CATALYST MEDIA GROUP PLC — Earnings Release 2013

Dec 12, 2013

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RNS Number : 3378V

Catalyst Media Group PLC

12 December 2013

Catalyst Media Group plc

("CMG" or the "Company")

Final results for the year ended 30 June 2013

The Board of Catalyst Media Group is pleased to announce the final results for the Company covering the year ended 30 June 2013. CMG is a 20.54% shareholder of Satellite Information Services (Holdings) Ltd ("SIS") and the results for the year to 30 June 2013 incorporate its share of the profits of SIS for its year ended 31 March 2013.

Highlights

·    Profit before tax and impairment charges	£4.7m (2012 £4.3m)
·    Impairment charge on our interest in SIS following loss of BBC outside broadcasting contract	£8.4m (2012: Nil)
·    (Loss)/profit before taxation after impairment charge	Loss £3.7m (2012: Profit 4.3m)
·    Net assets after impairment charge	£28.6m (2012: £36.1m)
·    Net assets per share after impairment charge	103.6p (2012: 128.4p)
·    Net cash as at 30 June 2013	£0.62m
·    SIS Revenues	£261m (2012: £240m)
·    SIS profit before taxation	£27.8m (2011: £25.3m)

Enquiries:

Catalyst Media Group:
Michael Rosenberg Non-executive Chairman	+44 (0)7785 727 595
Melvin Lawson Non-executive Director	+44 (0) 20 7637 8412
Strand Hanson Limited:	+44 (0) 20 7409 3494
James Harris Richard Tulloch

Chairman's Statement

The Board of CMG report that for the 12 month period ended 30 June 2013 the audited accounts show a profit before tax and impairment charges of £4.7 million (2012 £4.3 million) after including its 20.54% equity share of profits in Satellite Information Services (Holdings) Ltd (SIS) for its year ended 31 March 2013, of £4.9 million (2012: £4.5 million). After taking account of an impairment charge of £8.4 million, CMG recorded a loss of £3.7 million before taxation. The loss arises from the decision by the Board of CMG to make a provision of £8.4 million for the impairment of the value of the 20.54% share in SIS as a result of its review of its investment in SIS following the loss of the outside broadcasting contract with the BBC as detailed below. Net assets after that impairment review as at 30 June 2013 were £28.6 million (2012: £36.1 million) with net assets per share of 103.6p (2012: 128.4p). Net cash at 30 June 2013 was approximately £0.62 million, and as at 9 December 2013 CMG had net cash of £0.58 million.

For the year ended 31 March 2013, SIS generated turnover of £261 million (2012: £240 million) and a profit before taxation of £27.8 million (2012: £25.3 million). Dividends totalling £15million were declared during the year (2012: £12million). Net cash inflow from operating activities was £52.5million (2012: £51.6million).

The principal activities of SIS during the period under review were:

The long established business of providing integrated television and information services delivered via satellite to licensed betting offices in the United Kingdom, Ireland and overseas and the production of television services for other broadcasters of racing (SIS Betting).

The provision of satellite news-gathering and associated transmission services and outside broadcast television production units, including sound, support and communication (together branded as SIS LIVE); and

The services provided by SIS to the betting industry are supported in the main by fixed term contracts both with the retail owners of betting shops and with the racecourses that enable pictures to be delivered to those shops. SIS now holds media rights representing in excess of 50% of all UK horse racing fixtures. This ensures the supply of images and data from the coverage of horseracing fixtures at various racecourses and also has rights covering dog track racing expiring at various dates between now and 2018. The number of betting shops has remained stable and the racing services business is trading in line with budget.

SIS provides more than 45,000 betting opportunities per year to its customers including exclusive racing from 26 UK and 26 Irish tracks and greyhound racing, together with international racing from South Africa, France, Germany and the UAE. Services also include football and the exclusive rights to distribute official English and Scottish FA and FIFA football data. Virtual content includes numbers games, football and racing with up to 40 new virtual events every day.

The uplink division owns and operates the largest uplink fleet in Europe, with over 500 MHz of permanently leased satellite capacity and a comprehensive connectivity infrastructure which includes two large broadcast teleports/MCRs and a national fibre network. A new seven year agreement has recently been signed with ITV and ITN which includes the provision of a highly-specified fleet of 18 HD SNG vehicles, downlinks, IP systems and satellite capacity, to facilitate ITV and ITN's satellite news gathering requirements in the UK.

During 2012 SIS underwent one of the biggest developments in its history with the move out of its head offices in Corsham St, London where it had been based since 1986. The operations have now been successfully moved to the expanded Milton Keynes facility and the new base in MediaCityUK in Salford. Operating exceptional costs relating to the relocation of £3.8million (2012: £2.4million) have been charged to the Profit and Loss account for the year ended 31 March 2013.

The outside broadcast division achieved an exceptional performance in the year, mainly due to a large number of major events occurring in the same year including the London 2012 Olympics, the Euros and the Queen's Jubilee alongside the many recurring events for the major broadcasters.

However, the contract with the BBC, which was entered into in 2008, under which SIS provided certain outside broadcasting services, was put out to tender following the year end and in September 2013 the BBC announced that despite efforts to renew it by SIS, it had awarded these contracts to a number of other service providers due to a failure to reach satisfactory commercial terms with SIS. Accordingly, the present contract is to be terminated at the end of its period in March 2014.

As a result of this decision, the Board of SIS undertook a strategic review of its Outside Broadcasting Division and its future. It concluded that the return on capital employed did not justify continuing this business given the increasing competitive nature of the sector and announced in October 2013 that it intends to close this division. This decision will involve exceptional closure costs that will impact the profits for the year to 31 March 2014 and to a lesser extent the following two years.

The full extent of these costs is still to be determined but in the light of this decision, the Board of CMG has reviewed the valuation of its investment in SIS, which as at 30 June 2012 was £34.6 million. It has concluded that a fair value for this investment is currently £28.0 million. In arriving at this value it has noted that the ongoing contribution to the profits of SIS of the Outside Broadcasting division was relatively small (with the exception of the year ended March 2013 which was unusually active) and the remainder of the core business of SIS continues to trade profitably and in line with budget expectations with strong cash generation.

The results of SIS for the year ended 31 March 2013 are as follows:

	31 March 2013	31 March 2012
	£'000	£'000
Turnover	260,758	239,583
	---------	-----------
Operating expenses	(231,368)	(211,970)
Operating profit	29,390	27,613
Ongoing operations	33,144	30,054
Exceptional items	(3,754)	(2,441)
Share of operating profit/(loss) of joint venture	251	(53)
Profit on disposal of fixed asset	424	49
Net interest payable	(2,345)	(2,281)
Profit on ordinary activities before tax	27,720	25,328
Tax on profit on ordinary activities	(7,273)	(6,723)
Retained profit transferred to reserves	20,447	18,605

Dividends

During the year under review SIS paid dividends to its shareholders totalling £15 million and in turn CMG has distributed approximately £3.9 million of dividends to its shareholders. It is the policy of SIS to continue the distribution of dividends subject always to cash requirements for the business. However, in light of the closure of the outside broadcast division and the costs associated with this process, the timing of any future dividends from SIS is uncertain pending clarification of the related costs of that closure. As a result, the Company does not propose to pay a final dividend.

CMG overheads

The current rate of overheads per annum is approximately £150,000 and is not expected to change in the near future.

AGM

A Notice of the Annual General Meeting of CMG is attached. This will be held on 17 January 2014 at 10.00 a.m. at 6 Stratton Street, London W1J 8LD. It is proposed to renew the special authority to enable the company to repurchase shares by way of a Special Resolution. No shares were purchased during the period under review.

Michael Rosenberg OBE

Chairman

Report and financial statements for the year ended 30 June 2013

Consolidated statement of comprehensive income

				Year ended		Year ended
				30 June		30 June
				2013		2012
			£		£
Revenue			25,000		25,000
Cost of sales			-		-
Gross profit			25,000		25,000
Administrative expenses			(147,698)		(166,682)
Operating loss			(122,698)		(141,682)
Financial income			10,763		3,069
Financial costs			(20)		(27,846)
Net financial costs			10,743		(24,777)
Share of profit of equity-accounted associate, net of tax			4,854,420		4,466,218
Impairment of equity-accounted associate			(8,400,767)		-
(Loss)/profit before taxation			(3,658,302)		4,299,759
Taxation			25,836		41,700
(Loss)/profit for the year			(3,632,466)		4,341,459
Share of other comprehensive income/(loss) of associate			8,832		(46,420)
Total comprehensive (loss)/income for the year			(3,623,634)		4,295,039
Attributable to equity holders of the Company			(3,623,634)		4,295,039
(Loss)/earnings per share:
Basic			(13.07p)		15.43p
Diluted			(13.07p)		15.43p

Consolidated statement of financial position

	30 June 2013 £	30 June 2012 £
Assets
Non-current assets
Intangible assets	-	-
Investment in associate	28,000,000	34,618,166
	28,000,000	34,618,166
Current assets
Trade and other receivables	9,493	14,512
Corporation tax receivable	192	10,927
Cash and cash equivalents	622,763	1,481,309
	632,448	1,506,748
Total assets	28,632,448	36,124,914
Equity and liabilities
Capital and reserves attributable to equity holders of the parent
Share capital	2,764,567	2,814,319
Capital redemption reserve	49,752	-
Merger reserve	2,402,674	2,402,674
Retained profits	23,374,056	30,868,084
Total equity	28,591,049	36,085,077
Current liabilities
Trade and other payables	41,399	39,837
	41,399	39,837
Total equity and liabilities	28,632,448	36,124,914

Consolidated statement of cash flows

	Year ended 30 June 2013 £	Year ended 30 June 2012 £
Cash flow from operating activities
(Loss) / profit before taxation	(3,658,302)	4,299,759
Adjustments for:
Share of profit from associate	(4,854,420)	(4,466,218)
Impairment of associate	8,400,767	-
Finance income	(10,763)	(3,069)
Finance expense	20	27,846
Corporation taxes recovered	36,572	41,659
Net cash flow used in operating activities before changes in working capital	(86,126)	(100,023)
Decrease in trade and other receivables	2,024	2,965
Increase / (decrease) in trade and other payables	1,561	(9,373)
Net cash flow used in operating activities	(82,541)	(106,431)
Investing activities
Dividend received	3,080,651	2,464,357
Interest received	13,758	74
Net cash flow from investing activities	3,094,409	2,464,431
Financing activities
Shares purchased into Treasury	-	(253,737)
Repayment of long-term borrowings	-	(634,635)
Dividends paid	(3,870,394)	-
Interest paid	(20)	(15,901)
Net cash flow used in financing activities	(3,870,414)	(904,273)
Net (decrease) / increase in cash and cash equivalents in the year	(858,546)	1,453,727
Cash and cash equivalents at the beginning of the year	1,481,309	27,582
Cash and cash equivalents at the end of the year	622,763	1,481,309

Notes to the financial statements

1.       Investment in associate

Year Ended 30 June 2013		Share of net  assets	Fair Value of   Intangibles	Total
		Group	Group	Group
		£	£	£
Cost
At 1 July 2012		13,440,125	21,178,041	34,618,166
Share of profit		4,854,420	-	4,854,420
Share of other comprehensive income		8,832	-	8,832
Dividend received		(3,080,651)		(3,080,651)
Impairment		-	(8,400,767)	(8,400,767)
At 30 June 2013		15,222,726	12,777,274	28,000,000

The Group's interest in the associate, Satellite Information Services (Holdings) Limited (SIS), a company incorporated in Great Britain, is held by Alternateport Limited. Alternateport Limited holds an investment of 20.54% in the equity share capital of SIS and is entitled to appoint a director and alternate director to the SIS board. This right has been exercised since acquisition. Alternateport Limited is a wholly owned subsidiary of Catalyst Media Holdings Limited a wholly owned subsidiary of Catalyst Media Group plc.

Following an announcement in October 2013 that SIS would be closing one of its divisions and that exceptional closure costs would arise, the Board of CMG has reviewed the valuation of its investment and concluded that the fair value of the investment is currently £28,000,000 resulting in an impairment of £8,400,767. The recoverable amount of the investment has been calculated at its value in use, with a discount rate of 5% (2012: 5.35%).

Share of profit of associate	2013 SIS Total £'000	2013 CMG share £'000	2012 CMG share £'000
Revenue:
SIS Betting Services	183,261	37,642	34,635
SIS LIVE Services	77,497	15,918	14,575
Total revenue	260,758	53,560	49,210
Operating profit (i)	32,828	6,743	6,306
Net interest payable	(2,345)	(482)	(467)
Profit on disposal of fixed asset	424	87	10
Profit before tax	30,907	6,348	5,849
Taxation	(7,273)	(1,494)	(1,381)
Share of profit after taxation	23,634	4,854	4,468
Net income from associate	23,634	4,854	4,468
Other comprehensive income:
Actuarial gain/(loss)	58	12	(63)
Deferred tax	(15)	(3)	16
	43	9	(47)
Share of net assets and liabilities of associate
Net assets (i)	202,172	41,526	42,426
Net liabilities (i)	(128,058)	(26,303)	(28,986)
Net equity	74,114	15,223	13,440

(i)         The financial results for SIS are taken from its latest accounts to 31 March 2013, adjusted in order to align the accounting policies of SIS (whose accounts are prepared under UK GAAP) and CMG (whose accounts are prepared under International Financial Reporting Standards). Adjustments have been made in respect of the amortisation of goodwill and the recognition of the fair value of derivatives held by SIS as at the balance sheet date. The net cumulative effect of these adjustments is to increase the value of the investment in associate in the Group's financial statements by £2,697,000 (2012: £2,043,000).

Year Ended 30 June 2012		Share of net  assets	Fair Value of   Intangibles	Total
		Group	Group	Group
		£	£	£
Cost
At 1 July 2011		11,484,684	21,178,041	32,662,725
Share of profit		4,466,218	-	4,466,218
Share of other comprehensive income		(46,420)	-	(46,420)
Dividend received		(2,464,357)	-	(2,464,357)
At 30 June 2012		13,440,125	21,178,041	34,618,166

2.       Annual Report

The Annual Report for the year ended 30 June 2013 will be posted to shareholders today and are also available from the Company's website www.cmg-plc.com today.

The Annual General Meeting will be held at 6 Stratton Street, London W1J 8LD, at 10.00 a.m. on 17 January 2014.

This information is provided by RNS

The company news service from the London Stock Exchange

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