RNS Number:8089B
Channel Health PLC
9 April 2001
CHANNEL HEALTH PLC
PRELIMINARY RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2000
Floated on the Alternative Investment Market in August 2000, Channel Health
PLC ("Channel Health" or "the Company") operates the first dedicated health
related television channel with an interactive website in the UK. Having
launched as a free-to-air service on Sky Digital in June 2000, Channel Health
now broadcasts 18 hours a day and has recently been awarded a prestigious
contract with the National Health Service for the delivery of fully
interactive health programming for NHS Digital.
Highlights
* Operating loss of #2.3 million, in line with the Board's expectations.
* Awarded a #1.2 million contract by the National Health Service for the
production and broadcast of digital interactive television services.
* Broadcast partner in a European Commission initiative, HealthSat,
whereby Channel Health will roll out its programming services into 8
million European homes by September 2001.
* Expansion from eight hours transmission a day (June 2000) to 12 hours a
day (October 2000) to 18 hours a day (February 2001).
* Distribution into five million UK homes on Sky Digital Channel 193.
* Expansion of distribution to cable with successful completion of NTL
trial into 1600 homes - carriage agreement currently in negotiation.
* Completion of 35 hours of proprietary television programming and
negotiation of three important distribution contracts.
* Assembly of high quality team of broadcasting professionals completed.
Joanne Sawicki, Chief Executive of Channel Health, commented:
"The milestones we have reached since launching our service on Sky Digital
nine months ago are fairly staggering and would not have been achieved without
the support we received at the time of the flotation and the extraordinary
efforts of the team we have assembled at Channel Health. We have now secured
the highest level of accreditation, both in the UK and Europe, in the form of
our contract with the NHS and participation in the EU's HealthSat consortium.
"We still have a huge amount to do and are now determined to build on our
achievements to date whilst remaining fleet of foot in the light of rapidly
changing market conditions and, above all, conscious of the need to accelerate
revenue growth and carefully conserve the cash resources we raised on IPO.
2001 is undoubtedly going to be a very exciting year for Channel Health."
9 April 2001
Enquiries:
Channel Health Tel: 020 7758 3200
Joanne Sawicki, Chief Executive
Dabinder Dhanda, Finance Director
College Hill Tel: 020 7457 2020
Nicola Weiner nicola.weiner@collegehill.com
Clare Warren clare.warren@collegehill.com
CHANNEL HEALTH PLC
PRELIMINARY RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2000
CHAIRMAN'S STATEMENT
Introduction
I joined the board of Channel Health as Non-Executive Chairman just prior to
the Company's flotation on AIM in August 2000. Before that time, I had been
impressed by the achievements of Joanne Sawicki and her team which had
launched www.channelhealth.tv web site in November 1999 followed by the UK's
first dedicated health and lifestyle television channel on Sky Digital Channel
193 in June 2000. In addition, there was already a significant amount of
original programme content "in the can", with more series in production.
Finally, there were a number of commercial relationships and strategic
alliances cemented with major organisations such as BSkyB, Hollinger Digital,
Digital Broadcasting Company, Harper Collins, Bounty SCA and many others.
Channel Health successfully raised #5.0 million, net of expenses, in August
2000. The flotation, which valued the Company at #20.1 million, attracted the
highest quality of institutional investor.
Results
Since August the Company has concentrated on building a business for the
future, in a rapidly changing trading environment. I am pleased to report that
our operating loss of #2.3 million for the period to December 2000 was in line
with our expectations. Whilst turnover was substantially below budget, due to
a number of factors, the cost line was aggressively managed and our year end
cash position of #2.6 million was higher than forecast.
The considerable demands on management time commanded by the flotation process
resulted in many of the revenue initiatives scheduled for the second half of
2000 being delayed. Whilst Channel Health has undoubtedly recovered much of
the ground expected to be achieved in the second half of last year, the
largest proportion of the revenues forecast for that period were deferred into
the current financial year. Significantly, the revenue model adopted by the
Board has, in terms of its component revenue streams, proved to be
well-founded. Those revenue streams, in order of magnitude, consisted of
medical sponsorships, programme sales, web infrastructure sales, e-commerce,
web advertising, web sponsorship, television sales, television advertising and
premium phone lines.
Award of #1.2 million contract from Department of Health
After nearly six months of negotiations, I am delighted to announce that the
Company has been awarded a #1.2 million contract to provide the Department of
Health with digital interactive television services. Under the terms of the
initial contract, Channel Health will create seven half-hour programmes about
pregnancy which the NHS will sponsor. The Company's strategy is to expand the
template created for the Department of Health into other pharmaceutical areas
so creating an environment for other companies in the rapidly expanding health
sector to advertise and sponsor.
NTL carriage contract
Channel Health now broadcasts 18 hours a day into 5 million UK homes on Sky
Digital. Negotiations are underway to distribute to UK cable platforms. A
successful trial into 1,600 of NTL's UK homes has resulted in the negotiation
of a long-form carriage contract. Carriage has already begun into Isle of
Wight cable customers' homes.
Membership of European Commission's HealthSat Consortium
Channel Health is on track with its expansion into Europe. In December 2000,
it was awarded a contract by the European Commission to participate in the
HealthSat Consortium, which will enable the Company to rollout its programming
services into 8 million European homes by September 2001. Other Consortium
members include Astra/SES, CanalWeb and Planet Medica. The detail in the
contract is being negotiated. Negotiations are also well underway for carriage
of the channel in Sweden, Denmark, Norway, Benelux, Spain, Russia and Ireland
from which between 2p and 20p per subscriber can be expected.
Strategy
Channel Health aims to stay the leader in its field by "owning" the digital
interactive health market - from consumer to business. Its market is growing
and is attractive to advertisers, sponsors and satellite and cable operators.
The strategy is then to serve these markets to generate revenue while keeping
a tight control on costs. Now that an excellent team has been established and
the business model validated by the contracts that have already been awarded,
Channel Health will pursue further important strategic relationships along the
lines of the NHS contract and HealthSat alliance.
Douglas Yates
Chairman
9 April 2001
CHANNEL HEALTH PLC
PRELIMINARY RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2000
CHIEF EXECUTIVE'S REVIEW
Channel Health's flotation on AIM in August 2000 has provided the cash
injection to enable the business to capitalise on its first mover advantage as
the UK's first health and lifestyle channel. It has also enabled the Company
to commence development of interactive content and applications for digital
television. This strategy positioned Channel Health to win the tender in
October 2000 to provide digital interactive television services for the
National Health Service beating 20 other major media competitors.
Vision and Strategy
Channel Health's size and flexibility has enabled us to respond swiftly to a
changing market. Our policy of outsourcing infrastructure and keeping staff
numbers down has enabled us to conserve cash whilst consolidating the
commercial deals upon which we can build future growth. In the past year we
have established an exciting and entertaining product which we are now
beginning to monetise and recycle into other forms. The business has focused
its activities on the creation of several revenue streams that will be built
upon in the current financial year. In descending order of importance, they
are: medical sponsorship, programme sales, Web IPR, TV sponsorship, premium
phone lines, e-commerce and web advertising and sponsorship.
#1.2 million contract with the Department of Health
The #1.2 million Department of Health contract validates the revenue streams
of medical sponsorship, programme sales and Web IPR. Channel Health will
produce seven, half-hour programmes about pregnancy, which will be sponsored
by the NHS. Using the technology deployed in the creation of the Channel
Health web site, plus newly created interactive television applications, the
programmes will be fully interactive and will be broadcast on Channel Health,
Channel 193 on Sky Digital, in the last quarter of this year. This contract
represents a broadcasting 'first' for the Government which has made a
commitment to further investment in the creation of digital services.
Since being awarded the contract in principle in October last year, there was
an expectation that revenues would start coming in before the end of the year
2000. However, the process of concluding the contract have brought these into
the current year. Some #250,000 of fees are due to be billed to the Department
of Health by the end of April 2001.
The NHS contract not only lends credibility to Channel Health but also creates
the right environment for other companies in the health sector to advertise
and sponsor. The health sector is wealthy and growing and the NHS is clearly
one of the largest budgets in the domestic market. Channel Health's strategy
is to expand the template created for the Department of Health contract into
other pharmaceutical and consumer areas. There has already been interest from
a number of international pharmaceutical and top-100 companies to replicate
the NHS model.
Growing market - women's media
Channel Health's market is a growing one. It caters primarily to women in the
25-45 years of age demographic. This demographic has traditionally been
relatively neglected by satellite and digital providers, albeit that it is
highly desirable for advertisers, sponsors and satellite and cable operators.
Our strategic alliance with Bounty SCA (a partner in the NHS bid) will enable
Channel Health branded materials to reach 80 per cent of new mothers in the
UK, via the Bounty sample packs distributed to new mothers in hospital
delivery rooms throughout the UK.
Size of healthcare market
* The scale of the healthcare industry is vast. For example, the UK spends
over 6% of its GDP on health-related services and the NHS is the largest
employer in Western Europe. The British Government spends some #840 per
capita annually on healthcare.
* Private expenditure - consumer spending on health goods and medical
services is growing at a compound rate of 6% per annum and represented a
market of #14.4 billion in 1997 (#245 per capita).
Channel Health - the brand
Channel Health has created a brand that consumers can trust - it is an
independent company that represents integrity in the market place. Channel
Health provides a targeted approach to "brandcasting" and can provide
advertisers and sponsors a bespoke service - from the preparation of specially
made programmes, right through to customised interactive applications. No
other channel offers this one-stop service.
Other revenues
Advertising is now being sold on both the website and television channel,
advertisers include British Gas, BUPA, So Good Soya Milk Vitatonic, MFI,
Standard Life and Femail (Associated Newspapers). Revenues from both
e-commerce and premium phone lines have begun to build.
Channel Health has also followed a carefully co-ordinated and clearly planned
entry into continental European markets. Building on our policy of monetising
pre-existing assets, contracts have been issued for carriage of the existing
English-speaking service in Spain, Sweden, Finland, Benelux and Russia with
revenues expected to range from 2p-20p depending on the territory.
In the UK, having completed a successful trial on NTL, a long-form contract is
currently being negotiated with carriage expected by September 2001. Cable
companies in the UK have been delayed in their digital roll-out due to a
shortage of microchips for their set top boxes. Negotiations are also under
way with Telewest.
'Content is King'
Channel Health has always placed great emphasis on the importance of
originally produced entertaining content. Twenty-five per cent of our
programming is produced by ourselves, the rest is acquired from major
international distributors, such as Paramount and Beyond International. Our
mission is to provide "change your life" content that inspires and informs.
Our message is about self-empowerment. With over 1,000 articles on the web and
35 plus hours of original programming already completed, we have begun to
license both the web and TV content domestically and internationally. A
distribution agreement has been agreed with the Content Factory for
distribution of web content and three deals are currently being negotiated
with channels from Australia, Sweden and India for the home-produced Chill
Out, Highly Alternative and Change Your Life television series. Two programme
distributors, Electric Sky and Extreme, have been appointed to sell on this
programming.
Our newest series, Fitness Zone, began broadcasting this month. Presented by
Mr Motivator, it features leading experts on tai chi, yoga, back health and
conditioning who present 15 minute workouts five times a day.
What sets Channel Health's content apart from other companies is that all
originally produced content is "Rich" meaning it is designed for interactive
applications and features both words and moving pictures. There is a gap in
the market for this compelling "sticky" content that works on multi-platforms.
Milestones
Since floating on Aim in August 2000, Channel Health has reached some
important milestones:
* Distribution into five million UK homes on Sky Digital, channel 193 via
Digital Broadcasting Company.
* Expansion from eight hours transmission a day (June 2000) to 12 hours a
day (October 2000) to 18 hours a day (Feb 2001)
* A new live play-out system (outsourced to TSI, Feb 2001) enabling a full
advertising schedule and live events to be broadcast.
* 35 hours of original programmes have now been made and two distributors
have been appointed to sell-on this content.
* The re-launch in October 2000 of the Channel Health brand - with a
revamped logo and new website - www.channelhealth.tv featuring greater
capacity for interactivity and more e-commerce capability.
Key strengths unchanged
* First mover advantage.
* Distribution free-to-air into five million UK homes and roll-out to UK
cable and Europe.
* Management: strong team of top management.
* Content: ownership of home-produced programming and web content.
* Brand: readily identifiable and ripe for promotion.
* Revenue: multiple revenue streams.
Strong Management Team
Channel Health has been able to attract some hugely talented and highly
experienced professionals to its team. These include Dabinder Dhanda, Finance
Director (ex Carlton Online, Price Waterhouse); James Ramsay, Vice President
of Content and Programming (ex launch director of MTV and Universal and most
recently head of broadcast for CanalWeb, France); Louise Angus, Vice President
Sales and Marketing (former President of Sales and Marketing for MTV); Sanjay
Nazerali, Marketing Director (former Vice President Marketing for MTV).
The Future
2001 will be an exciting year for Channel Health as our reach expands into
Europe and into cable. It will see the first fully interactive programmes
being transmitted and will see the growth of the business into the
business-to-business and professional sector of the health market.
Work has begun on rolling out a white label website and television channel
product into health clubs - with a strategic alliance formed with the Sports
Development Corporation and The Leisure Corporation - experts in marketing to
health clubs. We will also provide broadcast services to niche channels as
evidenced by the European Union HealthSat contract. Channel Health has further
plans to roll-out broadcasting and programming services into hospitals,
doctors surgeries and pharmacies. Further strategic alliances are currently
being formed and there is evidence of strong revenue potential from this area.
Channel Health is a name that can be trusted to deliver high quality,
entertaining health information across all sectors of the industry.
Joanne Sawicki
Chief Executive
9 April 2001
CHANNEL HEALTH PLC
Consolidated Profit and Loss Account
for the Period ended 31 December 2000
#'000
Turnover
Existing operations -
Acquisitions 20
20
Cost of sales (850)
Gross loss (830)
Administrative expenses (1,479)
Operating loss
Existing operations (62)
Acquisitions (2,247)
(2,309)
Interest receivable and similar income 80
Interest payable and similar charges (2)
Loss on ordinary activities before and after taxation (2,231)
Retained loss carried forward (2,231)
Basic (loss) per share (6.2p)
Fully diluted (loss) per share (6.1p)
CHANNEL HEALTH PLC
Consolidated Balance Sheet
as at 31 December 2000
#'000
Fixed assets
Intangible assets 2,296
Tangible assets 382
2,678
Current assets
Stock 717
Debtors 555
Cash at bank and in hand 2,610
3,882
Creditors: amounts falling due within one year (918)
Net current assets 2,964
Total assets less current liabilities 5,642
Capital and reserves
Called up share capital 3,578
Share premium account 4,295
Profit and loss account (2,231)
Shareholders' funds 5,642
CHANNEL HEALTH PLC
Consolidated Cash Flow Statement
for the Period ended 31 December 2000
#'000 #'000
Net cash outflow from operating activities (2,773)
Returns on investments and servicing of finance:
Interest received 80
Interest paid and similar charges on external financing (2)
Net cash flow from returns on investment and servicing of finance 78
Capital expenditure:
Purchase of tangible fixed assets (301)
Net cash outflow from capital expenditure (301)
Acquisitions and disposals:
Cash in subsidiary at acquisition 234
234
Financing:
Issue of equity share capital 1,078
Share premium received on share capital issued 5,036
Less: Share issue expenses written off (742)
Net cash inflow from financing 5,372
Increase in cash 2,610
Notes to the Financial Information
1. Publication of non-statutory accounts
The financial information contained in this preliminary statement does
not constitute statutory accounts as defined in section 240 of the
Companies Act 1985. The financial information for the period to 31
December 2000 has been extracted from the audited group financial
statements on which the Auditors' report was signed on 6 April 2001.
The accounts have not been delivered to the Registrar.
2. Annual Report
The Annual Report for the results for the period to 31 December 2000
will be mailed to shareholders on 14 May 2001.
The following are extracts from the notes to the audited group
financial statements for the period to 31 December 2000.
3. Loss per share
The calculations of earnings per share are based on the following
profits and numbers of shares.
Earnings per share
Basic Diluted
# #
Loss for the financial year (2,231,072) (2,231,072)
Weighted average number of shares:
For basic earnings per share 35,784,796
Exercise of share options 952,378
For diluted earnings per share 36,737,174
4. Reconciliation of operating loss to net cash flow from operating
activities
#'000
Operating loss (2,309)
Depreciation 44
Amortisation of goodwill 49
Increase in stock (631)
Increase in debtors (372)
Increase in creditors 446
Net cash outflow from operating activities (2,773)
5. Comparative figures
The financial statements cover the period from incorporation on 27
July 2000 through to 31 December 2000. There are thus no comparative
figures.
6. Investments held as fixed assets
On 28 July 2000, the Company acquired 100% of the issued share capital
of Channel Health Interactive Lifestyle Limited for consideration
comprising the issue of 25,000,000 ordinary shares of 10p each in the
Company. The fair value of the consideration was #2,500,000. The
acquisition has been accounted for as an acquisition.
The subsidiary undertaking operates the first dedicated health related
television channel with an interactive website in the UK. All the
subsidiary's transactions are reflected in the consolidated position.
The Company was incorporated in the United Kingdom.
Channel Health Interactive Lifestyle Limited incurred a loss after
taxation of #2,724,364 in the period ended 31 December 2000, of which
#603,996 arose in the period from 1 December 1999 to 31 May 2000,
being the date of the last management accounts available prior to
acquisition on 28 July 2000.
7. Reconciliation of net cash flow to movement in net funds
#'000
Increase in cash in the period 2,376
At acquisition of subsidiary 234
Net funds at 31 December 2000 2,610
8. Analysis of change in net funds
Cash in
subsidiary At 31
on Cash December
acquisition flow 2000
#'000 #'000 #'000
Cash at bank and in hand 234 2,376 2,610
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