DCD Media PLC - Interim Results

Executive Chairman's Statement

This announcement presents the unaudited interim results for the Group for the six months ended 30 June 2019.

The DCD Rights team have continued to acquire high quality content to augment the growing library under license with the increased funding facility which was made available in prior periods. The Board is therefore confident that the underlying business remains strong in 2019 and the catalogue remains commercially attractive to buyers in the global TV rights markets.

The funding partnership with Back Catalogue Distribution independent programming fund has continued its commitment to DCD Rights by driving more programming through the production to licensing cycle. The Back Catalogue Distribution board has also continued to support investment in co-production arrangements which fosters longer-term relationships with independent producers.

The London based DCD Rights team led by our veteran rights CEO Nicky Davies Williams continue to perform well as they seek to acquire the best available content in the market at competitive rates. Engagement with the buying networks has never been stronger, and as reported in previous periods, the shift towards on-demand content aggregation further widens the scope for available buyers on a global scale.

We are pleased to report a number of notable content achievements in the first half of the year.

As in previous years, DCD Media's proprietary formats continue to perform well. The long-running Bridezillas franchise continued to remain appealing to global audiences. September films format and WE Produced Bridezillas season 12 sold to ITV network as well as A&E for Africa after successful ratings from the WE TV US premiere. 

Elsewhere in the business, the team announced the sale of two leading and highly rated Australian drama series The Hunting and My Life is Murder to UK broadcasters Channel 5 and UKTV respectively. The sales team signed pre-sales for three new factual series with Discovery UK which combined with DCD investment against international rights triggered production for a total of 30 hours of production for new series including, The Lady Killers.

Also notable in the period was the acquisition of the rights to two new series of best-selling Australian factual series Aussie Gold seasons 5 and 6 to deliver a further 40 hours of programming over 2020 and 2021.

We are particularly pleased to have renewed the Company's output deal with The Open University to distribute the renowned factual catalogue of 160 hours of diverse and engaging factual programming. The output deal includes new programming such as Hannah Fry's Mysterious World of Maths as well as a broad range of history and science programming such as Empire of the Tsars: Romanov Russia with Lucy Worsley and The Beginning and End of the Universe with Jim Al-Khalili.

Earlier in the spring, MIP TV featured the launch of a new factual slate of programming including Secret Nazi Bases which was bought by multiple networks including SBS Australia, Planete France, A&E Africa, Prima Czech, Emirates Cable, A&E Networks, Eastern Europe, True Visions Thailand, Discovery Spain and Proseiben Germany.

English historian, Bettany Hughes' The Nile:5000 Years of History sold to SBS Australia, Viasat Scandinavia, TV Ontario, Knowledge Network Canada and Acorn TV USA. Also launched was a new series of Tern TV Productions highly popular Art Detective with season 4 selling to Foxtel Australia, Acorn TV USA and Sky Television NZ. In North America the Ovation Channel USA acquired a package of multiple factual titles including new seasons of World's Greatest Songwriters, The Greenhouse Effect, Eat Grow Love and music series Berlin Live.

As we look forward to MIPCOM this autumn, we believe sales revenue is likely to improve against last year but with our low-cost structure, the business is expected to deliver growth on 2018's performance as a result of the efforts of the DCD Rights team to exploit the strong investment in the library in recent periods.

The Board would like to thank its staff for their continued support and wish everyone well for the remainder of 2019.

1.             Profit and Loss Review

Revenues for the six months to 30 June 2019 were £3,548k (2018: £3,369k). Revenues across the business remain steady with a small increase of £179k seen against the same period in 2018.

We continue to benefit from funding support from our existing external finance provider and our major shareholder, Timeweave. The funding support both funders have provided allows us to be competitive in the tender process for new titles and content, while we add to our burgeoning catalogue.

Adjusted profit before tax was £161k (2018: £111k), resulting in an adjusted gain per share for the period of 6p (2018: 5p). The Group's statutory profit after tax was £161k (2018: £80k).

Adjusted profit or loss before tax (PBT) is the measure used by the Group to indicate operating performance and aims to reflect normalised trading before exceptional, restructuring items and non-cash impairment charges, but after net finance costs. The change in PBT is largely down to decreased sales due to timing of DCD Rights income and contract completion.

A reconciliation of the Group's operating profit to Adjusted Profit before Tax and Earnings before Interest Tax Depreciation and Amortisation (EBITDA) is shown below:

2.             Balance Sheet Review

Intangible assets as at 30 June 2019 stood at £1,017k (2018: £1,017k). There has been no movement in the balance since 2017 with carrying values fully justified through future cashflows of the businesses.

Trade and other receivables and trade and other payables at £8,049k (2018: £10,275k) and £8,499k (2018: £10,288k) respectively. Debtors are down 22% on the previous year while creditors are down 17% accordingly.

Cash on hand at the period end stood at £2,254k (FY2018: £2,276k). The majority of the Group's cash balances represent working capital commitment in relation to programme making and cash held in DCD Rights' client accounts and therefore is not all considered to be free cash. 

Bank overdrafts are secured by a fixed charge over the Group's intangible programme rights and a floating charge over the remaining assets of the Group.  The bank overdraft facility of £150k has been extended to the 30 November 2019 and is repayable on demand. The Directors expect an overdraft facility to be available to the Group for the foreseeable future.

The total convertible loan debt at 30 June 2019 stood at £Nil (2018: £77k) including accrued interest. The balance as at 31 December 2018 was £Nil. As mentioned in the 2018 financial statements, released in May 2019, the convertible loan debt was settled in the 2018 year with no balance remaining as at the end of the year.

At the end of 2016, the Group had accrued £0.9m of recharges including VAT for director, management and financial services from Timeweave Ltd ("Timeweave"), its major shareholder. In 2018, the Group was recharged £108k which was repaid in the year. There has been no recharge from Timeweave in the 2019 year. As at 30 June 2019 the balance payable to Timeweave is £299k. The Group aims to repay management charges as they fall due going forward while aiming to repay the remaining outstanding balance as and when this is possible.

During the period to 30 June 2019, the Group was recharged £13k (FY 2018: £17k) for director and managerial services from Ultimate Finance Group Ltd, a company under common ownership.   

The amounts recoverable from HMRC in relation to VAT and social security stood at £36k (2018: £32k).

There is a tax charge of £Nil (2018: £32k) recognised in the period as there are sufficient tax losses in the companies to cover the profit made in the period. No deferred tax asset has been recognised in relation to these losses.

Called up share capital has not changed, being £12.3m at 30 June 2018, 31 December 2018 and 30 June 2019.

No interim dividend is proposed for the period. Adjusted earnings per share are disclosed in note 3 to the interim financial statements. 

3.             Substantial shareholdings

As at 27 September 2019, the following notifications had been made by holders of beneficial interests in 3% or more of the Company's issued ordinary share capital as follows:

4.             Review of operational activities

The Group consists of two key divisions: rights and licensing, and production.

Rights and Licensing

DCD Rights kicked the year off at NATPE, the North and South American TV market, and announced a major deal with Britbox USA who acquired all 27 series of Taggart, the classic STV produced detective drama. The total 110 episodes will be available on the USA service this year.

An Accidental Studio, the documentary feature, premiered at the Curzon Cinema Mayfair attended by Michael Palin and Terry Gilliam followed by its TV Premiere on AMC's UK Network. The DCD Rights distributed film was made by Bill & Ben Productions / Propellor Films for AMC Networks International and DCD Rights.

In March, DCD Rights confirmed the renewal of the output deal with The Open University to distribute their prestigious catalogue of factual programming. The output includes new programming such as Hannah Fry's Mysterious World of Maths as well as a broad range of history and science programming such as Empire of the Tsars: Romanov Russia with Lucy Worsley and The Beginning and End of the Universe with Jim Al-Khalili.

Real Detective: North of the Border won the prestigious Canadian Screen Award for Best Factual Series as well as Best Picture Editing in a Factual Series. The Open University produced The Joy of Winning with Hannah Fry won Best International Film at the Czech Republic's AFO Science Programming awards.

MIP TV in April featured the launch of a new factual slate of programming including Secret Nazi Bases which was bought by multiple networks including SBS Australia, Planete France, A&E Africa, Prima Czech, Emirates Cable, A&E Networks, Eastern Europe, True Visions Thailand, Discovery Spain and Proseiben Germany. Bettany Hughes' The Nile: 5000 Years of History sold to SBS Australia, Viasat Scandinavia, TV Ontario, Knowledge Network Canada and Acorn TV USA. Also launched was a new series of Tern TV Productions' popular Art Detective with new season 4 selling to Foxtel Australia, Acorn TV USA and Sky Television NZ. The Ovation Channel USA acquired a package of multiple factual titles including new seasons of World's Greatest Songwriters, The Greenhouse Effect, Eat Grow Love and music series Berlin Live.

DCD's growing drama catalogue featured key sales in the UK for the new dramas launched in Cannes, namely, The Hunting starring Asher Keddie and Richard Roxburgh sold to Channel 5, and My Life is Murder starring Lucy Lawless sold to UK TV's popular crime drama network, Alibi.

Overall, the consolidation of the marketplace and major channel groups that continued throughout last year has started to stabilize, creating a growth in demand for channel and market tailored programming, but increasingly in a co-production/pre-sale model, rather than full commissions. DCD has increasingly grown closer producer partnerships by utilising our investment funds toward managing co-production and pre-sales in partnership with channels and producers alike, allowing DCD Rights to part underwrite production as well as gain valuable rights for international sales. During the first half of the year major pre-sales were signed for 3 new series using this model, Disasters Engineered, a 10 part series for Discovery UK, Ten Steps to Murder and The Ladykillers, both  10 x 60' for Discovery UK.

Production

DCD Media's production subsidiary September Films (in a co-production with 1/17 Productions) transmitted the fifth series of Penn & Teller: Fool Us in Vegas in H1 2019 for The CW Network in the USA. Furthermore, Rize USA's hugely popular talent show for teenagers Got What It Takes? is due to air in H2 2019 for its fifth series. The Group continues to focus on its key production franchises that includes these titles.

5.             Change in accounting reference date

The Board have considered and approved a change in the accounting reference date. The reason for the change is to manage deal flow given the lack of availability for many contracting parties around Christmas and New Year - the end of the current fiscal year. This change will allow management to focus on obtaining the best possible deals rather than being concerned with the logistics of closing deals during the holiday season which is the case currently. As such the Group plans to move to a 31 March year end with the current period of account running from 1 January 2019 to 31 March 2020, being a 15-month period.

6.             Outlook

The Board of DCD Media is confident that while the business has contracted in the last 18 months, the market back-drop for the Company remains favourable. The expansion of the market has been driven by the digital revolution with new and existing video-on-demand operators forcing traditional players to raise their game. As multi-platform consumption continues to drive global demand for quality original content, DCD Media is well positioned with a fresh catalogue of high-quality programming.

The support from its funding partners in the last few years has enabled DCD to buy with confidence in what is a more competitive acquisitions market, such that the team feels it now has the strongest content offer it has had in the last five years.

We expect revenues for the 12 months to December 2019 to surpass the prior year and to return the Group to profit. This is driven by a good order book and from continued support from external funding providers.

In the short-term, as the team prepares to market key new content offerings in the third-party licensed library at MIPCOM in October 2019, we are confident that we will deliver a positive financial outcome in the current period. Beyond that, it is imperative the DCD Rights team works with additional funders to deliver a scaled product in the marketplace given the abundant opportunities in this expanding market.

David Craven

Executive Chairman

30 September 2019