Ascendant Films Ltd

Gold Due Diligence for GrowthInvest – EIS Report

09 Feb 2018 / Tax enhanced research

Ascendant Films Limited (AFL) is a UK-based maker and distributor of films, TV programmes and documentaries. It is raising money to produce three new films and plans to distribute its own content on a new digital platform, potentially boosting film profits. Through an associate (Ascendant Releasing), it will distribute third-party films.

Why Invest?

Positives

Strategy: Produce and distribute films on its own digital platform, earning higher film margins than is currently the case for independent films.

Issues

The Model: Unpredictable marketing and development costs, and revenues from the new platform.

 

The Management

Positives

Team: AFL is run by an experienced duo with writing, production and directing backgrounds in TV and film. International film sales will be handled by a highly experienced agent.

Issues

Finance: There are no internal financial staff. On current forecasts, EIS and film profits should be enough to finance the film slate; further spending on building out the new platform is indicated.

 

Nuts & Bolts

  • Share Issue: AFL wishes to raise £3.9m, which will be spent on the three key film titles in the current slate, which supports Phase 1 of its strategy.
  • Offer: AFL plans to raise £150,000 from SEIS investors, £2.12m from an EIS issue and the rest (£1.63m) from non-EIS sources.
  • Exit Strategy: AFL will look for an exit after trading for four years. This will be either by means of a trade sale or a management buyout.

 

Specific Issues

  • Industry Background: Digitally driven changes in film distribution and the rising global spend on content should play in AFL’s favour.
  • Advance Assurance: This has been applied for and obtained for SEIS and EIS.

Risks

  • Content: The risks in any film offering lie fundamentally in the strength of the slate of films on offer.
  • Distribution: AFL’s plans for a standalone digital platform for its own films aim to capitalise on the disruptive effect of new digital platforms. There are risks in managing and financing the new model.
  • Finance: The SEIS and EIS monies are planned to cover the production of the current film slate. AFL has already indicated that building out the new model will require further funding for additional content.