TIDM7DIG
RNS Number : 7728R
7digital Group PLC
26 September 2017
26 September 2017
7digital Group plc
("7digital", "the Group" or "the Company")
Interim results for the half year ended 30 June 2017
7digital Group plc (AIM: 7DIG), the global leader in end-to-end
digital music solutions, today announces its interim results for
the half year ended 30 June 2017 ("H1").
Highlights
-- Strong sales momentum into the second half of the year
- Total revenues up 17% on a pre currency movement basis and 9%
on adjusted basis to GBP5.9m (H1 2016: GBP5.4m)
- Licensing revenues up 33% to GBP4.0m (H1 2016: GBP3.0m)
- MRR up 38% to GBP3.2m (H1 2016: GBP2.3m)
- LBITDA reduced by 36% to GBP1.7m (H1 2016: GBP2.6m)
-- Benefits from the acquisition of 24-7 Entertainment ("24-7"),
effective from 1 June 2017, starting to come through with
additional revenue of GBP530k in June as a result of the
acquisition
-- MediaMarktSaturn ("MMS"), Europe's biggest electronics and
entertainment retailer, becomes the Company's largest shareholder
following the acquisition of 24-7 Entertainment
-- Contracts signed with MMS as part of the transaction with a
value of GBP18.0m over three years
-- Total combined value of other one/two year contracts signed
in the period of GBP4.0m. These included contracts with all three
major record labels, the re-launch of TriPlay's eMusic service in
the US and a renewed contract with musical.ly across additional
territories, with revenue to be recognised over the next year
-- More than 65% of H2 licensing revenues (GBP7.5m out of
GBP11.3m) already contracted or committed
-- GBP2.9m raised through a placing and open offer in March 2017
which allowed the Company to broaden its shareholder base
-- 7digital's strategic decision to move into higher quality
streaming or "Hi-Res" gains significant momentum:
- Hi-Res files outsold traditional MP3 files in the Company's
download stores in every month of this period
- The MQA format and technology, adopted 18 months ago by
7digital, gains significant traction and is endorsed by major and
independent labels
-- Creative revenues grew 17% on the same period in 2016 to
GBP1.0m (H1 2016: GBP0.8m) with the division bringing an increasing
number of synergistic benefits to our licensing and B2B
operations
-- Statutory loss for the period was GBP3.0m (H1 2016: statutory loss of GBP3.2m)
-- Cash at period end of GBP0.9m ahead of pre-payments from
MediaMarktSaturn in August and October
-- The Board remains confident in its 2017 expectations and that
2018 will be a year of profitability and positive operating cash
flow as the full benefits of 24-7 Entertainment are realised
Post Period End Highlights
-- Several key contracts signed in Q3. Today, 7digital announces
that it has signed a deal with Fender(R), one of the world's
leading musical instrument companies, to provide technology and
access to its music and metadata platform
Simon Cole, Chief Executive of 7digital, said:
"These results show clearly, after just one month, how
transformational the acquisition of 24-7 and, with it, the
relationship with MediaMarktSaturn will be for the Group. Our work
to create a suite of new digital services for Europe's biggest
entertainment and electronics retailer has begun and will gain
momentum in the second half and into 2018.
Our licensing revenues continue to see the results of the global
growth in music streaming and, more particularly, the development
of services in new markets and with new business models. In-flight
entertainment, with our first client Global Eagle and today's news
of our new contract with Fender are just two examples.
We have always believed that the mature music streaming market
will be about much more than "all you can eat" services for a fixed
subscription. 7digital's business is in providing the tools and the
platform on which our customers build the myriad of ways in which
people will consume digital music in the future.
Our healthy first half performance has continued into the second
half of the year, our pipeline is strong and the Board is confident
in meeting full year expectations for 2017 and seeing the full
benefits of consolidation realised in 2018 and beyond."
The information communicated in this announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014.
Enquiries:
7digital Group 020 7099 7777
Simon Cole, Chief Executive
Matt Honey, Chief Financial
Officer
Holly Ashmore, PR and Client
Relations Manager
finnCap (nominated adviser and
broker) 020 7220 0500
Geoff Nash / Carl Holmes - Corporate
Finance
Mia Gardner - Corporate Broking
Weber Shandwick 020 7067 0000
Nick Oborne / Tom Jenkins
7digital Group plc
Chief Executive's Review
7digital is a global leader in end-to-end digital music
solutions. The core of our business is the provision of robust and
scalable technical infrastructure and extensive global music rights
used to create music streaming and radio services for a diverse
range of customers - including consumer brands, mobile carriers,
broadcasters, automotive systems, record labels and retailers.
7digital also offers radio production and music curation services,
editorial strategy and content management expertise.
Our strategy is to grow revenues, profitability and shareholder
returns through:
-- Increasing the number and quality of customers we serve
-- Consolidating our sector to bring the benefits of scale to a fixed cost base
-- Improving the quality and predictability of our earnings by
driving growth in recurring revenues
-- Expanding our geographic coverage
-- Continued investment in market leading technology to meet
shifting technology trends and customer needs
-- Maintaining strict control of our cost base to ensure that
revenue growth is quickly reflected in improved overall Group
profitability
Summary
The first half of 2017 was a period of further solid progress
for 7digital.
The most important event in the period was the successful
acquisition in June of our only remaining significant European
competitor, 24-7 Entertainment ("24-7") (the "Acquisition"), and,
with it, the contract to supply its owner, MediaMarktSaturn,
Europe's biggest electronics and entertainment retailer with our
music services.
Our strategy over the last two years has been to consolidate the
sector and create a business with scale which can benefit from a
fixed cost base. Having acquired, last year, the Snowite business
in France, the acquisition of 24-7 consolidates our position as the
largest provider of B2B music services and is anticipated to
increase 7digital licensing revenue in 2017 by approximately
GBP5.0m, the majority of which will be recognised in H2 this year,
and more than GBP8.0m in FY2018. The Acquisition is expected to be
materially earnings enhancing in 2018 as the benefits of the
economies of scale take hold.
Although the Acquisition was only concluded four weeks before
the period end, its influence on our financial performance can
already be seen in these results with an additional GBP530k of
revenues in June as a direct result of the acquisition. Total Group
turnover in the first half increased 9% to GBP5.9m (H1 2016:
GBP5.4m) and by 17% on a pre currency movement basis to GBP6.1m (H1
2016: GBP5.2m). Within this, total licensing revenues rose by 33%
to GBP4.0m (H1 2016: GBP3.0m). We have continued to improve the
quality and mix of our revenues, with total monthly recurring
revenues ("MRR") rising by 38% against the same period in 2016,
giving a raised Gross Margin at 71%.
Improving sales momentum during the period saw the annualised
total licensing exit MRR rise by 113% and annualised streaming exit
MRR rise by 180% compared with June 2016.
We continue to focus on our cost base which was reduced by 3% to
GBP6.2m (H1 2016: GBP6.4m) on the same period last year. Costs are
expected to rise for a period during the second half of the year as
we integrate the 24-7 business but these are expected to fall again
in 2018 and as a result lead to higher profitability.
The Group continues to benefit from global acceleration of music
streaming as an increasing number of clients use our platform to
build new digital music services. The wirelessly connected world is
rapidly bringing the capability of streamed music to a wide variety
of new devices including home hi-fi, car dashboards and even
aeroplanes. 7digital has customers providing services in all of
these areas.
The BPI, the leading British music industry association,
reported recently on the rise in audio streaming, which increased
by approximately 604% worldwide in 2016 and is expected to overtake
sales of physical music in the UK for the first time ever in 2017.
Geoff Taylor, Chief Executive, BPI & BRIT Awards, said: "the
global digital streaming market represents a huge new
opportunity."
We also continue to be well placed to take advantage of the
increasing momentum around higher quality or "Hi-Res" music
streaming, thanks to our partnership with MQA. With MQA securing
major and significant independent label support for its technology
in 2017, we are seeing the growing demand for Hi-Res audio have an
increasingly positive impact on all divisions of our business.
Licensing division
Licensing is the core of our business, providing the platform
and rights management expertise through which our B2B customers can
create their own streamed music services, either standalone or
bundled into their device or product offering. Typically, customers
pay an initial set up fee and then a fixed monthly licence fee for
using our platform; in addition, we may also take a share of user
related revenues generated by the service, including transaction
and subscription revenues.
Licensing revenues rose by 33% to GBP4.0m (H1 2016: GBP3.0m)
with total June licensing revenues of GBP1.4m following the
acquisition of 24-7 Entertainment.
Annualised exit MRR, which includes streaming and other platform
licensing revenues, for June 2017 grew to GBP11.5m, an increase of
113% against June 2016 (GBP5.4m). Licensing fees included GBP0.8m
(H1 2016: GBP0.7m) of initial set up fees paid by new customers,
who we would expect to contribute to increasing MRR in H2 2017.
The successful acquisition of 24-7 Entertainment ("24-7)
resulted in its previous owner, MediaMarktSaturn ("MMS"), Europe's
biggest electronics and entertainment retailer, becoming one of our
largest customers and shareholders. We are supporting MMS on a
range of new and existing services, including a three-year contract
for existing "Juke" music services in Germany and the Netherlands
totalling GBP11.0m. A new contract to the value of GBP6.0m over its
lifetime, including an initial set up fee of GBP1.4m, has also been
agreed with MMS to develop several new digital music services. 24-7
has other significant customers which together account for
anticipated annual revenues of GBP2.7m; one of these customers is
Danish telecom operator TDC and 7digital now provides its 'Play
Music' service, used by approximately 8% of the Danish
population.
We are also seeing revenue growth in all of our major sales
verticals as the streaming music industry expands:
In hardware, the Group signed a deal with an initial term of 3
years to power a subscription streaming service on the innovative
"Prizm" smart audio player (www.meetprizm.com), now available in
France with further territories to follow, which selects music
according to the moods and tastes of the people in the room. We
have also been working with Onkyo, the Japanese consumer
electronics manufacturer, to redesign their music stores and load
MQA content, and with DTS, a pioneer in audio solutions for
automotive, mobile devices, home theatre systems and cinema, to
develop new high-resolution audio solution prototypes for the
automotive market.
New direct-to-consumer music services which signed on to use the
7digital platform in this period include TriPlay's eMusic service
in the US. The HDmusicStream service, which we announced last year
on an un-named basis within our interim results statement for the
six months to 30 June 2016, is now expected to launch in H2 2017
and will use MQA technology to deliver studio quality music.
7digital will handle app development, host the music catalogue on
its platform and deliver tracks to consumers.
Our expertise and technology capabilities in Hi-Res audio, via
our partnership with MQA, is also resulting in additional work with
the major labels and their artists, across both our licensing and
creative divisions, by enabling companies across a range of sectors
to include Hi-Res audio in their offering to consumers. Recent
announcements by Sony Music Group and Merlin confirmed that MQA has
secured major and significant independent label support for its
technology. Along with Warner Music Group and Universal, who
previously revealed partnerships with MQA, those labels will make
their music catalogues and new releases available in the Hi-Res MQA
format. Several mobile handset manufacturers, including LG, are
preparing to launch new smartphones, which will include MQA as
standard. We expect to see further results from our investments in
MQA, and Hi-Res in general, in the second half.
In line with a strategic emphasis on further developing
commercial relationships with rights holders, 7digital has
continued to win new work with all three of the world's major music
labels in 2017. In addition to licensing and providing access to
their catalogues for customers, 7digital is helping to create new
services for the labels across a number of geographies and earning
direct revenues from the labels.
The Group strengthened its position in the merging of radio and
music streaming with the acquisition of the FlowRadio(R)
technology, platform and certain customers from Imagination
Technologies Group plc. FlowRadio(R) is an internet radio
aggregation service which offers instant access to over 25,000
stations worldwide. As part of the acquisition, 7digital has
acquired responsibility for three staff and all current contracts
from IMG.
The Group's growth in emerging markets has continued, with new
services extending 7digital's reach and, as anticipated, several of
the deals agreed in 2016 have developed into further contracts for
additional territories. We renewed our agreement with musical.ly,
one of the world's fastest growing social video networks. The new
contract doubled the number of territories in which we provide
access to music for the musical.ly service, extending its reach
from 30 to 60 territories around the world.
Since the period end we have continued to make good progress in
licensing, agreeing several key contracts as the digital music
industry continues to expand into new areas of current music
consumption. These have included an agreement, announced today,
with Fender(R), one of the world's leading musical instrument
companies, to provide technology and access to music and metadata.
7digital will provide services to bolster Fender's suite of
innovative online and mobile products.
The Group also recently announced its first in-flight client in
Global Eagle Entertainment Inc., a leading worldwide provider of
in-flight entertainment content to the airline industry, as well as
a three-year deal with French company Deedo SAS to power a new
streaming service across 27 markets and a two year deal with
US-based company Fan Label, a dynamic new music fan engagement
platform.
7digital Creative division
Our Creative division works on the production of audio, video
and multimedia content both to enhance the services provided by our
technology licensing division and also to create new content
streams for digital services.
Examples of this work are the videos produced for Technics and
MQA featuring leading artists explaining the benefits of higher
quality digital music and audio entertainment news bulletins
produced for Amazon's ground-breaking "Echo" wireless loudspeaker.
Other customers for 7digital creative content include Sky
Television, the BBC's national music radio networks, commercial
radio stations and Yahoo! Europe.
As streaming music services using 7digital's technology platform
increasingly rely on "playlisting" or "curation" of music for the
more casual listener, 7digital's creative skills are beginning to
be used by our clients to provide human input to this process. Our
client Electric Jukebox, which recently launched its innovative
service of music via connected TVs, has used 7digital Creative to
compile specialised playlists in areas like Folk music and
Jazz.
7digital Creative revenues grew 17% on the same period in 2016
to GBP1.0m (H1 2016: GBP0.8m) with the division continuing to win
and retain business as a result of our broad capabilities and deep
industry relationships.
The Group retained BBC Radio 2 programmes Pick of the Pops, The
Folk Show and The Golden Hour in the latest commissioning round and
there are other opportunities for the Group to add to these with
the new 'Compete or Compare' commissioning process, whereby a
minimum of 60% of BBC Radio hours will be open to competition from
independent content producers by 2022.
7digital.com: the content division
As anticipated, Hi-Res continues to increase as a proportion of
content sales, with year-on-year Hi-Res sales showing 100% growth
and with Hi-Res audio outselling MP3 audio every month in the first
half of the year.
The content division includes revenue from the lower margin
legacy sales of digital music downloads by the Group direct to
consumers and higher margin one off projects from record labels.
Content revenues in the first half were GBP1.1m (H1 2016: GBP1.4m),
with the comparative period last year benefitting from a contract
with a major label to use 7digital's platform for the sales of
music downloads direct from an artist's own website. The Group has
won similar work with major labels in 2017, with revenues now being
recognised as higher-margin licensing revenues.
Outlook
The Board believes that the enlargement of the Group has
significantly strengthened our market position and will bring
materially enhanced revenue against a fixed cost base. Our healthy
first half performance has continued into the second half of the
year, our pipeline is strong and the Board is confident in meeting
full year expectations for 2017 and seeing the full benefits of
consolidation realised in 2018 and beyond.
7digital Group plc
Financial review
Results for the six 2017 2016 Change %
months ending 30 GBP'000 GBP'000
June
Revenue 5,937 5,443 494 9%
Cost of Sales (1,702) (1,923) (221) 12%
--------- --------- ------- ------
Gross profit 4,235 3,520 715 20%
Other operating income 298 250 48 19%
Other administration
expenses (6,219) (6,398) (179) 3%
--------- --------- ------- ------
Adjusted LBITDA (1,686) (2,628) (942) 36%
Depreciation (647) (451) 196 -44%
--------- --------- ------- ------
Adjusted operating
loss (2,333) (3,079) (746) 24%
Share based payments (15) 16 31 -191%
Exceptional items (626) (116) 510 -440%
--------- --------- ------- ------
Operating loss (2,974) (3,179) (205) 6%
Taxation on continuing
operations (1) (46) 45 98%
Finance charges - 5 5 -100%
--------- --------- ------- ------
Loss for the period (2,975) (3,220) (245) 8%
--------- --------- ------- ------
This review covers the consolidated results of 7digital Group
plc.
Revenue breakdown
Revenue 2017 2016 Change %
GBP'000 GBP'000
Monthly recurring
revenue 3,188 2,316 872 38%
Set-up fees 848 727 121 17%
--------- --------- ------- ------
Licensing revenue 4,036 3,043 993 33%
Content 1,117 1,367 (250) -18%
Creative 982 837 145 17%
Foreign exchange (198) 196 (394) -201%
Total Revenues 5,937 5,443 494 9%
--------- --------- ------- ------
Total Group turnover increased 9% to GBP5.9m (H1 2016: 5.4m).
Within this, total licensing revenues rose by 33% to GBP4.0m (H1
2016: GBP3.0m)
Content revenues in the first half were GBP1.1m (H1 2016:
GBP1.4m), with the comparative period last year benefitting from a
contract with a major label to use 7digital's platform for the
sales of music downloads direct from an artist's own web-site.
7digital Creative revenues grew 17% on the same period in 2016
to GBP1.0m (H1 2016: GBP0.8m) with the division continuing to win
and retain business as a result of our broad capabilities and deep
industry relationships
Gross profit has increased 20% to GBP4.2m (2016: GBP3.5m). The
gross margin for the period increased to 71% (2016: 65%).
Adjusted LBITDA and operating loss
In the six months to 30 June 2017, the Group decreased its
adjusted LBITDA to GBP1.7m (2016: LBITDA GBP2.6m). The Group's
adjusted operating loss decreased to GBP2.3m from GBP3.1m.
Operating loss
The operating loss has decreased to GBP3m from GBP3.2m.
Statutory loss
The Statutory loss for the period has decreased by 8% to GBP3m
from GBP3.2m.
Cash flow & cash position
In the six months to 30 June 2017, the Group had a cash outflow
from operating activities of GBP2.3m (H1 2016: GBP0.6m). At 30 June
2017 cash in bank was GBP0.9m (H1 2016: GBP1.1m).
Loss per share
In the six months to 30 June 2017 the Company reported a basic
and diluted loss per share of 2.13 pence.
7digital Group plc
Condensed consolidated statement of comprehensive income
Six months ended 30 June 2017 (unaudited)
Unaudited Unaudited Audited
six six full
months months year
ended ended ended
30 June 30 June 31 Dec
2017 2016 2016
Notes GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 2 5,937 5,443 11,899
Cost of sales (1,702) (1,923) (3,451)
---------- ------------
Gross profit 4,235 3,520 8,448
Other income 3 298 250 560
Administrative expenses (7,507) (6,949) (14,328)
Adjusted operating
loss (2,333) (3,079) (4,860)
- Share based payments (15) 16 4
- Exceptional items 5 (626) (116) (464)
-------------------------- ------ ---------- ---------- ------------
Operating loss 4 (2,974) (3,179) (5,320)
Finance Income - 6 6
Finance cost - (1) (19)
Loss before tax (2,974) (3,174) (5,333)
Taxation on continuing
operations (1) (46) (12)
---------- ---------
Total comprehensive
income attributable
to owners of the parent
company (2,975) (3,220) (5,345)
========== ========== =========
Loss per share (pence)
Basic and diluted (2.13) (2.87) (4.69)
========== ========== =========
7digital Group plc
Condensed consolidated statement of financial position
As at 30 June 2017 (unaudited)
Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2017 2016 2016
Notes GBP'000 GBP'000 GBP'000
Assets
Non-current assets
6,
Intangible assets 7 3,192 2,025 2,303
Property, plant and
equipment 529 619 475
3,721 2,644 2,778
---------- ---------- --------
Current assets
Inventory: work-in-progress 224 172 142
Trade and other receivables 7,016 4,730 3,575
Patent 43 - 35
Cash and cash equivalents 910 1,108 838
8,193 6,010 4,590
---------- ---------- --------
Total assets 11,914 8,654 7,368
---------- ---------- --------
Current liabilities
Trade and other payables (10,391) (6,532) (6,731)
Provisions for liabilities
and charges - current (423) (10) (462)
(10,814) (6,541) (7,193)
---------- ---------- --------
Net current assets (2,621) (532) (2,603)
---------- ---------- --------
Non-current liabilities
Bank loan
Other long term liabilities (1,367) (941) (1,519)
Provision for Liabilities
and charges - non current (227) (381) (227)
(1,594) (1,322) (1,746)
---------- ---------- --------
Total liabilities (12,408) (7,863) (8,939)
---------- ---------- --------
Net assets (494) 790 (1,571)
========== ========== ========
Equity
Share capital 12,248 11,575 11,575
Share premium account 3,372 17,278 -
Treasury reserve (5) (5) (5)
Reverse acquisition
reserve (4,430) (4,430) (4,301)
Other reserves 129 (100) -
Retained earnings (11,808) (23,528) (8,840)
Total Equity (494) 790 (1,571)
========== ========== ========
7digital Group plc
Condensed consolidated cash flow statement
Six months ended 30 June 2017 (unaudited)
Unaudited Audited full year ended 31
six months Dec 2016
ended
30 June Unaudited six months ended
Notes 2017 30 June 2016
GBP'000 GBP'000 GBP'000
Loss for the period (2,974) (3,220) (5,345)
Adjustments for:
Taxation 1 46 12
Interest - (6) 13
Foreign Exchange 198 (196) (551)
Amortisation of intangible assets 471 314 746
Depreciation of fixed assets 176 189 410
Share based payments - - 176
Share option valuation adjustment 15 (16) (4)
Decrease in provisions (39) (160) (27)
Increase/(decrease) in accruals and
deferred income 2,895 868 1,355
Decrease in inventories (82) (110) (116)
(Increase)/decrease in trade and
other receivables (3,210) 110 1,432
Increase/(decrease) in trade and
other payables 273 1,582 1,445
----------------------------- -----------------------------
Cash flows from operating activities (2,276) (598) (454)
Taxation (1) (46) (12)
Net interest - 6 (13)
----------------------------- -----------------------------
Net cash used in operating activities (2,277) (639) (479)
------------ ----------------------------- -----------------------------
Investing activities
Purchase of property, plant and
equipment (135) (28) (448)
Acquisition of cash from
subsidiary 1,143 - -
Acquisition of subsidiary (888) 109 109
Purchase of intangible asset (288) (186) -
------------ ----------------------------- -----------------------------
Net cash (used) / generated from
investing activities (168) (105) (339)
------------ ----------------------------- -----------------------------
Financing activities
Repayment of Loans (152) - -
Proceeds from issue of
ordinary share capital 2,867 - -
------------ ----------------------------- -----------------------------
Net cash generated from in
financing activities 2,715 - -
------------ ----------------------------- -----------------------------
Net increase/(decrease) in cash and
cash equivalents 270 (744) (818)
------------ ----------------------------- -----------------------------
Cash and cash equivalents at
beginning of period 838 1,656 1,656
Effect of foreign exchange rate
changes (198) 196 -
Cash and cash equivalents at end of
period 910 1,108 838
============ ============================= =============================
7digital Group plc
Condensed consolidated statement of changes in equity
Six months ended 30 June 2017 (unaudited)
Share
Share premium Treasury Other Retained
capital account reserves reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2016 10,843 17,278 (42) (4,548) (20,167) 3,364
Loss for
the period - - - - (3,220) (3,220)
Other comprehensive
income for
the period - - - 18 (88) (70)
Acquisition
of subsidiary 732 - - - - 732
Share based
payment - 37 - (53) (16)
At 30 June
2016 11,575 17,278 (5) (4,530) (23,528) 790
--------- --------- ---------- ---------- ---------- --------
Loss for
the period - - - - (2,125) (2,125)
Other comprehensive
income for
the period - - - 64 (477) (413)
Capital Reduction - (17,278) - - 17,278 -
Acquisition
of subsidiary -- - - (11) - (11)
Share based
payment - - - 176 12 188
At 1 January
2017 11,575 - (5) (4,301) (8,840) (1,571)
--------- --------- ---------- ---------- ---------- --------
Loss for
the period - - - - (2,975) (2,975)
Other comprehensive
income for
the period - - - - 7 7
Capital raise 442 2,426 - - - 2,868
Acquisition
of subsidiary 231 946 - - - 1,177
Share based - - - - - -
payment
At 30 June
2017 12,248 3,372 (5) (4,301) (11,808) (494)
========= ========= ========== ========== ========== ========
1. Presentation of financial information and accounting policies
Basis of preparation
The condensed consolidated financial statements are for the six
months to 30 June 2017.
The combined financial information has been prepared in
accordance with 7digital Group plc accounting policies. 7digital
Group plc accounting policies are in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union and as issued by the International Accounting Standards
Board, and are set out in the 7Digital Group plc Annual Reports and
Financial Statements 2016, with the exception of the application of
new accounting standards.
The information for the six months ended 30 June 2017 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. The information for the year ending 31 December
2016 is taken from the Annual Reports and Financial Statements 2016
of 7digital Group plc.
Liquidity and going concern
These financial statements have been prepared on a going concern
basis. The directors have reviewed 7digital's going concern
position taking account of its current business activities,
budgeted performance and the factors likely to affect its future
development, including the Group's objectives, policies and
processes for managing its capital, its financial risk management
objectives and its exposure to credit and liquidity risks.
The directors have prepared cashflow forecasts and a funding
plan through to profitability, covering a period of at least 12
months from the date of these financial statements.
As such, the directors believe that the Group can continue to
operate as a going concern.
Estimates and judgments
The preparation of a condensed set of financial statements
requires management to make judgments, estimates and assumptions
about the carrying amounts of assets and liabilities at each period
end. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates. The
estimates and underlying assumptions are reviewed on an on-going
basis.
In preparing these condensed set of consolidated financial
statements, the significant judgments made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were principally the same as those applied
to the Group's consolidated financial statements for the year ended
31 December 2016.
Valuation of intangible assets on acquisition
On acquiring a business the Group is required to consider the
existence or otherwise of intangible assets. On identification of
these assets, the Group compares the consideration paid with the
fair value of the assets acquired. Amortisation is calculated using
the straight-line method over the expected useful life of the
intangible. For Bespoke Software and Intellectual Property
contained within software the expected useful life is estimated at
three years.
2. Business and geographical segments
Business segments
Unaudited Audited
Unaudited six full
six months months year
to to ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBP'000 GBP'000 GBP'000
Revenue
Licensing 4,036 3,043 6,830
Content 1,117 1,367 2,606
Production 982 837 1,912
Foreign Exchange (198) 196 551
------------ ---------- ---------
Total 5,937 5,443 11,899
Operating profit/(loss)
Licensing 3,526 2,771 6,162
Content 31 127 750
Production 546 423 985
Unallocated (7,219) (6,946) (13,777)
------------ ---------- ---------
Total (3,116) (3,625) (5,880)
Other income 298 250 560
Other gains and losses - - 6
Net finance costs (156) 201 (19)
Taxation (1) (46) (12)
Loss for the year (2,975) (3,220) (5,345)
============ ========== =========
Geographical information
Non-current
Revenue assets
------------------ ------------------
Unaudited six months 2017 2016 2017 2016
to 30 June
Continuing Operations GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 2,651 1,473 3,123 970
Europe 1,076 859 598 919
Rest of World 2,408 2,914 - -
Foreign Exchange (198) 196 - -
-------- -------- -------- --------
5,937 5,443 3,721 1,889
======== ======== ======== ========
3. Other income
Other income relates to research and development tax credits
which are receivable from HMRC at the end of the period.
4. Operating loss for the year
Operating loss for the year has been arrived at after
charging:
Unaudited Audited
Unaudited six full
six months months year
ended ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBP'000 GBP'000 GBP'000
Amortisation of intangible 471 172 746
Depreciation of property,
plant & equipment 176 201 410
Bad debt provisions and write
offs 213 818 1,120
Share based payment expense (15) (16) (4)
Staff costs 3,858 3,800 7,736
============ ========== ========
5. Exceptional items
Unaudited Unaudited Audited
six months six months full year
ended ended ended
30 June 30 June 31 Dec
2017 2016 2016
GBP'000 GBP'000 GBP'000
Acquisition costs (318) (24) (82)
Capital Reduction - - (25)
Cash Raise Fees (267) - -
Exceptional Legal Fees (8) - (105)
Restructuring costs (33) (92) (252)
(626) (116) (464)
============ ============ ===========
6. Acquisition
On 20 June 2017, 7digital Group plc acquired a Danish software
company 24/7 Entertainment ApS from MediaMarktSaturn. The amounts
recognised in respect of the identifiable assets acquired and
liabilities assumed are as set out in the table below:
Adjusted
Fair at
31 May Value 30 Jun
2017 Adjustment 2017
GBP'000 GBP'000 GBP'000
Tangible Fixed Assets 186,178 - 186,178
Intangible Fixed Assets 8,057 (8,057) -
Other Non Current Assets 52,386 - 52,386
Trade receivables - - -
Other debtors 49,602 - 49,602
Prepaid expenses and
deferred charges 136,637 - 136,637
Cash Balances 1,143,207 - 1,143,207
Payroll and Corporate
taxes (47,387) - (47,387)
Trade Payables (21,182) - (21,182)
Accruals and Provisions (423,317) - (423,317)
1,084,182 (8,057) 1,076,125
========== ============= ----------
Intangible assets 508,649
Goodwill 571,437
Deferred tax provision (88,782)
----------
Total consideration 2,067,428
==========
The transaction was satisfied by the issue of 23,144,616
ordinary shares at a value of GBP0.055p per share in 7digital Group
plc for 100% of the shareholding in 24/7 Entertainment ApS. In
addition, 7digital Group plc also agreed to pay an initial cash
payment of GBP0.9m in respect of the cash which remained on the
balance sheet of 24-7 at acquisition. The primary reason for the
acquisition was to acquire 24/7 Entertainment's customers.
Identifiable intangible assets acquired have been valued at fair
value and the balance between the adjusted fair value of the net
assets, the value of the identifiable intangible assets and the
consideration has been classified as Goodwill. The identifiable
intangible assets will be amortised over a 3 year period in line
with the Group policy on bespoke software and the value of the
Goodwill will be reviewed for any impairment annually.
7. Intangible assets
Bespoke Intangible
applications Goodwill assets
GBP'000 GBP'000 GBP'000
Cost
At 31 December 2016 3,137 546 3,683
Additions 789 571 1,360
-------------- --------- -----------
At 30 June 2017 3,926 1,117 5,043
-------------- --------- -----------
Depreciation
At 31 December 2016 1,380 - 1,380
Charge for period 471 - 471
-------------- --------- -----------
At 30 June 2017 1,851 - 1,851
============== ========= ===========
Net book value
At 31 December 2016 1,757 546 2,303
-------------- --------- -----------
At 30 June 2017 2,075 1,117 3,192
============== ========= ===========
8. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed within the financial statements or related notes.
9. Post balance sheet event
There have been no material events post 30 June 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LFFLFASIEFID
(END) Dow Jones Newswires
September 26, 2017 02:01 ET (06:01 GMT)
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