Regulatory Announcement
REG - Indian Film Co (The) - Half Yearly Report - Part 1
Released: 08/12/2009
Released: 08/12/2009
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RNS Number : 7219D
Indian Film Company Limited (The)
08 December 2009
8 December 2009
Press Release
The Indian Film Company Limited
("IFC" or the "Company" or the "Group")
Unaudited half-yearly results for the six months ended 30 September 2009
The Indian Film Company Limited (AIM:IFC), a specialist investment company dedicated to the Indian film industry, is
pleased to announce its unaudited half-yearly results for the six months ended 30 September 2009:
Key Points
*
IFC consolidated into the Network 18 Group to leverage upon its industry leading position and access to capital
*
As announced on 9 June 2009, after two months of negotiations, an agreement on new revenue sharing terms was reached
between United Producers and Distributors Forum and the key national multiplex cinema chains in India. The Directors expect
this to help increase revenues from the domestic box office
*
"Road Movie" selected for screening at the Toronto and Tokyo International Film Festivals
*
Revenues for the six months ended 30 September 2009 were down to P9.63m (2008: P15.43m) due to the two month long
negotiations between United Producers and Distributors Forum and the key national multiplex cinema chains, which delayed
film releases, pressure on advertising spend due to the challenging economic environment and weak performances from the
movies released in the reporting period
Outlook
*
Strong slate of six films scheduled for release in the second half of the financial year, two of which were released by the
Group in October 2009. "London Dreams" was released in the overseas territories and "Fruit 'N' Nut" was released at the
domestic box office
*
The Group's productions and co-production projects are progressing as scheduled
*
Margins from films released in the first six months of the financial year are set to improve in the second half of the
financial year as one-off costs such as marketing, printing and publicity already accounted for in the six months ended 30
September 2009
Sandeep Bhargava, CEO of the Investment Adviser commented:
"Although adverse global economic conditions continue to prevail, putting pressure on the revenues and margins of our
films, we have a strong slate of films in place and believe the recent signs of an upturn in the global economy should
improve the performance of the Group in the second half of the financial year."
For further information, please contact:
Enquiries:
The Indian Film Company Limited
Sandeep Bhargava Tel: +91 226 629 1723
Grant Thornton Corporate Finance (Nominated Adviser)
Fiona Kindness Tel: +44 207 383 5100
Elara Capital (Joint Broker)
Raj Bhatt/Mary Phelan Tel: +44 207 486 9733
Oriel Securities (Joint Broker)
Natalie Fortescue/Daniel Conti Tel: +44 207 710 7600
Pelham Public Relations
Alex Walters/Francesca Tuckett Tel: +44 207 337 1500
Chairman's Statement
I am pleased to present the half-yearly results of The Indian Film Company Limited (the "Company") and its Subsidiaries (collectively the "Group") for the six month period ended 30 September 2009.Financial updateAs detailed in the 31 March 2009 annual report, the Group was pleased to have reached an agreement on the revenue sharing terms between the United Producers and Distributors Forum and the key multiplex cinema chains in India, which, over the long-term, the Directors believe will benefit the Group
with increased revenues from the domestic box office. However, the two month long negotiations with the multiplex owners resulted in a delay in the planned release of films. This industry-wide delay resulted in the release of all films being concentrated into a shorter, highly competitive, period for release. As a result, the Group's share of revenues from theatrical revenue has been lower than would normally be expected over the first six months of the Group's financial year.The challenging economic
environment has also continued to put pressure on broadcasters' advertising income globally, reducing the broadcasters' funds available for purchasing film content. This has further impacted the Group's operations and reduced revenues from the sale of satellite rights during the six months ended 30 September 2009.The Directors believe that these factors contributed to the Group achieving lower revenues of P9.63 million for the six months ended 30 September 2009, compared to P15.43 million for the six months
ended 30 September 2008. Net loss for the period was P3.12 million (30 September 2008: net profit of P1.41 million).Furthermore, as a result of the takeover offer (see details below), the Group incurred one-off expenses amounting to approximately P0.16 million, which further impacted the results for the period.It is expected that the Group's margins from the films released during the six months ended 30 September 2009 will improve during the second half of the financial year since the majority of one-off
costs such as marketing, printing and publicity costs have already been accounted for in the first half of the financial year. Furthermore, revenues from the exploitation of television syndication rights of these films (these also include revenues from sales to satellite channels) will be accounted for during the second half of the financial year. Additionally, due to the seasonality of the Group's revenues, it is anticipated that the Group will receive a greater proportion of its revenue in the second half
of the financial year, than in the first half of the financial year.The Group's unaudited net asset value ("NAV") as at 30 September 2009 was 105.44 pence per Ordinary Share; a decrease of 10.13% from the audited NAV of 117.32 pence per Ordinary Share as at 31 March 2009.Operational updateWhilst it is the Group's intention to invest in two to four cornerstone film projects each year, the Directors felt that the terms of the film projects evaluated this year have not been commercially viable and therefore,
the Group has not added any cornerstone film projects to its film slate to date this year.*
The Group released three films during the period: "Shortkut - The Con is On", "Luck" and "Life Partner".
*
"Shortkut - The Con is On" was the first release in the current financial year. The film is initially likely to make a loss, but is expected to break even over the term of its licence, although at this stage there can be no certainty that this will be the case.
*
"Luck" was the second release for the Group this financial year and it performed below expectations at the box office, despite having a strong star cast. Based on the level of revenues generated to date, "Luck" is expected to be a loss-making project for the Group.
*
The third film released in the six month period ended 30 September 2009 was "Life Partner". This film opened to good reviews and, based on revenues generated to date, the investment in this film is expected to generate positive returns over the term of its licence.
*
The Group's international production, "Road Movie" directed by Dev Benegal, premiered at the Toronto International Film Festival ("TIFF") in September 2009 to very promising reviews by film critics. The film was screened as a special presentation at TIFF. The film also gained entry into the competition section of the Tokyo International Film Festival.
*
The Group's production and co-production projects are progressing as scheduled.
Network 18 Holdings Limited ("Network 18") takeover offerDuring the six month period ended 30 September 2009, the Company received a mandatory cash offer (the "Offer") from Network 18, a subsidiary of Network 18 Media & Investments Limited, of which Raghav Bahl, a non-executive Director of the Company, is a director and substantial shareholder. The Offer was at 40 pence per share for the entire issued share capital of the Company not already owned by the Network 18 Parties (together, Network 18 Holdings
Limited, Network 18 Media & Investments Limited and its subsidiaries, BK Media Mauritius Private Limited and Raghav Bahl and his immediate family). As at the date of announcement of the offer on 30 July 2009, the Network 18 Parties held, in aggregate, 19,813,500 shares in the Company, equating to 36.02% of the Company's issued share capital.The Offer closed on 7 September 2009 and the Network 18 Parties' holding in the Company stood at 44,209,742 shares, being 80.38% of the Company's issued share capital.
As announced on 16 September 2009, the Board confirmed that it expected no change to the current strategy of the Group and that the Company would continue to be traded on the AIM market of the London Stock Exchange.The Offer has resulted in the Group being consolidated as a Network 18 Group company, which is expected to allow the Group the full benefits of directly and openly leveraging the strengths of the Network 18 Group, such as its branding, its association with some of the world's high profile and
widely respected media brands, such as, CNN, CNBC, Viacom and Forbes and the Network 18 Group's track record in the media sector in India. As a result of the Group's association with the Network 18 Group, the Directors anticipate that the Group will be in a stronger position to compete better with the other big names of the industry.It is anticipated that this will lead to greater traction with all film industry participants such as producers, directors, artists, distributors and exhibitors and will allow a
more direct association with the branding that the Network 18 Group enjoys in the media industry. It is also expected to result in better access to capital on the strength of the Network 18 Group's track record with the financial community.Board of DirectorsOn 31 July 2009 and 13 August 2009, it was announced that Mr Atul Setia and Mr Deepak Gupta, respectively, resigned from the Board. The Board would like to thank Mr Setia and Mr Gupta for their contributions throughout their time with the
Company.OutlookThe Group expects to release a total of six films in the second half of the financial year. These releases are primarily the Group's production and co-production projects. In October 2009, the Group released its maiden production, "Fruit 'N' Nut", and "London Dreams", for which the Group had overseas theatrical rights. Whilst "Fruit 'N' Nut" received a lukewarm response at the domestic box office, "London Dreams" was received more favourably by audiences in overseas markets than at the
domestic box office, which can be attributed largely to better marketing and distribution of the film in the overseas territories.The Group continues to be committed to creating, acquiring and distributing quality content and the Directors firmly believe that, by increasing the Group's focus on multiple revenue streams, better shareholder returns can be delivered.On behalf of the Board, I would like to thank the entire team at The Indian Film Company Limited, the Investment Manager, the Investment Adviser,
Studio 18, our stakeholders and our audiences.
Shyam Benegal
Chairman
7 December 2009
7 December 2009
Investment Manager's Report & Interim Management Report
The first six months of the financial year ending 31 March 2010 was a difficult period for the Group due to the two month long negotiation with the key multiplex cinema chains in India and the resultant delayed releases of films at the domestic box office, as mentioned in the Chairman's Statement. All film releases were concentrated over a four month period rather than over the first six months of the financial year ending 31 March 2010. This shortened the run time of the films, thereby having an adverse
effect on the Group's revenues from the domestic box office.The global economic recession continued and lower advertising spends on satellite channels put a lot of pressure on broadcasters. This limited broadcasters' ability to buy filmed content, which resulted in lower revenues from the sale of satellite rights of films.Following these events, the Group was not able to report a profit for the six month period ended 30 September 2009. The Group achieved total revenue of P9.63 million and a net loss of
P3.12 million for the period.StrategyWe continue to follow a three-way strategy of building content by productions, co-productions and acquisitions.2009 has been a tough period for the Indian film industry as a whole, as Bollywood films have struggled this year to date and we have not seen the number and level of success of blockbuster hits as was experienced in 2008. Difficult capital market conditions and increased pressure on revenues has had an adverse impact on the number of film projects being
mounted. The Indian film industry is also facing the impact of the recessionary environment continuing across many countries in the world.The pricing of projects available for acquisition have still not seen the desired correction. As a result, most projects available for the acquisition of worldwide rights are commercially unviable. In a recessionary environment, commercial viability of any project is paramount. The Group has evaluated numerous projects but has not made any acquisitions as they have not
been commercially viable.Whilst the Group continues to evaluate film projects for acquisition, it continues to have a strong focus on its productions and co-productions. The films currently in production are progressing as per schedule and pre-production work has been initiated on multiple projects.The Group continues its strategy to own good and commercially viable content.Films released in the period"Shortkut - The Con is On"*
Starring: Akshaye Khanna, Arshad Warsi, Sanjay Dutt, Amrita Rao
*
Directed by: Neeraj Vora
*
Music: Shankar Ehsaan Loy
*
Genre: Comedy
*
Produced by: Anil Kapoor Film Company
*
Released: 10 July 2009
"Luck" *
Starring: Imran Khan, Sanjay Dutt, Shruti Hasan, Danny Denzongpa, Mithun Chakraborty
*
Directed by: Soham Shah
*
Music: Salim Sulaiman
*
Genre: Action thriller
*
Produced by: Shree Ashtivinayak
*
Released: 24 July 2009
"Life Partner"*
Starring: Govinda, Fardeen Khan, Tusshar Kapoor, Genelia D'Souza, Prachi Desai
*
Directed by: Rumi Jaffery
*
Music: Pritam
*
Genre: Romantic comedy
*
Produced by: Burmawala Brothers
*
Released: 14 August 2009
Films under productionOur productions and co-productions are currently in various stages of production and are on schedule."It's a Wonderful Afterlife"Director: Gurinder ChadhaCast: Sendhil Ramamurthy, Mark Addy, Sally Hawkins, Shabana AzmiGenre: Comedy horror"King Kaun"Director: Tigmanshu DhuliaCast: Govinda, Vidya Malvade, Rimi Sen, Celina JaitleyGenre: ComedyCo-produced with: Reel Life Entertainment (I) Pvt. Ltd."Loot"Director: Rajneesh ThakurCast: Suniel Shetty, Govinda and othersGenre: Action
comedy"Panch Pandav"Director: Ravi ChopraCast: N/AGenre: AnimationCo-produced with: B R Films"Ishq Unplugged"Director: Swapna JoshiCast: Himesh Reshamiya, Purbi Joshi, Sonal Sehgal, Rajesh KhattarGenre: Romantic dramaOur slate of releases in the second half of the financial year 2010 is:"Fruit 'N' Nut"Released: 23 October 2009Director: Kunal VijaykarCast: Cyrus Broacha, Boman Irani, Diya MirzaGenre: Comedy"London Dreams" - overseas theatrical releaseReleased: 30 October 2009Director: Vipul ShahCast: Salman
Khan, Ajay Devgan, AsinGenre: Drama"Striker"Proposed release date: 29 January 2010Director: Chandan AroraCast: Siddharth, Vidya MalvadeGenre: Sports dramaCo-produced with: Make Films Pvt. Ltd. "Road Movie"Proposed release date: 26 February 2010Director: Dev BenegalCast: Abhay Deol, Satish Kaushik, Tannishtha ChatterjeeGenre: Crossover"Banda Yeh Bindaas Hai"Proposed release date: February / March 2010Director: Ravi ChopraCast: Govinda, Lara DuttaGenre: Comedy"Kaun Bola"Proposed release date: 26 March
2010Director: Kabir KaushikCast: Arshad Warsi, Diya Mirza, Boman IraniGenre: ComedyCo-produced with: Shooting Star Films Pvt. Ltd.The release dates of these films have been scheduled for the latter part of the financial year to avoid conflicts with rival productions.Risks and uncertaintiesThe Group's latest annual report for the year ended 31 March 2009, which is available on the Group's website, www.theindianfilmcompany.com, contains the most significant long-term risks relating to the Group's operations
that were in force at the date of that report. We do not consider that these risks have changed during the six months ended 30 September 2009 and we do not anticipate these risks changing over the second half of the financial year. However, any changes to these risks could have a material impact on the Group's performance over the remaining six months of the financial year and could materially affect actual results compared with expected and historical results.The industry-wide approach is very cautious
due, in part, to the prevalent cash crunch. Banks and institutions are being very cautious in lending. It is expected that the two month long negotiations with multiplexes at the beginning of the year will continue to impact the release of films throughout the remainder of the current financial year as film releases will be concentrated over a ten month period rather than twelve months.OutlookWhilst the Group has a slate of films lined up for release in the second half of the current financial year, it
believes that adverse global economic conditions will continue to prevail for the rest of the financial year and will continue to put pressure on the revenues and margins of these films. Nonetheless, it is expected that the recent signs of an upturn in the global economy will have a positive impact on the Group's financial performance.
Raghav Bahl
Film Investment Managers (Mauritius) Limited
7 December 2009
Raghav Bahl
Film Investment Managers (Mauritius) Limited
7 December 2009
Condensed Consolidated Statement of Comprehensive Income
for the six month period ended 30 September 2009 (unaudited)
Six months ended 30 September 2009 Six months ended 30 September 2008 Year ended31 March 2009
(unaudited) (unaudited) (audited)
P'000 P'000 P'000
Income
Revenue 9,633 15,426 40,896
Cost of sales (11,281) (13,087) (34,454)
------------ ------------ ------------
Gross (loss)/profit (1,648) 2,339 6,442
Expenses and net foreign exchange gains/(losses)
Management fees (645) (548) (1,095)
Other expenses (817) (400) (1,179)
Net foreign exchange gains/(losses) 27 (43) 200
------------ ------------ ------------
Operating (loss)/profit before interest and tax (3,083) 1,348 4,368
Finance income 62 344 445
Finance costs (102) (66) (224)
------------ ------------ ------------
Operating (loss)/profit before tax (3,123) 1,626 4,589
Corporate income tax expense - (212) (700)
------------ ------------ ------------
Net (loss)/profit for the period/year (3,123) 1,414 3,889
------------ ------------ ------------
Other comprehensive (loss)/income:
Exchange differences on translating foreign operations (3,414) (1,505) 5,867
------------ ------------ ------------
Other comprehensive (loss)/income for the period/year (3,414) (1,505) 5,867
------------ ------------ ------------
Total comprehensive (loss)/income for the period/year (6,537) (91) 9,756
------------ ------------ ------------
Earnings per Ordinary Share: basic and fully diluted (5.68)p 2.57p 7.07p
------------ ------------ ------------
Condensed Consolidated Statement of Changes in Equity
for the six month period ended 30 September 2009 (unaudited)
Sharecapital Distributable reserve Foreign exchange translation reserve Total
P'000 P'000 P'000 P'000
At 1 April 2009 - 58,631 5,897 64,528
Net loss for the period - (3,123) - (3,123)
Other comprehensive loss - - (3,414) (3,414)
------------ ------------ ------------ ------------
At 30 September 2009 - 55,508 2,483 57,991
------------ ------------ ------------ ------------
Condensed Consolidated Statement of Changes in Equity
for the six month period ended 30 September 2008 (unaudited)
Sharecapital Distributable reserve Foreign exchange translation reserve Total
P'000 P'000 P'000 P'000
At 1 April 2008 - 54,742 30 54,772
Net profit for the period - 1,414 - 1,414
Other comprehensive loss - - (1,505) (1,505)
------------ ------------ ------------ ------------
At 30 September 2008 - 56,156 (1,475) 54,681
------------ ------------ ------------ ------------
Condensed Consolidated Statement of Changes in Equity
for the year ended 31 March 2009 (audited)
Sharecapital Distributable reserve Foreign exchange translation reserve Total
P'000 P'000 P'000 P'000
At 1 April 2008 - 54,742 30 54,772
Net profit for the year - 3,889 - 3,889
Other comprehensive income - - 5,867 5,867
------------ ------------ ------------ ------------
At 31 March 2009 - 58,631 5,897 64,528
------------ ------------ ------------ ------------
Condensed Consolidated Statement of Financial Position
as at 30 September 2009 (unaudited)
30 September 2009 30 September 2008 31 March2009
(unaudited) (unaudited) (audited)
P'000 P'000 P'000
Non-current assets
Exploitation rights 30,235 15,851 25,294
Investments in films and films under production 18,050 25,396 26,769
Term deposit 2,350 2,326 2,350
Office equipment 1 - -
------------ ------------ ------------
50,636 43,573 54,413
------------ ------------ ------------
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