REG-MediaZest Plc: Final Results for the Period ended 30 September 2020
04/03/2021 07:05
4 March 2021
The information contained within this announcement is deemed to constitute
inside information as stipulated under the UK Market Abuse Regulation. Upon
the publication of this announcement, this inside information is now
considered to be in the public domain.
MediaZest Plc
("MediaZest" or the "Company”; AIM: MDZ)
Final Results for the Period ended 30 September 2020
MediaZest, the creative audio-visual company, is pleased to provide
shareholders with final results for the period ended 30 September 2020.
CHAIRMAN’S STATEMENT
Introduction
The Board presents the consolidated audited results for the eighteen months
ended 30 September 2020 for MediaZest plc ("MDZ") and its wholly owned
subsidiary company MediaZest International Ltd ("MDZI") which together
constitute the "Group".
MDZ Group Results for the year and Key Performance Indicators ("KPIs")
All KPIs compare the eighteen-month period to 30 September 2020 with 2019
comparatives for the prior twelve-month period of 1 April 2018 to 31 March
2019.
* Revenue for the period was £3,068,000 (2019: £3,303,000).
* Gross profit was £1,524,000 (2019: £1,675,000).
* Gross margin was 50% (2019: 51%).
* Administrative expenses excluding depreciation and amortisation were
£1,735,000 (2019: £1,546,000).
* Depreciation and amortisation costs were £124,000 (2019: £40,000). This
increase is partly due to the impact of IFRS16 which was £71,000.
* EBITDA was a loss of £186,000 (2019: profit of £129,000).
* Net loss for the period after taxation was £448,000 (2019: profit of
£6,000).
* The basic and fully diluted loss per share was 0.0324 pence (2019: earnings
per share 0.0004 pence).
* Cash in hand at 30 September 2020 was £91,000 (2019: £24,000).
MDZ Group Summary
The Group financial results for the eighteen-month period were affected
substantially by the Covid-19 pandemic (the "Pandemic"), with a significant
reduction in revenue particularly during the first UK lockdown. In response
the Board secured £200,000 of new debt financing to provide additional
liquidity, and reduced costs wherever possible without compromising the
long-term goals of the business.
Client projects and, in particular, recurring revenue streams have remained
consistent; however, the former are subject to timing delays due to the
Pandemic. New client wins and long-term client relationships remain
encouraging and value continues to build in the operations of the business.
The Group operates in three core sectors - Retail, Automotive and Corporate
offices. The Board expects significant growth in all three of these markets in
the medium to long term as businesses in these sectors embark upon, or widen
their adoption of, digital transformation programmes.
Group Strategy
The Board's strategy continues to be one of growing both the quantum and
quality of revenues with an emphasis upon clients where there is a long-term
opportunity to deploy solutions across multiple sites, and sometimes
countries, over a period of time.
The Group focus is on providing a high-quality Managed Service offering
wrapped around hardware and software delivery that generates ongoing
contractual revenues from the customer base over several years and this is a
major objective.
In the longer-term, the aim is to cover the Group's costs with recurring
contractual revenues to achieve consistent profitability, supplemented by one
or more 'game changing' large scale roll-out projects.
In the context of the above narrative, the Board has recognised the current
period of economic slowdown as a result of the Pandemic. It has, therefore,
taken the following steps during the period to help mitigate this:
* Reduced costs by c. £187,000 for the 18 month period to 30 September 2020;
* Used Government Schemes such as the Job Retention Scheme where appropriate
to partially fund employee costs;
* Took advantage of the Government Bounce Back Loan Scheme to raise £50,000
in debt funding via the Company's bankers; and
* Undertook a £150,000 fundraising by means of Convertible Loan Notes to
improve working capital, as detailed below.
MDZ Group Operational Review
The eighteen-month period fell into three distinct phases of roughly six
months each:
The first six months trading reflected uncertainty in the UK due to ongoing
Brexit negotiations and the subsequent impact on macro-economic conditions;
particularly in the retail sector. Many clients delayed investment decisions
waiting for clarity on the UK's arrangements to leave the EU, and as a series
of delays and votes appeared to give opportunity for a clearer picture in the
short term, this trend continued.
In August 2019, the Board first noticed signs of a change in attitude whereby
businesses appeared to decide that investment decisions could no longer wait
and began to proceed with previously deferred planned projects.
There then followed a strong six-month period of growth and significant
improvement in both revenues and profitability as macro-economic conditions
improved. For this period, from 1 September 2019 to 29 February 2020, Group
EBITDA profit was £65,0000, with a small loss of £18,000 after tax heading
into a what was scheduled to be a very busy March 2020.
This progress was abruptly halted by the impact of the Pandemic which began
negatively affecting financial results in mid-February 2020 and particularly
March 2020 and throughout the final six months of the period. Clients
initially began to defer some projects and then temporarily closed stores and
other places of business as countries went into lockdown. All deployments and
installations were placed on hold at that stage, and in particular this
affected key projects across the UK and in Milan, Copenhagen and Berlin that
were scheduled for those months.
Encouragingly, as the summer progressed, more and more client sites reopened
and new projects began to be embarked upon.
MDZ Group Cost base and Covid-19 Response
The costs of MediaZest plc, the holding company, were £541,000 for the
18-month period (2019: £345,000). These costs continue to rise as a
combination of both accounting, audit, legal and administrative and compliance
work related to being a quoted public company become more onerous, and
professional fees increasing accordingly. In addition, finance costs have
increased during the period, from £83,000 to £168,000.
Overall administrative expenses excluding depreciation and amortisation in the
period were £1,735,000 (2019: £1,546,000). However, because of the different
lengths of the two periods this conceals the fact that the Group has
significantly reduced its administrative expenses compared to the prior year
despite the increases noted above. Average administrative costs per month were
£96,000 for the period (2019: £129,000).
Depreciation and amortisation costs were £124,000 (2019: £40,000). As well
as the increased period length, this is also impacted by the reclassification
of some property rent costs into depreciation, due to new accounting standard
IFRS16, discussed below.
In the first 6 months of the year to September 2019, this reduction was
achieved with a cost cutting programme which had been implemented during Q1
calendar year 2019 in anticipation of difficult trading conditions and ongoing
political uncertainty due to Brexit.
Costs were further reduced by cuts implemented in the wake of the Pandemic
pursuant to which the Company saved approximately £187,000 for the
eighteen-month period to 30 September 2020, with further savings realised in
the subsequent period from 1 October 2020 onwards.
The Group has utilised the Government's Job Retention Scheme to furlough
employees at appropriate levels during the period since 31 March 2020.
MDZ Group Client Work and Recurring Revenue Streams
The Group continues to service a core of long-standing client accounts
including Lululemon Athletica, the University of Central Birmingham, Tiffany &
Co, Kuoni, Ted Baker, HMV and Hyundai, all of which undertook new projects
with the Group during the period under review. In addition, our work with Pets
at Home continues and the Company provided audio visual solutions for over a
dozen Pets at Home stores in the period. The Group was pleased to see that in
March 2020 Pets at Home won the coveted Best Large Format Store award at the
'Retail Week Awards' for their refurbished Stockport store, a store for which
the Company provided the audio-visual solutions.
New clients added in the year included Twinings, Belron, and Avis Budget
Group. In addition, the Group won a high-profile project for Porsche to
deliver audio visual solutions for its new CityLife concept store in Milan,
Italy. This project had been initially scheduled to complete in February and
March 2020 and was delayed during the first lockdown, subsequently being
delivered by the Group's highly skilled in-house teams over the summer of
2020.
During the first lockdown period in the UK, all Group deployments and
installations were placed on hold, and the ability of the Group to generate
project-based revenue during this period was restricted accordingly. However,
contractual revenues based around the Group's Managed Service proposition
(including service, maintenance, data reporting and content management
offerings) were robust and continued to deliver underlying turnover during
that period.
A handful of clients continued to keep stores open as a result of operating in
'critical industries' throughout the first lockdown period. Strictly following
the appropriate Government guidelines, the Group continued to support these
clients on an ongoing basis; often using advanced remote management tools to
quickly assist clients. These clients were able to use digital signage
installed by the Group to communicate quickly and effectively with their
customers and visitors to improve safety and both introduce and react to new
rules as they have needed to be implemented.
With the beginning of easing of some of the lockdown measures, further client
sites re-opened and in May 2020 MediaZest delivered the first two of the
previously delayed projects, with others following over the course of the
summer. All but two of the delayed projects were completed by the end of 2020.
In addition to the projects which resumed and completed following the first
lockdown, the Group recommenced discussions in relation to potential new
client mandates from the beginning of May, several of which have already been
won and delivered, including large projects for Hyundai and Samsung in the
Summer of 2020.
Contractual recurring revenue streams remain robust and in May 2020 the Group
renewed a key long-term contract until October 2022 (with a clause to extend
for a further 12 months) in addition to a significant annual contract with
another client.
Group Fundraising
As a result of the Pandemic, the Board deemed it necessary to raise further
capital during the period.
In May 2020, the Company secured a Bounce Back Loan of £50,000 under the
Government's scheme to provide additional cash resources during the lockdown.
In August 2020 MediaZest raised a further £150,000 by way of a Convertible
Loan Note instrument ("CLN") to provide additional working capital for the
Group.
New Accounting Standards
The introduction of IFRS16 has had an impact on the way the Company accounts
for Leases and as such there is a change in the way that rent is presented in
the accounts, as noted below. In essence, in the Consolidated Statement of
Comprehensive Income, this rental cost for the Company's premises in Woking is
now charged predominantly through depreciation rather than administrative
costs. The effect on the Statement of Financial Position, is that a Right of
Use Asset has been created which falls into Property, Plant and Machinery and,
on the opposing side, a Lease Liability has been created which falls into the
Financial Liabilities category. The change and impact on presentation, whilst
netting out to virtually zero, is documented in Note 23.
Outlook from October 2020 into 2021
At this time, it remains difficult to fully assess the extent to which the
Pandemic will affect the Group's forthcoming trading and financial performance
as the situation continues to evolve. The second national lockdown in November
2020 and closure of many retail businesses had an impact, however new project
pitches have increased in number since the start of 2021, despite the third
national lockdown coming into effect. Conversion rates on the pitches into
live projects will be crucial to financial performance for the coming year
that has begun positively so far.
Many clients ceased on site work during December 2020 and January 2021 but
begun to execute new projects from early February 2021 onwards.
Existing customers continue to require the Company's services and several
long-term roll out projects that the Group had begun delivering have now
restarted, albeit often at a slower pace than was intended by the client prior
to the start of the Pandemic. Demand from these and other ongoing clients is
expected to remain strong.
Recurring revenue streams and the building of value with longer term
contractual agreements continues to be successful and provides further
potential for growth in profitability for the future.
The Group has been investigating several new lines of business, all associated
with the audio-visual market, which are aimed at meeting client's changing
needs after the Pandemic. Two of these - gesture-based control systems and
'remote control' over interactive screens in store using a customers' mobile
phone - have already been successfully deployed in live client projects.
The Board is working on the assumption that the disruption caused by the
Pandemic will have an impact deep into 2021 and continues to plan accordingly,
searching for new revenue streams whilst managing costs carefully and as
flexibly as possible.
Lance O'Neill
Chairman
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Period 1.4.19 to 30.9.20 Year Ended 31.3.19
£'000 £'000
Continuing operations
Revenue 3,068 3,303
Cost of sales (1,544) (1,629)
Gross profit 1,524 1,675
Other operating income 25 -
Administrative expenses – excluding depreciation & amortisation (1,735) (1,546)
EBITDA (186) 129
Administrative expenses – depreciation & amortisation (124) (40)
Operating profit/(loss) (310) 89
Finance costs (168) (83)
Profit/(loss) on ordinary activities before taxation (478) 6
Tax on profit/(loss) on ordinary activities 30 -
(Loss)/profit for the period (448) 6
(Loss)/profit attributable to: Owners of the parent (448) 6
Earnings/(loss) per ordinary 0.1p share
Basic (0.0324) 0.0004
Diluted (0.0324) 0.0004
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 SEPTEMBER 2020
2020 2018
£'000 £'000
Non-current assets
Goodwill 2,772 2,772
Owned
Intangible assets - 1
Property, plant and equipment 39 62
Right of use
Property, plant and equipment 171 -
Total Non-current assets 2,982 2,835
Current assets
Inventories 93 69
Trade and other receivables 493 481
Cash and cash equivalents 91 24
Total current assets 677 574
TOTAL ASSETS 3,659 3,409
Equity
Called up share capital 3,656 3,656
Share premium 5,244 5,244
Share option reserve 146 146
Retained earnings (7,677) (7,227)
Total equity 1,369 1,819
Non-current liabilities
Financial liabilities – borrowings
Interest bearing lease liabilities 157 25
Other interest bearing loans and borrowings 176 -
Total Non-current liabilities 333 25
Current liabilities
Trade and other payables 968 814
Financial liabilities – borrowings
Invoice discounting facility 245 203
Interest bearing lease liabilities 59 15
Other interest bearing loans and borrowings 685 533
Total current liabilities 1,957 1,565
Total liabilities 2,290 1,590
Total equity and liabilities 3,659 3,409
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 SEPTEMBER 2020
Called up share Retained Share Share Option Total
capital Earnings Premium Reserve Equity
£'000 £'000 £'000 £'000 £'000
Balance at 1 April 2018 3,546 (7,115) 5,244 146 1,821
Changes in equity
Issue of share capital 110 - - - 110
Total comprehensive loss - (112) - - (112)
Balance at 31 March 2019 3,656 (7,227) 5,244 146 1,819
Impact of IFRS16 implementation - (2) - - (2)
Balance 1 April 2019 (restated) 3,656 (7,229) 5,244 146 1,817
Changes in equity
Total comprehensive loss - (448) - - (448)
Total comprehensive loss for the period - (448) - - (448)
Balance at 30 September 2020 3,656 (7,677) 5,244 146 1,369
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD 1 APRIL 2019 TO 30 SEPTEMBER 2020
Period 1.4.19 to 30.9.20 Year Ended 31.3.19
£'000 £'000
Cash flows from operating activities
Cash (absorbed by)/generated from operations (73) 117
Tax paid 30 -
Net cash from operating activities (43) 117
Cash flows from investing activities
Purchase of tangible fixed assets (29) (30)
Net cash used in investing activities (29) (30)
Cash flow from financing activities
Other loans (16) (19)
Shareholder loan receipts 718 385
Shareholder loan repayments (515) (330)
Bounce back loan 50 -
Payment of lease liabilities (47) -
Share issue - 110
Share issue costs - (1)
Interest paid (93) (58)
Net cash generated from/(used in) financing activities 97 87
(Decrease)/increase in cash and cash equivalents 25 174
Cash and cash equivalents at beginning of period (179) (353)
Cash and cash equivalents at end of the period (154) (179)
NOTES TO THE FINANCIAL STATEMENTS
The financial information set out in this announcement does not constitute the
Group’s financial statements for the period ended 30 September 2020 or year
ended 31 March 2019, but is derived from those financial statements. Statutory
financial statements for 2019 have been delivered to the Registrar of
Companies and those for 2020 will be delivered following the Group’s annual
general meeting. The auditors have reported on those accounts; their reports
were (i) unqualified, (ii) did include a reference to which the auditor drew
attention by way of emphasis without qualifying their report in respect of
going concern and (iii) did not contain a statement under section 498(2) or
498(3) of the Companies Act 2006.
The Group made a loss after tax of £448,000 (2019: profit of £6,000) and has
net current liabilities of £1,280,000 (2019: £991,000). The financial
statements are prepared on a going concern basis which the Directors believe
to be appropriate for the following reasons:
The Directors have carefully considered the going concern assumption on the
basis of financial projections and the factors outlined below.
The Directors have considered financial projections based upon known future
invoicing, existing contracts, pipeline of new business and the increasing
number of opportunities it is currently working on in 2021, across all main
sectors the company specialises in. Several substantial new contracts have
been won during the new financial year and recurring revenues remain robust.
Future operating and capital costs have also been reviewed and included in the
cash flow forecast prepared by the Directors.
These forecasts have also been considered in light of the ongoing economic
difficulties in the global economy as a result of the ongoing Covid-19
Pandemic and consequences of the UK Brexit agreement, previous experience of
the markets in which the company operates and the seasonal nature of those
markets.
Management has engaged with clients where possible to understand their plans
for the coming year, the likely timing of those plans and any contingencies
such as the timing and extent of lockdown measures that may impact them.
Several have indicated substantial projects which they expect to work with the
Group to deliver in the next 12 months, however as always, timing remains
difficult to predict.
These forecasts indicate that the Group will generate sufficient cash
resources to meet its liabilities as they fall due over the 12-month period
from the date of the approval of the accounts.
However, the current impact of the Covid-19 Pandemic in the UK and around the
world means that the exact timing of clients’ projects can be difficult to
determine with timetables being adjusted to accommodate lockdown constraints,
clients’ priorities and Government advice. The exact timing of cash inflows
is therefore harder to predict than normal and is therefore uncertain.
Consequently, the Directors have produced additional downside sensitised
cashflow forecasts which consider the mitigating actions which could be taken
in order for the Group to continue to remain a going concern. Whilst the
Directors are confident that a number of options would be available to it
there remains some uncertainty around the timing and quantum of these actions.
The Directors have budgeted carefully for the coming 12 months to include
sufficient flexibility to meet such challenges, should they arise. In the
event of additional UK lockdowns, the Group would seek to reduce costs and
obtain additional liquidity if it were required. The Group successfully
implemented this approach during 2020.
The Directors have obtained letters of support from two shareholders who have
provided material loans to the Group, stating that they will not call for
repayment of the loan within the 12 months from the date of approval of these
financial statements or, if earlier, until the Group has sufficient funds to
do so. The balance of these loans at 30 September 2020 totalled £589,000
(2019: £427,000).
As a result the Directors consider that it is appropriate to draw up the
accounts on a going concern basis. However, these circumstances represent a
material uncertainty that may cast significant doubt on the Group’s ability
to continue as a going concern and, therefore, to continue realising its
assets and discharging its liabilities in the normal course of business. The
financial statements do not include any adjustments that would result from the
basis of preparation being inappropriate.
Whilst the financial information included in this announcement has been
computed in accordance with International Financial Reporting Standards
(IFRS), this announcement does not in itself contain sufficient information to
comply with IFRS. The accounting policies used in preparation of this
announcement are consistent with those in the full financial statements that
have yet to be published, and other than in respect of IFRS 16 as explained
above, were consistent with the policies for the year ended 31 March 2019.
The Report and Consolidated Financial Statements for the period ended 30
September 2020 will be posted to shareholders shortly and will also be
available to download from the Company's website: www.mediazest.com
1. SEGMENTAL INFORMATION
Revenue for the year can be analysed by customer location as follows:
Period 1.4.19 to 30.9.20 Year Ended 31.3.19
£’000 £’000
UK and Channel Islands 2,669 2,549
Rest of Europe 374 561
North America 25 29
Rest of World - 164
3,068 3,303
An analysis of revenue by type is shown below:
Period 1.4.19 to 30.9.20 Year Ended 31.3.19
£’000 £’000
Hardware and installation 2,097 2,008
Support and maintenance – recurring revenue 832 645
Other services (including software solutions) 139 650
3,068 3,303
Segmental information and results
The Chief Operating Decision Maker ('CODM'), who is responsible for the
allocation of resources and assessing performance of the operating segments,
has been identified as the Board. IFRS 8 requires operating segments to be
identified on the basis of internal reports that are regularly reviewed by the
Board. The Board have reviewed segmental information and concluded that there
is only one operating segment.
The Group does not rely on any individual client - the following revenues
arose from sales to the Group's largest client.
Period 1.4.19 to 30.9.20 Year Ended 31.3.19
£’000 £’000
Goods and services 433 155
Service and maintenance 53 181
486 336
2. EARNINGS/(LOSS) PER ORDINARY SHARE
Period 1.4.19 to 30.9.20 Year Ended 31.3.19
Profit/(Loss) £’000 £’000
Profit/(Loss) for the purposes of basic and diluted earnings per share being net loss attributable to equity shareholders (448) 6
2020 2019
Number of shares Number Number
Weighted average number of ordinary shares for the purposes of basic earnings per share 1,396,425,774 1,296,370,979
Number of dilutive shares under option or warrant - -
2020 2019
£’000 £’000
Weighted average number of ordinary shares for the purposes of dilutive loss per share 1,396,425,774 1,296,370,979
Basic earnings per share is calculated by dividing the (loss)/profit after tax
attributed to ordinary shareholders of £448,000 (2019 profit: £6,000) by the
weighted average number of shares during the year of 1,396,425,774 (2019:
1,296,370,979).
The diluted loss per share is identical to that used for basic loss per share
as the options are "out of the money" and therefore anti-dilutive.
3. CASH AND CASH EQUIVALENTS
The Group The Group The Company The Company
2020 2019 2020 2019
£’000 £'000 £’000 £'000
Cash held at bank 91 24 - 2
Invoice discounting facility (245) (203) - -
(154) (179) - 2
Enquiries:
Geoff Robertson Chief Executive Officer MediaZest Plc 0845 207 9378
David Hignell/Adam Cowl Nominated Adviser SP Angel Corporate Finance LLP 020 3470 0470
Claire Noyce Broker Hybridan LLP 020 3764 2341
About MediaZest
MediaZest is a creative audio-visual systems integrator that specialises in
providing innovative marketing solutions to leading retailers, brand owners
and corporations, but also works in the public sector in both the NHS and
Education markets. The Group supplies an integrated service from content
creation and system design to installation, technical support, and
maintenance. MediaZest was admitted to the London Stock Exchange's AIM market
in February 2005. For more information, please visit www.mediazest.com
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