Review of Operations
The past financial year has seen a significant improvement in the financial performance of the Company.
Beyond International Limited recorded a pre tax operating profit of $439,000 (2002: loss $22,241,000) and a net profit of $150,000 (2002 net loss $22,085,000).
Consolidated revenue for the year was $58,093,000 (2002: $53,239,000), an increase of 9%.
The improved trading was primarily a result of an increase in the volume of non-fiction television program production, the success of the Beyond Television Investment Fund and the reduction in fixed overhead costs. The levels of international sales revenue for both the film and television divisions were consistent with the prior year in terms of finished program/film sales – the increase of revenue by 55% to $23,811,000 being the result of the Company securing pre sale commitments during the period.
The Company incurred a significant realized and unrealized foreign exchange loss for the year totaling $1,326,000 (2002: $1,258,000), which has a material negative impact on the Company’s operating result for the year to June 30, 2003.
Net cash flow contribution from operating activities was $1,104,000 (2002: $1,970,000) and bank debt has decreased to $9,625,000 from $11,125,000 in the previous financial year.
On the 30th June 2003, Beyond disposed of its shareholding in Beyond Online Limited for $387,000 in cash. This had no effect on the operating results for the year as the investment was recorded in the books at the market value.
The Beyond Television Investment Fund generated $9,120,000 in revenue for the Company through the sale of some of its copyright interests in a number of non-fiction television programs. It is the intention of the Company to continue generating production financing in the normal course of business through similar arrangements in the 2004 and future financial years.
Last year the Company set the following financial objectives, which were all met during the 2003 financial year: -
1. return to profitability;
2. a positive operating cash flow and;
3. reduced bank borrowings.
Beyond Productions and Copyright Production Companies
Television production revenues were steady at $34,057,000 (2002 35,892,000) during the year. Despite this small decline in revenue, the production and copyright division has improved margins and returned to profitability with operating earnings before tax of $5,965,000 (2002: loss before tax $2,681,000).
During the year Beyond Simpson Le Mesurier (BSLM) produced series 6 and 7 of the long running police drama Stingers.
Non-fiction program production by Beyond Productions was consistent with the previous financial year and included long running series Hot Property/Hot Auctions, Earthpulse, Mythbusters, Anaesthesia (In Surgery and Awake) as well as a number of short run programs for Discovery Channel, National Geographic Channel, Travel Channel and TLC in the USA.
The strategy of maintaining a mix of domestic and international production will continue into the 2004 year. In June 2003, Beyond Productions was commissioned to produce a 55-hour series entitled Double Agents for the Discovery Channel in the USA. As a result the Company has established a production office in Bethesda, Maryland. It is intended to use this office as the base for expanding the Company’s production business in the USA.
The trend of Australian audiences to favor local programs has continued during the year. BSLM produced the 150th episode of Stingers in August 2004, making this series one of the most successful drama series in Australia. Stingers is also a valuable addition to the sales catalogue of Beyond Distribution, being a consistent seller in foreign markets.
BSLM has come to an agreement with The Nine Network and the Film Finance Corporation to produce a new telemovie pilot for a drama series entitled Troppo. A children’s drama series is also in development for the ABC. BSLM is working on a pilot for a US drama series with Warner Brothers International, and is the development of a mini series to be co produced with a Canadian producer.
Liberty and Beyond is developing a new drama series for the ABC and a mini series on the Lindy Chamberlain story for the Seven Network.
The strong relationships that have been built with US based broadcasters have led to an increase in non-fiction programs commissioned from these customers from approximately 50 hours in 2002 to approximately 100 hours currently in production. The strategy of having a strong offshore customer base compensates for any weakness in local demands or change in local program commissioning trends. The foreign productions are usually in the nature of “co productions” so the company benefits by acquiring the international rights to these programs being the international distributor. We are continuing to vigorously grow these opportunities by taking advantage of our international network of staff and offices in London, New York and Maryland.
Beyond Films and Beyond Distribution
Revenue from the sale of television programs and feature films and television pre sales increased by 55% to $23,811,000 (2002) $15,400,000 during the year. As noted above, the sales of finished television programs and films was consistent with the prior years with the increase being accounted for by an increase of pre sales for programs produced during the 2003 financial year.
Sales of completed television programs in the international market have grown marginally during the year and it is expected that this trend will continue into 2004. The company has a very strong non-fiction catalogue including Tomorrows World, Mythbusters and Pilot Guides. Beyond also sold a number of drama programs during the year including Stingers, Halifax, Temptation and Secret Bridesmaids Business. The company was also involved in arranging the domestic and international pre sale agreements in conjunction with Pearson Broadband for the Backyard Science series, which is being produced by Beyond Productions.
In terms of feature film sales the last financial year saw significant changes in the Company’s acquisition strategy. During the 2003 year Beyond Films sold a number of Australian features including Crackerjack and Take Away in the international market. The trend in Australia of funding and producing comedy films has led to a decline in international sales for the division as these films have limited appeal outside Australia. The company has been working to develop projects outside of the comedy genre and has secured the international sales rights to a number of new drama feature films including A Good Woman starring Helen Hunt and The Oyster Farmer starring Rose Byrne, Kerry Armstrong and Jack Thompson. The company is expecting that this strategy will result in an increase in sales during the 2004 financial year.
Outlook for 2003/2004
The past six months have seen an improvement in the advertising earnings of television broadcasters both domestically and overseas. This has lead to an increased demand for programming. The current programming preference of broadcasters is for local production. This is a positive trend for Beyond’s original production operations in terms of its key markets of Australia and the United States. The establishment by the Company of a production operation in Maryland is expected to significantly improve our ability to obtain new programming commissions. The company expects this operation to grow substantially during the year in terms of hours produced, revenue and earnings.
The improvement in advertising revenue should also lead to broadcasters increasing their demand for finished programming – although it is anticipated that increases in demand for this product will be significantly slower than original production. The television distribution operation is focused on acquiring quality product from internal and external sources for worldwide distribution. A modest improvement in earnings for this division is expected in the 2004 financial year as a result of the new product and improved market conditions.
Film sales are projected to grow this year as a result of the acquisition of a number of star driven quality drama feature films that are designed to appeal to the international theatric markets. These films should be able to generate revenue through all media – theatrical release, DVD and video and pay and free television.
The Company has met its cost reduction targets in the international sales operations and in the administration, accounting, management and legal departments. By consolidating head office operations at the facility owned by the Company in Sydney we have achieved substantial overhead savings and improved intra company communications.
Our financial objectives this year are to continue to improve annual operating profits, increase the generation of free operating cash flow and reduce bank borrowings by the 30th June 2004.
The company maintains a strong management team both in Australia and overseas and their efforts are appreciated in continuing to improve the company’s creative and financial performance in 2004 and beyond.
Mikael Borglund
Managing Director
This announcement is made pursuant to Listing Rule 4.3A
All enquiries should be directed to:
Mr Mikael Borglund, Managing Director, Beyond International Limited
Telephone 02 9437 2000 or email: investor_relations@beyond.com.au
published: Friday, September 12, 2003 
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