Hoodless Brennan Daily Small Cap Newsflash featuring ContentFilm

ContentFilm (CFL, 1.75p, £3.06m) Interims to 30 September 2009 saw revenues down 19% to £6.5m (H109: £8m), due to lower US DVD sales related to the Allumination restructuring last year. Despite an improvement in gross profits to 46% (H109: 43%) predominately from higher margins in DVD sales, higher overheads led the group to move into adjusted pre-tax losses of £0.1m (H109: profit £0.6m). A major TV series being delivered in H2 2010, the recognition of revenues from Collins Avenue’s “Fly Girls”, improving library sales and the recognition of several large digital deals, provides the group with confidence that H2 will be substantially stronger than H1. However, management do not state the order book for H2 and we continue to believe the market will remain challenging. The group is focusing on growing revenues and profitability in all three areas of film, TV and digital. Net debt stood at £20.0m – the company is highly gearing. The group expects to be cash generative in H2 2010 and 2011, which will help reduce net debt levels. We expect the business to be profitable for the full year. There are no forecasts in the market. The share price has fallen 18% since our Sell recommendation on 15/07/09. Border line hold, but given the high levels of debt, we retain our SELL recommendation.