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27 August 2009

Metrodome Group plc

('Metrodome' or 'the Group')

Unaudited interim results for the six months ended 30 June 2009

Metrodome is pleased to announce its results for the six months ended 30 June 2009.

Highlights

• Revenues of £4,545,000 up 30% (H1 2008: £3,494,000)

• Headline operating profit £161,000 up 23% (H1 2008: £131,000)

• Profit before tax £159,000 up 189% (H1 2008: £55,000)

• Secured access to up to £1,960,000 of additional funding

Without the investment constraints which hampered performance in the prior year, Metrodome has been able to release high quality films during 2009, both theatrically and straight to DVD, which has led to significant increases in revenues across all rights.

Business Environment

The various markets within which the Group operates have experienced quite differing fortunes.

The DVD sell-through market has undergone great change with Woolworths and Zavvi disappearing from the retail landscape as well as the major DVD distributor, Entertainment UK ('EUK'), failing with Woolworths towards the end of 2008.

Metrodome's response to these external events has been to develop direct relationships with many of EUK's former retail customers, including the supermarkets. As a result, we are delighted to report that Metrodome continued to outperform the market with DVD sales up 14% year on year and 38% up on the second half of last year.  In contrast, the British Video Association (BVA) report that retail volumes of DVDs in the UK fell year on year by 7.7% in the same period which, together with a similar percentage fall in retail prices, has left the DVD sell-through market 14.4% lower by value.

On the theatrical side, the Film Distributors Association (FDA) reports that UK Cinema admissions in the same period were up 14.5% and again we over-performed the market with our sales being up 296%.

Financial results

Total revenues were £4,545,000, 30% up on the same period last year and significantly higher than  budget.  Approximately 16% of revenue in the first half was due to The Warlords which was released on DVD and Blu-Ray in March, following its theatrical release in the second half of last year, and outperformed all expectations. Excluding the effect of The Warlords, total revenues showed an increase of 9% on the same period last year. As 2008 first half revenues included a similar spike caused by In The Name of the King, the underlying increase was an impressive 34%.

The Group's gross margin percentage has decreased to 29% (H1 2008: 34%). There is considerable price pressure on the high street and online for several reasons including; ex-EUK stock flooding the market with high volumes of low-price product, reduction in consumer spending during the credit crunch and the buying power of the supermarket retailers.

Overheads have increased by 11% during the period, the largest of which is employment costs which have risen by 15% due to the investment in additional staff in preparation for future growth, including the welcome addition of our new non-executive director, Leonard Fertig, to the board in 2009. Considerable effort has been made to identify cost savings in view of the current economic climate and we are pleased to have reduced other overheads by 4%.

Increased revenues, offset by lower gross margin and overhead increases have given Metrodome a headline operating profit of £161,000 (H1 2008: £131,000) before non-recurring items.

Legal and professional fees of a non-recurring nature were £nil in the first half (H1 2008: £88,000). The net result is a 189% increase in profit before tax for the period to £159,000 (H1 2008: £55,000).

Net cash at 30 June 2009 decreased to £605,000 (£1,091,000 as at 31 December 2008 and £1,331,000 as at 30 June 2008) reflecting increased investment in both theatrical and DVD product of £2,888,000 during the first half, compared to £1,644,000 in the first half and £2,013,000 in the second half of last year. This also resulted in an increase in the value of the film distribution library to £3,329,000 (£2,730,000 as at 31 December 2008 and £2,187,000 as at 30 June 2008).

Operating performance

In line with the declared strategy of releasing 10-12 theatrical releases each year, Metrodome released six theatrical releases in the first half: Flame & Citron, Genova, Fifty Dead Men Walking,  Shifty, Mark of an Angel and Anything For Her, which together grossed over £1 million at the Box Office.  The improvement in the size and quality of these films compared to last year is a result of the increased investment during the period with further benefit to be derived in the second half as several of these titles are released on DVD.

Despite the television channels having reduced budgets and generally accepting fewer titles, we achieved television sales in excess of both 2007 and 2008 levels.

Video on Demand ('VOD') revenue has also increased as more and stronger titles have been added to the library. In the month of May, Metrodome achieved the number two position in the library market share on Virgin Media's Filmflex, amongst the studios, which was quite an achievement for an independent film distributor and underlines our commitment to focus on new media as a form of distribution. 

DVD rental has also shown an increase due to the commercial quality of our titles for the rental market and our excellent relationship with key rental retailers.

DVD sales have increased significantly due to Metrodome's strategy of investing heavily in the home entertainment market, with a focus on commercially valuable titles. This is particularly pleasing given the general downturn in the DVD market. We have also benefitted from developing direct relationships with EUK's former retail customers, including the supermarkets. 

Key titles released on DVD in the first half were:

• The Warlords*

• North Face*

• Dragon Hunter

• Goal III

* title released theatrically in 2008

A full breakdown of the Group's Distribution revenue is as follows:

	Six months  ended   30 June 2009	Six months ended  30 June 2008	Variance
	£'000	£'000	%
Cinema Sales	293	74	296%
Television Sales	228	61	274%
Video on Demand	259	178	46%
Other ancillary	33	31	6%
DVD Rental	273	106	158%
DVD Sell Through	3,459	3,044	14%
	4,545	3,494	30%

 

Review of Current Trading

Although theatrical releases provide less than 10% of the Group's revenues, they are vital to the ongoing operation of the business as they allow us to demonstrate our unique marketing skills, attract UK and European grants and significantly enhance the value of titles in other forms of exploitation after the theatrical release.  Our strategy as an independent distributor is not to compete head to head with the major studios, but to focus on specialised films including art-house and foreign language titles, which will also sell on other formats such as DVD and Blu Ray.

For the Home Entertainment and New Media markets, which constitute over 90% of the Group's revenues, we focus on commercially strong titles with popular themes, directors and cast. 

The strategy is to release quality films, both theatrically and on DVD, throughout the year, thereby spreading the revenues, margins and cash flows evenly. 

The release schedules for the second half of 2009 reflect this strategy and are as follows:

Theatrical 

• Bustin' Down the Door (September)

• Three Miles North of Molkom (September)

• Thirst (October)

• First Day of the Rest of Your Life (October)

• Seraphine (November)

DVD Retail Titles:-major releases

• Genova (July) - starring Colin Firth

• Shifty (August) - starring Riz Ahmed and Daniel Mays

• Fifty Dead Men Walking (September) - starring Ben Kingsley and Jim Sturgess

• Management (September) - starring Jennifer Aniston

• American Virgin (October) - starring Rob Schneider

• The Other Man (November) - starring Liam Neeson and Antonio Banderas

We will also continue to expand the range of budget priced films available on our In2Film label.

Funding

In March we raised £960,000 of funding through the issue of new shares, which comprised £610,000 of new capital through the issue of 40,666,667 new ordinary shares at 1.5 pence each, representing 33.7% of the existing share capital, and the conversion of a £350,000 loan from MediaPro through the issue of a further 23,333,333 new ordinary shares, representing 19.3% of the existing share capital. The net cash proceeds, after costs of £11,000, were £599,000. Following the issue of equity, the Company's total issued share capital consists of 184,717,915 ordinary shares of 1 pence each.

In addition, the Company secured exclusive access to up to £1,000,000 via Acme International Investments Limited P&A Fund, a specialised vehicle dedicated to funding expenditure on Prints and Advertising ('P&A'). In the first half of the year, Metrodome used £689,000 of the P&A fund to release its theatrical titles, of which £396,000 had been repaid out of film proceeds as at 30 June 2009.

Outlook

The fundraising in the first half has put Metrodome in a strong position to take advantage of potential merger and acquisition opportunities as they arise. Trading conditions have improved since the turbulent second half of 2008, when Woolworths, Zavvi and EUK lapsed into administration, and, supported by the release schedule of the second half, the board is cautiously optimistic for the second half of 2009.

Looking ahead, there is strong competition from other film distributors in the film market for the acquisition of product for next year. Film producers have also recently cut back production which may limit the number of quality titles available. Having built a reputation for releasing quality independent films that challenge audiences and provoke critics, we believe we are in a good position, both strategically and financially, to acquire strong titles for release in 2010 and beyond.

I would personally like to thank all the staff of Metrodome for their unique contribution to the success of the Group in the first half.

Mark Webster

Chairman

27 August 2009

General Information 

The interim results will be available on the website from 27 August 2009 and will be posted to shareholders soon thereafter.

 

For further information:

Peter Urie, CEO, Metrodome Group plc	020 7534 2060
James Caithie / Antony Legge, Dowgate Capital Advisers Limited	020 7492 4777
Duncan McCormick, Tavistock Communications	020 7920 3150

Metrodome Group plc
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2009
		Six Months ended		Six Months ended		Year  ended
		30 June 2009		30 June 2008		31 December 2008
		(Unaudited)		(Unaudited)		(Audited)
	Notes	£000		£000		£000
Revenue		4,545		3,494		6,587
Cost of sales		(3,223)		(2,321)		(4,648)
Gross profit		1,322		1,173		1,939
Operating expenses		(1,161)		(1,042)		(2,038)
Headline operating profit/(loss)		161		131		(99)
Non recurring items		-		(88)		(466)
Profit/(loss) on ordinary activities before investment income, finance costs and income tax expense		161		43		(565)
Investment income		1		21		38
Finance costs		(3)		(9)		(16)
Profit/(loss) before income tax expense		159		55		(543)
Income tax expense		-		-		-
Profit/(loss) for the period attributable to equity holders of the company		159		55		(543)
Total comprehensive income for the period attributable to equity holders of the company		159		55		(543)
Earnings/(loss) per share
Basic	3	0.1p		0.0p		(0.4p)
Diluted	3	0.1p		0.0p		(0.4p)

Metrodome Group plc
Condensed Consolidated Statement of Financial Position
As at 30 June 2009
		30 June 2009		30 June 2008		31 December 2008
		(Unaudited)		(Unaudited)		(Audited)
	Notes	£000		£000		£000
Non current assets
Property, plant and equipment		25		20		30
Intangible assets		4		2		4
Film distribution library		3,329		2,187		2,730
Trade and other receivables		38		241		116
		3,396		2,450		2,880
Current assets
Inventories		53		174		53
Trade and other receivables		3,338		2,155		1,949
Cash and cash equivalents		605		1,331		1,091
		3,996		3,660		3,093
Total assets		7,392		6,110		5,973
Current liabilities
Trade and other payables		(4,313)		(3,272)		(3,895)
Bank loans and overdrafts		-		(86)		(84)
Other borrowings		(423)		(301)		(282)
		(4,736)		(3,659)		(4,261)
Non current liabilities
Bank loans		-		(240)		(200)
Other borrowings		-		(131)		-
		-		(371)		(200)
Total liabilities		(4,736)		(4,030)		(4,461)
Net assets		2,656		2,080		1,512
Equity
Share capital		1,847		1,207		1,207
Share premium account		2,890		2,581		2,581
Share option reserve		164		122		128
Accumulated losses		(2,245)		(1,830)		(2,404)
Capital and reserves attributable to equity holders of the company		2,656		2,080		1,512

Metrodome Group plc
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2009		Share capital	Share premium	Share option	Accumulated	Total equity
			account	reserve	losses
	Notes	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
		£000	£000	£000	£000	£000
Balance at 1 January 2008		1,207	2,581	87	(1,885)	1,990
Profit for the six month period		-	-	-	55	55
Total comprehensive income for the six month period		-	-	-	55	55
Share option charge for the period		-	-	35	-	35
Balance at 30 June 2008		1,207	2,581	122	(1,830)	2,080
Loss for the six month period		-	-	-	(598)	(598)
Total comprehensive income for the six month period		-	-	-	(598)	(598)
Share options forfeited during the period		-	-	(24)	24	-
Share option charge for the period		-	-	30	-	30
Balance at 31 December 2008		1,207	2,581	128	(2,404)	1,512
Profit for the six month period		-	-	-	159	159
Total comprehensive income for the six month period		-	-	-	159	159
Net proceeds from issue of ordinary share capital		407	192	-	-	599
Conversion of parent company debt for equity		233	117	-	-	350
Share option charge for the period		-	-	36	-	36
Balance at 30 June 2009		1,847	2,890	164	(2,245)	2,656

Metrodome Group plc
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2009
		Six Months ended		Six Months ended		Year  ended
		30 June 2009		30 June 2008		31 December 2008
		(Unaudited)		(Unaudited)		(Audited)
	Notes	£000		£000		£000
Net cash from operating activities	5	1,950		2,071		3,693
Net cash used in investing activities	6	(2,891)		(1,649)		(3,678)
Net cash from financing activities	7	455		42		209
Net (decrease)/increase in cash and cash equivalents		(486)		464		224
Cash and cash equivalents at beginning of period		1,091		867		867
Cash and cash equivalents at end of period		605		1,331		1,091

 

 

Metrodome Group plc
Notes to the Financial Statements
For the six months ended 30 June 2009

 

1. General information

Metrodome Group plc is a company incorporated in the United Kingdom under the Companies Act 1985 and domiciled in the United Kingdom.

2. Accounting policies

Basis of Presentation

The unaudited financial statements have been prepared under the historical cost convention on a going concern basis and in accordance with applicable International Financial Reporting Standards and IFRIC interpretations ('IFRS') as adopted by the EU.

These financial statements are presented in pounds sterling since that is the currency in which the majority of the Group's transactions are denominated.

The financial information in this interim report does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information contained in this interim report has been neither audited nor reviewed by the auditor. Statutory accounts for the year ended 31 December 2008 have been delivered to the Registrar of Companies. The audit report on these statutory accounts was unqualified and did not contain a statement either under section 237(2) or 237(3) of the Companies Act 1985.

The comparative figures for the year ended 31 December 2008 were derived from the statutory accounts for that year.

Basis of new and revised standards

The following standards and interpretations have been applied in these financial statements:-

IFRS 2     Share based Payment - Amendments relating to vesting conditions and cancellations (endorsed)
IFRS 8     Operating Segments (endorsed)
IAS 1       Presentation of Financial Statements - Revised (endorsed)    
IAS 1       Presentation of Financial Statements - Amendments relating to Puttable Financial Instruments and
               obligations arising on liquidation (endorsed)
IAS 27     Consolidated and Separate Financial Statements - Amendments; Cost of an investment in a subsidiary, jointly-
               controlled entity or associate
IAS 32     Financial Instruments Presentation - Amendments relating to Puttable Financial Instruments and obligations
               arising on liquidation (endorsed)
IAS 34     Embedded Derivatives
IFRIC 9    Embedded Derivatives
IFRIC 13  Customer Loyalty Programmes (endorsed)
IFRIC 15  Agreements for the construction of Real Estate Assets
IFRIC 16   Hedges of Net Investment in a Foreign Operation

The directors consider the adoption of these standards and interpretations as appropriate has had no material impact on the financial statements.

Segmental reporting

The Group has applied the requirements of IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires financial information to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.

An operating segment is a component of an entity:

a)  that engages in business activities from which it may earn revenues and incur expenses,

b)  whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions 
     about resources to be allocated to the segment and assess its performance, and

c)  or which discrete financial information is available.

In the opinion of the directors, the chief decision maker is the Board of Metrodome Group plc and there is one segment whose reports are reviewed by the Board in order to allocate resources and assess performance. The Group has one operating segment based on its single business activity of film distribution. The Consolidated Statement  of  Comprehensive Income and the Consolidated Statement of Financial Position contain financial information relevant to this operating segment, therefore no further disclosure is required.

3. Earnings/(loss) per share

The earnings/(loss) per share is based on the consolidated profit/(loss) after taxation and the weighted average number of shares in the period of 163,384,582 (30 June 2008: 120,717,915).

Basic and diluted earnings per share are the same as there are no potential ordinary shares that would decrease/(increase) net earnings/(loss) per share from continuing operations in the year.

4. Dividends

As in prior periods the directors are not recommending payment of a dividend.

5. Reconciliation of profit from operations to net cash from operating activities

	Six Months ended		Six Months ended		Year  ended
	30 June 2009		30 June 2008		31 December 2008
	(Unaudited)		(Unaudited)		(Audited)
	£000		£000		£000
Profit/(loss) before income tax expense	159		55		(543)
Adjustments for:
Investment income	(1)		(21)		(38)
Finance costs	3		9		16
Depreciation of property, plant & equipment	6		6		12
Amortisation of intangible assets	1		-		-
Amortisation of film distribution library	1,944		1,593		2,932
Impairment of film distribution library	345		172		303
Share based payment expense	36		35		65
Gain on disposal of property, plant & equipment	-		-		(2)
Decrease in inventories	-		-		121
(Increase)/decrease in receivables	(1,311)		(164)		167
Increase in payables	768		386		660
Net cash from operating activities	1,950		2,071		3,693

  6. Investing activities

	Six Months ended		Six Months ended		Year  ended
	30 June 2009		30 June 2008		31 December 2008
	(Unaudited)		(Unaudited)		(Audited)
	£000		£000		£000
Purchases of film distribution library	(2,888)		(1,644)		(3,657)
Purchases of property, plant and equipment	(2)		( 3)		(20)
Purchases of intangible assets	(1)		(2)		(4)
Proceeds from disposal of property, plant & equipment	-		-		3
Net cash used in investing activities	(2,891)		(1,649)		(3,678)

7. Financing activities

	Six Months ended		Six Months ended		Year  ended
	30 June 2009		30 June 2008		31 December 2008
	(Unaudited)		(Unaudited)		(Audited)
	£000		£000		£000
Net proceeds from issue of ordinary share capital	599		-		-
Other loans	689		200		550
Bank loan repayments	(284)		(39)		(81)
Other loan repayments	(547)		(131)		(282)
Investment income	1		21		38
Finance costs	(3)		(9)		(16)
Net cash from financing activities	455		42		209

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