Works Media Group (The) PLC 30 September 2005 THE WORKS MEDIA GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 30 September 2005 The Works Media Group Plc, whose principal activity is the finance, sale and distribution of feature films, announces today its interim results for the six months ended 30 June 2005. Highlights include: • Change of name and re-branding o Company name changed to The Works Media Group Plc o All group businesses re-branded "The Works" • Film Distribution - The Works UK Distribution o Expansion of activities into domestic theatrical, DVD and television sales o Achieved without the cost of a corporate acquisition o Delivers a move up the value chain to more regular predictable revenues o Experienced and highly commercial team appointed o "Heidi" and Berlin Festival winner "Live and Become" start the ball rolling o Slate currently being assembled for exploitation in 2006 • Film Sales - The Works International o Critically acclaimed slate gathers momentum but trades below expectation o Sales visibility remains unpredictable • Financials o Half year loss £0.10 million after goodwill and depreciation of £0.11 million o Cash reserves of £1.98 million o Half year admin costs fall to £0.77 million Crispin Barker, non-executive Chairman of The Works Media Group Plc said: "I am pleased to report the continuing diversification of the business. We have re-branded the Group and moved successfully at no capital cost into UK distribution. Whilst uncertainty continues to surround the environment for International Sales and Production, these activities will become less important to the Group as we move forward ". For further information, please contact: The Works Media Group Plc 020 7612 0030 Crispin Barker, Chairman Chris Auty, Managing Director Norman Humphrey, Finance director Citigate Dewe Rogerson 020 7638 9571 Seb Hoyle CHAIRMAN'S STATEMENT OVERVIEW Since my last report in March this year, the Group has re-branded itself "The Works" and moved into UK distribution. These are fundamental and positive steps along the road to a more diversified and ultimately less risky media business. The correctness of this policy is amply demonstrated by the continuing uncertainties which surround the Group's old core activities of film finance and international rights sales, where immediate prospects remain gloomy. On 26th August 2005, shareholders voted overwhelmingly to change the name of the Group from Civilian Content Plc, to The Works Media Group Plc. Henceforth, all Group activity will be branded "The Works". Our sales agency, formerly The Works, is now trading as The Works International, and our production services business, formerly The Film Consortium, is now trading as The Works Production. The result for the six months to 30 June 2005 was a loss of £96,000, after allowing for amortisation of goodwill and depreciation of £113,000. Whilst this is below the performance achieved in the comparable period of 2004, it is in line with our expectations; given that the delivery of our 2005 production slate and the major film markets are skewed towards the second half of the year. However, indications from the recent trade market at Toronto suggest the full-year contribution made by The Works International will be materially below forecasts. The US, theoretically the World's largest market for English language films, is still not buying rights in any meaningful quantity. In production, the picture is also uneasy. Continuing uncertainty surrounds the availability of tax relief for UK production investment, and this is impacting the number of films being made. Consultative documents recently issued by the Inland Revenue may lead to clarity later this year, but in the interregnum, it is very difficult indeed to green-light production. Whilst it is too early to say whether these changes to our old core business activities are structural or temporary, clearly at the present time it has ceased to be a buyers market. This is therefore a perfect time to launch a distribution company, to buy and exploit rather than sell rights. On 20th July 2005, The Works UK Distribution was born, and although so far it has taken only its first tentative steps, the management intend it to quickly become a cornerstone activity. The impact of The Works UK Distribution on second half performance is likely to be negative as we acquire product and initiate campaigns. However, we will be fully operational by the end of this year, with four titles being released theatrically in the first quarter of 2006. FUTURE PLANS The creation of The Works UK Distribution has moved the Group further up the value chain, and the Board intends to continue moving the centre of gravity into more regular and predictable revenues streams. We are looking at the acquisition of domestic film catalogues and evaluating opportunities for moving into cinema exhibition. FINANCIAL REVIEW During the six months to 30 June 2004, The Works Media Group made a loss of £96,000 on turnover of £719,000. This compares unfavourably with the profit of £429,000 achieved in the first half of 2004. Administration expenses have fallen once again, from £797,000 during the first half of 2004 to £771,000 during the first half of 2005. The available cash at bank has fallen from £2,330,000 at 31 December 2004 to £1,976,000 million at 30 June 2005. Crispin Barker 30 September 2005 MANAGING DIRECTOR'S STATEMENT OVERVIEW The highlight of the first half of the year has been a significant move into UK distribution. This new company headed by Mick Southworth (ex- Channel 4, Winchester Entertainment and Content Film) was launched in July 2005. Branded "The Works UK Distribution" it has hit the ground running and will release a sizable slate of films in the UK over the next twelve months, including this year's Berlin audience award winner Live and Become; and Grey Friars Bobby the classic children's story originally made by Disney. Our first video release, Heidi, will go into the DVD and video market as a Christmas offering later this autumn. We are pleased to have created this new cornerstone activity without the acquisition of a pre-existing business and therefore at no capital cost. Unfortunately, like most of our competitors, we are finding the international film sales market tough. Our significant and critically acclaimed slate of films, offered to the market most recently in Toronto, has not sold as well as expected and this will have a detrimental effect on the second half results of the Group. Production activity has been poor in the first half of the year following the withdrawal of certain key tax breaks by the government, and the environment remains uncertain whilst consultation on new tax incentives with the industry continues until October 2005. This is having, and will continue to have, a detrimental impact on "The Works Production" during 2005. INTERNATIONAL SALES & PRODUCTION ACTIVITY The early part of the year saw the successful launch of several titles, including: The Sun, Tickets, Love & Hate, and The Mighty Celt at the Berlin Film Festival. Following on from the Berlin activity, six new titles were screened as market premieres during the Cannes Film Festival, including: The Best Man, The Proposition, Tara Road, Guy X and Wah Wah. The late spring saw hectic activity around the completion of the 2004-05 production slate with several films (Vincent Ward's River Queen, John Hillcoat's The Proposition, Gilles McKinnon's Tara Road, Stefan Schwartz's The Best Man, and Michael Winterbottom's Cock & Bull Story) all being delivered at almost the same time. Although completed during the period, Cock & Bull Story, starring Steve Coogan, was premiered at the Toronto Film Festival to great acclaim in September and sales prospects are promising. The film opens across the US later this autumn. CURRENT OUTLOOK & FUTURE PROSPECTS We are reasonably optimistic about the Group's prospects for 2006 which we expect to be driven by the material growth of The Works UK Distribution. Whilst this may be offset by ongoing difficult trading conditions in both production and international sales, we are actively seeking new business opportunities and continue to maintain tight controls on costs and overheads. Chris Auty 30 September 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 30 JUNE 2005 6 Months Ended 6 Months Ended 12 Months 30 June 2005 30 June 2004 Ended Unaudited Unaudited 31 Dec 2004 Audited Notes £000 £000 £000 Turnover: 3 Continuing operations 719 1,352 3,872 Cost of sales (36) (114) (1,342) Gross profit 683 1,238 2,530 Administrative expenses (771) (797) (1,733) Selling and distribution expenses (34) (32) (69) Operating (loss)/profit Continuing operations (122) 409 728 Net interest 26 20 43 (Loss)/profit on ordinary activities (96) 429 771 before taxation Taxation - - - Equity minority interests - - - Retained (loss)/profit (96) 429 771 Earnings per share Basic (pence) 4 (0.23) 1.05 1.86 CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2005 6 Months Ended 6 Months Ended 12 Months 30 June 2005 30 June 2004 Ended Unaudited Unaudited 31 Dec 2004 Audited Notes £000 £000 £000 Fixed assets Goodwill 2,367 2,542 2,439 Tangible assets 28 15 33 2,395 2,557 2,472 Current assets Stocks 31 62 31 Debtors 1,083 866 1,334 Debtors: amounts falling due after one year - 11 5 Cash at bank and in hand 6 2,268 2,248 2,524 3,382 3,187 3,894 Creditors: amounts falling due within one (1,300) (1,517) (1,881) year Net current assets 2,082 1,670 2,013 Total assets less current liabilities 4,477 4,227 4,485 Creditors: amounts falling due after more (263) (360) (276) than one year Provision for liabilities & charges - - - Shareholders' funds 4,214 3,867 4,209 Capital and reserves Share capital 4,289 4,188 4,188 Share premium account 6,458 6,458 6,458 Profit and loss account (6,371) (6,617) (6,275) 4,376 4,029 4,371 Minority interest (162) (162) (162) Shareholders' funds 4,214 3,867 4,209 The accompanying accounting policies and notes form an integral part of these financial statements. CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2005 6 Months Ended 6 Months Ended 12 Months 30 June 2005 30 June 2004 Ended Unaudited Unaudited 31 Dec 2004 Audited Notes £000 £000 £000 Net cash (outflow)/inflow from operating 5 (346) 1,621 1,905 activities Return on investments and servicing of 26 20 42 finance Taxation - - - Operating cash flow after taxation and (320) 1,641 1,947 finance costs Capital expenditure Purchase of tangible fixed assets (4) (1) (31) Acquisitions and disposals - - - Equity dividends paid - - - Financing Exercise of share options 68 - - (Decrease)/increase in cash during the 6 (256) 1,640 1,916 period NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 1. Basis of Preparation The interim figures for the six-month period to 30 June 2005 are unaudited. The comparative figures for the 12 month period ended on 31 December 2004 are extracts from the published accounts for that year and do not constitute full statutory accounts. A copy of the full accounts for that period, on which the auditors have issued an unqualified report, has been delivered to the Registrar of Companies. 2. Accounting Policies The financial statements have been prepared in accordance with applicable United Kingdom accounting standards and under the historical cost convention. The principal accounting policies of the Group have remained unchanged from the previous year. 3. Turnover Turnover of the Group for the period has been derived from its principal activity, the management of development, financing, and production of feature films and the international sale of film rights. 4. Earnings per share The calculation of basic earnings per ordinary share is based on earnings of £ (96,000). The weighted average number of ordinary shares in issue during the six month period ended 30 June 2005 was 42,661,112 ordinary shares for basic earnings per ordinary share. Diluted earnings per share are not materially different from basic earnings per share. 5. Net cash inflow from operating activities 6 Months Ended 6 Months Ended 12 Months 30 June 2005 30 June 2004 Ended Unaudited Unaudited 31 Dec 2004 Audited £000 £000 £000 Operating (loss)/profit (122) 409 728 Depreciation 8 27 39 Loss on disposal of fixed assets - - - Amortisation of goodwill 105 78 181 (Increase)/Decrease in stocks 0 (44) (13) Decrease/(Increase) in debtors 257 517 54 (Decrease)/Increase in creditors (594) 634 916 Operating cash flow (346) 1,621 1,905 6. Reconciliation of net cashflow to movement in net fund 6 Months Ended 6 Months Ended 12 Months 30 June 2005 30 June 2004 Ended Unaudited Unaudited 31 Dec 2004 Audited £000 £000 £000 (Decrease)/Increase in cash in the period (256) 1,640 1,916 and change in net funds resulting from cash flows. Net funds at 1 January 2005 2,524 608 608 Net funds at 30 June 2005 2,268 2,248 2,524 Less: Production and Development funds (292) (647) (194) held on trust for third parties. Available cash at bank and in hand 1,976 1,601 2,330 7. Publication of Non-Statutory Accounts The financial information set out in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The figures for the year ended 31 December 2004 have been extracted from the statutory financial statements that have been filed with the Registrar of Companies. The auditors' report on those financial statements was unqualified and did not contain a statement under Section 237(2) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange