Forbidden Technologies plc (AIM: FBT), the AIM-quoted owner and developer of the market leading cloud video platform, FORscene, is pleased to announce its preliminary results for the year ended 31 December 2013.
- Revenue of GBP772,180 (2012: GBP812,744). Excluding the one-off effect of the major world sporting event in 2012 revenue increased by 33%.
- Increased gross profit margin by 2.7 percentage points to 86.4% (2012: 83.7%).
- Robust balance sheet with liquid funds of GBP7.8m (2012: 0.5m) following a successful equity placement.
- Increased investment in the business to facilitate growth opportunity.
- Appointed high-profile Head of US operations.
- Hired additional R&D staff in the second half to help maintain and enhance market-leading technology.
- Added to network of partners following integration of FORscene into Microsoft’s Windows Azure platform.
- Appointed Marketing Team Direct to help review and refocus the Forbidden brand.
Post Period Highlights
- Launched US subsidiary to help deliver on huge market opportunity.
- Successful trials in the US Sports sector.
Commenting on the results, Stephen Streater, Forbidden Technologies CEO, said:
“2013 has been a significant year for the Company, with a successful equity placing and extensive investment undertaken to create a solid platform for growth.”
“Our addressable market continues to grow alongside the increasing acceptance of cloud-based workflows and, with the establishment of our US subsidiary and limited competition offering a comparable service, we believe we are now ideally positioned to maximise the potential of our direct and partner sales channels in order to grow our customer base in 2014 and beyond.”
“We would like to thank shareholders for their continued support and look forward to taking advantage of the substantial opportunity available to us.”
Forbidden Technologies plc
Tel: +44 (0)20 8879 7245
Stephen Streater, CEO
Cenkos Securities plc (Nominated Adviser and Broker)
Tel: +44 (0)20 7397 8900
Bobbie Hilliam, Corporate Finance
Alex Aylen, Sales
Redleaf Polhill (Financial PR)
Tel: +44 (0)20 7382 4730
About Forbidden Technologies plc
Forbidden Technologies plc (AIM: FBT, www.forbidden.co.uk) floated in February 2000.
The Company develops and markets the powerful cloud video platform, FORscene, which is used by broadcasters, in professional web video, in education and by consumers. FORscene is one of the worlds most advanced browser-based and mobile applications.
It gives me great pleasure to present the fourteenth annual report to shareholders of Forbidden Technologies since its flotation on the AIM market of the London Stock Exchange in February 2000.
Statement of Comprehensive Income and Statement of Financial Position
In the year to 31st December 2013, the Company achieved sales of GBP772,180 (GBP812,744 FY2012), which, excluding the one-off effect of the 2012 Olympic Games, represented an increase of 33% on an organic basis. The cost of sales was 20% lower than in 2012 and the resulting gross profit margin of 86.39% showed a 2.7% improvement on 2012.
Administrative expenses in the year to 31st December 2013 were GBP1,491,408, an increase of 55% compared to GBP963,237 in the previous year. The increase is the result of Management setting the platform for growth with higher investment in people, and in higher promotional costs in the second half of the year.
The loss for the year of GBP797,547 compares to a loss of GBP216,715 in the previous year, reflecting the investment into the Company structure to facilitate growth.
Following the successful fund raising in July 2013, the balance sheet is dramatically strengthened. At the end of the 2013 year it shows positive liquid funds of GBP7,839,109 compared to GBP459,787 at the close of 2012.
Progress and Plans
The simplest description of the management culture of Forbidden Technologies today is of a team that is “Going for Growth”.
The major event in 2013 was the successful fund-raising from a wide number of new institutional investors and from existing shareholders. The money was raised to strengthen the balance sheet and to accelerate growth in the coming years, initially in the U.K. and North America and subsequently across the globe to achieve our ambition of becoming a global leader in video processing and publishing. GBP2,000,000 has been placed on term deposit.
The North American video post- production and broadcasting market is 10 times the size of the U.K. market. Based upon Forbidden’s successful penetration of the U.K. post – production market our plan is to build significant business in the North American market. In November 2013 a management team was recruited, led by a high profile business leader with many years of experience in the broadcast post-production markets. This has been followed in early 2014 by the incorporation of a U.S. subsidiary company Forbidden Technologies Inc. and the establishment of office facilities in Burbank California.
The U.S. team has now identified a significant list of customer opportunities, in both reality T.V. and sports and is in the process of installing a number of trial servers in potential customer premises.
The Company has developed a technology platform over many years which others have attempted, unsuccessfully, to match. To help maintain the technological edge, the technology is dynamic and is regularly upgraded. Additional R&D personnel have been recruited in the second half of 2013 and in early 2014, with the intention of staying ahead of the game. (See C.E.O.’s report).
Partners are one of the Group’s two routes to market, providing significant reach and marketing power. Having established relationships with EVS and deltatre in sports and news as a result of our involvement in the 2012 games, the second half of 2013 saw the integration of FORscene into Microsoft’s Windows Azure cloud platform for broadcasters and production companies internationally. Also a relationship was established with Sony involving the integration of FORscene with their wireless enabled cameras. Both Microsoft and Sony will be demonstrating FORscene on their stands and on the Forbidden stand at NAB in early April. EVS and deltatre will feature on the Forbidden stand.
Historically, as a B2B company with very little resources, Forbidden has had to endure low awareness in its market place. With increased resources the company has embarked upon a pro-active campaign to build both awareness and reputation. In December 2013 Wall Street, a global trade P.R. company in the broadcast sector was appointed to build our reputation internationally amongst broadcasters. This is expected to help to raise the profile of Forbidden and its platform and to highlight the advantages that FORscene offers to its target market.
In August 2013 Forbidden appointed the agency Marketing Team Direct with the intention of reviewing and revitalising the company brand (Forbidden) and its platform FORscene. This major project is now close to completion and will be released to the world at the NAB convention and show
n in Las Vegas in early April.
Self-production and publishing plays a bigger and bigger part in consumer use of video through various devices from mobile and smartphones through to tablets and laptops/desktops. Against this background, Forbidden is examining the best way to take advantage of its market leading technology to become a significant force in this rapidly growing area at a low cost but potentially high reward.
Forbidden and Marketing Team Direct are undertaking a consumer research programme with the objective of understanding consumer motivations, behaviours and attitudes to processing, publishing and sharing video in this enormous market.
Forbidden’s “Going for Growth” has clearly spread through a number of facets of the company. The significant investment of people resources, continuous technology development and geographic expansion are all designed to lead to growth in business over the coming years.
The global wider scale adoption of cloud-based workflows, coupled with our technology developments are well timed for our growth ambitions. However, workflow changes in a conservative business sector take some time to come to fruition. Forbidden is well placed to pursue the opportunity with vigour and the longer term view.
CHIEF EXECUTIVE’S REVIEW
Forbidden has made good use of 2013.
Anything but not everything
The cloud as a concept is remarkably efficient at allowing companies to work together. This is good for Forbidden, because as a technology company, we can do anything, but not everything.
We started the year with our cloud video platform, FORscene, fully vindicated by its licensing and use by Google, our biggest integration client yet, in our key target area of Sports. Forbidden used this success as a springboard to bring in major new partners in Sports and internationally.
Forbidden’s technology is so widely applicable that we don’t seek to address all the potential end users directly. Forbidden’s business model focuses on working with partners – each with specialist knowledge of their own markets – to make our cloud services widely available. The growing range of partners has reduced exposure to any one sector.
During the year, Forbidden has worked closely with key players in its chosen markets, including deltatre and EVS in the Sports market. Both these companies have integrated their services with FORscene, which they are helping to promote to their clients.
Two other significant companies we are working with are Sony and Microsoft. Sony is a leader in professional video cameras, and a Forbidden client is making their first television series using a new integration allowing footage from a Sony 4G-enabled camera to be transferred to FORscene and worked on during the shoot. The technology saves significant time on the production – further enhancing FORscene’s cloud benefits.
Microsoft’s Windows Azure Media Services cloud platform is also a good fit. Forbidden first showed cloud editing in FORscene integrated with the Azure platform at the IBC trade show in Amsterdam, and further developments are expected.
Forbidden has a technology that is market leading, and we constantly look at ways to enhance that position and improve our service. Forbidden’s willingness to innovate and experiment is undimmed, and the scope and range of Forbidden’s technologies give us flexibility to serve markets as they arise and develop.
During 2013 we increased the capacity of our cloud platform with a string of efficiency gains. FORscene’s unique design gives a very responsive user interface, and a dozen or so upgrades extended this speed of response to new video tasks previously undertaken on desktop systems from other suppliers. This has moved FORscene a step further in addressing the craft editing market in broadcast, where Avid systems dominate: editors in broadcast who normally use Avid have started to use FORscene in their day-to-day work.
New features are often targeted at the most adventurous of our target markets. Upgrades in the year included support for multiple video tracks, transparency on video layers for animated logos, live voice over audio recording from the web client, improvements to the craft editing interface, and higher resolution proxy video. These are all are important in our new Sports markets where customers finish video in FORscene – giving us more of the value chain.
Patents continue to be an important to Forbidden, and progress was made on several patents during the year.
Since its formation Forbidden has been creating a wide range of technology components that are very forward-thinking. Some concepts (such as micropayments and our own digital currency) were years ahead of their time. Others, such as cross platform cloud storage, later formed the basis of successful businesses. Though the technologies available to the FORscene platform are too many to list here, a number are now becoming commercially relevant for the Company.
An example of this commerciality is Live video support (launched in 2003) and browser-based cloud video editing (2004), which are becoming mainstream and form the heart of Forbidden’s growth strategy into near-live clipping and highlights editing of Sports.
Mobile internet video streaming (2002) has developed into our Clesh mobile app, launched three years ago (2011). With tens of thousands of accounts and over 100 upgrades behind us, work is underway to bring out an iPad version aimed at creatives in the professional market. The growth of smartphones has created a great opportunity for Forbidden.
Forbidden raised over GBP8m after expenses during the year from a placing and open offer. Forbidden took care to protect its private investors, with an EIS qualifying open offer large enough to allow shareholders to avoid dilution. Its high take up demonstrated investor support for the company.
The use of funds is covered in the Chairman’s report.
Technology is a cut throat business, and markets limited by technology, such as video, are in constant turmoil. Avid, historically the de facto standard for broadcast editors, has recently been delisted from NASDAQ. In broadcast, Apple’s reluctance to embrace cross supplier integration has been a real barrier to their success, and Adobe’s wide area network solution has met with limited commercial success so far.
When FORscene pioneered cloud video post-production, with our 2004 launch at IBC, we had no competition in this space. This technology lead extended each year as potential rivals either ignored this sector, or failed to deliver working solutions into it.
With internet doubling in speed, and storage doubling in size, every year, you might expect that ten years on, with 1000x improvement in storage and internet, other companies would have succeeded in making a cloud service to rival FORscene: frame accurate and responsive browser logging and editing with no client installation step to get in the way, with access from PCs, Macs, and mobile devices. You might think that, but you would be wrong. In fact, the stunning fact is that no company comes close to the FORscene cloud platform. The big broadcast suppliers focus on outdated client server models with installed clients. The consumer companies lack the underlying technology, such as in video codecs, to build a fully integrated low latency cross platform cloud solution.
Forbidden has never rested on its laurels. And now, with growing client awareness pushing suppliers to try to address this market, Forbidden is determined to use its first mover advantage in what is fast becoming a land grab far beyond the market for broadcast post production. Weakened or poorly positioned participants in the market means that an opportunity is there for Forbidden, offering a service backed by market leading technology. As part of the strategy we are investing in the business, including a new US subsidiary, to target that market opportunity.
In the professional market, we are increasing the number of concurrent users we can support and reducing the administration overhead of supporting them. Higher resolution video, increasingly advanced editing features, and an iPad client now under development, are all targeted at bringing the global professional video editing community on board.
In the consumer space, Forbidden is undertaking market research programme to supplement the experience gained from our Android Clesh app (now aimed squarely at ‘prosumers’). We are also building the R&D infrastructure to support a consumer offer. The modern mobile platforms are perfectly placed for Forbidden to enter the mass market.
Forbidden has a globally important cloud solution backed by market leading technology, a market place that has limited peers, a balance sheet that provides security, some of the largest partners in the industry, and a very scalable model that can generate significant returns.
By tackling the discerning broadcast post-production market, FORscene has many features which are difficult to retrofit on more simplistic solutions. Our mobile app has given us considerable technical and market knowledge, and positioned us for the coming mobile era, with the app culture itself opening up the mass market for “non-standard” software technologies, such as Forbidden’s codecs.
Like-for-like price destruction in technology puts Forbidden in a position of relative advantage with our ability to innovate and create our own high technology on demand – and to meet higher volumes in new markets through our unique architecture.
The dynamic world we are entering is at the heart of our technology and product sweet spot. We are entering it both well financed and highly motivated. With our new marketing resources, our leadership has every chance of being much more visible going forwards.