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American Company Spotlight
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Seven Arts Pictures plc. Website:
Click Here |
Information As Of June 25,
2008 |
| Exchange:
OTCBB |
Market
Cap:
14.9 Million |
| Outstanding Shares:
29.7 Million |
52 Low / High:
$0.36 / $0.55 |
|
Price June 25, 2008:
$0.50 |
SAPXF Recent Stock Quote and News:
Click Here |
'Seven Arts Pictures
had revenues of over $10 Million in 2007 with profits of $2.2
Million. In 2008, the Company is expecting revenues of over
$15 Millions with profits being pegged at $5 Million. With an
expected increase in movies going into production and release
in 2009 and 2010, revenues as well as profits should also see
substantial increases.'
Overview
Seven Arts Pictures is an independent producer and
distributor of feature length films, and has a history of
producing high quality films at low cost. The Company’s
business model does not rely on blockbuster receipts from
first run theatrical release (called a “theatrical breakout”
if revenues exceed $35 million); they are very profitable
from pre-sales of worldwide DVD, PPV, as well as pay and
free TV rights. The company also acquires the rights to
films it has not produced to distribute through its
established network in the distribution markets. Seven Arts
maintains movie copyrights for future distribution and has a
library of 35 movies. Several new releases delivered in FY
2008 as well as films in development have much stronger
revenue potential than the historical average.
Investment Highlights
- The Company’s core business strategy is to finance,
produce, and distribute 4-7 films annually with budgets of
less than $10 million each with built in margins based on
pre-sales of 30-50%. These are supplemented by higher costs
movies (15-40 million), with lower guaranteed margins and
that may enjoy a higher upside in the event of theatrical
breakthrough. The company also seeks to acquire completed
films for distribution as an agent for a 15-20% fee.
- The Company reduces its financial risk on each movie by
pre-selling certain domestic and international rights to
distributors before production commences.
- The Company does not expect wide US theatrical release
for many of it pictures and therefore the majority of its
revenues on these pictures are derived from the pre-sale
agreements payable upon delivery of the movie in the
appropriate format. The majority of revenues come from
domestic and international DVD distribution, pay-per-view (PPV),
as well as pay and free TV distribution.
- Although the Company is not dependent on theatrical
distribution, when it occurs, the advertising and marketing
associated with the theatrical release helps to propel DVD,
PPV, and TV distribution revenues. Further the 1-2
supplemental larger budget movies per year have breakout
potential and limited downside.
- The company is poised to benefit from expected revenues
generated by technology changes when consumers download
movies directly.
- Seven Arts Pictures has excellent relationships with
theatrical distributors including MGM, Sony, Paramount, and
fox, as well as international distributors such as Momentum,
Pathe, AMG (Japan), and Scanbox, These relationships provide
a majority of pre-sale agreements.
- Through a combination of releases and selected
acquisitions Seven Arts would like to increase its film
library from 35 films to 125 films over the next five years.
- Several films are in final post production or are ready
for distribution, and will likely be released in the next
several months. Some of these may have a theatrical release.
American Summer may become the highest revenue generating
film in the Company’s history.
- Seven Arts Pictures has secured the exclusive rights to
create motion pictures based on a series of 11 novels by
Boris Akunin, a Russian writer. The novels are
adventure/thriller stories based in Czarist Russia and are
very popular in Europe. The first film of the series, Winter
Queen, should be released in FY10.
- Management has a wealth of experience in the film
industry, including financing transactions, risk management,
film production and distribution. Management has been
directly involved in many successful feature films such as
Terminator 2, Basic Instinct, Total Recall, Rambo, Rambo
III, Platoon, The Big Easy, Johnny Mnemonic and Showgirls.
Profile
The motion picture industry is dominated by movie studios
that rely on first run theatrical box office receipts to cover
high film budgets and to maximize the value of the domestic
and international distribution rights. Major studios execute a
business model to inflate box office revenues with massive
marketing and advertising budgets at the expense of current
gross margins and profitability. Seven Arts Pictures focuses
on producing films that are profitable in the post first run
theatrical distribution market, and do not require a
theatrical release. Growth of the post first run theatrical
distribution market has been driven by the proliferation of
DVD players worldwide, the availability of PPV to a large
segment of the G-7 population, and the growth of in-home high
definition television and sound systems which closely
replicate the cinema experience. Seven Arts Pictures takes
advantage of this trend by producing moderately budgeted
quality films that target the post theatrical distribution
market and are highly sought after by the wholesale DVD and
rental market. The Company reduces its financial risk by
obtaining purchase commitments from distributors before film
production utilizing tax credit investors that do not require
principal repayment for up to 50% of the production budget,
and debt investment with recourse to a specific film. This
enables Seven Arts to produce films with gross margins of 20 %
to 50% based on minimum revenue forecasts, far higher than the
industry average.
The company focuses on drama, adventure, and horror-comedy
films. These films have strong appeal to a selected
demographic audience and when combined with careful
construction of the film’s “elements” (the director, actors,
producer, and writer), create a valuable long term asset as a
library title. Film libraries are the engines for long term
value creation in the movie business. Seven Arts Pictures
plans to expand its movie library of 35 films to 125 titles
within 5 years by producing four to seven films per year and
by carefully acquiring additional titles.
Growth Opportunity
The key to the Company’s ongoing development and growth is the
continual expansion of Seven Arts’ distribution library, which
underpins the value of the Company and provides long-term
sustainable revenues. The Company achieves this not only
through its own creation and production of new feature films
but also by the acquisition of other productions at various
stages of completion.
As such the Company is currently in production on new feature
films to add to its growing library. Current projects include
“The Winter Queen”, a $30m production to be directed by Paul
Verhoeven (“Total Recall” and “Basic Instinct”), starring
Milla Jovovich (“Resident Evil”). The Company commenced
filming last month on two new movies: “American Summer” and
“Autopsy”. Both will be produced by Warren Zide, the Producer
of the hugely successful “American Pie” trilogy.
As well as continuing to make and acquire feature films for
international theatrical release, Seven Arts believes there is
significant value in the “straight to DVD” market and will
continue to exploit this area, particularly in the horror
genre.
Market Opportunity
Content providers are starting to reinvent business models
to capitalize on a nascent digital market, which will likely
expand rapidly and generate increasingly meaningful
contributions to revenue in the years ahead. This year is
expected to be another turning point as more film studios
embrace online and mobile platforms. In addition to growth,
emerging digital strategies for entertainment includes select
acquisitions and partnerships with both traditional and
internet distributors. Over the past five years the motion
picture industry has shown a steady increase in sales, rising
approximately +400%. Showing an increase in sales since early
January 08, money has started to move back into this industry.
Management
Anthony Bryan - Chairman Anthony J.A. Bryan, Sr.
is currently the Chairman of 360 Global Wine Company, Chairman
of U.S. Dry Cleaning Corporation, and Vice Chairman of Astrata
PLC. He was formerly Chairman & CEO of Copperworld Corporation
(Pittsburg, PA), President & CEO of Cameron Iron Works
(Houston, TX), Vice President and Member of Board of Directors
and General Manager of the International Division of the
Monsanto Company (St. Louis, MO) and Chairman & CEO of
Oceanics PLC (London). He has served on the Board of Directors
of a number of companies, including Federal Express Co.,
Chrysler Corporation, ITT Corporation, PNC Financial, Koppers
Corporation, Hamilton Oil Co., Imental (France), Oceanics PLC
(London), as well being a Trustee of a number of Charitable
and Educational Institutions. He was educated at Ampleforth
College, in England and the Harvard Business School where he
received an MBA. He served in the Royal Canadian Air Force in
UK and in Italy and was awarded the Distinguished Flying Cross
in 1944.
Peter Hoffman - Chief Executive Officer Chairman and
founder of SEVEN ARTS PICTURES, an independent producer and
distributor of feature motion pictures as a successor to
CineVisions’ business as a producer of motion picture
projects. Seven Arts has produced and distributed four motion
pictures since inception, JOHNNY MNEMONIC, NEVER TALK TO
STRANGERS, ANOTHER 9½ WEEKS and SHATTERED IMAGE. Seven Arts
has also produced the following films: ONEGIN; DUETS; the 2001
Sundance Grand Jury Prize winner, THE BELIEVER; AN AMERICAN
RHAPSODY; CLETIS TOUT; and INTERSTATE 60. Seven Arts has also
produced several movies in conjunction with PARAMOUNT PICTURES
CORP., with whom Seven Arts has an overhead “first look”
agreement. They are as follows: RULES OF ENGAGEMENT, RAT RACE
and HARDBALL. Mr. Hoffman is a graduate of Drew University,
A.B. (1971), Summa Cum Laude, and of the Yale Law School, J.D.
(1974). Hoffman is actively involved in a number of
organizations including such academic affiliations as Yale and
UCLA. An active political supporter and fundraiser, he has
been involved in a number of local, statewide and national
campaigns.
Elaine New - Chief Financial Officer A Cambridge
University educated, Price Waterhouse (London) qualified
Chartered Accountant Elaine has been in the media industry for
the last six years as Finance Director of Metrodome Group plc,
a UK film distributor. Titles she helped release included the
cult classic Donnie Darko and Monster for which Charlize
Theron won the best actress Oscar. Prior to her interest in
the media world Elaine was heavily involved in the UK’s retail
sector. She worked as Financial Controller of Harrods
International, helping to set-up the famous store’s airport
retailing arm and Commercial Director of Outfit a new division
of Sears Womenswear Ltd that she helped to create in the
latter part of the 1990’s.
Contact
Corporate Contact:
Seven Arts Pictures plc
38 Hertford Street
London, England W1J 7SG
Phone: 011-44-20-3006-8222
Investor Relations Contacts:
Seven Arts Pictures plc UK contact:
Elaine New, +44-207-355-2051
elainenew@7artspictures.com
Seven Arts Pictures plc USA contact:
Erik Smith, +1-323-692-5010
esmith@7artspictures.com
FORWARD LOOKING STATEMENTS
This report includes forward-looking
statements that reflect Seven Arts Pictures plc. current
expectations about its future results, performance,
prospects and opportunities.
Seven Arts Pictures plc. has
tried to identify these forward-looking statements by using
words and phrases such as "may," "will," "expects,"
"anticipates," "believes," "intends," "estimates," "plan,"
"should," "typical," "preliminary," "we are confident" or
similar expressions. These forward-looking statements are
based on information currently available and are subject to
a number of risks, uncertainties and other factors that
could cause Seven Arts Pictures plc.'s actual results,
performance, prospects or opportunities to differ materially
from those expressed in, or implied by, these
forward-looking statements. These risks, uncertainties and
other factors include, without limitation, the Company's
growth expectations and ongoing funding requirements, and
specifically, the Company's growth prospects with scalable
customers, and those outlined above. Other risks include the
Company's limited operating history, the Company's history
of operating losses, consumers' acceptance, the Company's
use of licensed technologies, risk of increased competition,
the potential need for additional financing, the terms and
conditions of any financing that is consummated, the limited
trading market for the Company's securities, the possible
volatility of the Company's stock price, the concentration
of ownership, and the potential fluctuation in the Company's
operating results.
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link of which can be found on our web site. This document
contains forward-looking statements, particularly as related
to the business plans of the Company, within the meaning of
Section 27A of the Securities Act of 1933 and Sections 21E
of the Securities Exchange Act of 1934, and are subject to
the safe harbor created by these sections. Actual results
may differ materially from the Company's expectations and
estimates. This is an advertisement for
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