I’m joined today by Paul Langworthy, the CEO of 7digital (LSE:7DIG), which is the global leader in B2B end-to-end digital music solutions. Yesterday 7digital announced contract wins in the fitness industry, a strategic growth market for DIG. The company currently has a market cap of around 27 million pounds, and as regular users of the 7Digital board will know, we are taking this opportunity to put some of your questions to the CEO.
Turning to yesterday’s announcement – new contract wins in the fitness space. Barry’s has 77 fitness studios globally and is moving online, Volava is a Spanish online fitness platform with hopes to expand.
"These are two examples of an emerging trend to move online from Barry's and an existing trend for online from Volava. That's in addition to existing contracts we've already signed with Apex Rides and Form. This is an exciting market, a growing market and it will provide a significant revenue contribution for us in this year and into the next as well."
In answer to your questions, Paul confirmed that "7digital will be full-year profitable, EBIT positive, by the end of 2021. Our analysts Arden have forecast that and we are comfortable with that number, with a 30% revenue increase as well, and that gives us a useful springboard for revenue growth in 2022. There are lots of recurring revenues built in there and importantly long term contracts as well. "
"Revenues were £6.5M last year with an EBIT loss of £1.4M, half the loss of 2.8M the previous year" said Paul. "We are already seeing a great demand for fitness and for social, as well as artist monetization through this year and particularly in 2022."
Finally, John George Stamp believes that a paragraph referencing 'Material Uncertainty relating to a going concern' has caused investors to sell shares.
Here is Paul's reply: "We have transitioned this business, we have massively reduced costs and we have positioned ourselves well for growth from here on. The company is a going concern, there is no issue there, the accounts were signed off by the auditors and by the Directors. The material uncertainty is a separate issue and as we said in the RNS that relates to a short term liquidity issue. We do see that as an accounting issue. The bar is higher for the audit industry post-Covid in relation to 'Material Uncertainty' and we are confident this isn't going to cause us a problem. We've got support from the major shareholders should we need it and we have a vibrant pipeline which will bring cash into the business in 2021 and 2022".
