MediaZest Plc - Half-year Report

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23 December 2019

MediaZest plc

("MediaZest", the "Company” or the “Group")

Unaudited results for the six months ended 30 September 2019

MediaZest (AIM: MDZ), the creative audio-visual company, announces its unaudited interim results for the six months ended 30 September 2019.

CHAIRMAN’S STATEMENT

Introduction

The Board presents the consolidated unaudited results for the six months ended 30 September 2019 for MediaZest plc and its wholly owned subsidiary company MediaZest International Ltd (together the “Group”).

Financial Review

• Revenue for the period was £943,000 (Restated 2018: £2,136,000)
• Gross profit was £475,000 (Restated 2018: £1,049,000), impacted by delay to a major project
• Sharp improvement in performance post period end with Profit after tax in October and November of £44,000 on revenue of £709,000 (2018: loss of £12,000 on revenue of £531,000)
• Gross margins were consistent at 50% (Restated 2018: 49%)
• EBITDA was a loss of £140,000 (Restated 2018: profit of £273,000)
• Net loss for the period after taxation of £228,000 (Restated 2018: profit of £207,000)
• The basic and fully diluted loss per share was 0.0163 pence (Restated 2018: earnings per share 0.0161 pence)
• Overdraft at period end was £6,000 (2018: cash in hand of £12,000). The period end cash position is reflective of payments made to suppliers prior to the month end and large receipts from customers falling in October and November. Cash in hand at close of business 20 December 2019 was £38,000.

Operational Review

As shown in the Financial Review above, the results for the six months to 30 September 2019 were adversely affected by the difficult business conditions encountered in the current year, by way of comparison with the prior period. This shows a reduction in both revenue and profitability at Group level.

In anticipation of the possibility of this slowdown, the Board implemented a cost cutting programme during January and February 2019 and reduced the cost base by approximately £200,000 for the current financial year. The impact of this was to reduce ongoing costs and overheads, half of which was experienced in the period, thus having a mitigating effect on the reduction in project activity.

The impact on the interim results was accentuated by delays to a large project with a UK University, as noted in the Group’s Final Results announcement of 28 August 2019. This project is currently progressing towards completion, with the majority of the work falling into October and November 2019.

In light of the above, the Directors believe the results for the six month period ending 30 September 2019 should be viewed alongside MediaZest’s stronger performance during October and November 2019, when the Group generated profit after tax of £44,000, based on revenue of £709,000. Accordingly, key performance indicators for the eight month period to 30 November 2019 are revenue of £1,652,000, loss at EBITDA of £95,000 and a loss after tax of £184,000.

The Group’s operating subsidiary, MediaZest International, shows corresponding profit after tax of £83,000 and EBITDA of £150,000 within those results before deduction of Plc costs, for the eight months to 30 November 2019.

Client Work

The Group continues to service a core of long-standing client accounts including Lululemon Athletica, 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 has now provided audio visual solutions for a further twelve stores since 1 April 2019 with a further six scheduled to be completed early in 2020. New clients added to date in the current financial year include Twinings, Belron and Avis Budget Group. In addition, the Group has recently won a high-profile project with a global luxury automotive brand, which is also a new client, and expects to announce further details regarding this project during 2020.

Recurring revenues have diminished by approximately 7% during the period with renewals strong, but with a small number of store closures and projects completing leading to a reduction in retainer income. This has led to an ongoing annualised recurring revenue base total of approximately £650,000 (2018: approximately £700,000). The Board is targeting a run rate of £700,000 worth of recurring revenues by the end of the financial year, which would cover almost 50% of the cost base going into the next financial year.

Administrative costs have been reduced, primarily, by refining the already lean team of dedicated in house staff that the Company employs and by relinquishing the London sales office. The Group is also looking to generate more new business in the Corporate and Education markets in order to reduce the reliance on the proportion of business completed in the retail sector. As such, further investment in the sales and marketing process has been made during the period to target these markets.

The introduction of IFRS16 has had an impact on the way the Company accounts for leases as shown in note 6 to these results.

Outlook

As noted, both in this statement and previously, the UK market continues to suffer from macroeconomic headwinds particularly in the Retail sector, leading to delayed investment decisions, cost cutting programmes and the termination of projects by clients. Despite these pressures, over the last three months, the Group has seen a marked increase in enquiries and built an encouraging pipeline for 2020. Several existing clients have already indicated plans to extend their engagement with the Company substantially in 2020 via new projects and the expansion of existing programmes.

Notwithstanding the disappointing performance in the period, the Board believes that the new calendar year will provide opportunities for the Group to continue the progress it made in the last Financial Year ended 31 March 2019.

Feedback from clients on projects delivered remains encouraging and, as such, the quality of the services provided by the Company gives cause for optimism as a continued differentiator in the market. The Directors continue to review costs on a month by month basis and will make further adjustments as necessary based on market conditions as they evolve in the coming period.

Lance O’Neill

Chairman

23 December 2019