RDF profits hit by Crowngate affair

RDF Media, the independent producer behind Wife Swap, has reported a dramatic fall in profits in its first full year set of financial results since the Crowngate affair last summer. Profit before tax for the year ended January 31, 2008 was £2m - two-thirds less than the £6.2m profit figure for RDF's previous financial year.

Both ITV and the BBC slapped a commissioning freeze on RDF for a period after it emerged in July last year that promotional footage for a BBC documentary about the Queen had been misleadingly edited. The promo clip, shown to journalists at a BBC1 programme launch, appeared to show the Queen storming out of a photo shoot with Annie Leibovitz but in fact she had been walking in.

Stephen Lambert, the RDF creative director, accepted responsibility for the misleadingly edited footage and resigned. The BBC1 controller, Peter Fincham, also resigned over the Crowngate affair.

Richard Eyre, the RDF chairman, said the company's strong performance in the US had helped offset the lost business in the UK last year. "It would be an understatement to say that the events of the summer have cast a shadow over the full-year performance," Eyre added. "However, I am pleased to report that overall group revenues rose 21.5% to £120.6m. Year-on-year UK production revenues were effectively flat for well documented reasons, but US production revenues posted a 93.2% increase, early justification for our investment in this division."

ITV ended its commissioning freeze in November and the BBC in March and the company has been hired to produce 100 episodes of Way to Blue, a pre-school children's series for digital channel CBeebies to be broadcast in 2009.

Gross profit was up 16% to £35.5m, including a 104% rise in US gross profit and a 100% rise in gross profit from exploitation of intellectual property - a key part of RDF's growth strategy. However, margins fell because of higher operating costs, with overheads increasing year on year by 29% to £26m.

The company said it had expanded its sales and acquisition teams and invested in infrastructure ahead of growth that did not occur because of the Crowngate commissioning hiatus in the UK. Gross margin in the UK content division fell year on year from 27% to 22%, while gross profit margin in the rights division was 24%, down from 29% the year before.

Last month it emerged that a consortium including RDF founder David Frank and other members of the company's senior management team had made a buyout offer to the board, though analysts have warned shareholders would be unlikely to accept an offer below the 144p a share at which the company was floated. An RDF spokeswoman said today there was no further news on the buyout offer.

RDF shares, which are traded on AIM, were worth as much as 250p before the Crowngate affair but fell to a year low of 94.5p. The shares have rallied since the buyout offer emerged and yesterday closed at 127.5p.