Ludorum : Preliminary Results

24 June 2014

LUDORUM PLC PRELIMINARY RESULTS FOR THE YEAR ENDING 31 MARCH 2014

Ludorum plc, ("Ludorum" or the "Company"), the AIM-listed media investment company, today announces its results for the year ended 31 March, 2014.  The prior accounting period was for 15 months ended 31 March 2013.

Highlights for the year ended 31 March 2014 versus the 15 Months Period ended March 2013 

Turnover £4.91m (2013: £7.78m)

Broadcast income £1.33m (2013: £0.58m)

Consumer products revenues £3.58m (2013: £7.17m)

EBITDA £1.12m (2013: £0.88m)

Operating profit £0.33m (2013: £0.01m)

Administrative expenses £1.26m (2013: £2.49m)

Chuggington has now been licensed for broadcast to 175 countries

A new series of 26 episodes was completed during the year and production commenced on a further ten episodes for delivery in 2015.

Strong performance in toy sales where new content has been aired.

Rob Lawes, Chief Executive, said:

"This has been a year of transition for the Company.  We have adjusted our team and our overheads to deal with a changed market environment, and this strategy is now creating a positive effect on our profits and cash flow. We were pleased to be able to deliver a 25% increase in EBITDA to £1.12m despite a fall in consumer products revenues. Moving forward, there are some exciting developments taking place with our new Chuggington series starting to air on a global basis alongside a very innovative toy range. We feel that we are in a good position to continue making Chuggington into the premier evergreen pre-school global train property ."

Contacts

Ludorum plc 020 8246 4010

Rob Lawes     

Investec Investment Banking (NOMAD)   020 7597 4000

Andrew Pinder

David Flin

CHIEF EXECUTIVE'S REVIEW

Overview

This has been a year of transition for the Company.   Whilst we have seen a year on year decline in revenues from our master toy partner, driven by the withdrawal of one of the three train systems in the market, we have seen some encouraging underlying sales growth in the two remaining systems as a result of the enthusiastic reception for the new programming content which started to air towards the end of 2013.

This is the first new content we have delivered to broadcasters since Spring 2011.  This new season delivers even more adventure and excitement and introduces many new locations and characters. The first 26 episodes have already commenced broadcast in the UK, US and Germany and are generating strong ratings.  We are also in production for a further ten episodes for 2015 delivery.

Recently, we have enjoyed some good successes at retail and our new characters and sets have been performing well.  This has led to increased distribution in key markets where the new content has been aired. We are also pleased with the continued innovation in the toy lines which will be reflected in the new product launches later on in this year and in 2015.

Chuggington

Chuggington is an action packed series of train adventures that come to life in a vibrant modern world called Chuggington.  Wilson and his friends Brewster and Koko take on exciting challenges that test their courage, speed and determination.  Along the way, they learn positive values and new skills empowering them to become the best trainees they can be.  To date we have created 118 x 10" episodes and 46 x 4" shorter episodes.  We are in production on a further 10 x 10" episodes with delivery of these episodes scheduled for early 2015.

The first Chuggington series was created by Ludorum in 2006 and has continually and successfully been on air since 2008. We have concluded broadcast agreements with all leading broadcasters in their respective territories in 175 countries.  The series has established a highly successful ratings record in many markets including the UK (BBC -Cbeebies), North America (The Disney Channel), Germany (Super RTL), France (TF1), Japan (Fuji -TV), Australia (ABC) and Canada (Treehouse). 

Financial Review

In June 2012 we announced that our accounting reference date would change to 31 March.  We do not have a like for like audited comparison for the 12 month period ending 31 March 2013 and all the prior year numbers relate to the 15 month period ending 31 March 2013.

Ludorum generated revenues of £4.91m for the year ended 31 March 2014 (2013: £7.78m). This reduction is mainly the result of lower reported consumer product revenues of £3.58m (£7.17m). Consumer products revenues represented 73% of revenues (2013: 92%)  Broadcast revenues represented 27% of revenues at £1.33m (2013: £0.58m).

Europe (including the UK) represented 48% (2013: 39%) of total revenues at £2.35m The Americas represented 33% (2013: 34%) of revenues at £1.64m and Asia/Australasia 19% (2013: 26%) of revenues at £0.92m.

Total administrative expenses were £1.26m, a substantial reduction over the prior period cost of £2.49m.

Operating profit for the year was £0.33m versus £0.01m for the prior period.  EBITDA for the year grew by 25% to £1.12m versus £0.88m for the prior period. Both benefitted from the reduction in administrative expenses referenced above.

Capital expenditure on Chuggington during the period was £1.33m (2013: £1.11m).

As at 31 March 2014, the Company had cash and cash equivalents of £0.33m (31 March 2013 £0.95m) and bank overdrafts of £0.98m (31 March 2013: £0.97m).  In June 2014, the Company renewed its £0.75m overdraft facility with Coutts & Co for a period of six months to 1 December 2014 at which time it will reduce to £0.5m. During the period under review, Coutts & Co temporarily increased the Company's overdraft facility from £0.75m to £1m through January and February 2014 and then £0.9m until 31 March 2014 when it reverted to £0.75m.

In March 2012, the Company issued £2.75m of loan notes. The loan notes are held by client funds of Downing LLP and D C Thomson & Co Limited. The loan notes are repayable in March 2017.  If the Company redeems the loan notes within the first two years the redemption will be £1.25 per £1 of loan notes. If the loan notes are redeemed after two years the loan notes are redeemable at par. The coupon on all notes is the higher of 7.5% or 3% above LIBOR for the first three years.  After the three years the coupon is 12.5%.

On the basis of enquiries made by the Directors and in the light of current financial projections and facilities available, the Directors have reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future. Accordingly, we continue to adopt the going concern basis in preparing the accounts.In making this assessment the directors have considered scenarios which in light of the reduced overdraft facility include a downturn in trading and the implication of mitigating factors such as further cost reductions.

Outlook

We remain committed to building Chuggington into the premier evergreen pre-school global train property. We are excited about the introduction of our new series content alongside some great toy product lines, and we feel there are excellent opportunities to make this strategic aim a reality.as we build on our successes to date.

Rob Lawes

Chief Executive

Audited consolidated statement of comprehensive income

	Note	For the year ended 31 March 2014 £000	For the 15 months ended 31 March 2013 £000
Revenue	2	4,912	7,779
Cost of sales		(3,323)	(5,276)
Gross profit		1,589	2,503
Administrative expenses		(1,263)	(2,493)
Operating  profit		326	10
Finance costs - bank and loan interest		(142)	(162)
Finance cost		(142)	(162)
Profit / (loss) before income tax		184	(152)
Income tax expense	3	(59)	(133)
Profit / (loss)  for the year		125	(285)
Other comprehensive income /(loss): Foreign exchange differences which may be recycled into the statement		(19)	6
Total comprehensive income / (loss)  income  for the year		106	(279)
Basic earnings / (loss) per share Diluted earnings / (loss) per share	4 4	1.27p 1.23p	(2.9)p (2.9)p

Audited b alance sheets as at 31 March 2014

	Note	GROUP 2014 £000	GROUP 2013 £000
Assets
Non-current assets
Investments		-	-
Property, plant and equipment		-	2
Intangible assets	5	4,493	3,956
		4,493	3,958
Current assets
Trade and other receivables		1,791	1,728
Overseas tax receivable		34	20
Cash and cash equivalents		328	954
		2,153	2,702
Liabilities
Current liabilities
Overseas tax payable		(3,184)	(3,363)
Trade and other liabilities		(984)	(966)
Borrowings	6	(4,168)	(4,329)
		(2,015)	(1,627)
Net current liabilities
Non-current liabilities		(2,750)	(2,750)
Borrowings	6	(2,750)	(2,750)
		(272)	(419)
Net liabilities
Shareholders' deficit
Ordinary shares		88	88
Deferred shares		50	50
Share premium		9,296	9,296
Share based payments reserve		2,359	2,318
Foreign currency translation		(27)	(8)
Accumulated losses		(12,038)	(12,163)
Equity attributable to owners of the parent		(272)	(419)

Audited group statement of changes in equity

	Attributable to the owners of the parent
Group 2014	Called up share capital £000	Share Premium £000	Accumulated losses £000	Share based payments reserve £000	Foreign currency translation £000	Total deficit £000
At 1 April 2013	138	9,296	(12,163)	2,318	(8)	(419)
Profit for the year	-	-	125	-	-	125
Other comprehensive income:	-	-	-	-	(19)	(19)
Total comprehensive income / (loss) for the year	-	-	125	-	(19)	106
Transactions with owners:
Credit relating to share based payments reserve	-	-	-	41	-	41
Total contributions  for distribution to owners of the Company recognised directly in equity	-	-	-	41	-	41
At 31 March 2014	138	9,296	(12,038)	2,359	(27)	(272)
2013	Called up Share capital £000	Share Premium £000	Accumulated losses £000	Share based payments reserve £000	Foreign currency translation £000	Total deficit £000
At 1 January 2012	138	9,296	(11,878)	2,212	(14)	(246)
Comprehensive income:
Loss for the period	-	-	(285)	-	-	(285)
Other comprehensive income:	-	-	-	-	6	6
Total comprehensive (loss) / income for the period	-	-	(285)	-	6	(279)
Transactions with owners:
Credit relating to share based payments reserve	-	-	-	106	-	106
Total contributions  for distribution to owners of the Company recognised directly in equity	-	-	-	106	-	106
At 31 March 2013	138	9,296	(12,163)	2,318	(8)	(419)

Audited cash flow statements for the year ended 31 March 2014

	Notes	GROUP	GROUP
		For the year ended 31 March 2014 £000	For the 15months ended 31 March 2013 £000
Cash flows from operating activities
Cash generated from operations	7	637	786
Interest paid		(142)	(162)
Taxation paid		(73)	(176)
Net cash generated  from operating activities		422	448
Cash flows from investing activities
Investment in subsidiaries		-	-
Investment in intangible assets		(1,066)	(1,212)
Net cash used in investing activities		(1,066)	(1,212)
Cash flows from financing activities
Issue of  new loan stock	6	-	1,250
Net cash generated from financing activities		-	1,250
Net (decrease) / increase   in cash and cash equivalents and bank overdrafts		(644)	486
Cash and cash equivalents and bank overdrafts at 1 April		(12)	(498)
Cash and cash equivalents and bank overdrafts at 31 March		(656)	(12)

Notes to the audited preliminary results for the year ended 31 March 2014

1.     Basis of preparation

The financial information in this preliminary announcement has been extracted from the audited financial statements of the Group for the year ended 31 March 2014. The financial statements were approved by the board of directors on 23 June 2014 and are prepared in accordance with IFRS as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial information for the 15 months period ended 31 March 2013 has been extracted from the audited financial statements of the Group for that period which have been delivered to the Registrar of Companies. The auditors' report on the accounts for 2014 and 2013 were unqualified and did not contain a statement under section 237(2) or section 237(3) of the Companies Act 1985.

During 2012, the Company changed its accounting reference date from 31 December to 31 March and accordingly the previous financial statements had been prepared for the 15 months period ended 31 March 2013. The accounting reference date was changed to bring it into line with the accounting year end of our master toy partner, Tomy.

The basis of preparation of the financial information in both financial years presented is consistent with the accounting policies set out in the Group's statutory accounts for the year ended 31 March 2013. No additional standards or amendments to existing standards have been adopted by the Group with effect from 1 April 2013.

On the basis of enquiries made by the directors and in the light of current financial projections and facilities available, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial information. In making this assessment the directors have considered scenarios which in light of the reduced overdraft facility include a downturn in trading and the implication of mitigating factors such as further cost reductions.

2.     Segmental reporting

The Group currently has one operating segment, the development and exploitation of its rights in Chuggington. Management information used by the CODM is in a format similar to the Consolidated statement of comprehensive income and Balance sheets. The CODM is considered to be the Board of Directors.

Revenue by product line

	For the year ended 31 March 2014 £000	For the 15 months ended 31 March 2013 £000
Broadcasting rights	1,328	581
Consumer products	3,577	7,169
Other	7	29
	4,912	7,779

Geographical analysis of revenue by location

	For the year ended 31 March 2014 £000	For the 15 months ended 31 March 2013 £000
UK, Europe, Middle East & Africa	2,353	3,068
Asia & Australasia	917	2,032
Americas	1,642	2,679
	4,912	7,779

All material assets are located in the UK.

3.     Income tax expense

The tax assessed for the year differs from the UK Small Company's tax rate in the UK. The difference is explained below:

	For the year ended 31 March 2014 £000	For the 15 months ended 31 March 2013 £000
Current tax
UK taxation	-	-
Overseas taxation - withholding taxes	45	100
Overseas taxation - US income taxes	14	33
Total overseas taxation	59	133
Total current tax expense	59	133
Deferred taxation	-	-
Total income tax expense	59	133

The tax assessed for the year differs from the UK Small Company's tax rate in the UK. The difference is explained below:

	For the year ended 31 March 2014 £000	For the 15 months ended 31 March 2013 £000
Profit / (loss) before taxation	184	(152)
Profit / (loss) before taxation multiplied by the weighted-average rate of UK corporation tax applicable to small companies of 20% (2013: 20%)	(37)	30
Effects of:
Overseas taxation	(59)	(133)
Expenses not deductible for tax purposes	(1)	(2)
Losses brought forward	38	-
osses available to carry forward and other timing differences		(28)
Total income tax expense	(59)	(133)

4.     Earnings / (loss) per share

Basic earnings / (loss) per share ("EPS") is calculated by dividing the earnings / (loss) attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year. Diluted EPS is calculated by adjusting the weighted average number of shares in issue to assume conversion of all dilutive potential ordinary shares.

Basic and diluted EPS	Earnings / (loss) attributable to owners of the parent £000	Weighted average number of shares (basic)	Weighted average number of shares (diluted)	Per-share amount (pence) (basic)	Per-share amount (pence) (diluted)
2014	125	9,850,001	10,127,819	1.27p	1.23p
2013	(285)	9,850,001	9,971,001	(2.9)p	(2.9)p

5.     Intangible assets

Group	Capitalised costs £000
Cost
At 1 January 2012	4,768
Additions	1,112
At 31 March 2013	5,880
Additions	1,329
At 31 March 2014	7,209
Accumulated amortisation
At 1 January 2012	1,064
Charge for the period	860
At 31 March 2013	1,924
Charge for the year	792
At 31 March 2014	2,716
Net book value
At 1 January 2012	3,704
At 31 March 2013	3,956
At 31 March 2014	4,493

6.     Borrowings

The following borrowings are included in current and non-current liabilities:

	GROUP 2014 £000	GROUP 2013 £000
Bank overdraft (see Note 12)	984	966
Loans	2,750	2,750
	3,734	3,716
Undrawn borrowing facilities
Bank overdraft	49	293

The Group has an overdraft facility from Coutts & Co of £750,000.  The overdraft is secured by a first charge over the Company's assets (including the Company's intellectual property). Ludorum has the legal right to set off balances within the Group. The net position within the group is £701,000.

In March 2012 the Company redeemed, at par, £1.5m of loan notes ("old loan notes"), being all of the loan notes in issue. These old loan notes were held by client funds of Downing LLP. At the same time the Company issued £2.75m of new loan notes. £1.5m of the new loan notes are also held by client funds of Downing LLP.  £1.25m of the new loan notes are held by D. C. Thomson & Co Limited. The new loan notes are repayable in March 2017. If the Company redeems the new loan notes within two years of issue the redemption will be £1.25 per £1 of loan notes. If the new loan notes are redeemed after two years of issue the loan notes are redeemable at par. The coupon on the new loan notes is the higher of 7.5% or 3% above LIBOR for the next three years. After three years the coupon is 12.5%. The new loan notes are secured by a second charge over the Company's assets and a charge over the assets of Ludorum Enterprises Limited, a wholly owned subsidiary of the Company.

The old loan notes held by client funds of Downing LLP were exchanged for new loan notes and therefore no cash payment was made to Downing LLP on redemption of the old loan notes. Accordingly, the cash flow effect of the redemption of the old loan notes and issue of new loan notes in the period was an inflow of £1.25m arising from the issue of new loan notes to D. C. Thomson & Co Limited.

7.     Cash flows from operating activities

	GROUP 2014 £000	GROUP 2013 £000
Profit  / (loss) for the year	125	(285)
Adjustments for:
Interest paid	142	162
Tax paid	59	133
Depreciation of property, plant and equipment	2	26
Loss on disposal of property, plant and equipment	-	8
Amortisation of intangible assets	792	860
Charge relating to share based payments	41	106
Change in working capital
(Increase) / decrease  in trade and other receivables	(62)	650
(Decrease) / increase in trade and other payables	(462)	(874)
Cash generated by operations	637	786

8.     Reconciliation of net cash flow to movement in net debt

The following borrowings are included in current and non-current liabilities:

	GROUP 2014 £000	GROUP 2013 £000
Net debt at beginning of year	(3,262)	(1,998)
Increase / (decrease)  in cash and cash equivalents	(626)	453
Decrease / (increase) in bank overdraft	(18)	33
Issue of loan notes	-	(1,750)
Increase in net debt	(644)	(1,264)
Net debt at end of year	(3,906)	(3,262)

9.     Related parties

Included in trade and other liabilities at the end of the year is £135,023  in respect of unpaid remuneration owed to Directors of the Company and the employer's National Insurance payable on this remuneration (2013: £135,023) and £109,358 in respect of accrued pension costs owed to the Directors (2013: £85,358). Richard Hall, a director if the Company is also a director of D.C. Thomson Co Ltd, which holds £1.25m of loan notes issued by the Company (see note 14), and of Parragon Books Limited. Parragon Books Limited has a publishing licence with Ludorum Enterprises Limited. Parragon Books Limited was owed £60,000 at the end of the year (2013: £39,000).

10.  Commitments

In 2007 the Company entered into an agreement with Tomy under the terms of which the toy manufacturer agreed to fund 50% of the production cost of the Company's animated series "Chuggington" in return for which it has a global master toy licence and the right to participate in the net profit of the property. The Company and Tomy have now jointly funded the production of four series, comprising 118 x 10 minute episodes and 46 x 4 minute episodes of Chuggington. The Company and Tomy have also agreed to produce a fifth series of 10 episodes which started during the year and is expected to be delivered in 2015. The budget for the series is $3m. Tomy has agreed to initially fund 100% of the costs of this series and recover the Company's half share of the production costs from a reduced toy royalty payment commencing January 2015.

This information is provided by RNS

The company news service from the London Stock Exchange

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