.6 million from US$11.9 million in 2009. The decline is primarily related to scheduling issues experienced by the client, which resulted in delayed revenues and which are now planned to be fully realized during 2011. Broadcasting and format rights sales represented 26% of total revenues for the period, and the proportion remained stable compared to 2009.

Revenues from the ancillary business (merchandising & publishing, music, DVDs, CDs, videos and Live shows) declined year on year, from US$0.7 million for the full year 2009 to US$0.3 million in 2010. The decline was in line with expectations, as some major localizations of Dori Media content no longer generate royalties after a decrease in the number of exhibition appearances for certain shows. However, exhibitions of new formats have now commenced and include exhibitions and Licensing of shows including 'Champs 12' in Europe and 'Split' in both Europe and Latin America.

Other income (including TV and internet advertising) contributed 1% of total full year sales, and amounted to US$0.5 million for the full year 2010, compared to US$ 0.2 million reported in 2009. This is the result of an increase in Dori Media Ot' client base driven by its high-quality subtitling, dubbing and format conversions.

Gross Margin

The Company recorded a gross profit of US$11.4 million for the full year, which represented a decline from US$15.4 million in 2009. The change reflected an increase in amortization, expenses relating to DMG's Library and an additional impairment in the amount of US$1.16million.

Gross margin for the current reporting period was 24% decreasing from 32% in 2009 as anticipated as a result of lower revenues from broadcasting and format rights, increase in amortization and delays of income generation.

The cost of goods sold for the twelve months of 2010 increased to US$35.6 million compared to US$33.3 million in 2009. This increase can be mainly attributed to amortization charges related to DMG's Library, as well as charges related to the set-up and depreciation of broadcasting rights.

Operating Expenses

Total operating expenses amounted to US$14.7 million for the full year, up from US$13.7 million in 2009. Total sales and marketing expenses were lower than expected, and declined by 7% from US$3.3 million in 2009 to US$3.1 million for the full year as a result of cost savings and efficiency during conventions, significantly lower merchandising commissions and decreased advertising and marketing expenses.

Whilst the overall sales and marketing costs decreased, sales commissions rose significantly year on year, from US$0.4 million in 2009 to US$1 million for the full year, as a result of initiatives with local partners.

Sales personnel salaries were reduced by 29% year on year, from US$0.8 million in 2009 to US$0.6 million in 2010, while PR expenses were reduced by 38% year-on-year to US$0.1 million.

Administration & General expenses were up by 11% year on year from US$10.4 million in 2009, to US$11.6 million in 2010. The main increase reflected provisions for bad debts of approximately US$1.5 million. Salaries and management fees were down from US$6 million in 2009, to US$5.8 million in 2010 - 2% decrease. The actual reduction in salaries and management fees of 7% was set off to 2% as a result of the fluctuations in the currency exchange rate between the US$ and the NIS of US$0.1 million, and US$0.2million of one-off options and equity provisions in Novebox. When excluding the year on year effects of the bad debts provision, the currency exchange rate movements and the impact of one-off options and equity provisions in Novebox, Administration & General expenses were down year on year from US$ 10.4 million in 2009, to US$ 9.8 million for the full year 2010.

Professional expenses, including legal fees, auditors remuneration and payments for other consultancy services increased by 12% from US$1.3 million in 2009 to US$1.5 million in 2010.

EBITDA

The Company recorded an EBITDA profit of US$9.3 million for the full year, compared to US$12.2 million in 2009. The decrease in EBITDA is mainly due to the postponement of a major revenue-generating production that was expected to be fully realized in 2010 as a result of scheduling issues. The EBITDA margin for the full year was 20%.

Income Tax

The Company reported total tax expenses of US$0.5 million for the full year. At the Group level, Dori Media recorded a net loss for the full year of 2010 but the Company is still subject to income tax charges as tax charges for each of DMG's subsidiaries are calculated individually. Consequently, a loss result by one subsidiary cannot be offset by a profit from another for tax purposes. The Company is making efforts to address these tax issues and is expecting to have this issue resolved in the near future.

Cash Flow

Despite the predicted slowdown in activity during 2010, Dori Media's cash flows remained positive, and facilitating strong cash generation and the financing of new productions and ventures. Operating cash inflow amounted to US$7.7 million for the year, compared to US$5.6 million in 2009. DMG's cash flow, combined with the bank facilities available to the Company, enables it to continue to invest in new productions, often with other partners, and therefore to grow its new content inventory.

Report and Accounts

The Company's Financial Report and Accounts are available on the Company's website www.dorimedia.com.

Outlook

Early indications support the Management team's belief that 2011 will prove to be a stronger year for Dori Media. Trading for the first three months of the year has been strong and the Company is witnessing positive response to many of its productions. The Company's business operations remain stable and cash generative and Dori Media continues to have a strong balance sheet. Despite this, the Board considers the potential delisting to be in the best interests of the Company's and all of its shareholders.

***

For further information on Dori Media Group, please visit our website on www.dorimedia.com or contact:

 
Dori Media Group Ltd.             Shared Value Limited 
Nadav Palti, CEO & President      Mark Walter 
Tel: +972 3 7684000               Investor & Media relations 
info@dorimedia.com                Tel. +44 (0) 20 7321 5010 
                                  dmg@sharedvalue.net 
Daniel Stewart & Company 
Paul Shackleton/Oliver Rigby 
Tel. +44 (0) 20 7776 6550

Dori Media Group is an international group of media companies, located in Israel, Switzerland, Argentina and the US. The group produces and distributes TV and New Media content, broadcasts various TV channels and operates video-content internet sites. The group owns approximately 5,250 TV hours, more than 5,000 clips of 3 minutes on average, 120 - 9 minute webisodes and around 556 1-5 minute cellular episodes of Telenovelas and daily series that it sells to a wide variety of audiences in more than 80 countries. It owns and operates two telenovela channels, Viva and Viva Platinum broadcasted on all Israeli multi-channel platforms and via the co-branded internet site offering telenovelas to Israeli surfers through Walla.com. Dori Media Paran and Dori Media Darset produce top-end series as well as daily dramas for the Israeli and international markets. Dori New Media develops and produces formats specially tailored for the internet and cellular platforms, and realizes new opportunities enabled by the new technologies. Dori Media Spike packages, produces and operates the main movie channels on the Israeli cable TV platform and general entertainment channels on all Israeli TV multi-channel platforms. In Indonesia and Malaysia, the company operates the Televiva Vision 2 channel that is devoted to telenovelas and Baby TV Vision 3 for toddlers, in addition to the Ginx gamers' channel. Ginx is localized and broadcasted to Turkey as well. Novebox operates an ad-based VOD and SVOD commercial internet site targeted at the Hispanic and Latin American audience offering a variety of shows and movies. The group is traded on the London Stock Exchange where its symbol is DMG. For more information on Dori Media, visit our corporate website at http://www.dorimedia.com/.

***

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
                                        Year ended 31 December 
                                        2008        2009        2010 
                                  Note  US$ '000*)  US$ '000*)  US$ '000*) 
Revenues                          17a   50,427      48,716      47,023 
Cost of revenues                  17b   27,868      33,348      35,601 
Gross profit                            22,559      15,368      11,422 
Selling and marketing expenses    17c   4,826       3,323       3,082 
General and administrative        17d   11,163      10,401      11,580 
expenses 
Totaloperating expenses                 15,989      13,724      14,662 
Operating profit (loss)                 6,570       1,644       (3,240) 
Financial expenses, net           17e   822         638         817 
Other income, net                       (7)         -           - 
Profit (loss) before                    5,755       1,006       (4,057) 
taxes on income 
Taxes on income                   14c   2,365       1,669       532 
Profit (loss) for the year              3,390       (663)       (4,589) 
from continuing operations 
Profit (loss) for the year from   18    449         (784)       - 
discontinued operations 
Profit (loss) for the year              3,839       (1,447)     (4,589) 
Other comprehensive 
income (loss): 
Currency translation                    (87)        (466)       146 
adjustments 
of foreign operations 
Totalcomprehensive                      3,752       (1,913)     (4,443) 
income (loss)

*) Except per share amounts.