CATALYST MEDIA GROUP PLC — Earnings Release 2017

Dec 12, 2017

National Storage Mechanism | Additional information

You don't have Javascript enabled. For full functionality this page requires javascript to be enabled.

RNS Number : 0196Z

Catalyst Media Group PLC

12 December 2017

Catalyst Media Group plc

("CMG" or the "Company")

Final Results for the year ended 30 June 2017

The Board of Catalyst Media Group plc is pleased to announce the final results for the Company for the year ended 30 June 2017. CMG is a 20.54% shareholder of Sports Information Services (Holdings) Ltd ("SIS") and the results for the year to 30 June 2017 incorporate its share of the profits of SIS for its year ended 31 March 2017.

Financial overview

·           CMG profit before taxation £3.40 million (2016: £0.06 million loss)

·           Profit per share 15.43p per share (2016: 0.18p loss per share)

-         Earnings per share before impairment 15.43p per share (2016: 12.17p)

·           Net Asset value per share 120.9p (2016: 98.1p)

·           SIS Revenues for year ended 31 March 2017 £218.3 million (2016: £227.9 million)

·           SIS total operating profit: group and share of joint venture and associates £21.0 million (2016: £20.4 million)

·           SIS profits after tax and exceptional items £17.0 million (2016: £16.6 million)

·           SIS net cash inflow from operating activities £43.4 million (2016: £48.0 million)

·           SIS declared a dividend of £20.0 million in July 2016, £4.1 million received by CMG

·           Following receipt of the SIS dividend, the Company purchased, in aggregate, 3,379,327 ordinary shares in the market at a total cost of £2,514,495

·           Post the period end, SIS declared a dividend of £15.0 million in October 2017, £3.1 million received by CMG

-         The Company had a cash balance of £4.5 million as at 30 November 2017

Enquiries:

Catalyst Media Group:
Michael Rosenberg Non-executive Chairman	+44 (0)7785 727 595
Melvin Lawson Non-executive Director	+44 (0)20 7734 8111
Strand Hanson Limited:	+44 (0)20 7409 3494
James Harris Richard Tulloch

Chairman's statement

I am pleased to present the results for Catalyst Media Group plc ("CMG" or the "Company") for the year ended 30 June 2017, which incorporates our share of profits for Sports Information Services (Holdings) Ltd (SIS) in which CMG has a 20.54% interest.

After taking account of CMG's share in the profits of SIS for its year ended 31 March 2017 of £3.5 million (2016: £3.4 million), CMG recorded a profit before taxation of £3.40 million, (2016: loss of £0.06 million). No impairment charge was made in respect of the 2017 accounts (2016: £3.0 million). Net Assets at the year end were £25.4 million (120.9p per share) (2016: £24.9 million (98.1p per share)).

The main asset of CMG continues to be the 20.54% shareholding in SIS. CMG equity accounts for its share in the profits of SIS. For the year ended 31 March 2017, SIS had revenues of £218.3 million (2016: £227.9 million) of which £202.5 million was derived from Betting Services (2016: £209.3 million) and £15.8 million from SIS LIVE Services (2016: £18.6 million). The total operating profit for SIS was £21.0 million (2016: £20.4 million). Profits after exceptional items and taxation were £17.0 million (2016: £16.6 million). The share attributable to CMG after tax was £3.5 million (2016: £3.4 million). SIS's Net Cash inflow for the period was £43.4 million (2016: £48.0 million) from operating activities. At its year end, SIS had increased its cash position to £74.3 million (2016: £62.2 million). SIS's operating profit margin(1) increased slightly to 9.3% compared to 8.9% for the previous year.

(1) SIS's operating profit margin is the ratio of SIS's operating profit (total operating profit before exceptional items and share of associate and joint venture) to revenues expressed as a percentage.

Review of CMG's investment in SIS

As reported in the Company's trading update announced on 21 July 2017, the profit after tax was at similar levels to prior years. This was despite a reducing Licensed Betting Office UK subscriber base during the year, the impact of which was partially offset by overseas expansion.

In light of this consistent performance, the strong cash position of SIS, the progress it has made in signing new media rights and the continued positive cash flow generation from its operations SIS approved a dividend of £15.0 million in October 2017. CMG received its share of £3.1 million on 23 October 2017 and as at 30 November 2017, CMG had a cash balance of £4.5 million.

SIS Betting - UK Retail

As previously reported various racing media rights acquired from Arena Racing and Northern Racing expire at the end of 2017.

However, SIS has secured a series of rights to ensure a full and complete service including the following:

Ø  5-year UK Horseracing rights from Racecourse Media Group ("RMG") (which includes Ascot, Aintree, York) - commencing April 2018

Ø  5-year Extension to existing Irish Horseracing rights from Horse Racing Ireland ("HRI")

Ø  Long-term agreement with Chelmsford City racecourse ("CCR")

Ø  Various long-term greyhound rights - direct with 8 UK tracks

Ø  Various overseas horseracing and greyhound rights

On the basis of the above rights and service SIS has already secured mid and long term agreements with around 95% of the UK and Irish retail market, including all the major UK bookmaking groups and a large number of the independent market to its service for independents for the next three years despite uncertainty caused by the DCMS Triennial Review. This review is now subject to a further 12 weeks of consultation which may result in legal restrictions on the side of individual bets on fixed odds betting terminals and the possible reduction in the number of retail betting shops. The new agreements are at lower margins overall and will impact results - with operating results expected to decline by approximately 50% as previously outlined from April 2018 with some additional impact on the current financial year. In respect of the current year, SIS is experiencing increased litigation costs and although legal advice continues to indicate a successful outcome is expected for SIS. This will have an impact on budgeted profits for the year ending 31 March 2018.

SIS Betting - International & Online

SIS is already supplying several International and online operators and has been progressing a strategy to increase its distribution in these markets using proprietary streaming and production technology as well as data pricing services.

SIS plans to use its expertise, developed in the UK retail market, delivering short form betting opportunities, with associated data and services, to maximise the value for betting operators in the International and digital arena. There has been significant progress achieved in this area and new product and services are due to go live from early 2018 which will further increase access to these markets securing both customers and distribution technology.

Whilst securing media rights for UK use SIS has also acquired rights for International and online use on all the deals signed this year including Horse Racing Ireland (HRI), Chelmsford City Racecourse (CCR) and greyhounds.

SIS has recently been shortlisted for two main industry awards, firstly for its streaming product SIS STREAM which facilitates IPTV into both online and retail at low latency enabling delivery of content anywhere in the world facilitating bespoke production services by SIS. The second nomination is for SIS Trading Services which offers operators outsourced pricing and derivative products for horse and greyhound racing.

SIS LIVE

SIS LIVE continues to offer specialised broadcast solutions including HD, UHD, satellite uplinks, streaming, satellite internet and teleport together with fibre services and transmits 250 hours of live broadcasting per day and covers over 6,000 sports events per annum. SIS LIVE has transitioned into a mixed satellite and fibre business and now has 125 fibre connections across the UK and Ireland and expects this to increase to 150 by mid-2018 together with two satellite uplink teleports.

SIS LIVE has signed agreements with SKY, Tata and other service providers for a number of sports including cricket, moto GP and rugby league and continues to expand its penetration into the key sports connectivity market.

The trend of news broadcasters to move away from Satellite News Gathering ("SNG") towards using IP technology and 4G mobile technology has continued and this has seen a decrease in demand from SIS LIVE customers for SNG trucks, with the fleet size of 34 expected to reduce over the coming years. Connected with this SIS LIVE have exited its Satellite Hardware division, which has historically provided the satellite technology for the SNG trucks, with a successful sale completed in January 2017.

Another trend being seen by SIS LIVE is the demand for additional services to pure fibre connectivity and the start of a move towards remote production which offers a significant opportunity for the business. SIS LIVE is well placed with its 125 fibred venues and its connections to broadcasters to facilitate this market change and it is expected to be an area of growth in the future.

SIS's management continue to see a prosperous future for SIS LIVE within the SIS Group, though also recognise there may be a strategic benefit for SIS LIVE in alternative ownership and they continue to keep this under review.

SIS Results

The results of SIS for the year ended 31 March 2017 are as follows:

	31 March 2017	31 March 2016
	£'000	£'000
Revenue	218,337	227,930
Operating expenses	(197,345)	(207,534)
Operating profit before exceptional items	20,291	20,396
Exceptional items	701	-
Operating profit Share of operating profit/(loss) of joint venture: -     joint venture	20,992 -	20,396 (36)
Total operating profit Profit / (Loss) on the managed wind down of business+ Profit on disposal of joint venture Profit on disposal of tangible assets	20,992 923 - 25	20,360 (490) 642 317
Net interest receivable / (payable)	534	458
Profit on ordinary activities before tax	22,474	21,287
Tax on profit on ordinary activities	(5,440)	(4,686)
Retained profit transferred to reserves	17,034	16,601

Share of net assets and liabilities of associate
Net assets	161,735	159,128
Net liabilities	(71,449)	(63,858)
Net equity	90,286	95,270

• Profit/(Loss) on the managed wind down of business relates to the closure of SIS's Outside Broadcast Division in 2014.

India

As previously reported the claim in respect of the Indian project continues to be pursued but the outcome remains uncertain. The legal and associated costs relating to this claim have been significantly reduced but are still impacting profits. Further detail is provided in note 2 of the financial statements.

Outlook and distribution policy

SIS have considerable cash reserves and have indicated that further distributions are likely to be made to shareholders. Although CMG has recently received a dividend payment of approximately £3.1 million from SIS, the Board has resolved to defer a decision on the timing of distributions to its shareholders pending clarification of the timing and quantum of any such further distribution. As soon as we are advised of the timing, shareholders of CMG will be informed and a decision will be made on the form of distribution.

As already reported SIS's generation of cash in the future will be at a significantly lower level than in the past few years, reflecting the lower profits that are predicted following the changes in media rights ownership and contractual arrangements, resulting in an expected 50% reduction in SIS's underlying operating results.

AGM

The next Annual General Meeting of the Company will be held on 12 January 2018 at 10.00 a.m. Formal Notice of the meeting is set out at the end of the report and accounts together with the form of proxy.

Michael Rosenberg OBE

Chairman

11 December 2017

Consolidated statement of comprehensive income for the year ended 30 June 2017

					Year ended	Year ended
					30 June	30 June
					2017	2016
					£	£
		Revenue			25,000	25,000
		Cost of sales			-	-
		Gross profit			25,000	25,000
		Administrative expenses			(128,916)	(112,036)
		Operating loss			(103,916)	(87,036)
	Financial income			3,056	7
	Financial costs			(106)	(186)
		Net financial income			2,950	(179)
		Share of profit of equity-accounted associate, net of tax			3,498,784	3,409,845
		Impairment of equity-accounted associate			-	(3,014,622)
		Transitional adjustment relating to equity-accounted associate			-	(368,521)
		Profit / (loss) before taxation			3,397,818	(60,513)
		Taxation			16,783	16,543
		Profit / (loss) for the year			3,414,601	(43,970)
		Share of other comprehensive loss of associate			(414,292)	(26,702)
		Total comprehensive profit / (loss)			3,000,309	(70,672)
		Attributable to equity holders of the Company			3,000,309	(70,672)
		Earnings / (loss) per share:
		Basic			15.43p	(0.18p)
		Diluted			15.43p	(0.18p)
		Before impairment			15.43p	12.17p

Consolidated statement of financial position as at 30 June 2017

		30 June 2017 £			30 June 2016 £
Assets
Non-current assets
Investment in associate			23,976,958	25,000,000
			23,976,958	25,000,000
Current assets
Trade and other receivables			15,080	34,173
Cash and cash equivalents			1,463,462	633
			1,478,542	34,806
Total assets			25,455,500	25,034,806
Equity and liabilities
Capital and reserves attributable to equity holders of the parent
Share capital			2,103,202	2,541,136
Capital redemption reserve			711,117	273,183
Merger reserve			2,402,674	2,402,674
Retained profits			20,203,836	19,718,022
Total equity			25,420,829	24,935,015
Current liabilities
Trade and other payables			31,134	96,423
Corporation tax payable			3,537	3,368
			34,671	99,791
Total equity and liabilities			25,455,500	25,034,806

The financial statements were approved by the Board of Directors and authorised for issue on 11 December 2017.

Michael Rosenberg OBE

Director

Company registration number: 03955206

Consolidated statement of cash flows for the year ended 30 June 2017

		Year ended 30 June 2017 £	Year ended 30 June 2016 £
Cash flow from operating activities
Profit / (loss) before taxation		3,397,818	(60,513)
Adjustments for:
Share of profit from associate		(3,498,784)	(3,409,845)
Impairment of associate		-	3,014,622
Transitional adjustment		-	368,521
Finance income		(3,056)	(7)
Finance expense		106	186
Corporation taxes recovered		16,952	18,449
Net cash flow used in operating activities before changes in working capital		(86,964)	(68,587)
Decrease / (increase) in trade and other receivables		19,093	(3,513)
Increase / (decrease) in trade and other payables		(65,289)	55,943
Net cash flow used in operating activities		(133,160)	(16,157)
Investing activities
Dividend received		4,107,534	-
Interest received		3,056	7
Net cash flow from investing activities		4,110,590	7
Financing activities
Shares purchased into Treasury		(2,514,495)	-
Interest paid		(106)	(186)
Net cash flow used in financing activities		(2,514,601)	(186)
Net decrease in cash and cash equivalents in the year		1,462,829	(16,336)
Cash and cash equivalents at the beginning of the year		633	16,969
Cash and cash equivalents at the end of the year		1,463,462	633

Notes

1.       Basis of preparation

These consolidated financial statements of Catalyst Media Group plc have been prepared in accordance with accepted International Financial Reporting Standards (IFRSs), International Accounting Standards (IAS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations (collectively "IFRSs") as adopted for use in the European Union and as issued by the International Accounting Standards Board and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Catalyst Media Group plc is a publicly limited company registered in England and Wales where it is domiciled for tax purposes.

The financial statements are prepared under the historical cost convention.

These results are audited, however the financial information set out in this announcement does not constitute the Group's statutory accounts for the year ended 30 June 2017, but is derived from the 2017 Report and financial statements. The auditors have issued an unqualified audit report in respect to these financial statements.

2.       Investment in associate

Year Ended 30 June 2017
						Group
						£
Cost
At 1 July 2016						25,000,000
Share of profit - 2017						3,498,784
Share of other comprehensive loss - 2017						(414,292)
Dividend received - 2017						(4,107,534)
Impairment - 2017						-
At 30 June 2017 - CMG share of SIS net assets						23,976,958
Year Ended 30 June 2016
							Group
							£
Cost
At 1 July 2015 - Restated							25,000,000
Transitional adjustment							(368,521)
Share of profit - 2016							3,409,845
Share of other comprehensive loss - 2016							(26,702)
Dividend received - 2016							-
Impairment - 2016							(3,014,622)
At 30 June 2016 - CMG share of SIS net assets							25,000,000

The Group's interest in the associate, SIS, a company incorporated in England and Wales, 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.

A copy of the strategic forecast prepared by SIS was made available to the Directors of CMG showing management forecasts through to 2022/2023 of the income statement, statement of financial position and statements of cash flow. The assumptions made by management were also provided.

It is expected that the net operating profits of SIS would significantly fall to a much lower level due to the change in margins arising from media rights ownership.

After reviewing the forecasts and other factors, the Directors concluded that the carrying value of the investment should continue at £24 million.

Share of profit of associate	2017 SIS Total £'000	2017 CMG share £'000	2016 CMG share £'000
Revenue:
SIS Betting Services	202,524	41,598	42,987
SIS LIVE Services	15,813	3,248	3,830
Total revenue	218,337	44,846	46,817
Operating profit	20,992	4,312	4,182
Net interest receivable / (payable)	534	110	94
Profits / (losses) on business wind down	923	189	(101)
Profit on disposal of joint venture	-	-	132
Profit on disposal of fixed asset	25	5	65
Profit before tax	22,474	4,616	4,372
Taxation	(5,440)	(1,117)	(962)
Share of profit after taxation	17,034	3,499	3,410
Net income from associate	17,034	3,499	3,410
Other comprehensive income:
Actuarial loss	(1,500)	(308)	(308)
Deferred tax	500	103	7
Change in value of hedging instrument	(1,017)	(209)	274
	(2,017)	(414)	(27)
Share of net assets and liabilities of associate
Net assets	161,735	33,221	32,685
Net liabilities	(71,449)	(14,676)	(13,117)
Net equity	90,286	18,545	19,568

As at 30 June 2017, SIS was continuing to deal with tax and legal issues that arose from the 2010 Commonwealth Games (CWG) in Delhi, India. SIS, via a partnership of the name of SIS Live, delivered the host broadcast production and facilities contract for the 2010 CWG. Given continuing scrutiny of the entire CWG project immediately after the closure of the Games, approximately 40% of the contact has still not been paid. A provision of £5.9 million was made in respect of this non-payment. 

SIS Live received a draft assessment in March 2014 from Indian tax authorities in relation to the year ended March 2011. SIS has strongly rejected the draft assessment, and continues to appeal it through the Indian judiciary system. As appeal proceedings continue it is not possible to quantify the potential tax liability that may arise of the subsequent recoverability of that amount through the courts and therefore no further provision has been made in the accounts of SIS.

3.       Annual Report

The Annual Report for the year ended 30 June 2017 will be available today from the Company's website www.cmg-plc.com.

The Annual General Meeting will be held at 6 Stratton Street, London W1J 8LD, at 10.00 a.m. on 12 January 2018.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR FFFFWFFWSEIE