RNS Number:5350D
Imagesound PLC
10 September 2007
10 September 2007
Imagesound plc
Interim Results for the six months ended 30 June 2007
Imagesound plc (AIM: ISD.L), the UK's leading listed supplier of in-store music,
radio and TV services to the branded retail and leisure sectors, today announces
unaudited results for the six months ended 30 June 2007.
Financial Highlights
* Revenue reduced in line with expectations to #3.5m (H1 2006: #3.9m)
* Adjusted* operating profit up 7% to #629k (H1 2006: #590k)
* Adjusted* operating profit margin increased 3 percentage points to 18%
* Adjusted* earnings per share up 10% to 0.74p (H1 2006: 0.67p)
* Cash from operations up 69% to #505k (H1 2006: #299k)
* Adjusted to exclude amortisation of intangible assets, non recurring
expenditure and share based payments
Operational Highlights
* Subscriber outlets increased to 17,000 sites/zones as at 1 August 2007;
* Major renewals and additional sites secured in H1 with Wickes,
Superdrug, Bon Marche, HBOS, Foot Locker, Richleys, Slug & Lettuce and Ha Ha
bars;
* New contract signed today with Au Naturelle for 180 stores across the
UK;
* MusicStyling have agreed a contract with Rezidor Group to supply 150
hotels over the next 12 months, in addition to the continuing rollout to the
Marriott chain;
* Acquisition of TSC Music Systems Ltd on 31 July for #4.75m adds new
clients including Starbucks, Caffe Nero, Montblanc and Alliance & Leicester.
Derek Mapp, Chairman of Imagesound said:
"I am very pleased with the progress we have made in the first half, which is
building value for H2 and beyond. Whilst some of our clients are experiencing
tough trading conditions, this is not impacting their recognition of the need
for managing and developing their retail and leisure offer through music,
messaging and AV. Imagesound is in a strong position to capitalise on this
continuing trend and well placed to take advantage of opportunities for further
growth through acquisition - both in the UK and overseas. Our recent acquisition
of TSC is an example of such opportunity and we remain confident that we are on
track to meet our expectations for the year as a whole."
For further information:
Imagesound plc
Derek Mapp, Executive Chairman Tel: 01246 572 990
Collins Stewart
Seema Paterson/Lorraine Delannoy Tel: 020 7523 8350
Hogarth Partnership
James Longfield/Sarah Richardson Tel: 020 7357 9477
Notes to Editors
Imagesound is the UK's leading listed supplier of in-store music, radio and TV
services. It provides music and messaging services to over 50 leading branded
retail and leisure chains reaching over 17,000 subscriber outlets.
Customers include Superdrug, B&Q, Foot Locker, Carphone Warehouse, McDonald's,
Subway, Halifax, Next, Focus, Holiday Inn, River Island, O'Neill's, Pizza
Express, Hyatt, Starwood, Marriott and JJB.
Imagesound is listed on the AIM market of the London Stock Exchange (AIM:
ISD.L).
Imagesound plc
(the "Company" or "Group")
Interim Results for the six months ended 30 June 2007
Chairman's Statement
I am pleased to report that we have made further good progress in the first half
of 2007 as we continue to build on the benefits of our operational and financial
restructuring in 2006 and by securing the opportunities that have arisen from
our recent acquisitions. New clients added in the first half together with the
completion of a number of major equipment roll-out programmes are helping to
build a strong pipeline of recurring revenue opportunities, which are expected
to positively impact trading in the second half. Accordingly, we are confident
that we are on track to meet our expectations for the full year.
Financial Review
Our focus on improving the quality of the business and more predictable
recurring revenues saw turnover drop slightly, as expected, to #3.5m (H1 2006:
#3.9m). Within this, however, recurring revenues increased to #2.5m, and now
represent 68% of total turnover (H1 2006: 62%). The higher quality revenues,
combined with our continued focus on costs and leveraging our existing operating
infrastructure, has led to an increase in adjusted operating profit of #629,000,
a 7% increase on the same period last year. Adjusted operating margins improved
three percentage points to 18%. Adjusted earnings per share were up 10% to 0.74p
(H1 2006: 0.67p).
Interest costs were lower following the refinancing of the business in the
second half of 2006, leading to a 21% reduction in net finance costs to #95,000
(H1 2006: #120,000). After the #963,000 amortisation of intangible assets
relating to prior year acquisitions, #62,000 of non-recurring restructuring
charges and #65,000 of share based payments, Imagesound reported a loss before
tax of #556,000 (H1 2006 loss: #621,000) and a loss per share of 0.88p (H1 2006
loss: 1.04p).
The improving quality of the business was further evidenced by an 69% increase
in cash generated from operating activities to #505,000 (H1 2006: #299,000).
Proforma Income Statement Restated
--------------------------- ----------
Half Year Half Year Year
--- ----------- ----------- ------
Ended Ended Ended
--- ------- ------- -------
30-Jun-07 30-Jun-06 31-Dec-06
--- ----------- ----------- -----------
(Unaudited) (Unaudited) (Audited)
---
---
Revenue 3,513 3,909 8,184
Adjusted EBITDA 882 868 1,630
Depreciation (253) (278) (561)
---------- ---------- ----------
Adjusted Operating Profit 629 590 1,069
Non recurring expenditure (62) (89) (109)
Amortisation of intangible assets (963) (936) (1,903)
Share based payment charge (65) (66) (145)
---------- ---------- ----------
Operating loss (461) (501) (1,088)
Profit on sale of head office - - 609
Net financing costs (95) (120) (293)
---------- ---------- ----------
Loss before tax (556) (621) (772)
Taxation (131) - 361
---------- ---------- ----------
Loss after Tax (687) (621) (411)
Adjusted Earnings per share (p) 0.74 0.67 1.02
Weighed average number of shares 63,312,500 60,716,667 61,945,000
Operating Review
Competition in the international luxury hotel sector remains under-developed and
our activities in this market continue to move from strength to strength. In the
UK retail and leisure markets competition remains strong and market conditions,
for retailers in particular, have remained challenging throughout the first half
of 2007. Despite this, branded retail and leisure operators increasingly
recognise the importance of maintaining brand differentiation for their
businesses and this has strengthened Imagesound's pitch to both existing clients
and prospects. We continue to see a strong pipeline of opportunities for new
business. We have increased subscriber numbers to 17,000 outlets/music zones as
at 1 August 2007 (December 2006: 13,383).
During the first half we secured new contracts and service and equipment
upgrades with Wickes, Superdrug, Bon Marche, HBOS, Foot Locker, Richleys, Slug &
Lettuce and Ha Ha. The majority of these contract renewals are for three year
terms, which increases our recurring income levels and improves future
visibility.
We are delighted to announce today that we have won a new contract with Au
Naturelle, providing music services to 180 stores across the UK.
A major initiative for the Group during 2007 is the transition of our technology
offer away from expensive satellite transmission to a network-based system,
delivered via the internet. Building on the experience from MusicStyling, which
delivers the majority of music content via the web, the reduced cost for our
customers and improved efficiency of delivery is expected to have a positive
impact on our competitiveness and on gross margins going forward. To date we
have transitioned Superdrug, Peacocks, Poundland and Bon Marche in retail and
Slug & Lettuce and Ha-Ha in the leisure arena to web-based delivery. Discussions
are ongoing with a number of other clients and we expect further moves in the
second half.
MusicStyling.com, which is the clear world leading provider of bespoke music
content to the international luxury hotel, spa and resort industry, has
continued to perform extremely well in the first half. Recurring annualised
revenues increased to #700,000 in the period, and we anticipate a further uplift
in the second half as the new wins and rollouts completed in the first half come
on stream. New wins in H1 include the Four Seasons and Radisson chains and a
major roll out across the Marriott estate.
The acquisition of MusicStyling in May 2006 represented a significant step in
Imagesound's international growth strategy, and the business is now operating in
around 1,200 music 'zones' in 292 hotels in 70 countries around the world.
Supporting this business, we will be opening an office in Vancouver later this
month, which will allow us to build on our position in the key American hotel
market.
The convergence of music licensing policies, procedures and prices, particularly
in Europe, is opening up other opportunities overseas. We have taken steps to
progress the international expansion of our in-store music business in the first
half. During the period we entered distribution partnership deals in Spain/
Portugal, where we already have penetration of 90 sites, and in Dubai, to
service the Middle East and Asia. We are also in discussions with other
potential distributors in Italy, Germany and South Africa, all of which offer
exciting opportunities. International revenues, including those from
MusicStyling, represent approximately 12% of total first half revenues. We
anticipate that this proportion could increase substantially over the coming
years
During the period we introduced a best in class Audio-Visual player, in
partnership with a leading international manufacturer and we are currently
developing a sales team to promote this further within the leisure market.
Acquisition of TSC
Since the half year end we have announced the acquisition of TSC Music Systems
("TSC") for a total consideration of #4.75m. This was a major step in our
strategy to consolidate our market leading position for the provision of
in-store music, adding some 3,500 outlets across the UK. TSC is a major supplier
of music services to the branded fashion retail, coffee chain, fast food and
retail financial services sectors, with a blue chip customer base which includes
leading brands such as Billabong, Orange Retail, Montblanc, Starbucks, Caffe
Nero, Alliance & Leicester, Welcome Break, and Gala.
The acquisition of TSC offers significant benefits through improved efficiencies
and economies of scale. The integration of TSC is progressing smoothly and on
plan, and we expect to see a contribution from this business in the full year
results.
The acquisition of TSC also adds further technology to Imagesound in the form of
a music player that is comparable in quality to the one used by Imagesound, but
is less costly to manufacture. Imagesound plans to adopt the TSC music player
for its existing clients further improving Imagesound's competitiveness as we
drive for renewals and new business.
James Abdool, former Managing Director of TSC has been appointed Retail Sales
Director of Imagesound.
Outlook
Our market continues to offer attractive opportunities. The branded retail and
leisure sectors are large and expanding with over 200,000 targeted outlets in
the UK alone, of which only around 25% are using a third party music provider.
In addition, the supply side of the market is highly fragmented, with ten
identified direct competitors in the UK. Most of these are smaller operators and
only one is of a comparable size to Imagesound.
We have shown with the recent acquisition of TSC and with our previous
acquisitions that we will continue to play a key role in the consolidation of
this market. Imagesound has a reshaped balance sheet and the necessary banking
facilities in place to enable the Group to continue to make acquisitions.
Trading since the half year end has continued in line with expectations, with
the anticipated uplift in business from TSC and the new MusicStyling clients
already coming through. With a strong pipeline of new opportunities both in the
UK and worldwide along with further upgrades and renewals from customers who
recognise the importance of controlling their retail environment, the Board
remains confident of meeting its expectations for the year as a whole.
Derek Mapp
Chairman
10 September 2007
Consolidated Income Statement for Six Months Ended 30 June 2007
Restated
----------
Half Year Half Year Year
----------- ----------- ------
Ended Ended Ended
------- ------- -------
30-Jun-07 30-Jun-06 31-Dec-06
----------- ----------- -----------
(Unaudited) (Unaudited) (Audited)
Revenue 3,513 3,909 8,184
Cost of sales (1,975) (2,268) (4,769)
----------- ----------- -----------
Gross Profit 1,538 1,641 3,415
Administrative Expenses (1,999) (2,142) (4,503)
----------- ----------- -----------
Operating loss (461) (501) (1,088)
Gain on disposal of profit - - 609
Financial Income - - -
Financial Expenses (95) (120) (293)
----------- ----------- -----------
Net Financing Costs (95) (120) (293)
----------- ----------- -----------
Loss before taxation (556) (621) (772)
Taxation (131) - 361
----------- ----------- -----------
Loss after taxation (687) (621) (411)
----------- ----------- -----------
Basic Loss per Share (0.88) (1.04) (0.66)
Diluted Loss per Share (0.88) (1.04) (0.66)
Consolidated Balance Sheet for Six Months Ended 30 June 2007
Restated
--- ---------- ---
Half Year Half Year Year
----------- ----------- ------
Ended Ended Ended
------- ------- -------
30-Jun 30-Jun 31-Dec
-------- -------- --------
2007 2006 2006
------ ------ ------
(Unaudited) (Unaudited) (Audited)
Net current assets
Intangibles 8,477 10,238 9,438
Property Plant & Equipment 1,256 1,826 891
Deferred Tax Assets 296 - 361
--------- --------- ---------
10,029 12,064 10,690
--------- --------- ---------
Current Assets
Inventories 649 621 440
Trade and Other Receivables 2,211 2,277 2,510
Cash and Cash Equivalents 32 - 23
--------- --------- ---------
2,892 2,898 2,973
--------- --------- ---------
--------- --------- ---------
Total Assets 12,921 14,962 13,663
--------- --------- ---------
Current Liabilities
Bank Overdraft (726) (768) (1,108)
Interest Bearing Loans and Borrowings (87) - (112)
Trade and Other Payables (3,289) (4,807) (3,709)
--------- --------- ---------
(4,102) (5,575) (4,929)
--------- --------- ---------
Non-Current Liabilities
Interest Bearing Loans and Borrowings (2,144) (2,499) (1,437)
--------- --------- ---------
(2,144) (2,499) (1,437)
--------- --------- ---------
Total Liabilities (6,246) (8,074) (6,366)
--------- --------- ---------
Net Assets 6,675 6,888 7,297
--------- --------- ---------
Equity Attributable to Equity Holders of the Parent
Called Up Share Capital 6,331 6,300 6,331
Share Premium 5,467 5,464 5,467
Other Reserve 86 - 86
Retained Earnings (5,209) (4,876) (4,587)
--------- --------- ---------
Total Equity 6,675 6,888 7,297
--------- --------- ---------
Cash Flow Statements for Six Months Ended 30 June 2007
Restated
--- ----------
Half Year Half Year Year
----------- ----------- ------
Ended Ended Ended
------- ------- -------
30-Jun-07 30-Jun-06 31-Dec-06
----------- ----------- -----------
(Unaudited) (Unaudited) (Audited)
Cash flows from operating activities
Loss for the period (687) (621) (411)
Adjustments for:
Depreciation & Amortisation 1,216 1,214 2,463
Financial Income - - -
Financial expense 95 120 293
Gain on sale of property, plant &
equipment - - (609)
Equity-settled share based payment
expenses 65 66 145
Taxation 66 - (361)
--------- --------- ----------
Operating profit before changes in working
capital & provisions 755 779 1,520
(Increase)/decrease in trade & other
receivables 234 (85) (316)
(Increase)/decrease in stock
inventories (209) (139) 42
(Decrease)/increase in trade & other
payables (275) (256) (1,183)
--------- --------- ----------
Cash generated from the operations 505 299 63
Interest Paid (87) (109) (239)
Tax Paid - 24 -
--------- --------- ----------
Net cash from operating activities 418 214 (176)
--------- --------- ----------
Cash flows from investing activities
Proceeds from sale of property , plant
& equipment - 41 1,658
Interest received - - -
Acquisition of subsidiary , net of
cash acquired - (152) (384)
Acquisition of plant & equipment (617) (119) (468)
--------- --------- ----------
Net cash from investing activities (617) (230) 806
--------- --------- ----------
Cash flows from financing activities
Proceeds from the issue of share
capital - - 50
Proceeds from convertible loan notes - - 1,450
Proceeds from capital expenditure
loans 635 - -
Repayment of borrowings (38) (159) (2,565)
Payment of finance lease liabilities (8) (19) (27)
Payment of arrangement fees - (16) (65)
--------- --------- ----------
Net cash from financing activities 589 (194) (1,157)
--------- --------- ----------
Net decrease/(increase) in cash &
equivalents 391 (210) (527)
Cash & cash equivalents at beginning
of period (1,085) (558) (558)
--------- --------- ----------
Cash & cash equivalents at end of
period (694) (768) (1,085)
--------- --------- ----------
Notes to the interim report
1. Preparation of the interim report
The interim report has been prepared using accounting policies consistent with
those adopted in the statutory accounts of the group for the year ended 31
December 2006.
2. Interim financial information
The interim financial information for the period ended 30 June 2007 is unaudited
and does not constitute statutory accounts within the meaning of section 240 of
the companies Act 1985.
The results for the year ended 31 December 2006 have been extracted from the
financial statements of the group on which an unqualified auditors' report has
been received and which has been delivered to the Registrar of Companies.
3. Tax
The tax charge for the period is based upon the anticipated effective rate of
tax for the year to 31 December 2007.
4. Loss per share
The calculation of loss per share is based on a loss of #687,000 (H1 2006: loss
of #621,000) and on a weighted average of 63,312,500 (H1 2006: 60,716,667)
ordinary shares in issue during the period.
In both the half year ended 30 June 2007 and 2006 and the year ended 31 December
2006 the impact of share options is anti-dilutive and these have been excluded
from the calculation of the diluted weighted average share capital.
5. Reconciliation of movements in total equity
30 Jun 2007 30 Jun 2006 31 Dec 2006
(unaudited) (unaudited) (Audited)
#000 #000 #000
----------------------------- ---------- ---------- ----------
Opening total equity shareholders'
funds 7,297 7,143 7,143
Share issue - 300 334
Accumulated loss for the period (687) (621) (411)
Share based payment charge 65 66 145
Equity portion of convertible loan
note - - 86
----------------------------- ---------- ---------- ----------
Closing total equity shareholders'
funds 6,675 6,888 7,297
----------------------------- ---------- ---------- ----------
6. Post balance sheet event
Since the period end, Imagesound has acquired TSC Music Systems Limited.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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