Highlights

• Gross Profit increased by 42% compared to first half 2008 from £617k to £875k, on reduced turnover due to the mix of income from higher margin clients.
• EBITDA Loss reduced from £432k to £359k.
• New deals encompassing music publishing and ancillary rights signed with companies including Cinevolve, Village Productions, GRB, Hearst, and Times Group of India.

CONEXION MEDIA GROUP PLC (CXM) Chairman’s Statement

CXM has performed well in extraordinarily difficult market conditions and I believe it is in better shape now than it was 12 months ago when Justin Sherry assumed the position of CEO. Justin's team have embarked on a solid and concise expansion plan focused on film & television, an area in which CXM excels. We have greatly reduced our exposure to the risks associated with the traditional song based music publishing business.

Turnover fell by £689k (29%) due to certain client contracts having expired. However the new deals we have signed will start to deliver income in the second half of 2009 and 2010. The Gross Profit increased by £258k (42%) due to the mix of higher margin business. The Gross Profit percentage varies over different periods depending on the make up of the income.

Operating costs have risen by £185k from £1,049k to £1,234k, compared with the same period last year. This was as a result of sterling weakening against the U.S. dollar. There is a non-cash charge of £208k (2008: £5k profit) resulting from the loss on translation of inter-company balances with our U.S. subsidiaries. In addition, due to the negative effects of exchange rates our overseas costs increased in the period by £89k. For comparison purposes, if we eliminate exchange rate movements, operating costs have fallen by £117k (11%) on a like for like basis. Operating costs also include a non-cash charge of £120k for share options.

Internationally CXM, whilst investing in those areas where we see significant expansion opportunities, has concentrated on reducing the costs and consolidating the back office functions. We have commenced the process of opening an operating centre in Los Angeles which will serve as an important base for the sourcing of new deals for the Company. The new operation will largely be funded from savings made in our U.K. and other international operations.

The sector is showing positive signs as a number of private equity players choose to exit the arena due to unrelated business issues. With the realignment of music asset valuations many of these rights owners are looking to warehouse their music assets via an outsourced administration arrangement. We are in discussion with several of these companies and the future looks promising.

Brian Scholfield 25th September 2009

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