Civilian Content PLC 30 March 2005 CIVILIAN CONTENT PLC PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2004 30 MARCH 2005 Civilian Content plc ("Civilian") whose principal activities are the management of development, financing and production of feature films and the international sale of film rights, announces today its preliminary results for the twelve months ended 31 December 2004. Highlights: • Financials o 2004 Group retained profit of £0.77 million (2003: loss of £1.18 million) o 2004 EBITDA grew to £0.95 million (2003: loss of £0.40 million) o Cash reserves of £2.33 million (2003: £0.37 million) o Gross margin increased to 65% (2003: 48.0%) • Film Finance & Production - The Film Consortium (TFC) o TFC has enjoyed its most profitable and productive year to date o Over £50m of production activity during the year o My Summer of Love success with 2004 BAFTA for Best British Film o Final Lottery Franchise funds invested in two films in first half o SureFire Joint Venture achieved successful fund raising, advising on £25 million of feature film production finance o Six films currently in post production to be sold in 2005 by group subsidiary, The Works • Film Sales - The Works o In 2005 The Works will have available for sale the largest volume of feature film rights it has ever assembled o In my Country and My Summer of Love sold to Sony and Universal divisions respectively for release in 2005 o Sales rights secured for Tickets (which premiered at Berlin) and Tristram Shandy (pre-sold to Newmarket, a leading US distributor) o Significant levels of catalogue income expected to continue o 2005 trading results expected to be significantly second half weighted Crispin Barker, non-executive Chairman of Civilian Content said: "Civilian Content plc has enjoyed the most successful year in its history, and has assembled a significant slate of film rights for sale in 2005. The process of restructuring the business, which began in 2002, is now substantially complete. Having rationalised its core activities, Civilian is now actively seeking the acquisition of complimentary businesses". For further information, please contact: Civilian Content 020 7612 0030 Chris Auty / Norman Humphrey Citigate Dewe Rogerson 020 7638 9571 Seb Hoyle CHAIRMAN'S STATEMENT OVERVIEW Civilian Content plc ("Civilian") has enjoyed the most successful year in its history, whether measured by retained profit, production income, film volume, or budget size. Civilian made a retained profit for the year ending 31 December 2004 of £771,000, which is a substantial improvement on the result for 2003 when the Group recorded a loss of £1,183,000. The full year EBITDA on continuing operations in 2004 was a profit of £948,000, compared with a loss of £405,000 in 2003. Turnover increased for continuing operations, to £3,872,000 from £2,330,000, and the gross margin, which has been steadily improving since the acquisition of The Works, rose to 65% from 49%. At the beginning of the year an Italian film company, Fandango SRL, acquired a major shareholding in the Group from a former Civilian director, and in so doing triggered the repayment of loan notes with a value of £759,000. This transaction, combined with strong net cashflow arising from operating activities, has significantly improved the Group's liquidity. At 31 December 2004, Civilian had cash reserves of £2,330,000. The production services subsidiary, The Film Consortium, has enjoyed its most profitable and productive year. It invested the balance of its Lottery Franchise funds into two films during the first six months and then, after a successful fund-raising by our joint venture partner, SureFire, it advised on the investment of over £25 million of feature film production. These films are in the later stages of post production and will be sold by our subsidiary, The Works, in 2005. The Film Consortium also supervised the investment of £1 million of SureFire development funds during 2004, and this process will continue. In 2005, The Works will have available for sale the largest volume of feature film rights it has ever assembled. The production cost of these rights exceeds £50 million, and the Board is hopeful this volume of quality product will yield a positive result for the Group in 2005. The timing of delivery of this product to The Works, and the incidence of this year's major film festivals, will lead to a trading result significantly weighted towards the second half of the year. The ongoing quality and expanding quantity of Civilian's library of film rights has lead to significant levels of catalogue income being received during 2004. This is a trend we expect to continue. Civilian's management is working hard to generate new managed funds for future investment in feature films. In this regard, we consider pronouncements made by the Chancellor in his recent budget about continuing tax incentives for British Films a positive development. The process of restructuring the business which began in 2002 is now substantially complete. Having rationalised its core activities, Civilian is now actively seeking the acquisition of complimentary businesses. Your Board has decided to propose a change of company name to CIVILIAN Plc and will seek shareholder approval for this change at the next AGM. FINANCIAL REVIEW During the 12 months ended 31 December 2004, Civilian made a retained profit after exceptional items and taxation of £771,000. This compares favourably with a retained loss of £1,183,000 for the 12 months ended 31 December 2003. Administration, selling and distribution expenses fell by £65,000 to £1,802,000 during the year, which represents a 3% fall from £1,867,000 in 2003. The head-count also fell, averaging 18 during 2004 compared with 23 during 2003. As at 31 December 2004, the group had £2,524,000 cash at bank, although £194,000 was held on trust for third parties leaving available net cash of £2,330,000. This compares with available net cash at 31 December 2003 of £375,000. DIVIDEND The Directors do not recommend the payment of a dividend in respect of 2004 (2003:£nil) BOARD CHANGES There were a number of Board changes during 2004: - Domenico Procacci joined the Board as a non Executive Director on 5th February 2004 and James Atherton joined the Board as a non Executive Director on 10th May 2004. Michael Henry joined the Board as a non Executive Director on 10th May 2004, but resigned on 26 October to concentrate on his growing legal practice. Aline Perry resigned from the Board on 24th May 2004. Our Staff have worked tirelessly in 2004 and the Board of Civilian thank them all sincerely for their efforts and help in making 2004 such a successful year. ANNUAL GENERAL MEETING The Annual General Meeting will be held at 10 a.m. on Friday 6th May 2005 at the offices of KBC Peel Hunt Limited, 111 Old Broad Street, London EC2 1PH Crispin Barker 30 March 2005 MANAGING DIRECTOR'S REPORT OVERVIEW 2004 saw a significant upswing in the company's activities, and a successful transition after the expiry of the Film Consortium's Lottery contract. The creation of the Surefire joint venture was followed by a successful fundraising in the summer, which significantly enhanced the Film Consortium's production output and the capture of international rights for sale by The Works. The improvement is reflected in a material increase in turnover at a time of falling costs and head-count. The group's cash position has shown a significant and corresponding improvement. The successful introduction of Fandango SRL as a major trade shareholder, and the conclusion and deployment of the Surefire fundraising have both greatly improved the company's reach and position within the international film business. Strategically, the management is happy to present a significantly positive outcome for 2004, despite continuing turbulent market conditions. PRODUCTION ACTIVITY 2004 represents the single most successful year of the company's activity by film volume and budget output. Over £50 million of production activity was in process during the period, which further establishes Civilian's leading position as a UK-based but internationally focused, production house. Half a dozen new films went into production during the period, including: Tara Road starring Olivia Williams and Andi MacDowell; Guy X starring Jason Biggs and Natasha McElhone; Best Man starring Stuart Townsend, Seth Green and Amy Smart; The Proposition starring Guy Pearce, Emily Watson and Ray Winstone; River Queen, starring Samantha Morton and Kiefer Sutherland. These titles are currently being completed and have now entered their sales cycle. Additionally in the same period, the company completed John Boorman's In My Country starring Juliette Binoche and Samuel L Jackson, and My Summer Of Love, which went on to win the BAFTA for Best British Film of 2004. At the same time, the company is managing the development of some 20 feature film scripts, several of which should proceed into production in 2005. SALES ACTIVITY Civilian's wholly owned sales agency The Works enjoyed an excellent year. Both In My Country and My Summer Of Love were successfully sold to divisions of US film studios (Sony, and Universal respectively), for release by them in 2005. As in previous periods, The Works has successfully secured representation for a number of high profile, third party films, including Ae Fond Kiss, which premiered at the Berlin Film Festival, Changing Destiny (Venice Film Festival), The Consequences Of Love (Cannes Film Festival) and Primo Amore (Berlin Film Festival). Towards the end of the period, The Works also secured sales rights to Tickets (which premiered at the Berlin Film Festival), and Tristram Shandy (which has been pre-sold to Newmarket, a leading US distributor with whom we enjoyed previous success on the US release of Whale Rider). The evergreen title Bugs!, a large screen format film aimed at the children's market, continues to enjoy a successful and extended worldwide release having achieved a cinema gross to date of over $22 million. CURRENT OUTLOOK AND FUTURE PROSPECTS The company is currently focusing its attention in two areas: The further development of new project financing structures (in regard to which the Chancellor's recent budget statement has been broadly positive), and corporate opportunities in the wider media environment, including UK distribution. The company's healthy cash position, enhanced reputation within the trade, and strong creative relationships with third party film financiers and producers give the management grounds for being cautiously optimistic in the coming year. Chris Auty 30 March 2005 Consolidated Profit and Loss Account For the year ended 31 December 2004 Note 2004 2003 £ 000's £ 000's Turnover 1 Continuing operations 3,872 2,330 Discontinued operations - 114 3,872 2,444 Cost of sales Continuing operations (1,342) (1,189) Discontinued operations - (82) (1,342) (1,271) Gross profit Continuing operations 2,530 1,141 Discontinued operations - 32 2,530 1,173 Administrative expenses (1,733) (1,791) Selling and distribution expenses (69) (76) Operating results Continuing operations 728 (611) Discontinued operations - (83) Total operating result 728 (694) Exceptional items - discontinued operations 2 - (562) Net interest 43 73 Profit/(Loss) on ordinary activities before taxation 771 (1,183) Tax on profit on ordinary activities - - Profit/(Loss) on ordinary activities after taxation 771 (1,183) Equity minority interests - - Profit/(Loss) for the financial year 771 (1,183) Dividends - - Retained Profit/(Loss) for the year 771 (1,183) Earnings per share 3 Basic (pence) 1.86 (2.89) Diluted (pence) 1.79 (2.89) Consolidated Balance Sheet As at 31 December 2004 2004 2003 Note £ 000's £ 000's Fixed assets Intangible assets 2,439 2,520 Tangible assets 33 40 2,472 2,560 Current assets Stocks 1 31 18 Debtors 1,334 1,376 Debtors: amounts falling due after one year 5 17 Cash at bank and in hand 5 2,524 608 3,894 2,019 Creditors: amounts falling due within one year (1,881) (809) Net current assets 2,013 1,210 Total assets less current liabilities 4,485 3,770 Creditors: amounts falling due after more than one year (276) (432) Provisions for liabilities and charges - - Shareholders' funds 4,209 3,338 Capital and reserves Share capital 4,188 4,088 Share premium account 6,458 6,458 Profit and loss account (6,275) (7,046) Equity shareholders' funds 4,371 3,500 Minority interest (162) (162) Shareholders' funds 4,209 3,338 Consolidated Cash Flow Statement For the year ended 31 December 2004 Note 2004 2003 £'000's £'000's Net cash inflow/(outflow) from operating activities 3 1,905 (305) Returns on investments and servicing of finance 42 73 Taxation - - Operating cash flow after taxation and finance costs 1,947 (232) Capital expenditure Purchase of tangible fixed assets (31) (6) Acquisitions and disposals Net cash disposed with subsidiary undertakings - (78) Equity dividends paid - - Financing - - Increase/(decrease) in cash in the year 4 1,916 (316) Reconciliation of Movements in Shareholders Funds For the year ended 31 December 2004 Number of Share Share Minority Profit and Total shares capital premium interest loss account £ 000's £ 000's £ 000's £ 000's £ 000's Group At 1 January 2004 40,882,541 4,088 6,458 (162) (7,046) 3,338 Share capital issued - SureFire production fund 1,000,000 100 - - - 100 Retained profit for the year - - - - 771 771 Minority interest in profit for the - - - - - - year At 31 December 2004 41,882,541 4,188 6,458 (162) 6,275 4,209 NOTES 1. Basis of preparation Accounting convention These financial statements have been prepared in accordance with the historical cost convention, using accounting policies that have been consistently applied during the year. The Group's policies on income recognition and stock are set out below: Turnover Turnover comprises sales commissions and rights exploitation income which is reported in the accounting period to which it relates. Production, development and management fee income is recognised when contractually due in so far as it equates to performance. Development Development costs are written off in the period of expenditure except when recoverability can be assessed with reasonable certainty and there is a clearly defined project. Amounts carried forward are shown in stock and work in progress. Stock and work in progress Stock and work in progress, which is stated at the lower of cost and net realisable value, represents acquired rights and costs incurred in respect of incomplete productions. These costs are carried forward only where, in the opinion of the directors, there is a clearly defined project and the recovery of these costs can reasonably be expected. Net realisable value is based on estimated selling prices less any selling costs expected to be incurred. 2. Exceptional Items There were no exceptional items during 2004. The exceptional loss during 2003 arose on disposal of the subsidiary, Isis Productions Limited as follows: - 2003 Loss on disposal of Isis Productions Limited £ 000's Goodwill written off on disposal of Isis Productions Limited (577) Net liabilities of Isis Productions Limited on disposal 15 Exceptional loss arising on the disposal of Isis Productions Limited (562) Earnings per share The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders dividend by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends and interest on the assumed conversion of all dilutive options and other dilutive potential ordinary shares. Reconciliation of the earnings and weighted average number of shares used in the calculations is set out below: 2004 2003 Earnings Weighted Earnings per Earnings Weighted Earnings per average share average share number of number of shares shares £'000's Thousands Pence £'000's Thousands Pence Basic earnings per share - Earnings attributable to ordinary shareholders 771 41,344 1.86 (1,183) 40,883 (2.89) Dilutive effect of options - 1,717 (0.07) - - - Diluted Earnings Per Share 771 43,061 1.79 (1,183) 40,883 (2.89) 3. Reconciliation of operating profit to operating cash flows 2004 2003 £ 000's £ 000's Operating Profit/(Loss) 728 (694) Depreciation 39 50 Amortisation of goodwill 181 181 Increase in stocks (13) (104) Decrease in debtors 54 1,694 Increase/(Decrease) in creditors 916 (1,432) Operating Cash Flow 1,905 (305) 4. Reconciliation of net cash flow to movement in net funds 2004 2003 £ 000's £ 000's Increase/(Decrease) in cash in the year and change in net funds resulting 1,916 (316) from cash flows: Net funds at 1 January 2004 608 924 Net funds at 31 December 2004 2,524 608 Less: Production and development funds held on trust for third parties (194) (233) Available cash at bank and in hand 2,330 375 5. Publication of non-statutory accounts The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The summarised balance sheet at 31 December 2004 and the summarised profit and loss account, summarised cash flow statement and associated notes for the year then ended have been extracted from the group's draft financial statements. Those financial statements have not yet been delivered to the Registrar, nor have the auditors reported on them. The financial information for the year ended 31 December 2003 is an extract of the statutory accounts to that date as delivered to the Registrar of Companies. Those accounts included an audit report which was unqualified and that did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange