Private Media Group Inc., a worldwide leader in premium-quality adult entertainment products, services and Internet content, has announced its full-year results for 2004.
The company reported a decrease in sales of 7 percent to 35.6 million euro for 2004. One Euro equals $1.29 in U.S currency as of April 1.
Net income was 0.2 million euro for 2004, compared to a net loss of 0.6 million euro for 2003, an increase of 0.8 million euro. Net income suffered from the effects of the reorganization of the company’s U.S. distribution in the fourth quarter and a significant fall in video sales. In addition, management took the decision to write down videocassette inventory by 1.5 million in the fourth quarter.
As part of the group-wide review initiated in 2003, the company’s U.S. subsidiary outsourced its distribution of physical products, inclusive of Internet shop fulfillment, to a third party. The restructuring started Sept. 30, 2004, and the impact has initially been a temporary loss of revenues from the U.S. during the fourth-quarter transition period.
The loss of revenues had a significant impact on gross profit. However, during the first quarter of 2005 distribution reached normal levels and it expects the impact of the restructuring to increase contribution of gross profit from the U.S. and reduce selling, general and administrative expenses by approx. 1.0 million euro in 2005 compared to 2004.
The decrease in video sales by 70 percent to 2.1 million euro, was primarily the result of a combination of an industry-wide decrease in video sales and 40 percent less titles being released by the company as a result of fewer new movie productions available for sale on video in 2004 compared to 2003.
DVD sales, which increased 6 percent, to 19.5 million euro, were also affected by the U.S. reorganization and the reduction in new productions available for sale. However, the company managed to offset the negative effect from fewer new titles by opening additional distribution channels, thereby increasing DVD sales on a per title basis. Magazine sales decreased 4 percent to 5.1 million euro, while Internet sales increased 1 percent to 4.9 million euro. Broadcasting sales increased 41 percent to 4.0 million euro spearheaded by the broadcasting launch of the Private Fantasy channel in the U.S. in Feb. 2004.
During 2004 the company reduced its debt by 4.0 million euro, or 29 percent. Working capital as of Dec. 31, 2004, increased by 4.9 million euro compared to Dec. 31, 2003.
Berth Milton, President and CEO of Private Media Group, said: " We are pleased with the restructuring of our operations, particularly in the U.S., and we expect our increased investments in the library as from the second half of 2004 to begin paying off in the first half of 2005.
“In 2004 we also signed an exclusive agreement with U.S.-based Pure Play Media, Inc. for content distribution in Europe. Under the agreement, we will distribute between six to ten newly produced movie titles per month in Europe, our main market for DVDs. The arrangement is based on a split of gross profit and does not require any up-front or future investment in content by Private. We will start releasing titles on DVD under the agreement in the second quarter of 2005.
“Following the launch of the Private Fantasy pay-per-view channel in the U.S., and as the U.S. market for video-on-demand services evolves, we expect to further exploit our content in this market which should impact on broadcast revenue.
“Looking forward, this year saw the launch of our own TV channel, PRIVATETV, an internet based proprietary 24/7 adult TV offer, that thanks to the latest technological developments means that content providers such as ourselves are now able to close deals at fair margins with a much wider spectrum of delivery networks while providing a unique and totally ‘Private’ consumer experience.
“All in all, I am confident that we can look forward to substantially improved results this year thanks to increased revenues from DVDs, Internet and broadcasting, coupled with better margins and reductions in SG&A,” Milton concluded.
