Posted: 14/05/2009
Forbidden Technologies plc (AIM: FBT, "Forbidden", www.forbidden.co.uk) develops and markets a powerful internet video platform, which is used by broadcasters, in professional web video, in education and by consumers. Forbiddens video post production platform, FORscene, is one of the worlds most advanced browser-based applications.
- Sales increase of 71% to £121,199 (2007: £70,848)
- Operating loss for the year cut by 59% to £284,994 (2007: £689,494)
- Drawdown from £1 million loan facility at year end: £635,000 (2007: £335,000)
- Major cost savings successfully implemented
- Main markets are broadcast television and professional web video
- Expansion into US continues
Vic Steel, Chairman, Forbidden Technologies, commented:
The company is enthusiastic and optimistic of a bright future.
Sales continued to grow in the first quarter of 2009 and at the end of March unaudited sales exceeded the full year numbers for 2007. The company is expecting that the growth rate in 2009 will exceed the growth rate experienced in 2008.
Forbidden is fortunate in having a high calibre and loyal team of R&D and sales professionals who have produced technologies which were developed ahead of the markets for which they were intended but which we now believe are coming into alignment to produce an exciting business future.
Enquiries:
Forbidden Technologies plc (020 8879 7245)
Stephen Streater, Chief Executive
Greg Hirst, Business Development Director
Brewin Dolphin Limited (0845 270 8612)
Nominated Advisor
Neil Baldwin
Chairmans statement
I am pleased to present this, the tenth annual report to shareholders of Forbidden Technologies since its flotation on the AIM market of the London Stock Exchange in February 2000.
Profit and Loss Account and Balance Sheet
In the year to 31 December 2008, the company recorded sales of £121,199 compared to £70,848 in the previous year, an increase of 71%. Administrative expenses in the year to 31 December 2008 at £406,193 were £354,149 lower than the £760,342 in the previous year, a reduction of 46.6%. Consequently, the operating loss of £284,994 for the year to 31 December 2008 was £404,500 less than the £689,494 for the year to 31 December 2007.
The balance sheet shows net liabilities of £514,124 at 31 December 2008, compared with £245,461 at 31 December 2007. The company continues as a going concern following the creation, at the beginning of June 2007, of a £1 million loan facility by two of the directors (Stephen Streater and Vic Steel). At 31 December 2008, £635,000 of this facility had been drawn down. The company has written off all R&D costs each year since its formation.
Throughout the 2008 year, Forbidden has continued to contain the cost base for the administration of the business through a combination of permanent cost savings and the conversion of fixed costs into variable costs, with the continued support and co-operation of all staff. As sales growth has begun to accelerate, cost control will continue, but there will be associated cost increases in those areas which are variable with sales.
It is gratifying to report that throughout 2008 the company has experienced a high level of repeat business from existing customers, and also an increase in the number of potential customers approaching the company to discuss possible relationships. This trend continues in the current year to date.
Market Place and Strategy
The current credit crisis and recessionary environment combined with rapid growth of the web as the mass medium for advertising and entertainment are creating conditions that the directors believe are favourable to Forbidden Technologies.
Broadcasters and post-production companies are being encouraged to adopt new web-based workflows. Customers say FORscene "saves time and money". This is an attractive benefit when costs are under a great deal of pressure.
The changing market place has led the company to refine its strategy. We now define four market opportunities:
- Broadcast (including all post-production companies);
- Professional web-video;
- In-house video;
- Serious hobbyists.
Whereas broadcast is well defined and established as a market, professional web-video is a new and fast growing market worldwide, with the potential to overtake broadcast TV in size. Both audience and advertising are moving from TV and print to the web, creating an explosion in demand for high quality video for media websites. Journalists are being asked to add video production and post-production to their varied skill sets, aiming to meet the low-production cost requirements. FORscene, the directors believe, will prove to be the most attractive toolset to produce the necessary professional quality output. Forbidden expects this new market to grow rapidly.
In House Video
Smaller companies will need to populate their websites with video, which many will make themselves to save cost – a long tail which over time should become very large.
Serious Hobbyists
This is the market appropriate to Clesh. As user-generated video (UGV) grows with the speed of broadband and the proliferation of high-quality camera phones, the need to edit content before distribution to websites and to friends and family will increase. Clesh has been designed to be the practical user-friendly tool integrating upload from camera, editing, publishing and distribution.
Of the four market opportunities described, the focus of the company throughout 2008 has been in the broadcast and professional web video markets. This will continue during 2009.
We are experiencing increased interest and take-up of FORscene in the broadcast market, and we expect sales to continue to grow as more customers bring repeat business and as our reputation spreads by word of mouth.
The company is achieving considerable success in the professional web video market, particularly in the USA. The partnership with BIM established at the end of 2008 has resulted in FORscene being used in 53 TV station web sites across North America, and is producing a significant monthly income flow. The recent announcement of the partnership with Chyron in the USA could provide similar widespread use in broadcast during the coming months and years.
Throughout 2008 and continuing into 2009 the company has participated in a number of key events and has been invited to take part in seminars. The London Stock Exchange chose Forbidden Technologies as one of a handful of companies to be subject to its new independent analyst research reports. Stephen Streater has made two TV appearances before investor communities and took part in an investor seminar in 2009. Forbidden was active at IBC in September 2008 and at the NAB convention in April 2009 where the partnership with Chyron was announced and created much interest with existing Chyron customers. We are convinced that these participations increase our visibility significantly.
Outlook
The company is enthusiastic and optimistic of a bright future.
Sales continued to grow in the first quarter of 2009 and at the end of March unaudited sales exceeded the full year numbers for 2007. The company is expecting that growth rate in 2009 will exceed the growth rate experienced in 2008.
Forbidden is fortunate in having a high calibre and loyal team of R&D and sales professionals who have produced technologies which were developed ahead of the markets for which they were intended but which we now believe are coming into alignment to produce an exciting business future.
Vic J Steel
Chairman
Chief Executives review
Introduction
Forbidden is a world leader in providing video post-production services over the internet, through its professional FORscene system and its consumer version Clesh. As a technology leader, our services are regularly encompassed by the latest buzz words. The newly relevant term is "The Cloud". Essentially, with FORscene, video content is sent into the Cloud (a symbolic word to represent somewhere accessible over the Internet whose position or internal structure is not that relevant to a user), from where it can be readily accessed by customers from anywhere.
During 2008, both the capabilities of the FORscene service and its markets have come sharply into focus. We have refined many features, and dramatically increased our capacity and user base. Forbidden's website (http://www.forbidden.co.uk/) has been enhanced as an information resource by the inclusion of strategy papers and workflow diagrams.
Markets
The Chairmans statement covers the commercial side of our main markets. The product side is covered here.
In broadcast, FORscene is used for review, logging, shot selection and rough cut. The advances outlined below have improved customer experience in all these areas.
In our professional web video sector, BIMs FORscene accounts provide immediate access to all recent content broadcast on over 50 TV stations. To enable this rate of content assimilation, we have released a new product for customers to install at their main sites: FORscene Server. Just as FORscenes editing client automatically increases the capacity of the FORscene system every time someone logs on through their web browser, every new FORscene Server increases the capacity of FORscenes distributed central server.
Our Canadian distributor has started to tweak the long tail market for businesses making their own videos – an ideal market for the FORscene system, though one which will be hard to penetrate cost effectively until we are better known.
We used the Master Investor Show 2008 to illustrate FORscene DV – ideal for news gathering. Web versions of the broadcast quality output are at http://clesh.com/videos/list/mi2008.
User Generated Video (UGV) is a route to keeping costs down on professional sites. With its easy web accessibility and camera phone integration, Clesh provides an elegant solution – as you can see from Forbiddens opportunistic exclusive interview with Boris Johnson, now Mayor of London: http://clesh.com/videos/view/BorisJoh-1207808863.can/ .
Development
FORscene was launched in 2004, so many of its capabilities are well established. However, FORscene is a dynamic system, with continuous improvements. The three main developmental themes of 2008 are: major FORscene capacity upgrades; new fine-cut editing features; and integration with third party systems, both in broadcast and professional Web.
The news section of the website http://www.forbidden.co.uk/news/ contains details.
Server upgrades
The FORscene Server product allows high volume users to supplement the capacity of the central FORscene servers as they join the system. For other users, who typically have up to a thousand hours of material each, we have increased the capacity of the central server system:
- FORscene has seven new server computers on the Internet backbone;
- server disk storage has been increased by a multiple, as disks have grown in capacity;
- improved software has multiplied the number of concurrent users supported by each server;
- a second site on the Internet backbone has increased overall reliability; and
- new FORscene software is turning the server network into a single distributed machine
Codec – Blackbird 5 and Impala
For strategic reasons, Forbidden owns and controls its own video and audio compression technology. The Blackbird 5 video codec, released in 2008, provides improved quality at a lower data rate and while using less CPU and memory. You can hear the (also improved) Impala audio codec on this example recording: http://clesh.com/videos/view/Schubert-1202327990.can/.
Other upgrades
The other FORscene components upgraded this year are: native compression / upload software for Linux, Windows and Mac OS; the Web browser editing interface; video publishing; the Forbidden Web player; and the Clesh Showreel.
Partners
Forbiddens North American sales have grown rapidly, and the US is featuring increasingly in Forbiddens world view. Given our current resources, we generally supply and support these sales through local companies and contacts. BIM sells FORscene as an integral component of its own services to television clients for Web output; and since the year end we have formed a partnership with Chyron, a large and established supplier to the broadcast market. FORscenes integration into Chyrons Axis system has begun, with single sign on and import of graphics already supported.
Restructuring
Forbidden embarked on a major transformation, which started in the summer of 2007 and which continued into 2008, exemplified by the move into our new office. The changes have proved a success, with R&Ds continued ground breaking progress supporting a dramatic increase in sales – even while costs have fallen markedly. I here express appreciation to all our staff for their assistance in implementing this plan.
Outlook
The technological base underlying FORscene continues to advance rapidly: faster Internet, bigger disks, faster computers. At the same time, FORscene is starting to benefit from economies of scale, both technically and through customer awareness and confidence. FORscene has advanced rapidly since its inception and it shows every sign of continuing to do so now that it is increasingly gaining traction.
Stephen B Streater
Chief Executive
Blackbird is best-of-breed
Jon Hanford - Group CTO, Deltatre