REG - Catalyst Media Group - Final Results <Origin Href="QuoteRef">CMX.L</Origin>

Catalyst MediaAnnouncement

30/11/2015 07:11

RNS Number : 2868H
Catalyst Media Group PLC
30 November 2015
Catalyst Media Group plc
("CMG" or the "Company")
Final Results for the year ended 30th June 2015
The Board of Catalyst Media Group is pleased to announce the final results for the Company for the year ended 30 June 2015. CMG is a 20.54% shareholder of Satellite Information Services (Holdings) Ltd ("SIS") and the results for the year to 30 June 2015 incorporate its share of the profits of SIS for its year ended 31 March 2015.
Financial overview
 CMG profit before taxation 1.4 million (2014: 3.0 million loss)
 Earnings per share 5.62p per share (2014: 10.83p loss per share)
 Net Asset value per share 98.4p (2014: 92.3p)
 SIS Revenues for year ended 31 March 2015 229.0 million (2014: 253.8 million)
 SIS total operating profit: group and share of joint venture and associates 25.9 million (2014: 24.2 million)
 SIS profits after tax and exceptionals 21.4 million (2014: 6.9 million)
 SIS net cash inflow from operating activities 37.8 million (2014: 50.2 million)
Chairman's comment
"The recent announcement of an agreement with Racecourse Media Group ("RMG") secures the future continuation of services to the retail betting industry well beyond 2018 and removes previous uncertainties concerning the future beyond that date. Current trading is in line with management expectations but after 2018 the financial model for this part of the business will significantly change. Meanwhile SIS continues to generate significant cash flow."
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) for the year ended 30 June 2015, which incorporates our share of profits for Satellite 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 2015 of 4.4 million (2014: 1.3 million), CMG recorded a profit before taxation of 1.4 million, following an impairment charge of 2.8 million (2014: loss of 3.0 million, following a 4.2 million impairment charge). Net Assets at the year end were 25.0 million (98.4p per share) (2014: 25.5 million (92.3p per share)).
The main asset of CMG continues to be the 20.54% share in SIS. CMG equity accounts for its share in the profits of SIS. For the year ended 31 March 2015, SIS had revenues of 229.0 million (2014: 253.8 million) of which 207.3 million were derived from Betting Services (2014: 198.2 million) and 21.7 million from SIS LIVE Services (2014: 55.6 million). The total operating profit for SIS was 25.9 million (2014: 24.2 million). Profits after exceptionals and taxation were 21.4 million (2014: 6.9 million). The share attributable to CMG after tax was 4.4 million (2014: 1.3 million). SIS's Net Cash inflow for the period was 37.8 million (2014: 50.2 million) from operating activities. SIS's operating profit margin(1) increased slightly to 11.1% compared to 10.3% (restated) 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
SIS's management expects revenues for its financial year to 31 March 2016 to be of a similar magnitude to 2015 but with operating profit being lower due to three main factors; costs associated with the restructure of the betting business to a more efficient model, the diversification into the digital sector which is a drain on profits at this stage of the development cycle and a reduced contribution from joint ventures following the sale of SIS's interest in Dock 10 in August 2015. The current media rights deals have largely included a partial advance payment element resulting in a robust cash generative business through to March 2018 and the commencement of the new rights contract announced in September 2015 between SIS and Racecourse Media Group (RMG).
The board of CMG (Board) has reviewed the value of its interest in SIS in the light of the comments from SIS and has also discussed the various scenarios that may impact the business of SIS over the next few years, including in particular the new arrangements with RMG. With the positive cash flow predicted over the next three years from existing activities and taking account, inter alia, of the present net asset value of SIS, the Board has concluded to maintain the value of its investment at 25m. Accordingly, as detailed in note 1 to the financial statements, following CMG's share of SIS's profits in 2015, this has resulted in an impairment of its investment in SIS of 2.8 million.
SIS Betting
The services to the betting industry are supported in the main by fixed term media contracts which include horse racing and dog track racing. A large proportion of the media portfolio expires between 2017 and 2020. In September 2015 SIS and RMG announced a new five year deal for the provision of pictures and data from all of RMG's fixtures, which accounts for a significant proportion of all racing in the UK, to bookmakers to commence in April 2018 and run till 2023.
This agreement will ensure that SIS will continue to be an important provider of UK horseracing media and data to the retail betting industry well beyond 2018, when the majority of the present rights are due to expire. Under the agreement, RMG will maintain responsibility for collecting pictures and data from RMG's production facility in Ealing, West London and will make it available to major bookmakers for inclusion in their in house channels, the majority of which are produced by SIS. In addition the pictures and data will be included in an SIS produced channel for bookmakers who currently rely on the SIS FACTS channel.
While this arrangement ensures continuity for the business for the foreseeable future it will significantly change the financial model for this division of the business. The board of SIS expects the business to continue to generate significant profits and cash up to 2018 but this is dependent, inter alia, on renewal of existing customer contracts in a time of significant uncertainty in the retail betting market. After 2018, the contribution from racing revenues can be expected to fall substantially from current levels. Other sources of revenues may arise but are not capable of being predicted at this stage.
SIS Management is pleased that it has reached a media rights agreement with RMG and confirms that all conditions necessary to make the contract binding on all parties have now been satisfied. UK horseracing is a very important part of SIS's product offering and this agreement clearly signals to both customers and other rights holders, that SIS will maintain its position in the supply chain of media and data from sporting events for use by bookmakers for the foreseeable future. SIS management remain focussed on developing more efficient commercial models, such as those implemented with RMG, that will be attractive to both rights holders and customers. While such arrangements are likely to generate less profit, they expect the low risk, open and collaborative nature of the arrangements to be very effective in aiding SIS to renew existing arrangements, sustaining its position in retail and also assisting SIS to succeed in the growing digital market.
The retail betting market in SIS's core market of UK and Ireland remains under commercial, regulatory and social pressure with the prospect of market consolidation and shop closures remaining likely. This represents a significant risk to future financial performance because SIS's cost base is largely fixed and the income stream variable according to the number of shops buying SIS's products. Although new commercial arrangements will gradually address this as current rights expire, SIS's management is also undertaking ambitious internal changes to drive cost out of the business and to increase efficiency. These measures include the outsourcing of non-core activities, such as field engineering work, and the automation of business processes across the business. The complete programme of business improvements is scheduled to take approximately two years to complete.
Greyhound Racing
SIS's management has recently renewed its rights agreement for two of the premier greyhound tracks (Hove and Romford), which is a significant step towards retaining a strong greyhound product for SIS customers for the foreseeable future.
SIS LIVE
SIS's management has recently achieved the internal separation of its subsidiary SIS LIVE, which focusses on critical connectivity solutions for the broadcasting industry. SIS LIVE provided connectivity for all matches in the 2015 Rugby World Cup, using a combination of fibre and satellite connectivity solutions. The successful completion of this contract for ITV clearly demonstrates SIS LIVE's capabilities and is expected to lead to further successes in this market. SIS LIVE is also undergoing a programme of efficiency improvements cost reductions while continuing to pursue commercial success in new areas of business such as the development and sale of satellite communications hardware.
SIS LIVE's revenues for the year ended 31 March 2015 decreased following the closure of SIS's Outside Broadcast Division, which accounted for a significant proportion of SIS LIVE's revenues, in 2014.
India
As has been previously reported, significant payments due to SIS LIVE arising from a contract for television production at the 2010 Commonwealth Games (CWG) in India are in dispute. Arbitration proceedings have started to recover the outstanding payment.
SIS LIVE received a draft assessment in March 2014 from the Indian tax authorities in relation to financial year ended 31 March 2011. On the advice of its lawyers and tax advisors it has commenced appeal proceedings through the Dispute Resolution Panel (DRP) of the Indian Tax Authority. 
The net effect of claims and counterclaims, including the tax claim,  is not expected to be material.
SIS Results
The results of SIS for the year ended 31 March 2015 are as follows:

31 March 2015
31 March 2014
Restated*

'000
'000



Revenue
229,035
253,446

---------
---------



Operating expenses
(203,612)
(229,959)



Operating profit before exceptional items
25,493
26,193
Exceptional items
(70)
(2,706)
Operating profit
Share of operating profit/(loss) of joint venture:
- joint venture
- associate
25,423
442
-
23,487
475
(40)
Total operating profit
Profit / (Loss) on the managed wind down of business
Profit on disposal of associate
Profit on disposal of tangible assets
25,865
1,064
40
5
23,922
(10,495)
-
796
Net interest payable
(590)
(2,192)



Profit on ordinary activities before tax
26,384
12,031



Tax on profit on ordinary activities
(4,984)
(5,404)



Retained profit transferred to reserves
21,400
6,627
*The prior year figures within the financial statements of SIS have been restated following a management review of their revenue recognition methods in relation to customer contracts.
+ Profit/(Loss) on the managed wind down of business relates to the closure of SIS's Outside Broadcast Division in 2014.
Dividends
No dividends have been declared in the period under review, however, in the light of the present high levels of cash and the prediction of further additions from future cash flow it is expected that SIS may declare dividends in the near future, though the timing and quantum of these remains uncertain.
Outlook
SIS remains profitable and cash generative in the immediate term and is planning the necessary steps, albeit in a challenging environment, to ensure the future profitability of the business. Current trading is in line with SIS's management expectations.
CMG continues to operate at a low overhead cost. Pending the receipt of any dividends from SIS, the Board has made arrangements to ensure sufficient funds are available to meet those costs.
AGM
The Annual General Meeting of the Company will be held on 14 January 2016 at 3.00 p.m. Formal Notice of the meeting is set out at the end of the report and accounts together with proxy forms.
Michael Rosenberg OBE
Chairman

Consolidated statement of comprehensive income for the year ended 30 June 2015



Restated 


Year ended
Year ended 


30 June
30 June 


2015
2014 






Revenue

25,000
25,000




Cost of sales

-
-




Gross profit

25,000
25,000




Administrative expenses

(119,991)
(111,259)
Other operating income

-
3,172




Operating loss

(94,991)
(83,087)




Financial income

1,012
2,898
Financial costs

160
-
Net financial income

1,172
2,898




Share of profit of equity-accounted associate, net of tax

4,352,427
1,302,031
Impairment of equity-accounted associate

(2,836,073)
(4,233,017)




Profit / (loss) before taxation

1,422,535
(3,011,175)




Taxation

22,866
17,888




Profit / (loss) for the year 

1,445,401
(2,993,287)




Share of other comprehensive loss of associate

(489,469)
(69,014)




Total comprehensive profit / (loss) for the year 

955,932
(3,062,301)




Attributable to equity holders of the Company

955,932
(3,062,301)




Earnings/(loss) per share:







Basic

5.62p
(10.83p)




Diluted 

5.62p
(10.83p)




Before impairment

16.66p
4.48p


Consolidated statement of financial position as at 30 June 2015


30 June
2015
Restated
30 June
2014
Assets



Non-current assets



Investment in associate

25,000,000
25,000,000






25,000,000
25,000,000




Current assets



Trade and other receivables

30,660
31,097
Cash and cash equivalents

16,969
538,416






47,629
569,513




Total assets

25,047,629
25,569,513




Equity and liabilities







Capital and reserves attributable to equity holders of the parent



Share capital

2,541,136
2,764,567
Capital redemption reserve

273,183
49,752
Merger reserve

2,402,674
2,402,674
Retained profits

19,788,694
20,311,755




Total equity

25,005,687
25,528,748




Current liabilities



Trade and other payables

40,480
31,399
Corporation tax payable

1,462
9,366


41,942
40,765




Total equity and liabilities

25,047,629
25,569,513


Consolidated statement of cash flows for the year ended 30 June 2015



Restated

Year ended
30 June
2015
Year ended
30 June
2014




Cash flow from operating activities



Profit / (loss) before taxation

1,422,535
(3,011,175)
Adjustments for:



Share of profit from associate

(4,352,427)
(1,302,031)
Impairment of associate

2,836,073
4,233,017
Finance income

(1,012)
(2,898)
Finance expense

(160)
-
Corporation taxes recovered

14,962
27,446




Net cash flow used in operating activities before changes in working capital 

(80,029)
(55,641)
Decrease / (increase) in trade and other receivables

439
(21,604)
Increase / (decrease) in trade and other payables 

9,080
(10,000)




Net cash flow used in operating activities 

(70,510)
(87,245)




Investing activities



Dividend received

1,026,884
-
Interest received

1,012
2,898




Net cash flow from investing activities

1,027,896
2,898




Financing activities



Shares purchased into Treasury

(1,478,993)
-
Interest paid

160
-




Net cash flow used in financing activities

(1,478,833)
-




Net decrease in cash and cash equivalents in the year

(521,447)
(84,347)
Cash and cash equivalents at the beginning of the year 

538,416
622,763




Cash and cash equivalents at the end of the year

16,969
538,416


Notes
1 Investment in associate
Year Ended 30 June 2015

Share of net assets
Fair Value of Intangibles
Total


Group
Group
Group


Cost




At 1 July 2014 - as previously stated

13,786,363
11,213,637
25,000,000
Prior year adjustment

(65,316)
65,316
-
Share of profit - 2015

4,352,427
-
4,352,427
Share of other comprehensive loss - 2015

(489,469)
-
(489,469)
Dividend received - 2015

(1,026,885)
-
(1,026,885)
Impairment - 2015

-
(2,836,073)
(2,836,073)
At 30 June 2015 - CMG share of SIS net assets

16,557,120
8,442,880
25,000,000





Year Ended 30 June 2014 - restated

Share of net assets
Fair Value of Intangibles
Total


Group
Group
Group


Cost




At 1 July 2013

15,222,726
12,777,274
28,000,000
Share of profit - 2014

1,302,031
-
1,302,031
Share of other comprehensive income - 2014

(69,014)
-
(69,014)
Dividend received - 2014

-
-
-
Impairment - 2014

(2,734,696)
(1,498,321)
(4,233,017)
At 30 June 2014 - CMG share of SIS net assets

13,721,047
11,278,953
25,000,000





(i) The impairment charge 4,233,017 (restated) comprises 2,734,696 relating to cumulative adjustments in respect of amortisation of goodwill no longer required as the goodwill is no longer held by SIS and 1,498,322 relating to the adjustment to the fair value of the Group's investment in SIS.
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. 
The Board has reviewed its valuation of the investment in SIS as at 30 June 2015. It has taken account of the closure of the Outside Broadcast Division and the exceptional costs incurred. In addition it has reviewed internal forward projections prepared by the management of SIS which include expectations of future cash flows from the business. It has applied a present day value to the expected cash flows using a discount rate of 7.50% and has taken account of the uncertainty surrounding the extension of media rights as well as the expected decline in numbers of retail betting shops. As a result, it has been concluded that an impairment of 2,836,073 should be applied to the investment resulting in a value of 25,000,000 as at 30 June 2015.
Prior year adjustment 
The prior year figures within the financial statements of SIS were restated following a management review of the revenue recognition methods in relation to customer contracts. The share of profit from associate in the Catalyst Media Group plc accounts has therefore been restated accordingly with the impact being a decrease in the share of profit from associate for the year ended 30 June 2014 of 65,316. As it was previously concluded that the value of Catalyst Media Group plc's investment was 25,000,000 as at 30 June 2014, the impairment charge for the year to 30 June 2014 has also been restated and reduced by 65,316. There was therefore no impact on the net assets of CMG as at 30 June 2014.
Share of profit of associate
2015
SIS Total
'000
2015
CMG share
'000
2014
Restated
CMG share
'000
Revenue:



SIS Betting Services
207,355
42,591
40,642
SIS LIVE Services
21,680
4,453
11,416
Total revenue
229,035
47,044
52,058




Operating profit (i)
25,655
5,270
4,855








Net interest payable
(590)
(121)
(450)
Profits / (losses) on business wind down
1,064
218
(2,156)
Profit on disposal of fixed asset
40
8
163
Profit on disposal of fixed asset
5
1
-
Profit before tax
26,174
5,376
2,412
Taxation
(4,984)
(1,024)
(1,110)
Share of profit after taxation
21,190
4,352
1,302
Net income from associate
21,190
4,352
1,302




Other comprehensive income:



Actuarial loss
(2,973)
(610)
(90)
Deferred tax
590
121
21

(2,383)
(489)
(69)




Share of net assets and liabilities of associate



Net assets (i)
146,431
30,077
36,657
Net liabilities (i)
(65,822)
(13,520)
(22,936)
Net equity
80,609
16,557
13,721
(i) The financial results for SIS are taken from its latest accounts to 31 March 2015, adjusted in order to align the accounting policies of SIS (whose accounts are prepared under UK GAAP) and Catalyst Media Group plc (whose accounts are prepared under International Financial Reporting Standards). Adjustments have been made in respect of the recognition of the fair value of derivatives held by SIS as at the balance sheet date. The net cumulative effect of these adjustments is to decrease the value of the investment in associate in the Group's financial statements by 140,000 (2014: 97,000).
2 Basis of preparation
These consolidated financial statements of CMG 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. 
CMG 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.
3 Annual Report
The Annual Report for the year ended 30 June 2015 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 3.00 p.m. on 14 January 2016.

This information is provided by RNS
The company news service from the London Stock Exchange
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