7 Aug 2007 08:00
Embargoed: 0800hrs, 7 August 2007
DCD Media plc ("DCD" or the "Group") Completion of Acquisitions, Fundraising, 100 for 1 Share Consolidation
Acquisitions of Independent Production Businesses
Further to the announcement of 11 July 2007, DCD Media is delighted to announce that it has today completed three acquisitions in the independent television production sector that are intended to cement its position as a leading independent producer and distributor in UK television.
Prospect Pictures Limited (a producer of lifestyle entertainment such as Daily and Saturday Cooks), September Holdings Limited (a producer of popular factual entertainment such as Hollywood Lives) and West Park Pictures Limited (a producer of documentary content with a major contract with Stephen Fry) have been acquired for a total consideration of approximately ‚£19.1 million, satisfied as to approximately half cash and half shares. Full details of the consideration for each individual company as well as detailed financial information appear below.
Each of the businesses joining the DCD group is established in its field and offers organic growth opportunities. However, as part of the DCD group, collectively they are expected to be able to capitalise on advantages not previously available. As has been evidenced by the performance of Box TV and Done and Dusted since joining the group in 2005/6, the benefits are expected to arise not only from the economies of scale but more importantly from the synergies between the production divisions. Furthermore, with the benefit of DCD's in-house distributor NBD TV, the Group proposes to retain almost all the upside from each production business's content as the necessity for outsourced distribution is eliminated.
Each of the acquired companies' Managing Directors is to join the executive management board of DCD whilst all key management have agreed to enter three year service agreements.
DCD has today raised ‚£8.5 million before expenses via a placing of 10,625,000 new Ordinary Shares with certain institutional investors at 80 pence per share following today's 100 for 1 share consolidation. In addition, the Company has today raised ‚£4 million in convertible loan from certain institutional investors.
Chief Executive of DCD Media, Chris Hunt, commented,
"We are delighted to have today completed these deals, which are all expected to be earnings accretive; we anticipate that this will be enhanced as the newly acquired businesses' growth as part of our group will be significant."
Enquiries:Chris Hunt, Chief ExecutiveDCD Media plcTel. 020 7297 8000Ben SimonsHansard GroupTel. 020 7245 1100Tom Price / Jeremy EllisEvolution SecuritiesTel. 020 7071 4300Introduction
The Company has today acquired the entire issued share capital of each of Prospect Pictures Limited, September Holdings Limited and West Park Pictures Limited for an aggregate consideration of approximately ‚£19.1 million, comprising ‚£9.37 million in cash, ‚£0.18 million in loan notes and ‚£9.55 million in new Ordinary Shares.
These companies operate in the areas of factual TV production, lifestyle TV production and factual entertainment TV production and meet the Company's criteria for growth by acquisition.
The Fundraising
In order to part finance the Acquisitions, the Company has today raised ‚£8.5 million (before expenses) by way of a placing of 10,625,000 new Ordinary Shares at a price of 80p per share. In addition, the Company has today raised ‚£4 million in convertible loan from certain institutional investors. The principal final agreed terms are as follows: a coupon of LIBOR plus 3.25% per annum whilst the notes have a second priority lien, reducing to LIBOR plus 2.25% after the notes are granted a first priority lien; an initial conversion price of 88p (that is 110% of the Placing Price); a maturity of 5 years; an interest make-whole provision and investor options to require the Company to repay the notes in January 2010 and January 2011.
Background to and reasons for the Acquisitions
The Company has made significant progress recently in shifting its focus towards production from the distribution of programme content for TV. The acquisition programme started in late 2005 with the acquisitions of NBD Television Limited and Box TV Limited, which were followed in February 2006 by the acquisition of Done and Dusted Group Limited. The Group is now recognised as a leading vertically integrated TV producer and distributor, focused on the arts, entertainment and drama. In addition to continuing organic growth, it is part of the Group's strategy to make further acquisitions within other genres, including lifestyle and factual production, which it believes will create commercial synergies.
The market dynamics are currently very positive for the Group. The 2004 Ofcom Code of Practice gave independent production companies the right for the first time to exploit the international rights in programmes they produce for the major UK broadcasters. This structural change in the sector provides a new opportunity for production companies, which have not yet exploited these rights, to benefit from the revenues generated thereby, and for distributors to obtain valuable new rights from which to generate sales commission. Additionally, as new forms of delivery emerge, such as video on demand, high definition television, IPTV and mobile applications, new revenue streams are expected to materialise for those able to offer suitable content.
The Directors believe the Acquisitions meet the Company's criteria for growth by acquisition and will help capitalise on the available market opportunity.
The Acquisitions
Prospect Pictures Limited
The company is a major producer of weekday mid afternoon entertainment programmes comprising cookery and other lifestyle television. It has a high volume of low cost productions and has recurring output deal contracts, which provide relatively stable and visible earnings.
The total consideration for the acquisition was ‚£7.05 million, comprising ‚£3.35 million in cash, ‚£0.18 million in loan notes and ‚£3.52 million satisfied by 4,406,250 new Ordinary Shares.
September Holdings Limited
The company is a major producer of `factual entertainment' for TV media channels headed by David Green, an internationally renowned producer and director. An important part of the business of September Holdings Limited is in the US, with a full time operating office in Los Angeles. Its credits include `Bridezillas' in its fourth season for Women's Entertainment channel in the US and `the Hollywood' brand now transmitting its thirteenth series for ITV1. It retains the international exploitation rights, which it exploits through its in-house distribution arm, to these programmes.
The total consideration for the acquisition was ‚£9.06 million, comprising ‚£4.53 million in cash and ‚£4.53 million satisfied by 5,662,152 new Ordinary Shares.
West Park Pictures Limited
The company is a producer of documentary content with an international flavour. It has established links with well known UK presenter personalities, including Stephen Fry, and also produces works for Prince Charles' artistic foundation.
The total consideration for the acquisition was ‚£2.96 million, comprising ‚£1.48 million in cash and ‚£1.48 million satisfied by 1,850,391 new Ordinary Shares.
Summary financial information
(i) Prospect Pictures Unaudited Unaudited Unaudited Limited 12m to 12m to 7m to 30 September 30 September 30 April 2005 2006 2007 ‚£000 ‚£000 ‚£000 Turnover 7,207 6,390 4,839 Gross Profit 1,650 1,479 1,570 Operating Profit 328 407 1,074 Profit Before Tax 365 474 1,090 Profit After Tax 253 339 796 Net Assets 23 362 1,158 (ii) September Holdings Audited Audited Audited Limited 12m to 12m to 12m to 31 December 31 December 31 December 2004 2005 2006 ‚£000 ‚£000 ‚£000 Turnover 7,124 5,100 7,329 Gross Profit 2,526 1,624 2,898 Operating (Loss)/ (290) (52) 707 Profit (Loss)/Profit (303) (76) 669 Before Tax (Loss)/Profit After (284) (74) 629 Tax Net Assets 892 820 1,460 (iii) West Park Pictures Unaudited Unaudited Unaudited Limited 12m to 12m to 2m to 31 March 2006 31 March 2007 31 May 2007 ‚£000 ‚£000 ‚£000 Turnover 612 1,098 26 Gross Profit/(Loss) 237 307 (25) Operating Profit/ 41 58 (55) (Loss) Net (Liabilities)/ (33) 25 (30) Assets
Current trading and prospects for the Enlarged Group
The Company announced its interim results for the six months to 31 December 2006 on 30 March 2007. In it the Company noted that "the Directors are satisfied that the new subsidiaries are performing according to expectations, and that the pre-existing operations are also in line with those expectations". It also noted that "the Directors are comfortable with their overall full year expectations", which remains the case.
The Directors believe that the prospects for the TV production business remain positive, and that the benefits to the sector of the Codes of Practice approved by Ofcom in 2004, which enabled independent producers to retain the international exploitation rights to content commissioned by the major UK terrestrial broadcasters, remain applicable following the Acquisitions. The Directors expect the Enlarged Group to be able to gain further and better access to the broadcasting marketplace following Completion as the production companies to be acquired have existing trading histories in areas not previously covered by the Group and hence have in place relationships with broadcasters, particularly in the UK and USA, which the Group has not previously enjoyed. Additionally these companies have been acquired with productions at various stages of development and/or commissioning.
The Directors further believe that these acquisitions will help to smooth the Company's existing profile of profits and cashflow, which have been largely the result of producing a small number of relatively high turnover projects. In particular, Prospect Pictures has a contract to produce daily cooking programmes over most weeks of the year, which is expected to result in regular and predictable revenues.
The Directors expect the Acquisitions to generate significant additional revenues for the Company's in-house distribution division, as they produce content suitable for international exploitation.
DCD MEDIA PLC