TIDMZIN
RNS Number : 7665H
Zinc Media Group PLC
15 March 2018
15 March 2018
Zinc Media Group plc ("Zinc Media" or the "Company")
Unaudited Interim Results for the six months ended 31 December
2017
Zinc Media Group plc, the TV and multimedia content producer,
today announces its unaudited interim results for the six months to
31 December 2017.
Highlights
-- Profitability increased at the half year
-- Continued improvement in gross margin
-- Key acquisition of Tern Television completed
-- Enhanced balance sheet as a result of completed fundraising and preference share conversion
-- David Galan appointment as CEO
-- Zinc Media consolidating its position as a 'super indie' in the television industry
Financial Performance
-- Group revenues of GBP9.76m (H1 17: GBP9.19m)
-- Gross margin increased to 33.0 per cent. (H1 17: 30.8 per cent.)
-- Adjusted EBITDA increased by over 300 per cent. to GBP0.24m (H1 17: EBITDA of GBP0.08m) *
-- Profit after tax from continuing operations of GBP0.10m (H1 17: loss GBP0.43m)
-- Diluted earnings per share from continuing activities 0.01p
(H1 17: diluted loss per share of 0.09p)
-- Total assets GBP18.42m (H1 17: GBP12.99m)
-- Cash at GBP3.69m (H1 17: GBP1.63m) and net cash of GBP0.23m (H1 17: net debt of GBP1.67m)
-- GBP3.5m fundraising and GBP2m conversion of preference shares
completed during the period to fund acquisition and strengthen cash
position and balance sheet
Operational Performance
-- Key acquisition of Tern Television completed, representing an
acceleration of the Group's M&A strategy, a major foothold in
the nations and providing a significant driver of future growth and
profitability
-- Current TV commissioned order book at GBP14.4m which,
together with the current sales pipeline, gives a basis for
confidence in the outlook for the full year
-- Management expect adjusted EBITDA to be higher in the second half of the year
-- As a consolidator in the independent TV sector we pitch and
produce content across many different factual non-scripted TV
genres, to a plethora of different broadcasters and from bases in
London and nationwide (an important driver in the current UK TV
industry); all helping to diversify risk profile
-- Strategic shift in TV programming continues, with a move
towards higher value series for both UK and international
broadcasters and less reliance on one-off lower value
commissions
-- Digital division continues to win new blue-chip clients, despite challenging markets
-- Publishing division continues to trade profitably and has won new client contracts
-- Senior management structural changes, with David Galan
promoted to CEO and Katie O'Reilly appointed as Interim Director of
Finance
* Adjusted EBITDA defined as EBITDA before exceptional
impairment charges in respect of the carrying value of goodwill in
relation to Reef Television, exceptional change in the fair value
of contingent consideration in respect of Reef Television and
restructuring costs in the publishing and digital businesses.
Outlook
The current year TV order book stands at GBP14.4m, defined as
commissioned and either already invoiced or planned to be
recognised within the current financial year. Whilst there are
still programme commissions to be won over the next few months, the
size and depth of the TV pipeline gives confidence in our year end
outlook.
The UK TV market is challenging, due to budget constraints from
the UK public service broadcasters, a tough domestic TV advertising
market, pressure to move TV production from London to the regions
and nations and stiff competition for viewers from the
international broadcasters and new streaming platforms such as
Netflix and Amazon. However, we recognise these challenges and see
the opportunities within them. Our strategy is designed to take
advantage of these opportunities and reduce our business risks into
the future. We are now a larger and more diversified TV business,
have a strong presence in the regions and nations and produce TV
content for an increased number of broadcasters both domestically
and abroad.
The Group's focus over the coming months, as ever, will be to
convert its pipeline into commissions and ensure that as much
production activity as possible falls into the current financial
year, whilst also building a strong pipeline into the next
financial year. The current pipeline has a strong mix and volume of
programme proposals across the different factual genres and across
multiple broadcasters, both domestic and international.
David Galan, CEO, commented:
"We are pleased with the overall results achieved in the first
half of the year and we remain committed to delivering on our
strategy of building a strong, diversified business, with a broad
reach, both domestically and internationally. As a result of the
acquisition of Tern Television and the ongoing implementation of
structural changes to the television business, the Group is now
well placed to meet demand and address the evolving UK and
international TV markets.
"We have clear growth ambitions and see opportunities to further
enhance the potential of the business."
For further information, please contact:
Zinc Media Group plc +44 (0) 20 7878 2311
Peter Bertram, Chairman
David Galan, Chief Executive Officer
www.zincmedia.com
www.zincmedia.com
N+1 Singer (NOMAD and Broker to Zinc Media Group plc) +44 (0) 20
7496 3000
Shaun Dobson / Lauren Kettle
Peterhouse Corporate Finance Limited
(Joint Broker)
Martin Lampshire / Duncan Vasey +44 (0) 20 7469
/ Eran Zucker 0932
Yellow Jersey PR
Georgia Colkin / Katie Bairsto +44 (0) 7825 916715
Chairman's Statement
The business is in radically different shape to two years ago.
TV production, which is now the clear focus of the Group, has been
expanded and significantly enhanced through the acquisition of Tern
Television, completed in the period. We are now positioned as one
of the largest independent TV production companies in the UK, and a
leader in the production of non-scripted factual programming. TV
production is expected to represent approximately 84 per cent. of
Group revenues in the current year.
We are focussed on continuing to increase profitability with a
clear strategy of growing our TV business, both organically through
hiring new talent and through the acquisition of carefully selected
complementary TV businesses.
The Board is pleased to report the successful equity fundraising
of GBP3.5 million, which completed in November 2017. The proceeds
were used primarily to fund the Tern Television acquisition and to
provide additional working capital to the Group. We also converted
approximately GBP2m of preference shares into ordinary shares. Both
the fundraising and the preference share conversion have
significantly strengthened the financial position of the Group and
provided a very firm footing for the management team to execute the
growth strategy. At the half year end, the Company has a net cash
position compared to a net debt position at the end of the prior
comparative period. The Board is appreciative of our existing
shareholders and new investors for facilitating the fundraising and
preference share conversion and for showing confidence in the
planned trajectory of the business.
Significant changes have also been made to the senior management
structure of the Group. I am pleased to report that David Galan was
appointed as CEO in February 2018 and Katie O'Reilly as interim
Director of Finance. The Group has been without a CEO since July
2016 and in that time David has been the driving force for much of
the structural change to the business, including the exit from the
majority of the publishing businesses, the acquisition of Tern
Television and the recent fundraising and balance sheet
restructuring. As CEO David has a direct mandate to continue the
pace of the Group's transformation and return to profitability and
we wish him continued success in the role.
The Group welcomes the addition of the Tern Television senior
team, including well respected and award-winning programme makers
Harry Bell, David Strachan, Andrew Snowball and Gwyneth Hardy,
strengthening the Group's TV management.
Finally, the Board would like to thank all our employees for
their professional and dedicated work across the Group.
CEO's Statement
The highlight of the first half has been the acquisition of Tern
Television and we are delighted to welcome the Tern team into the
Group. The acquisition is fundamental to the Group's strategy of
acting as a consolidator in the independent TV sector and will
broaden and enhance the Group's creative capabilities.
I am pleased to report that adjusted EBITDA for the first half
is significantly higher than that reported in the comparative prior
year period. There is still a long way to go to fulfil the
potential of the business and our ambitions are to substantially
grow profitability in the future. I was delighted to be appointed
as CEO of the Group last month and I intend to continue to drive
changes to enhance the operational performance and efficiency of
the Group. With a period of significant restructuring behind us,
the short-term objectives are to make the TV business more
efficient, through improving our TV organisational structure and to
ensure that we achieve higher net margins from our position as one
of the leaders in the independent TV sector. The TV business has
grown through multiple acquisitions over the years and there is the
scope to achieve a far greater level of integration between the
different units and realise greater synergies and efficiencies,
without diluting the creative legacy or energy of the individual
units and brands.
The first half of the year has had its challenges and trading
was mixed across the different TV units. Whilst there were areas of
strong outperformance, performance in certain units was
disappointing, in particular in Reef Television. However, despite
this backdrop we still delivered an adjusted EBITDA increase. We
remain confident however that we understand the reasons for the
areas of underperformance and have reacted or are reacting with
appropriate strategies to rectify this. Therefore, we are confident
that we can deliver higher profits for the full year.
We believe strongly in our strategy to move the business towards
longer running repeatable series and to focus on securing
relationships and commissions from a broader spread of UK
broadcasters and increasingly with the international market. We
have many examples of recent programme commissions that demonstrate
the success of this strategy such as the recent commission of a
twelve-part prime-time series by Channel 5 as a follow up to 'The
Wonderful World of Puppies', the commission by ITV of a three-part
prime-time series about the RAF and the recently aired 24-episode
series 'Village of the Year' for Channel 4. Our international
strategy is key to the future and the rewards will be far higher
production budgets and longer running series. While this strategy
will take time to develop and we are in the relatively early stages
of its implementation, examples of the early stages of this bearing
fruit are development commissions from A+E Networks and
co-productions with Smithsonian, Arte, National Geographic and
PBS.
The remedial action required to reshape the business and
withdraw from the old loss making Ten Alps print publishing
businesses is now complete. The remaining Macclesfield based
publishing division continues to trade profitably and as a
standalone non-core unit. It still concentrates primarily on one
contract in the home and build sector for LABC.
The Digital division had a relatively tough first half against a
backdrop of shrinking budgets in the CSR (corporate social
responsibility) marketplace. However, despite these challenges the
business continues to win new blue-chip clients such as Body Shop,
BBC and Freemantle Media and is reacting to a tougher market
environment by seeking out new client opportunities and by
broadening its product offering and skillset. A one-year extension
to the TfL contract was announced in October 2017.
BUSINESS OVERVIEW
Television Division
The strategy in our TV division is to expand our position as a
major independent TV production company. We believe that being a
larger TV group will provide the opportunity to capitalise on the
more lucrative international marketplace as the Group will have
more creative breadth, produce content in a wider range of factual
genres, and have more production resource and increased
relationships with international commissioners and broadcasters. We
are aiming to expand through a mixture of acquisitions, such as
Tern Television, and through an organic strategy of producing fewer
lower value 'singles' and more higher value long running series and
repeatable formats. Organic growth requires additional executive
talent to push new ideas and expand our traditional content
boundaries into new factual genres and formats. We have already
made significant senior hires in the TV business and continue to
look at 'talent' opportunities regularly as they arise. We have
recently hired an executive producer on a part time basis who has
an excellent record in formats to bolster development in that area
and we are re-examining our strategy for the US market to see if we
can move beyond co-production to bespoke commissioning from the
US.
The UK TV market is challenging, due to budget constraints from
the UK public service broadcasters, a tough domestic TV advertising
market, political pressure to move increasing amounts of TV
production from London to the regions and nations and stiff
competition for viewers from the international broadcasters and new
streaming platforms such as Netflix and Amazon. However, we
recognise these challenges and see opportunities within them. We
are now a larger and more diversified TV business, have a strong
presence in the regions and nations and produce TV content for more
broadcasters both domestically and abroad.
Public service broadcaster budgets for programme spending have
been under pressure; we have been reacting to this over the past
few years by reducing the Group's reliance on these revenue streams
and through developing new domestic broadcaster relationships.
Whilst BBC and Channel 4 are extremely valued and significant
customers of the Group, we have also produced many hours of
programming during the period for ITV, Channel 5, Sky and others.
There are also continued shifts in consumer viewing habits and the
growth of major new streaming platforms such as Netflix, Amazon and
Apple means that there are new buyers in the marketplace with the
ability to commission very high value productions. The appointment
last year of a Director of International signalled our commitment
to exploiting the potential in this global marketplace. There is
also a growing trend by the major UK broadcasters to require
production to be based outside of London, having the effect of
reducing available budgets for London based production companies.
We have acquired Tern Television based in Scotland and Northern
Ireland, and already had a production unit in Manchester, Blakeway
North. We are now able to produce large scale programmes in
Manchester, Glasgow, Aberdeen and Belfast.
Overall, the TV division is in healthy shape for continuing
growth with strong talent in each company and a diverse pipeline.
We are pursuing a strategy of higher budget programming (through
co-productions or series) to help drive profitability and are
continually focussed on content that will sell well
internationally.
Blakeway North
Blakeway North, based in Manchester, is performing well. This is
thanks to a successful strategy of developing long running series
such as 'Bargain Brits' for Channel 5, and a new 20-part series
'The Peoples' Vet' for Channel 4, alongside bespoke singles for a
full range of broadcasters. The addition of a second executive
producer has extended the range and versatility of the company so
they are able to take advantage of the increasing regional quotas
needed by the different broadcasters. They have also explored new
digital markets, achieving success with `Born to Vlog' for CBBC - a
series of online shorts with 13-year-old Nikki Lilly interviewing
high profile figures including Theresa May and Jeremy Corbyn - a
spin off from the 'My Life' programme which won a Children's BAFTA
nomination.
Blakeway London
In Blakeway London, the strategy of moving away from low budget
current affairs has paid off. We have developed and won a high
profile 3 part series for ITV ('Dambusters') with significant US
co-production interest. As recently announced we have also won a
12-part prime-time commission for Channel 5, a follow up to the
successful 'Wonderful World of Puppies' series which has just aired
to high audience ratings. Blakeway's international reputation for
quality programme making and genres of expertise (Natural History
and History) have meant that its productions can attract
co-production investment. This means the end product has higher
production budgets and can be more easily sold, enhancing the back
end.
Brook Lapping
Brook Lapping has experienced a slow start to the year because
of the severely delayed start of the Norma Percy Europe series.
This was largely due to the extended period of time required to
secure the necessary co-production partners. However, it appears
likely that, for the first time in many years, Norma will have two
series in production at once - including a series on Cuba looking
likely as a 2 part-series for ARTE and the BBC. There was also a
3-month delay in the start of 'Suffragettes' - a high budget
90-minute drama documentary special for BBC, for the new Creative
Director of Brook Lapping, Emma Hindley.
Films of Record
Films of Record has had an injection of energy with the hiring
last year of Roy Ackerman as MD of the division. They have
stretched out of pure observational documentaries to include new
genres of music and formats. There will be a time lag on delivery
of business because they are changing direction again away from
singles and into series and returnable series. They have had
success in winning a series commission, 'Love and Drugs on the
Streets' for BBC3 which rated number 1 on iPlayer. Roy has quickly
won some commissions in the Arts field and is trying to win
business in the returning format territory and from the US.
Reef Television
Reef Television had a disappointing first half and is expected
to fall significantly below internal budgets for the full year. The
founder and CEO of Reef Television, Richard Farmbrough recently
announced his resignation and will leave in the summer, following
an orderly transition.
Reef Television management had expected the recommission of
several of their long running daytime series. Disappointingly three
of these series were not recommissioned for the current year,
although two may still be recommissioned in future years.
Additionally, despite several new series having been developed and
commissioned in the last twelve months, these new series have not
been recommissioned.
There is a strong management team in place which has operated
alongside Richard, consisting of a managing director, two creative
heads and a head of development. Management are considering options
to improve performance and the newly empowered Reef senior
management team is working closely with the wider Zinc TV team to
reinvigorate the Reef business. We believe that both the reputation
of the Reef brand and its position as a leader in its marketplace
will allow the Reef senior management team to grow the business
into the future, despite the current disappointing trading.
Tern Television
We are delighted to welcome Tern Television into the Group and
their senior management team, all long established senior
executives in the TV industry. Tern, established in 1988, is a
successful independent TV production company, specialising in
factual production and currently employing 20 staff, based in
Scotland and Northern Ireland. Televisual Media's 2017 annual TV
industry survey showed Tern at No 29 in the Top True Independents
league table and at No 7 in the Genre Ratings: Specialist Factual
list, whilst Broadcast's 2017 survey showed Tern at No 14 in the
Regional Indies. The company is building a strong reputation for
programming in two distinct genres: Documentary & Specialist
Factual and Popular Factual & Formats. Typically, Tern will
produce over 60 hours of TV annually for broadcasters including BBC
One, BBC Two, BBC Four, BBC Scotland, BBC Northern Ireland, Channel
4, Sky 1, Discovery, and National Geographic Channels. Awards
include BAFTAs, Prix Italia, Royal Television Society awards and a
Cine Golden Eagle.
The Board believes that the acquisition has broadened and
enhanced the Group's creative capabilities. Tern has experience and
produces content in factual niches that the Group is not currently
active in. The Board has noted the growing trend by the major UK
broadcasters to require production to be based outside London. By
having a leading nations TV producer such as Tern within the Group,
Zinc will benefit by being able to produce major productions
specifically in the nations and regions, where there are strong
indications of future growth. In February 2017, the BBC announced
that it had reviewed its programming and services in the nations
and, as a result of this, it will be making significant changes and
major investments there including the biggest single investment in
broadcast content in Scotland in over twenty years. The BBC is
investing GBP20 million in a new TV channel to be broadcast from
Autumn 2018 - BBC Scotland - and intends to invest a further GBP20
million in increased network production from Scotland. Tern is in
active dialogue with BBC Scotland about a significant number of
projects for the new channel which would consolidate the company's
position as a core supplier of returning business.
In terms of current trading and the outlook for the full year
Tern is in a very strong position, with a high degree of visibility
over revenues. Over 77 per cent. of Tern's internal full year
revenue projections are either already delivered, contracted or
already in production. Tern's strategy includes expanding the
number of broadcasters it supplies in order to broaden its client
base and reduce reliance on any one broadcaster. This strategy is
working, with its first commissions won with Channel 5 over the
last few months and advanced stage sales discussions ongoing with a
whole host of other UK broadcasters. We believe that the
acquisition by Zinc Media will help to accelerate this process.
Digital Division
The Digital division continues to develop its product offering
and this will be key to its future growth. Its historical heartland
is CSR (corporate social responsibility) campaigns for blue chip
corporates and public bodies. Its largest contract with TfL is the
largest example of this and reflects this core competency and
market expertise. However, to drive growth the division is
developing new skills and expertise such as short-form film
production which will take it into new client relationships and
product offerings. Recent wins such as Body Shop, BBC and
Freemantle Media are examples of the success of the push into new
areas. They continue to see opportunities for short-form film
production to complement the TV production business, particularly
as the boundaries change between the traditional platforms for
consuming TV content and the new platforms and devices that make
video content ever more prevalent.
Highlights during the period include a 12-month contract
extension for the Children's Traffic Club, which continues their
fifteen-year relationship with TfL. New client wins include BBC, as
a short form film client, where they won a commission to deliver a
six-part series on 'being British' which will feature on BBC's
online learning platform. The Body Shop International is another
significant new client win; they are delighted to have won a
contract to develop Body Shop's education portfolio to engage with
their new generation of consumers. They also secured a 12-month
contract extension with Siemens to manage its STEM (science,
technology, engineering and mathematics) education programme. This
marks the 6(th) consecutive year of contract renewal.
Highlights
TV
Zinc Media produces television programming under the Blakeway,
Brook Lapping, Films of Record, Reef TV, and Tern TV brands:
Blakeway
-- 'Diana: 7 days that Shook the Windsors' for Channel 5 was
such a critical success at the end of June that it was repeated in
August around the anniversary of the Princess of Wales' death and
generated a significant level of international sales;
-- 'Shakespeare Uncovered' - series three, consisting of six
one-hour episodes, went into production for PBS;
-- `Dambusters' - ITV commissioned a three-part series with
exclusive access to the RAF as they reform the famous squadron to
fly the new F35 fighter jet;
-- Post period end a new twelve-part series on puppies
commissioned by Channel 5 following the highly rated 'Wonderful
World of Puppies';
Blakeway North
-- 'Bargain loving Brits in Blackpool' - a six-part series
spin-off from the Benidorm series broadcast on Channel 5 with above
average audiences for the slot;
-- 'My Life: Born to Vlog' for CBBC - nominated for a Children's
BAFTA and spawned a spin off online series `Nikki Lilly
Meets...';
-- Production began on a ten-part daytime feature series on an
animal hospital for Channel 4, a new market for Blakeway North;
Brook Lapping
-- 'Wasting Away: The Truth about Anorexia' - a single for
Channel 4. ITN correspondent, Mark Austin and his daughter Maddy
explore the issue of anorexia. Shortlisted for Best Current Affairs
in the Broadcast Awards;
-- 'The Search for a New Earth' - a 90-minute high profile
special for BBC, France 5 and Smithsonian - hosted by Stephen
Hawking the programme examined the science behind the race to find
a new planet for mankind;
-- Norma Percy's Europe series started production - a three-part
series for the BBC, France3, Smithsonian and other international
co-production partners;
-- 'Suffragettes' - a 90-minute high profile drama documentary
for BBC Two started production, a new departure for Brook Lapping
in the hybrid drama genre;
Films of Record
-- 'Love and Drugs on the Streets' - a three-part series for BBC
3 about homeless women was recommissioned for a second series and
was No 1 on the BBC i-Player straight after broadcast;
-- 'Stage Fight' - a paid development for a format series from
Motion Group takes Films of Record into the new genre of
formats;
-- 'Lennon Lacy' - the investigation of the violent death of a
black teenager in the US attracted a $200k development budget from
a major US network, the first time Films of Record has worked
bespoke for a US network;
Reef Television
-- 'Village of the Year' - a 24-part daytime and peak series,
presented by Dame Penelope Keith, for Channel 4, Reef's largest
ever commission;
-- 'Flying across Britain with Arthur Williams' - a four-part
series for Channel 4 which is expected to transmit in the
Spring;
-- 'Lucy Worsley's Nights at the Opera' - a two-part series for BBC2;
-- 'Getting the Builders In' - a 15-part daytime series for BBC;
the format has been sold in the international market;
-- Strong distribution revenues achieved during the period,
reflecting the international appeal of Reef content;
Tern Television
-- 'Helimedics' - a ten-hour Channel 4 series following air
ambulance helicopters carrying doctors who carry out life-saving
surgery on location;
-- 'Best Laid Plans' - another ten-hour series screened on
Channel 4, is Tern's first venture into programmes which had
commercial sponsorship, in this case by Hiscox Insurance;
-- 'Britain's Wildest Weather' - a returning series, and
'World's Wildest Weather' for Channel 4 and currently being
re-edited for international exploitation;
-- 'Britain's Lost Masterpieces' - a BBC Four series which found
an undiscovered Rubens in Series One and a Raphael in Series Two,
and has been commissioned for a third series to be made in
Belfast.
David Galan
Chief Executive Officer
FINANCIAL REVIEW
Revenue was GBP9.76m (H1 17: GBP9.19m), the increase being due
to the benefit of the recent acquisition of Tern Television,
partially offset by lower revenues in the Digital and Reef TV
businesses. TV divisional revenues were GBP7.78m in the first half,
an increase of GBP1.08m on the prior period. The Digital division
saw revenues of GBP0.91m, a decrease of GBP0.66m on the prior
period. The Publishing division delivered revenues of GBP1.02m, an
increase of GBP0.12m on the prior period.
Gross margin increased from 30.8 per cent. to 33.0 per cent. in
the period, with operating expenses increasing slightly to 30.6 per
cent. of revenues (H1 17: 29.9 per cent.). The increase in gross
margin is due to a focus on higher value productions and
distribution revenues.
The Company reported a profit at the adjusted EBITDA level of
GBP0.24m (H1 17: GBP0.08m). Adjusted EBITDA is reported before a
net exceptional credit of GBP0.18m, which is analysed in further
detail in note 4. Included in exceptional items is a GBP0.7m credit
due to a change in the fair value of contingent consideration in
respect of Reef Television; a goodwill impairment charge of GBP0.5m
in respect of Reef Television and restructuring costs in relation
to staff exit costs in the Digital division of GBP0.02m. Operating
profit increased to GBP0.14m (H1 17: loss of GBP0.38m).
The finance charges for the period were static at GBP0.14m (H1
17: GBP0.15m) and reflect the accrued costs on the Company's
outstanding long-term debt obligations. No corporation tax charge
was incurred, as carried forward losses continue to be utilised and
there was a credit in respect of the movement in deferred taxation
in the period. The profit for the period was GBP0.1m (H1 17: loss
GBP0.49m).
Earnings per share
Basic and diluted earnings per share from continuing operations
in the period was 0.01p (H1 17: loss 0.09p) and was based on the
profit for the period of GBP0.1m (H1 17: loss of GBP0.43m) with a
weighted average number of shares in issue during the year of
812,948,299 basic and 819,680,403 diluted (H1 17: 468,567,143 basic
and diluted). Adjusted basic and diluted profit per share
(adjusting for amortisation, restructuring and exceptional costs)
from continuing operations in the period was 0.017p (H1 17: loss
0.002p) and was based on the adjusted profit for the period of
GBP0.14m (H1 17: loss of GBP0.01m).
Dividend
No dividend is proposed. The Board considers the Group's
investment plans, financial position and business performance in
determining when to pay a dividend.
Statement of Financial Position
Assets
Non-current assets consisted of goodwill and intangibles of
GBP8.84m (H1 17: GBP7.12m), property, plant and equipment of
GBP0.39m (H1 17: GBP0.28m). The increase in goodwill and
intangibles is a result of the addition of the goodwill and
intangibles arising out of the Tern Television acquisition and the
impairment of the carrying value of goodwill in respect of Reef
Television. Reflecting the poor trading performance of Reef
Television, at the period end a GBP0.5m impairment charge was taken
against the carrying value of the Reef Television goodwill. A
further impairment review of the remaining goodwill will be carried
out at the year-end.
Inventories and trade receivables have increased by GBP1.10m to
GBP3.10 m (H1 17: GBP2.00m), largely as a result of the Tern
acquisition.
The Group had a cash balance of GBP3.69m as at 31 December (H1
17: GBP1.63m), the increase mainly as a result of the significant
equity fundraising carried out during the period. The Group was in
a net cash position at period end of GBP0.23m, compared to a net
debt position of GBP1.67m at the prior year comparative, after
taking into account the long-term debt facility of GBP3.46m,
maturing in December 2020 but not including a total of GBP1.64m
contingent deferred consideration (payable as a mix of cash and
shares) in respect of the Tern Television acquisition.
Total assets of the Group were GBP18.42m (H1 17: GBP12.99m) with
the main movements being an increase in goodwill and intangibles as
a result of the Tern Television acquisition and increased cash
balances as a result of the fundraising activities.
Equity and Liabilities
Total shareholders' equity at the period end was GBP7.27m (H1
17: GBP2.57m), the increase reflecting the impact of the conversion
of the preference shares and the recent fundraising activities,
which have significantly strengthened the balance sheet.
In November 2017, the Company carried out an equity placing to
new and existing shareholders, raising GBP3.5m gross, and a
preference share conversion, converting approximately GBP2m of
preference shares into ordinary shares. Following a debt variation
in the prior year, the repayment date on all the Company's
long-term debt obligations is a bullet repayment on 31 December
2020. The Group had an outstanding balance on long term debt of
GBP3.46m at the period end (H1 17: GBP3.30m), held by two of the
Company's shareholders and with no financial covenants relating to
the debt. Total non-current liabilities total GBP4.35m, including
GBP0.89m deferred contingent consideration (payable as a mix of
cash and shares) in respect of the acquisition of Tern Television.
The other GBP0.75m of deferred consideration in respect of the
acquisition of Tern Television is treated as a current
liability.
Current liabilities consisting of trade, other creditors,
deferred consideration payable and deferred income is broadly
unchanged at GBP6.8m (H1 17: GBP6.1m).
Zinc Media Group plc consolidated income
statement
For the six months ended
31 December 2017
Unaudited Unaudited Audited
--------------------------------- ---------- ---------- ----------
Half
year Half year 12 months
to to to
31 Dec 31 Dec 30 June
2017 2016 2017
Notes GBP'000's GBP'000's GBP'000's
-------------------------------- -------------- ---------- ----------
Continuing operations
Revenue 3 9,763 9,190 19,756
Cost of sales (6,542) (6,364) (13,447)
--------------------------------- ---------- ---------- ----------
Gross Profit 3,221 2,826 6,309
Operating expenses (2,985) (2,751) (5,865)
Adjusted EBITDA 236 75 444
Depreciation & amortisation (275) (248) (517)
Exceptional items 4 182 (210) 41
Operating profit / (loss) 143 (383) (32)
Finance costs (141) (146) (293)
Finance income - - -
--------------------------------- ---------- ---------- ----------
Profit / (loss) before
tax 2 (529) (325)
Taxation 94 98 253
Profit / (loss) for the
period 96 (431) (72)
Discontinued operations
Loss for the period from
discontinued operations - (59) (37)
Profit / (loss) for the
period 96 (490) (109)
--------------------------------- ---------- ---------- ----------
Continuing operations
attributable to:
Equity holders 96 (431) (72)
Discontinued operations
attributable to:
Equity holders - (59) (37)
Retained profit / (loss)
for the period 96 (490) (109)
--------------------------------- ---------- ---------- ----------
Basic earnings per share 5
From continuing operations 0.01p (0.09)p (0.01)p
From discontinued operations -p (0.01)p (0.01)p
Total 0.01p (0.10)p (0.02)p
Diluted earnings per
share 5
From continuing operations 0.01p (0.09)p (0.01)p
From discontinued operations -p (0.01)p (0.01)p
Total 0.01p (0.10)p (0.02)p
Zinc Media Group plc consolidated statement
of comprehensive income
For the six months ended
31 December 2017
Half year Half year 12 months
to to to
31 Dec 31 Dec 30 June
2017 2016 2017
GBP'000's GBP'000's GBP'000's
----------------------------------------------- ---------- ----------
Profit / (loss) for the
period 96 (490) (109)
Total comprehensive income
for the period 96 (490) (109)
------------------------------------------ ---- ---------- ----------
Attributable to:
Equity holders 96 (490) (109)
96 (490) (109)
------------------------------------------ ---- ---------- ----------
Zinc Media Group plc consolidated statement
of financial position
As at 31 December 2017
Unaudited Unaudited Audited
------------------------------- ------ ---------- ---------- -------------
31 Dec 31 Dec 30 June
2017 2016 2017
Notes GBP '000 GBP '000 GBP '000
------------------------------- ------ ---------- ---------- -------------
Assets
Non-current
Goodwill and intangibles 6 8,837 7,120 5,909
Property, plant and
equipment 394 277 231
9,231 7,397 6,140
------------------------------- ------ ---------- ---------- -------------
Current assets
Inventories 596 494 208
Trade receivables 2,504 1,508 1,326
Other receivables 2,398 1,960 1,904
Cash and cash equivalents 3,692 1,626 2,973
9,190 5,588 6,411
------------------------------- ------ ---------- ---------- -------------
Total assets 18,421 12,985 12,551
------------------------------- ------ ---------- ---------- -------------
Equity and liabilities
Shareholders' equity
Called up share capital 7 5,928 5,926 5,926
Share premium account 7 31,162 24,076 25,013
Merger reserve 27 696 27
Share based payment
reserve 47 - 47
Preference shares 934 2,909 2,909
Retained earnings (30,830) (31,039) (30,926)
------------------------------- ------ ---------- ---------- -------------
Total shareholders'
equity 7,268 2,568 2,996
Liabilities
Non-current
Borrowings 3,462 3,295 3,375
Other non-current
liabilities 887 1,000 700
4,349 4,295 4,075
------------------------------- ------ ---------- ---------- -------------
Current liabilities
Trade payables 1,599 1,450 1,205
Other payables 5,041 4,485 4,275
Current tax liabilities 120 34 -
Deferred tax 44 153 -
6,804 6,122 5,480
------------------------------- ------ ---------- ---------- -------------
Total equity and liabilities 18,421 12,985 12,551
------------------------------- ------ ---------- ---------- -------------
Zinc Media Group plc consolidated statement of
cash flows
For the six months ended 31 December 2017
Unaudited Unaudited Audited
Half Half
year year 12 months
to to to
31 Dec 31 Dec 30 June
2017 2016 2017
GBP '000 GBP '000 GBP '000
----------------------------------------- ---------- ---------- ----------
Operating activities
Reconciliation of profit to operating cash
flows
Profit / (loss) for the period 96 (490) (109)
Add back:
Taxation (94) (98) (253)
Depreciation 49 37 96
Amortisation & impairment of
intangibles 726 211 1,421
Finance costs 141 146 293
Share based payment charge - - 32
Gain on revaluation of deferred
contingent consideration (700) - (1,300)
Proceeds on disposal of assets - - (43)
----------------------------------------- ---------- ---------- ----------
218 (194) 137
Increase in work in progress (388) (292) (6)
(Increase) / decrease in trade
and other receivables (786) 342 415
Decrease in trade and other
creditors (1,487) (2,652) (1,759)
----------------------------------------- ---------- ---------- ----------
Cash used in operations (2,443) (2,796) (1,213)
Finance costs paid - - (1)
Tax paid (59) (12) (33)
Net cash flows used in operating
activities (2,502) (2,808) (1,247)
----------------------------------------- ---------- ---------- ----------
Investing activities
Acquisition of subsidiary undertakings,
net of cash and overdrafts
acquired 116 - 5
Payment of deferred consideration - (500) (500)
Purchase of property, plant
and equipment (22) (38) (69)
Investment in associate - 100 100
Net cash flows used in investing
activities 94 (438) (464)
----------------------------------------- ---------- ---------- ----------
Financing activities
Net proceeds on issue of ordinary
share capital 3,122 881 740
Borrowings received - 432 433
Net cash flows from financing
activities 3,122 1,313 1,173
----------------------------------------- ---------- ---------- ----------
Net increase / (decrease) in
cash and cash equivalents 714 (1,933) (538)
Translation differences 5 (12) (26)
Cash and cash equivalents at
beginning of period 2,973 3,571 3,537
Cash and cash equivalents at
end of period 3,692 1,626 2,973
----------------------------------------- ---------- ---------- ----------
Zinc Media Group plc consolidated
statement of changes in equity
For the six months ended 31
December 2017
Share
based
Share Share payment Merger Preference Retained Total
capital premium reserve reserve shares earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 July 2017 5,926 25,013 47 27 2,909 (30,926) 2,996
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Profit for the period - - - - - 96 96
Total comprehensive income - - - - - 96 96
Shares issued 1 4,285 - - - - 4,286
Expenses of issue of shares - (413) - - - - (413)
Shares issued in preference
share conversion 1 1,974 - - (1,975) - -
Accrued dividend on preference
shares converted to ordinary
shares - 303 - - - - 303
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Total transactions with
owners of the Company 2 6,149 - - (1,975) 96 4,272
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Balance at 31 December
2017 5,928 31,162 47 27 934 (30,830) 7,268
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Balance at 1 July 2016 5,925 22,671 - 696 2,909 (30,549) 1,652
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Loss for the period - - - - - (490) (490)
Total comprehensive income - - - - - (490) (490)
Equity share-based payments - 165 - - - - 165
Shares issued 1 1,338 - - - - 1,339
Expenses of issue of shares - (98) - - - - (98)
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Total transactions with
owners of the Company 1 1,405 - - - (490) 916
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Balance at 31 December
2016 5,926 24,076 - 696 2,909 (31,039) 2,568
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Balance at 1 July 2016 5,925 22,671 - 696 2,909 (30,549) 1,652
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Loss for the period - - - - - (109) (109)
Total comprehensive income - - - - - (109) (109)
Equity share-based payments 165 32 - - - 197
Transfer to share premium
account - 937 - (669) - (268) -
Tax credit relating to
share option scheme - - 15 - - 15
Shares issued 1 1,338 - - - - 1,339
Expenses of issue of shares - (98) - - - - (98)
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Total transactions with
owners of the Company 1 2,342 47 (669) - (377) 1,344
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Balance at 30 June 2017 5,926 25,013 47 27 2,909 (30,926) 2,996
-------------------------------- --------- --------- --------- --------- ----------- ---------- --------
Notes to the consolidated financial statements
1) GENERAL INFORMATION
The Company is a public limited company incorporated in the
United Kingdom. The address of its registered office is 7 Exchange
Crescent, Conference Square, Edinburgh, EH3 8AN.
The Company is listed on the London Stock Exchange's AIM
Market.
2) BASIS OF PREPARATION
The interim results for the six months ended 31 December 2017
have been prepared on the basis of the accounting policies expected
to be used in the 2018 Zinc Media Group plc Annual Report and
Accounts and in accordance with the recognition and measurement
principles of International Financial Reporting Standards as
adopted by the European Union ('EU') ('IFRS').
The same accounting policies, presentation and methods of
computation are followed in these interim condensed set of
financial statements as have been applied in the Group's latest
annual audited financial statements.
The interim results, which were approved by the Directors on 14
March 2018, are unaudited. The interim results do not constitute
statutory financial statements within the meaning of section 434 of
the Companies Act 2006.
Comparative figures for the year ended 30 June 2017 have been
extracted from the statutory accounts for the Group for that
period, which carried an unqualified audit report, did not include
a reference to any matters to which the auditor drew attention by
way of emphasis of matter, did not contain a statement under
section 498(2) or (3) of the Companies Act 2006 and have been
delivered to the Registrar of Companies.
3) SEGMENTAL INFORMATION
The operations of the group are managed in three principle
business divisions, TV, Digital and Publishing. These divisions are
the basis upon which the management reports its primary segment
information.
Unaudited Unaudited Audited
6 months 6 months 12 months
to 31 Dec to 31 Dec to 30 June
2017 2016 2017
Revenues by Business GBP'000 GBP'000 GBP'000
Division
---------------------- ----------- ----------- ------------
TV 7,783 6,705 15,167
Digital 908 1,567 2,566
Publishing 1,024 904 1,961
Central and plc 48 14 62
----------------------- ----------- ----------- ------------
Total 9,763 9,190 19,756
----------------------- ----------- ----------- ------------
4) EXCEPTIONAL ITEMS
Exceptional items are presented separately as, due to their
nature or the infrequency of the events giving rise to them, this
allows shareholders to understand better the elements of financial
performance for the period, to facilitate comparison with prior
periods and to assess better the trends of financial
performance.
6 months 6 months 12 months
to 31 to 31 to 30
Dec Dec June
2017 2016 2017
GBP'000's GBP'000's GBP'000's
------------------------------------ ---------- ---------- -----------
Impairment of carrying value
of goodwill in respect of Reef
TV (500) - (1,000)
Change in fair value of contingent
consideration in respect of Reef
TV 700 - 1,300
Reorganisation and
restructuring costs (18) (64) (75)
Other exceptional items - (146) (184)
-------------------------------------- ---------- ---------- -----------
Total 182 (210) 41
-------------------------------------- ---------- ---------- -----------
5) EARNINGS PER SHARE
6 months 6 months 12 months
to to to
Dec 2017 Dec 2016 June 2017
Number
Number Number of
of Shares of Shares Shares
Weighted average number
of shares used in basic
earnings per share calculation 812,948,299 468,567,143 544,171,445
Potentially dilutive effect
of share options 6,732,104 - 11,330,279
Weighted average number
of shares used in diluted
earnings per share calculation 819,680,403 468,567,143 544,171,445
GBP'000 GBP'000 GBP'000
Profit / (loss) for the
period from continuing
operations attributable
to shareholders 96 (431) (72)
Amortisation of intangible
assets post deferred tax
impact 226 211 421
Restructuring costs 18 64 75
Exceptional transactions - 146 184
Change in fair value of
contingent consideration (700) - (1,300)
Impairment of carrying
value of goodwill in respect
of Reef TV 500 - 1,000
Adjusted profit / (loss)
for the period from continuing
operations attributable
to shareholders 140 (10) 308
Loss for the period from
discontinued operations
attributable to shareholders - (59) (37)
Continuing operations
Basic earnings / (loss)
per share 0.01p (0.09)p (0.01)p
Diluted earnings / (loss)
per share 0.01p (0.09)p (0.01)p
Adjusted basic earnings
/ (loss) per share 0.017p (0.002)p 0.06p
Adjusted diluted earnings
/ (loss) per share 0.017p (0.002)p 0.06p
Discontinued operations
Basic loss per share - (0.013)p (0.01)p
Diluted loss per share - (0.013)p (0.01)p
6) GOODWILL AND INTANGIBLES
GBP'000's
--------------------------------------------- ----------
Balance as at 1 July 2017 5,909
----------------------------------------------- ----------
Impairment of carrying value of goodwill
(note 4) (500)
Provisional goodwill arising on acquisition
of Tern Television (note 9) 2,995
Provisional intangible assets recognised
on acquisition of Tern Television (note
9) 659
Amortisation of intangible assets (226)
---------------------------------------------- ----------
Balance as at 31 Dec 2017 8,837
----------------------------------------------- ----------
7) SHARE CAPITAL
31 Dec 31 Dec 30 June
2017 2016 2017
Ordinary shares with a
nominal value of: 0.00025p 0.00025p 0.00025p
Authorised:
Number Unlimited Unlimited Unlimited
Issued and fully paid:
Number 1,359,586,281 619,775,478 619,775,478
Nominal value (GBP'000) 3.4 1.5 1.5
Preference shares with
a nominal value of 0.01p
Authorised, issued and
fully paid:
Number 933,887 2,908,631 2,908,631
Paid up value (GBP'000) 934 2,909 2,909
Share Share
Ordinary shares Number Capital Premium
of shares GBP'000 GBP'000
Details of share issues
Balance as at 1 July 2017 619,775,478 1.5 25,013
Share placing and subscription
for cash 389,603,280 0.97 3,506
Shares issued in lieu of
fees 3,333,333 0.01 30
Consideration paid in shares 93,750,000 0.23 749
Expenses of issue of shares - - (413)
Shares issued in preference
share dividend conversion 33,708,222 0.08 303
Shares issued in preference
share conversion 219,415,968 0.55 1,974
Balance as at 31 December
2017 1,359,586,281 3.4 31,162
-------------------------------- -------------- -------- --------
Preference
Preference shares Number Share Capital
Details of share issues of shares GBP'000
Balance as at 1 July 2017 2,908,631 2,909
Conversion of preference shares
to ordinary shares (1,974,744) (1,975)
Balance as at 31 December 2017 933,887 934
--------------------------------- ------------ --------------
8) NOVEMBER 2017 PLACING, ISSUE OF CONSIDERATION AND FEE SHARES AND PREFERENCE SHARE CONVERSION
The Placing, Issue of Consideration Shares and Fee Shares
In November 2017 the Company raised approximately GBP3.5m
(before expenses) through a placing of 389,603,280 new ordinary
shares at 0.9p per share. The Company also issued 93,750,000 new
ordinary shares at 0.9p per share as part of the consideration for
the acquisition of Tern Television, to the Tern Television selling
shareholders. The Company also issued 3,333,333 new ordinary shares
in lieu of certain adviser fees.
Preference share conversion
In November 2017 the Company converted GBP1.97m of preference
shares and GBP0.30m of accrued dividend on the preference shares
into 253,124,190 new ordinary shares at 0.9p.
9) BUSINESS COMBINATIONS
Acquisition of Tern Television Productions Limited
On 14 November 2017 the Group acquired 100 per cent. of the
entire issued share capital of Tern Television Productions Limited.
The Group paid initial consideration of GBP2.35m cash and GBP0.75m
in ordinary shares for its 100 per cent. holding, with a further
GBP2.35m payable contingent on certain earn out targets being met
between 2018 and 2020. Of the GBP2.35m maximum earnout
consideration potentially payable, the Directors consider that
GBP1.75m is likely, based on the weighted average probability of
the possible payment and therefore the present value of this amount
is recognised in the Company's balance sheet. The balance sheet
acquired was GBP1.74m in net assets. The provisional fair value of
assets and liabilities arising from the acquisition are as
follows:
Provisional
Fair Value
GBP'000
----------------------------- ------------
Intangible assets 659
Property, plant and
equipment 197
Trade and other receivables 894
Cash and cash equivalents 2,436
Trade and other payables (1,756)
Current tax liabilities (576)
Deferred tax (112)
Net assets acquired 1,742
------------------------------- ------------
Goodwill capitalised 2,995
Consideration given 4,737
------------------------------- ------------
Satisfied by:
Cash 2,350
Issue of shares 750
Present value of deferred
contingent consideration 1,637
4,737
----------------------------- ------------
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR VZLFFVXFFBBE
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