MediaZest Plc - Second Interim Results and Restoration of Trading on AIM

18 September 2020

MediaZest Plc

("MediaZest", the "Company” or “Group"; AIM: MDZ)

Second Unaudited Interim Results for the year ended 31 March 2020

Restoration of Trading on AIM

MediaZest, the creative audio-visual company, announces its unaudited interim results for the year ended 31 March 2020.

As announced on 3 April 2020, MediaZest extended its current accounting year end to 30 September 2020 in order to defer audit costs until later in the year, thereby conserving cash during the “lockdown” period.

In addition to the Company’s announcements of 8 and 9 June 2020, unaudited, second interim results which incorporate results for the unaudited 6-month period to 31 March 2020 are set out below. All comparisons are against MediaZest’s audited results for the year ended 31 March 2019. The Company’s audited results for the 18-month period ending 30 September 2020 will be published by no later than 31 March 2021.

Further to its announcement of 14 September 2020, trading in the Company's ordinary shares on AIM will resume with effect from 7:30 a.m. today (18 September 2020).

CHAIRMAN’S STATEMENT

Introduction

The Board presents the consolidated unaudited results for the twelve months ended 31 March 2020 for MediaZest plc and its wholly owned subsidiary company MediaZest International Ltd (together the “Group”).

Financial Review

• Revenue for the period was £2,397,000, down 27% (2019: £3,303,000).
• Gross profit was £1,131,000, down 32% (2019: £1,675,000).
• Gross margin was down slightly to 47% (2019: 51%).
• Administrative expenses were £1,282,000, a reduction of 17% (2019: £1,546,000).
• EBITDA was a loss of £151,000 (2019: profit of £129,000).
• Net loss for the period after taxation was £271,000 (2019: profit of £6,000).
• The basic and fully diluted loss per share was 0.0194 pence (2019: earnings per share 0.0004 pence).
• Cash in hand at 31 March 2020 was £16,000 (2019: £24,000).

Operational Review

As highlighted in the Financial Review above, the unaudited financial results for the twelve months to 31 March 2020 were adversely affected first by the difficult business conditions encountered at the beginning of the current financial year and secondly by the Covid-19 pandemic (the “Pandemic”), by way of comparison with the prior period. This shows a reduction in both revenue and profitability at a Group level.

The impact on the results for the first 6 months of the year to 30 September 2019, 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 has subsequently been completed, with the majority of the work falling into October and November 2019.

Coupled with improving macro-economic conditions this led to a substantial improvement in financial performance during the second half of 2019, however this progress was curtailed from mid-February 2020 due to the impact of the Pandemic.

Results for February and particularly March 2020 were materially adversely impacted by the Pandemic, as 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.

The Company has significantly reduced its administrative expenses compared to the prior year. In the first 6 months of the year to September 2019 this was due to a cost cutting programme which had been implemented during Q1 2019, in anticipation of difficult trading conditions and ongoing political uncertainty. Costs were further reduced by cuts implemented in the wake of the Pandemic pursuant to which the Company expects to save approximately £170,000 on an annualised basis, although the majority of these savings will only be received in the subsequent period from 1 April 2020.

The Group has utilised the Government’s Job Retention Scheme to furlough employees at appropriate levels during the period since 31 March 2020. All furloughed employees have returned to work in some form since July 2020 as the “lockdown” eased and project delivery resumed.

Client Work

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 year. The Group was pleased to see that in March 2020 Pets at Home won the coveted Store of the Year 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 March 2020 and was delayed during “lockdown”, subsequently being delivered by the Group’s highly skilled in-house teams over the summer, as per the Company’s announcement of 10 August 2020.

Trading post UK “lockdown”

During the “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 delivered most of the turnover during that period.

A handful of clients continued to keep stores open as a result of operating in ‘critical industries’ throughout the “lockdown” period. Strictly following the appropriate Government guidelines including social distancing rules, 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 to improve safety and introduce/react to new rules as they have evolved.

With the easing of some of the “lockdown” measures, further client sites have re-opened and in May 2020 MediaZest delivered on the first two of the previously delayed projects. There were several other projects similarly completed in June and July 2020 and the Board expects that all previously delayed projects will be delivered before the end of 2020.

In addition to these projects existing pre “lockdown”, which are now at or nearing the completion stage, 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.

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. The combined value of these over the initial contractual periods is approximately £150,000 rising to up to £220,000 if extension clauses are activated.

Fundraising

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.

The terms of the CLNs are as follows:

• 3-year CLN (the “Term”), with interest of 7% per annum, payable quarterly in arrears;

• MediaZest will make a bullet repayment to each investor at the end of the Term if the CLN (in whole or in part) remains unconverted;

• The Company may repay in full the CLN at any time, including accumulated interest on a pro-rata basis;

• Each investor can convert the CLNs (in whole or in part) into new ordinary shares in MediaZest by serving written notice 14 days after each annual anniversary during the Term;

• The CLN conversion rate will be calculated by dividing the principal amount of the CLN by the mid-market price of the ordinary shares, on the last business day before the relevant anniversary date of the CLN, less a discount of 10%; and

• If the CLN is repaid at the end of the Term then warrants over new ordinary shares will be granted to each investor (the “Warrants”). The number of Warrants granted will be calculated by dividing a sum equal to 10% of the principal amount of the CLN by the mid-market price of the shares in MDZ at on the last business day before the closing of the CLN. The Warrants’ exercise price will be the mid-market price of the shares in MDZ on the last business day before the closing of the CLN and the Warrants will expire 12 months from the date of grant

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 6.

Outlook

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 rapidly.

In response to this, as well as the various cost cutting measures, 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.

The Company continues to receive enquiries from potential new clients although these remain below the expected levels for this time of the year.

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. Demand from ongoing clients is expected to remain strong.

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.

Lance O’Neill

Chairman

18 September 2020