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 September 2020.

DCD Rights has acquired quality content to augment the growing library under license. The Board is confident that the underlying business remains strong and the catalogue remains commercially attractive to buyers in the global TV rights markets.

Funding, as ever, remains a challenge although 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. In the period we finalised a funding facility with our principal bankers, Coutts & Co ("Coutts"), that replaced our existing overdraft facility with them. We look forward to continuing to work with Coutts going forward.

We are pleased to report a number of notable content achievements in the period:

·      Secret Nazi Bases - produced by Go Button Media and distributed internationally by DCD Rights won an award at the 53^rd WorldFest-Houston International Film Festival. 'Villa Winter', the third episode of the series, was the recipient of a Silver Remi Award for Best Historical Program.

·      The BBC announced that The Secrets She Keeps would premiere on BBC One primetime over the summer, a tremendous slot for an Australian produced drama. Back in Australia, the series premiered on Network 10, with audience ratings increasing week on week.

·      SWR Media's ten-part factual series, Deadly Engineering distributed internationally by DCD Rights under the title Disasters Engineered, received a Daytime Emmy nomination for Outstanding Educational or Informational Series.

·      Another Go Button Media series, A World Without NASA, was nominated as a semi-finalist at the Vienna Science Film Festival. The two-part series, distributed internationally by DCD Rights, explores the everyday technologies that we now take for granted but which were only made possible thanks to NASA's ground-breaking work in the race to the stars.

Much of the key sales activity was anticipated, in particular we are delighted that our current landmark drama productions are being well-received in the marketplace. It is also worth noting that DCD Rights announced a licensing and co-production agreement for a second season of My Life is Murder featuring Laura Carmichael filming in New Zealand early next year. We anticipate pre-sales to be strong as a consequence of this second season in production.

Strong trading was also driven by some specific high-level sales such as a major licensing deal for The Secrets She Keeps. This drama was scheduled in primetime on BBC One in July and as such is now the most high-profile production in the DCD Rights catalogue.

The DCD rights team performed particularly well through the first wave of COVID-19 and again through the summer of 2020, by successfully operating remotely and managing their stakeholder relationships with continuous conference calls and video meetings. This, together with some insightful acquisition work undertaken in the previous year, has set DCD Rights on a strong course for the remainder of FY21.

We believe DCD Rights is now in a growth phase and continuing to take market-share from other small independent distributors who have not benefitted from long-term development arrangements with emerging production companies.

As in previous periods, we are delighted to report a new series of Penn & Teller: Fool Us in Vegas, season 6 was transmitted over the summer of 2020 and the series order was extended for a further 13 episodes for delivery at the end of the year and subsequent transmission. DCD Rights is also now the distribution partner for the back catalogue of Penn & Teller: Fool Us in Vegas. The series is a result of a successful partnership with US based 1/17 Productions and we are actively working with the team there to explore other format opportunities.

The Board is confident that the Company will deliver a strong performance in the second half of FY 2021 and would like to thank its staff for their continued support through a very challenging year and wish everyone associated with the Company well for the forthcoming year.

1.             Profit and Loss Review

Revenues for the six-months to 30 September 2020 were £5,790k (2019: £3,548k). Revenues have increased in the six months to September 2020 in comparison to the six months to June 2019 as a result of a significant deal concluded for The Secrets She Keeps.

In the period we have secured a new revolving funding line with our principal bankers Coutts. We look forward to continuing to work with Coutts.

Adjusted profit before tax was £240k (2019: £161k), resulting in an adjusted gain per share for the period of 8p (2019: 6p). The Group's statutory profit after tax was £215k (2019: £161k).

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 increased sales in the period.

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:

* 2019 comparative numbers updated to incorporate implementation of IFRS 16 in the period to 31 March 2020. More detail on this can be found in the annual report released in September 2020.

2.             Balance Sheet Review

Intangible assets at 30 September 2020 remained unchanged at £1,017k (June 2019: £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 £9,309k (2019: £8,049k) and £10,407k (2019: £8,499k) respectively. Both are mainly up as a result of increased sales activity in the period.

Cash on hand at the period end stood at £2,762k (15 months to 31 March 2020: £2,735k). 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. 

At the end of September there was no bank overdraft facility in place as we were in the process of completing a new revolving credit facility of £500k that completed in November. The facility is secured by fixed and floating charges over the Group's assets. 

There was no recharge from Timeweave Ltd ("Timeweave"), its major shareholder, in the 2019 year or six months to September 2020 for director, management and financial services. As at 30 June 2019 there was a balance payable to Timeweave of £299k in relation to previous management charges that were unpaid. As at September 2020 the balance was £Nil.

During the period to 30 September 2020, the Group was recharged £13k (15 months to March 2020: £31k) 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 £119k (2019: £36k). The Group has taken advantage of payment holidays as a result of the COVID-19 outbreak with regards to PAYE and NIC as they assessed the impact it had made on the Company's trading. At 30 September 2020, amounts due to HMRC under COVID-19 arrangements were £146k and are repayable by the end of December 2020 under the repayment plan agreed with HMRC.

Called up share capital has not changed, being £12.3m at 30 September 2020, 31 March 2020 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 23 December 2020, 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 a rights and licencing division that generates a significant majority of the revenue of the business and also production division. However, the latter no longer actively seeks new productions, instead focussing on key franchises that continue to be a success for the Group.

Rights and Licensing

DCD Rights quickly adapted to COVID-19 conditions of working, aided by a strong technical team, and good communication through regular video conference meetings to follow our normal management structures.

As the COVID-19 lockdown was implemented the sales team were due to depart for Cannes in order to attend the MIP TV market festival, this is one of three key festivals in the year. Buyers and sellers alike co-operated to move all meetings online, to follow what was an already fully booked schedule for the sales team. Decision making was slowed by additional layers of approvals and budget re-appraisals due to the impact of COVID-19 on advertising revenues, however, DCD Rights again adapted to turn the team's attention toward the burgeoning Video on Demand (VoD) and Subscription Video On Demand (SVoD) channels, as well as our traditional broadcast and cable partners. The catalogue benefited from an increase in acquisition of new series in 2019, delivered in early 2020, and we were able to offer a full catalogue with 5 new factual series launched in the MIP TV Latest Releases brochure. 

Curiosity Stream, a growing SVoD channel, acquired 62 hours of factual programming across the range of our catalogue, with particular emphasis on the Open University produced titles. In May we announced a further 120 hours of factual and factual entertainment programming sales to a broad stretch of broadcast and cable networks around the world.

Best sellers from the market included further deals for Aussie Gold Hunters, and new series The Bone Detectives, sold to UR Sweden, Foxtel Australia, as well as TVO in Canada.  History series were in demand and Nazi War Machines Uncovered sold to Historie TV in France, Viasat History, for Central and Eastern Europe, and Scandinavia, as well as Foxtel in Australia and Prima in the Czech Republic.

During the summer, STV Productions produced and delivered a four-part series on the Royal Family for Channel 5, The Palace and the Press, which DCD Rights acquired and started to make sales on immediately whilst pre-planning a full October release and marketing.

In drama, The Secrets She Keeps starring Laura Carmichael, quickly became an international hit and was scheduled on BBC One Primetime in the UK as well as a having a successful launch in America in July on Sundance Now. DCD Rights announced further sales in Germany, Denmark and Norway, alongside those already announced in France, New Zealand, Russia, Poland, Israel and the Baltic States.

DCD Rights was instrumental in working with producers to finance new series during the period, as the financial impact of the dearth in advertising started to bite into commissioning budgets. Significant successes were a partnership with SWR Media whereby DCD combined pre-sales with investment to trigger production of a second season of the ten-part factual entertainment series Disasters Engineered. The series was produced by SWR, Intermission Films and DCD Rights in association with Dash Pictures for Science Network. The series was delivered from August onward and produced around the world using remote filming by internationally located cameramen and women for original interviews and local footage combined with archive. A tremendous achievement during lock down and tribute to the production team who were nominated for a Daytime Emmy Award for season one during the period.  

This trend continued with an extension of our partnership with Australian Production company, Cordell Jigsaw, whereby DCD raised 57% of an A$9.5m budget to produce a second season of the ten-part drama, My Life is Murder, starring Lucy Lawless. DCD achieved this through a combination of investment and international pre-sales/co-production, with the remainder of the budget funded by broadcasters in Australia (Channel 10), New Zealand (TVNZ) and local offset grants. The deal delivered significant value to DCD Rights, and the series will shoot in January in New Zealand for delivery in May 2021 onwards. 

Overall, the team have enjoyed a period where re-invention and ingenuity have been key. They have risen to the challenges with determination and worked hard with their trusted partners to maintain a steady flow of programming supply to the market.

Production

DCD Media's production subsidiary September Films (in a co-production with 1/17 Productions) transmitted the sixth series of Penn & Teller: Fool Us in Vegas over the summer of 2020 for The CW Network in the USA. A further 13 part series is due for delivery at the end of 2020 transmission in early 2021.

6.             Outlook

The period has been as unusual for DCD Media as it has for almost every other facet of business life. A global pandemic led to an economic recession impacting the media marketplace. Lockdown inevitably led viewers to migrate to home entertainment and on-demand streaming. While this may have seemed a perfect opportunity for DCD Media to upsell more content for higher premiums, the business environment has been and remains challenging because there is no new normality. It is difficult in this climate to provide a meaningful outlook given the macro economic pressures and uncertainties.

What we do know is that the Board is confident that while the business will require third-party funding over the coming months, the strength of the current catalogue and buyer engagement suggests the outturn for the year remains favourable.

We expect revenues for the year to 31 March 2021 to surpass the like-for-like performance of the prior year and to deliver a profit. In the short-term, the team is confident that we will deliver a positive financial outcome in this current period, but it is imperative that the DCD Rights team partners with additional funders to provide opportunities in this expanding market.

We are immensely proud that our team have stepped up to deliver a strong performance and set the business on a course for growth amid the unprecedented economic crisis in the fall out of the COVID-19 pandemic.

David Craven

Executive Chairman

23 December 2020