RNS Number:2026J
Music Choice Europe PLC
26 March 2003
26 March 2003
Music Choice Europe plc
("Music Choice" or "the Company")
Preliminary Results for the year ended 31 December 2002
Music Choice Europe plc ("Music Choice" or "the Company"), Europe's
leading digital audio broadcaster, is pleased to announce preliminary
results for the year ended 31 December 2002.
Preliminary Preliminary
Results Results
2002 2001
Turnover #9.8m #8.0m
EBITDA loss #7.3m #11.4m
Operating loss #8.2m #15.3m
Loss before tax #7.3m #13.1m
Loss per share - basic and diluted 6.09p 10.86p
- Turnover up 22% to #9.8 million from #8 million
- Operating loss reduced to #8.2 million from #15.3 million
- Cash and cash equivalents at year end of #21 million
- Appointment of Margot Daly as Chief Executive Officer
- Structure and organisational capability in place to enable Music
Choice to break even on a monthly basis at EBITDA within the next 12 months
- Renewed all distribution deals which were due to expire in 2002
- Subscriber base grown by 27% to 14 million from 11 million
- Rapid expansion in audience reach, with nearly one million people using
the Music Choice service during December
Commenting on the outlook for the coming year, Margot Daly,
Chief Executive, said:
"The digital TV and music world continues to be in a state of
flux, and Music Choice has been realistic about shaping the
business to match the conditions of the market.
"The Company remains well-funded, and is in a strong position
to reach its goal of sustainable profitability with
significant cash headroom. We have contracts in place with most
digital TV distributors, providing assurance on future
subscriber income streams.
"Music Choice is ideally placed to focus on product development
and the delivery of real value to existing and new customers
and consumers, within a framework of profitability."
- Ends -
For further information, please contact:
Music Choice Europe plc 020 7014 8700
Margot Daly, Chief Executive
Dylan Jones
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Becky Haywood
26 March 2003
Music Choice Europe plc
("Music Choice" or "the Company")
Preliminary Results for the year ended 31 December 2002
Chairman's Report
This has been a demanding year for Music Choice. The increase
in the size of our audience across Europe and the successful
renewal of all our key distribution deals has helped to offset
the inability to deliver projected advertising revenues,
caused by the continued downturn in media advertising and
marketing budgets.
In light of the changing economic climate, the Company has
conducted a thorough review of its structure from top to
bottom. As a result, on 25 February 2003, we announced that
both Chief Executive Simon Bazalgette and Chief Financial
Officer Jonathan Apps had left the Company, and former Chief
Operating Officer Margot Daly had been appointed Chief
Executive.
Simon joined Music Choice on start-up in 1993, and led the
Company to its successful flotation in October 2000. His
commitment to the business has been one of the key factors in
the company achieving its current position as Europe's leading
digital audio broadcaster. Jonathan moved to Music Choice in
December 2001, and last year led the acquisition of our key
European competitor MultiMusic. I would like to record the
Board's thanks for the hard work and integrity that both Simon
and Jonathan brought to Music Choice during their time here.
The appointment of Margot Daly as Chief Executive reflects the
new management needs and operational focus of the business.
Having been with the company since 1995, Margot provides the
product and customer attention that Music Choice needs at the
current time. We are currently reviewing our precise financial
management needs, but in the meantime, these are being handled
by Company Secretary, Mark Hillier, and interim Finance
Director, John Brocklebank.
The Company's operating loss in 2002 is much reduced from
2001, and reflects the series of efficiencies put in place
during the course of the year. We believe that we now have the
structure and organisational capability to reach monthly break
even within the next twelve months, while maintaining the
technical development of the service, and its roll-out on
digital and interactive platforms.
It is a testament to the quality of the Music Choice offering,
and its importance to major platforms across Europe, that we
successfully renewed every distribution deal that would have
expired in 2002. Research in the UK shows that the ongoing
development of the service has had a very real impact on the
size of our audience, with the number of people using Music
Choice every month increasing by 74% from March to December.
Despite this increase, we have been unable to deliver the
level of revenue we had anticipated through sales of
advertising space. We remain convinced that an improved
economic situation will allow us to establish this entirely
new advertising model, but this cannot be achieved in the
current climate. In the meantime, by minimising our costs in
this area, we have accelerated our ability to breakeven on
subscription revenue alone.
With a cash balance of #21 million at year end, we firmly
believe that the Company has sufficient funds to see it
through to profitability. In line with the Company's
articulated strategy, the Board recommends that no dividend be
paid in respect of 2002.
During the year, we welcomed three new members to the Music
Choice Board. Philippe-Olivier Rousseau, Executive Director
and Senior Advisor at BNP Paribas Structured Finance, has held
a series of senior posts in broadcast and telecommunications
companies. He is already proving to be instrumental in helping
Music Choice build its business across Europe, particularly in
France, which is one of the largest digital television
markets.
Dr. Kenji Kitatani was named the new representative from Sony
Corporation of America (SCA), one of Music Choice's founding
corporate shareholders, replacing Gary Podorowsky. Similarly,
Martin Goswami joined the board as a representative from
British Sky Broadcasting, replacing Richard Freudenstein. I
would like to record here the Board's thanks to both Gary and
Richard for their contribution to the Company during their
time as non-executive directors.
Music Choice has tight control over its costs, and continues
to increase its distribution and audience. With a new structure
headed by Margot Daly, we believe the Company is well
positioned to cement its position as Europe's leading digital
audio broadcaster.
Chief Executive's Review
2002 was a year of pragmatism for Music Choice. Real progress
was made improving our product, renewing long-term
distribution deals, and purchasing our largest European
competitor. However, the difficult economic climate prompted
us to review the structure of our business, and cut costs
significantly in those areas of the business that do not
affect our ability to increase our revenues.
The advertising downturn markedly affected our ability to
deliver advertising revenues to the level that we
had planned. This has resulted in the Company reducing UK
staff numbers by more than 40% over the last eighteen months.
Such strict control on costs should make the Company ideally
positioned to breakeven on a monthly basis within the next
twelve months.
Financials
At the end of the financial year, the Company held cash and
cash equivalents of #21 million (Interim 2002: #23.5 million).
Strong stewardship of our funds continues to be the Company's
financial priority. Turnover rose 22% to #9.8 million (2001:
#8 million). The operating loss of #8.2 million is
significantly better than last year (#15.3 million) due to a
concerted effort to contain costs. Total costs during the year
reduced from #23.2 million to #18 million, while further cost
reductions will be realised in 2003 to bring the Company to
monthly breakeven within the next twelve months.
Product enhancement
While cutting our cloth to reflect the market, we continue to
optimise the Music Choice offering on digital television. In
October 2002, we launched a new look and new channels,
improving the previous design and matching our visual
output with the music. By providing a series of organic,
atmospheric screen designs, we are able to balance the emotional
nature of the audio with the visual content on the viewer's
television set.
This year, Music Choice began to be measured by the UK's
television audience research body BARB, providing us with
accurate audience figures based on a representative panel of
UK homes.
BARB viewer research has allowed us to improve our focus on
providing a compelling proposition to consumers and to
platforms, and more closely define the service's target
audience. Ongoing product development has already led to
consistent month-on-month rises in our UK audience, with a 74%
rise from March to December. With almost a million people now
tuning in to Music Choice every month, the new line-up of
channels and new look screen designs are clearly appealing to
viewers more than ever before.
In 2003, we will be looking to drive audiences even further,
and increase our audience share, frequency and reach.
Broadband
Despite accelerated low-level growth in broadband take-up
during 2002, the main providers remain unclear about their
content strategies. However, with key players including
Microsoft working with Music Choice to develop an advanced
consumer-friendly broadband product, the potential for us to
roll out the service on major European platforms remains
strong.
Interactive TV
We have continued to roll-out our interactive TV ("iTV")
application this year, with the launch of the service on Canal
Satelite Digital in Spain. The interactive application offers
four key opportunities. Firstly, the graphic interface further
builds consumer awareness of Music Choice through non-
intrusive in-home branding. Secondly, it reinforces our mood-
led offering, allowing consumers to use both music and visuals
to create the atmosphere they want in their home. Thirdly, as
DTV platforms increasingly transmit traditional 'interruption-
based' radio stations, our iTV application and its graphic
capabilities further distinguish us from such providers and
enable us to serve both platforms and consumers in a unique
way.
Finally, the iTV service ensures that Music Choice is able to
capitalise on future potential to diversify revenue streams
through return path transactions and on screen advertising,
when this market returns. With more and more platforms around
Europe improving their broadcast technology, we will look to
roll out versions of our interactive application in key
markets where iTV can offer differentiating and revenue-
generating opportunities.
Distribution
Our subscriber base has grown by 27% to 14 million over the
last year, with 18 countries throughout Europe and the Middle
East receiving the Music Choice service.
We successfully secured the renewal of all the distribution
contracts that would have come to an end in 2002, with
operators including Premiere, Canal Digital Scandinavia and
Com Hem. The Company re-secured almost a quarter of its
overall revenue on better or same terms, demonstrating the
clear value that platforms place on Music Choice even during
times of economic difficulty.
In July 2002, Music Choice also acquired Multi Radio SA, whose
MultiMusic brand distributes music channels through digital TV
platforms such as Telepiu in Italy, to almost two million
homes across Europe and Asia.
The completion of key renewal deals and the acquisition of
MultiMusic ensured that we entered 2003 with ongoing broadcast
deals with the majority of Europe's leading digital broadcast
platforms, providing a solid platform for growth in the
current year.
Music Choice in 2003
The digital TV and music world continues to be in a state of
flux, and Music Choice has been realistic about shaping the
business to match the conditions of the market.
The Company remains well-funded, and is in a strong position
to reach its goal of sustainable profitability with
significant cash headroom. We are also in an ideal position to
benefit from both the recovery in the advertising market, and
the expected rapid expansion in broadband.
The Company has multi period contracts in place with most DTV
distributors, providing assurance on subscriber income streams
for the immediate future. Music Choice is ideally placed to
focus on product development and the delivery of real value to
existing and new customers and consumers, within a framework
of profitability.
- Ends -
For further information, please contact:
Music Choice Europe plc 020 7014 8700
Margot Daly, Chief Executive
Dylan Jones
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Becky Haywood
Music Choice Europe plc
Group Profit and Loss Account
For the year ending 31 December 2002
Year to
31 Year to
December 31 December
Notes 2002 2001
#'000 #'000
Turnover 9,776 8,019
Cost of sales (7,607) (6,449)
______________ ________________
Gross profit 2,169 1,570
______________ ________________
Distribution costs (4,472) (7,214)
Amortisation and impairment of intangible
fixed assets (100) (1,211)
Depreciation and impairment of
tangible fixed assets (814) (2,701)
Other administrative expenses (4,997) (5,752)
Administrative expenses (5,911) (9,664)
______________ ________________
(10,383) (16,878)
______________ ________________
Operating loss (8,214) (15,308)
______________ ________________
Loss on disposal of fixed assets - (11)
Interest receivable 941 2,257
______________ ________________
941 2,246
______________ ________________
Loss on ordinary activities before taxation (7,273) (13,062)
Taxation on loss on ordinary activities (162) (158)
______________ ________________
Loss for the period/year (7,435) (13,220)
______________ ________________
Loss per share
Basic & diluted - pence per share 3 (6.09) (10.86)
______________ ________________
Derivation of EBITDA
Operating loss (8,214) (15,308)
Amortisation and impairment of intangible
fixed assets 100 1,211
Depreciation and impairment of
tangible fixed assets 814 2,701
________________ ________________
EBITDA (7,300) (11,396)
________________ ________________
Statement of Total Recognised Gains and Losses
For the year ending 31 December 2002
Year to Year to
31 31
December December
2002 2001
#'000 #'000
Loss for the financial year (7,435) (13,220)
Exchange difference on translation of net 23 2
________________ ________________
Total recognised gains and losses
relating to the financial year (7,412) (13,218)
________________ ________________
Group Balance Sheet
As at 31 December 2002
31 December 31 December
2002 2001
#'000 #'000
Fixed assets
Intangible assets 585 -
Tangible assets 539 752
Investments - -
_______________ _________________
1,124 752
_______________ _________________
Current assets
Debtors 3,851 4,514
Investments 17,842 29,268
Cash 3,100 135
_______________ _________________
24,793 33,917
_______________ _________________
Creditors: amounts falling due
within one year (6,768) (8,130)
_______________ _________________
Net current assets 18,025 25,787
_______________ _________________
Total assets less current 19,149 26,539
liabilities
_______________ _________________
Capital and reserves
Equity share capital 1,227 1,224
Share premium account 46,160 46,137
Other reserve 22,922 22,922
Profit and loss account (51,160) (43,744)
_______________ _________________
Equity shareholders' funds 19,149 26,539
_______________ _________________
Group Statement of Cashflows
For the year ending 31 December 2002
31 December 31 December
2002 2001
Notes #'000 #'000
Net cash outflow from
operating activities 2 (8,017) (9,224)
__________________ ________________
Returns on investment and
servicing of finance
Interest received 941 2,257
__________________ ________________
941 2,257
__________________ ________________
Taxation
Tax paid (174) (135)
Consortium relief received 54 137
__________________ ________________
(120) 2
Capital expenditure and __________________ ________________
financial investment
Payments to acquire tangible
fixed assets (209) (2,853)
__________________ ________________
(209) (2,853)
__________________ ________________
Acquisitions and disposals
Payment to acquire subsidiary
undertaking (1,056) (828)
____________________ ______________
(1,056) (828)
____________________ ______________
Net cash outflow before management
of liquid resources and financing (8,461) (10,646)
Management of liquid resources
Purchase of interest bearing investments (28,877) (5,085)
Sale of interest bearing investments 40,303 15,206
__________________ ________________
11,426 10,121
__________________ ________________
Increase/(decrease) in cash in the
year 2,965 (525)
__________________ ________________
Reconciliation of Net Cashflows to Movement in Net Funds
31 December 31 December
2002 2001
#'000 #'000
Increase/(decrease) in cash in the year 2,965 (525)
Purchase of interest bearing investments 28,877 5,085
Sale of interest bearing investments (40,303) (15,206)
__________________ ________________
Movement in net funds in the year (8,461) (10,646)
Net funds at 1 January 2002 29,403 40,049
__________________ ________________
Net funds at 31 December 2002 20,942 29,403
__________________ ________________
Notes to the Interim Statement
1. Basis of preparation
The accounts are prepared in accordance with accounting
policies adopted in the preparation of the accounts for
the year to 31 December 2001 and which are set out in the
Company's Annual Report.
In preparing the financial statements for the current
year, the group has adopted FRS 18 'Accounting Policies',
FRS 19 'Deferred Tax' and the transitional arrangements
of FRS 17 'Retirement Benefits' relating to accounting
period ending on or after 22 June 2002. The adoption of
FRS 19 has resulted in a change in accounting policy for
deferred tax. Deferred tax is recognised on a full
provision basis. Previously, deferred tax was provided for
on a partial provision basis, whereby provision was made
on all differecnces to the extent that they were expected
to reverse in the future without replacement. Adoption of
FRS 18 and FRS 19 has not required any revisions to the
financial statements in either the current or prior years.
The abridged results for the 12 months to 31 December 2002
do not constitute statutory accounts within the meaning of
the Companies Act 1985. The auditor's report on the
Statutory Accounts for the 12 months to 31 December 2001
was unqualified and did not contain any statement under
Section 237 of that Act. These accounts have been
delivered to the Registrar of Companies.
2. Reconciliation of operating loss to net cash flow
from operating activities
12 months to 12 months to
31 December 31 December
2002 2001
#'000 #'000
Operating loss (8,214) (15,308)
______________ _________________
Depreciation of tangible fixed assets 350 799
Impairment of tangible fixed assets 464 1,902
Amortization of goodwill 100 -
Impairment of intangible fixed assets - 1,211
Foreign exchange adjustment to
tangible fixed assets (11) -
Decrease in debtors 1,018 504
(Decrease)/increase in creditors (1,724) 1,668
______________ _________________
Net cash outflow from operating
activities (8,017) (9,224)
______________ _________________
3. Tax
a) Tax on loss on ordinary activities
2002 2001
#000 #000
_______________ _________________
Corporation tax at 30% (146) (135)
Double tax relief 146 135
_______________ _________________
Foreign tax paid (146) (135)
Foreign corporation taxes (16) (23)
_______________ _________________
(162) (158)
_______________ _________________
The group was a consortium under the provisions of the
Income and Corporation Taxes Act 1998 and was entitled
to surrender its tax losses to consortium members. Under
an agreement with these consortium members the group was
entitled to charge for the surrender of these losses at
the prevailing corporation tax rate. On flotation, the
group ceased to fulfil the rules governing consortium
companies and hence such surrender ceased.
b) Factors affecting current tax charge
2002 2001
#000 #000
___________ _____________
Loss on ordinary activities before tax (7,273) (13,062)
___________ _____________
Loss on ordinary activities multiplied by
the standard rate of corporation tax in
the UK of 30% (2001: 30%) (2,182) (3,918)
Expenses not deductible for tax purposes
(including amortisation and impairment
of goodwill) 202 487
Accelerated capital allowances (130) 350
Higher taxes on foreign earnings 14 20
Losses arising in the year not relievable 2,258 3,219
against current tax
___________ _____________
Total current tax charge (note 3a) 162 158
___________ _____________
c) Factors that may affect future tax charges
Since no deferred tax has been recognised in the
financial statements, future profits will not be subject
to corporation tax until such losses, which at the
balance sheet date amounted to #33m, have been used up.
d) Deferred tax
No deferred tax has been booked due to the availability
of tax losses of approximately #33m (2001: #26million)
available for carrying forward against future profits.
There is no potential deferred tax on fixed assets due
to accelerated capital allowances, because the tax
written down value of eligible assets is higher than the
value carried in the balance sheet.
4. Loss per share
The calculation of loss per ordinary share for the year,
is based on losses of #7,435,000 and on 122,129,859
ordinary shares being the weighted average number of
ordinary shares in issue during the year after excluding
the shares owned by the Music Choice Europe plc Employee
Benefit Trust.
The calculation of loss per ordinary share for the year
to 31 December 2001 is based on losses of #13,220,000
and on 121,689,734 ordinary shares being the weighted
average number of ordinary shares in issue during the
year after excluding the shares owned by the Music
Choice Europe plc Employee Benefit Trust.
The loss attributable to ordinary shareholders and
weighted average number of ordinary shares for the
purpose of calculating the diluted earnings per ordinary
share are identical to those used for basic earnings per
ordinary share. This is because the exercise of share
options would have the effect of reducing the loss per
ordinary share and is therefore not dilutive under the
terms of FRS14.
2002 2001
#000 #000
______________ _____________
Loss on ordinary activities after taxation (7,435) (13,220)
______________ _____________
No. 000 No. 000
______________ _____________
Weighted average number of ordinary shares 122,130 121,689
______________ _____________
Pence Pence
per share per share
Loss per share - basic and diluted (6.09) (10.86)
______________ _____________
5. Analysis of net funds
At 1 At 31
January December
2002 Cashflow 2002
Group #000 #000 #000
___________ _____________ _____________
Investment in money market
fund 24,183 (22,470) 1,713
Fixed term deposits 5,085 11,044 16,129
___________ _____________ _____________
Investments 29,268 (11,426) 17,842
Cash at bank and in hand 135 2,965 3,100
___________ _____________ _____________
29,403 (8,461) 20,942
___________ _____________ _____________
6. Reconciliation of shareholders' funds
Profit
Share Share Other and loss
Capital Premium Reserve account Total
Group #'000 #'000 #'000 #'000 #'000
________ ________ __________ __________ _________
At 31 December 2002 1,224 46,137 22,922 (43,744) 26,539
Shares issued to
Employee Benefit Trust 3 23 - (26) -
On grant of LTIP awards - - - 22 25
Exchange difference on
translation of net
assets of subsidiary
undertaking - - - 23 20
Loss for the year - - - (7,435) (7,435)
________ ________ __________ __________ _________
Balance at 31 December 2002 1,227 46,160 22,922 (51,160) 19,149
________ ________ __________ __________ _________
7. Post Balance Sheet Events
On 24 February 2003, Simon Bazalgette and Jonathan Apps
resigned. Compensation amounting to #228,000 in total was
agreed to be paid.
8. Music Choice will not be paying a dividend in respect of
the year to 31 December 2002.
The Board will continue to review the Group's dividend
policy as appropriate.
9. Copies of the 2002 Report and Accounts will be sent
to shareholders in due course. Further copies will be
available from the registered office of Music Choice Europe
plc, Fleet House, 57-61 Clerkenwell Road, London EC1M 5AR.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MUSIC CHOICE
EUROPE PLC
We have audited the group's financial statements for the year
ended 31 December 2002 which comprise Group Profit and Loss
Accounts, Group Balance Sheet, Company Balance Sheet, Group
Statement of Total Recognised Gains and Loss and the related
notes. These financial statements have been prepared
on the basis of the accounting policies set out therein. We
have also audited the information in the Directors'
Remuneration Report that is described as having been audited.
This report is made solely to the company's members, as a
body, in accordance with Section 235 of the Companies Act
1985. Our audit work has been undertaken so that we might
state to the company's members those matters we are required
to state to them in an auditors' report and for no other
purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the
company and the company's members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual
Report, the Directors' Remuneration Report and the financial
statements in accordance with applicable United Kingdom law
and accounting standards are set out in the Statement of
Directors' Responsibilities.
Our responsibility is to audit the financial statements and
the part of the Directors' Remuneration Report to be audited
in accordance with relevant legal and regulatory requirements,
United Kingdom Auditing Standards and the Listing Rules of the
Financial Services Authority.
We report to you our opinion as to whether the financial
statements give a true and fair view and whether the financial
statements and the part of the Directors' Remuneration Report
to be audited have been properly prepared in accordance with
the Companies Act 1985. We also report to you if, in our
opinion, the Directors' Report is not consistent with the
financial statements, if the company has not kept proper
accounting records, if we have not received all the
information and explanations we require for our audit, or if
information specified by law or the Listing Rules regarding
directors' remuneration and transactions with the group is not
disclosed.
We review whether the Corporate Governance Statement reflects
the company's compliance with the seven provisions of the
Combined Code specified for our review by the Listing Rules,
and we report if it does not. We are not required to consider
whether the board's statements on internal control cover all
risks and controls, or form an opinion on the effectiveness of
the group's corporate governance procedures or its risk and
control procedures.
We read other information contained in the Annual Report and
consider whether it is consistent with the audited financial
statements. This other information comprises the Directors'
Report, unaudited part of the Directors' Remuneration Report,
Chairman's Statement and Financial Review and Corporate
Governance Statement. We consider the implications for our
report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our
responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom
Auditing Standards issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial
statements and the part of the Directors' Remuneration Report
to be audited. It also includes an assessment of the
significant estimates and judgments made by the
directors in the preparation of the financial statements, and
of whether the accounting policies are appropriate to the
group's circumstances, consistently applied and adequately
disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give
reasonable assurance that the financial statements and the
part of the Directors' Remuneration Report to be audited are
free from material misstatement, whether caused by fraud or
other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of
information in the financial statements and the part of the
Directors' Remuneration Report to be audited.
Opinion
In our opinion the financial statements give a true and fair
view of the state of affairs of the company and of the group
as at 31 December 2002 and of its loss of the group for the
year then ended; and the financial statements and the part
of the Directors'Remuneration Report to be audited have been
properly prepared in accordance with the Companies Act 1985.
Ernst & Young LLP
26 March 2003
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The company news service from the London Stock Exchange
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