7DIG.L Regulatory News (7DIG)

27 Nov 2006 07:02

UBC Media Group PLC27 November 2006 27 November 2006 UBC Media plc INTERIM REPORT FOR THE SIX MONTHS TO 30 SEPTEMBER 2006 Financial Highlights UBC (UBC: LN) is maintaining a strong trading position whilst developing groundbreaking digital radio revenue models. The main financial highlights for UBC Media Group for the six months to 30September 2006 are as follows: - Operating profit in the period of £21,000 (2005: loss of £58,000) before goodwill amortisation; - Operating loss pre- exceptional items improved to -£250,000 (2005: -£329,000) - Retained loss -£347,000 (2005: profit £182,000) - Gross profit maintained at £2.4 million (2005: £2.4 million); - EBITA losses improved to -£262,000 (2005: -£287,000) - Group turnover of £9.1 million (2005: £9.4 million). Billings in the period of £9.4 million (2005: £9.4 million); - Digital software turnover in the period up 96.1% at £659,000 (2005: £336,000); - Investment in music downloading in the period totalled £552,000 (2005: £175,000); - At 30 September 2006 UBC had cash in the bank of £4.2 million (2005: £2.5 million). Strategic Highlights - Results of successful consumer trials of the digital radio music downloading service exceeded UBC's projections; - Development funded by successful placing of 15 million new ordinary shares raising £3 million; - Confirmation of digital music download service launch with support of the major radio groups, record companies and Virgin Mobile in Q1 2007 - Major US software contract worth US$750,000 in full year - US$530,000 (£279,000) taken in H1. - Software trials underway in Australia and New Zealand. - Classic Gold Digital sees 15% increase in digital listeners Commenting on the performance of UBC Media Group in the six months to 30September 2006, Simon Cole, Chief Executive, said, "The UK radio industry is in a period of structural change. Radio listeningremains strong and radio is being consumed more on new digital platforms. It isclear, however, that the future of the industry relies on the development of newrevenue models. These are the models that we at UBC have been developing -like the direct sale of music via digital radio stations - and they are nowbearing fruit. I'm proud that our skilled staff are managing a period of rapidand exciting development whilst maintaining strong cash-generative businessmodels to fund it" There will be a presentation to analysts and investors this morning at 9.00amGMT at The London Stock Exchange, Forum 2, 10 Paternoster Square, London, EC4M7LS Enquiries: Simon Cole, CEO, UBC Media Group plc Tel: 020 7453 1600 Tim Allan or Diane Barnes, Portland for UBC Tel: 020 7404 5344 Strong New Digital Radio Business Models Emerge Today's results and accompanying announcements show what a transforming periodthe last six months has been for UBC Media Group. The model of profitable and cash generative businesses funding investments innew digital radio business models has placed the Company in a strong position.UBC is now seeing revenues and profits from those new businesses. UBC'sinvestment is focused on creating what the Company believes to be the digitalradio 'killer application' - its music downloading system that allows listenersto buy music directly from digital radio stations as they listen to it. As digital radio replaces analogue radio around the world, UBC has benefitedfrom both the UK's lead in digital radio and its own careful investments overthe last four years. Our software business, Unique Interactive, has doubled inboth turnover and profits. In this period, the company has agreed a contractwhich will be worth US$750,000 in the full year with a major US radio company;US$530,000 (£279,000) of this revenue has been taken in the period. Fulldetails of the contract can only be released when the work is completed forreasons of commercial confidentiality. As announced in July, future investment is concentrated on our digital radiomusic downloading service, to be launched in 2007. Progress to date has beenvery encouraging, with the completion of successful consumer trials, securingthe support of major record companies, radio groups and a partnership withVirgin Mobile. UBC's development strategy continues to be funded by our profitable networkedprogramming business which, despite a harsh commercial climate, has outperformedthe industry and which we are continuing to grow through investment in thecreation of a new national radio news service in partnership with BSkyB. Operating Review by Division DIGITAL DIVISION 2006 2005 £m £m % Change Turnover 0.659 0.336 +96.1 Music Downloading We have made good progress in developing a service allowing listeners topurchase digital music from DAB radio stations. In the six months to 30September 2006 UBC invested £552,000 (2005: £175,000) in developing the service.The results of the consumer trials held over the summer were very encouraging.The response of consumers supported our view that the capability to downloadmusic tracks from the radio as they are played has significant appeal,particularly with listeners that have not so far embraced the music downloadingculture. Consumers in the trial were given a balance of credit on a suitablyequipped mobile phone and allowed to spend that credit purchasing digital musicfiles from Heart 100.7 in Birmingham. Trialists purchased on average seventracks per week, which is more than six times the number required to fulfilUBC's revenue projections for the service when launched. Research by Universal Music shows that 66% of music is purchased by consumers asa result of hearing it played on the radio. The capability to download musictracks as you listen to them has the potential to become a substantial newrevenue model for the radio industry, and builds on the radio industry's greatstrength of being the place where consumers discover music. Digital Software UBC reported digital software revenues in the six months to 30 September 2006 up96.1% at £659,000 (2005: £336,000). Digital radio continues to grow worldwideand there is increasing interest in UBC's digital software products from anumber of countries that have either launched or plan to launch digital radioservices. UBC's software was originally developed for the DAB technical standardused in the UK. However, in last 12 months UBC has undertaken significantdevelopment work to extend its software to meet many of the other digital radiostandards around the world. This investment is now beginning to deliverresults. In the six months to 30 September 2006 UBC delivered strong growth from the saleof its digital software into North America, driven by significant contracts,which, in the full year will be worth £390,000; £279,000 has been taken in thisperiod. In addition, trials of UBC's Electronic Programme Guide and ManDLSsoftware have commenced or have been extended in Australia and New Zealand. UBCintends to continue to develop its software to maintain its lead in thesedeveloping markets. The Board believes that prospects for the sale of digitalsoftware products are positive, and the Company is actively pursuingopportunities to grow its software sales in a number of major internationalmarkets. BROADCAST DIVISION 2006 2005 £m £m % Change Turnover 8.39 9.06 -7.4 Networked Programming UBC's networked programming business traditionally has a second-half bias. Thistrend was compounded in the first six months of the year by the negative impactthe World Cup had on overall radio advertising. Revenues from UBC's networkedprogramming business in the period were £4.81 million (2005: £5.21 million).However, total billings in the six months to 30 September 2006 were flat at£5.16 million (2005: £5.21 million), against a market that declined overall. Analbeit slow recovery in radio advertising since September leaves the Companyconfident that it will continue to outperform the industry average for theremainder of the year. During the first half of the financial year UBC has continued to invest in thefuture growth of its networked programming business - with the continuing rollout of the Network News service across a growing number of radio groups. Despitethe current investment required to build the service, prospects for the newservice remain good; we expect shortly to announce contract wins in this area.We believe that as the number of stations taking the service increases, NetworkNews has the potential to deliver significant growth for UBC's networkedprogramming business in the future. Digital Stations UBC's digital stations continue to trade in line with expectations. Revenues forClassic Gold Digital in the first six-month period were £2.16 million (2005:£2.1 million). Over the last six months UBC has focused on marketing ClassicGold Digital to potential new digital listeners. The latest audience figuresshow that this marketing is having an effect, with digital listening showing asignificant impact on the overall audience figures for the network. Classic GoldDigital's audience has grown overall by 8% in the last three months. Thisincrease is strongest in the areas where Classic Gold Digital is transmittedexclusively on digital, where it is showing a 15% increase. Even in those areaswhere Classic Gold Digital's audience is partially delivered by declininganalogue Medium Wave, listening increased by 6% in the same period, whichindicates that the increase in digital listening in these areas is faster thanthe decline in analogue listening. We will continue our investment in strategiesto reduce the rate of decline of listeners to the analogue service and tomigrate audiences across to digital platforms. Classic Gold Digital alsobenefited in the first half of the year from an improved market for Sponsorship& Promotions activities. In the period Classic Gold Digital also recorded itsfirst text-driven interactive revenues. Digital Content UBC's production businesses continue to lessen their reliance on the BBC. In thefirst six months Unique increased its revenues from podcasting, while SmoothOperations recorded its first revenues from record sales. Overall, The BBC'spolicy of increasing its programming from the regions continues to benefit ourCambridge and Manchester production businesses. In response to changes in theBBC's commissioning policies our London production business is increasinglyfocused on securing a smaller number of higher margin commissions. In the firsthalf of the year both Unique and Smooth Operations were re-commissioned by theBBC to produce flagship programmes for the network, and this provides thedigital content business with valuable forward visibility for the year ahead. Inaddition, both Unique and Smooth Operations have been successful in winning newcommissions from the BBC's new digital stations. Following the closure last year of a studio operation that predominantly servedexternal clients, UBC's studio business has been absorbed into the digitalcontent business, reflecting its increasing role as a provider of studioservices to the Group. In the six months to 30 September 2006 UBC's digitalcontent business, including studios, reported turnover in the period of £1.43million (2005: £1.76 million). Board of Directors Sadly the Company announced the death on 16 July 2006 of the non-executivedirector, Prof. Roger Silverstone. Roger had been a non-executive director ofUBC Media Group since the Company's flotation in June 2000. During that timeRoger made a significant and valuable contribution to the deliberations of theBoard. Prospects The first six months of the year have been a transitional period for theCompany. Despite a difficult trading environment, UBC has continued to tradestrongly whilst at the same time taking a number of significant steps in itsstrategy of developing new business streams. Recent improvements in tradingconditions for radio advertising give the Board confidence that UBC'sperformance for the full year will be in line with expectations. Financial Review Fundraising In June 2006 UBC raised £3 million before expenses through a placing of15,000,0000 new Ordinary Shares at 20p per share. The shares were placed withexisting and new institutional investors and certain directors and the proceedswill be used to further the Company's investment in its digital musicdownloading technology. Smooth Operations deferred consideration The acquisition of the business of Smooth Operations in August 2004 included amaximum deferred consideration of £1.9 million depending upon the profit growthachieved by Smooth Operations in each of the two years following theacquisition. The final part of the deferred consideration of £1,235,000 becamepayable in September 2006, comprising a cash payment of £741,000 and the issueof approximately 2.44 million new UBC ordinary shares. The final part of thedeferred consideration was paid in October 2006. Investment in Digital Music Downloading & digital radio In the six-months to 30 September 2006 UBC invested the following amounts indigital radio and the development of digital music downloading: - Expenditure on Classic Gold Digital licences of £494,000 (2005: £483,000), which related to transmission of Classic Gold Digital on digital multiplexes primarily covering Northern England and London; - Investment of £552,000 (2005: £175,000) in Digital Music Downloading, of which £470,000 was capitalised; - Joint Venture Investment of £321,000 (2005: £231,000) in Oneword Radio. Capitalisation of investment in Digital Radio Music Downloading The Board has decided to capitalise £470,000 of its total investment of £552,000in the period in the development of digital radio music downloading.Capitalising part of the Company's investment is a requirement under IFRS. It isUBC's intention to comply in full with IFRS by September 2007. Sale of investment in DNN In July 2006 UBC received cash proceeds of £66,000 from the sale of its 28.05%shareholding in the digital radio station DNN. UBC's investment in DNN was anon-core investment by the Company. Cash At 30 September 2006, UBC had cash in the bank of £4.2 million (2005: £2.5million). Payment of dividend The Board is not recommending the payment of a dividend for the interim period. CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006 Unaudited Unaudited Audited Six months Six months Full year ended 30 ended 30 ended 31 September September March 2006 2005 2006 £'000 £'000 £'000 Turnover (including share of joint ventures) 9,100 9,451 19,484Less: Share of turnover of joint ventures (48) (56) (49)Group turnover 9,052 9,395 19,435Cost of sales (6,619) (6,952) (14,352)Gross profit 2,433 2,443 5,083 Administrative expenses before digital licence costs, development costs and (1,836) (1,754) (3,519)goodwill amortisationDigital licence costs (494) (572) (1,145)Development costs (82) (175) (70)Goodwill amortisation (271) (271) (542)Total administrative expenses (2,683) (2,772) (5,276)Operating loss (250) (329) (193)Share of operating loss in joint ventures (283) (229) (522)Total operating loss: Group and share of joint ventures (533) (558) (715)Exceptional non-operating items 66 629 363Interest receivable 52 62 119Interest payable - (1) (1)(Loss)/profit on ordinary activities before taxation (415) 132 (234)Tax charge - - (10)(Loss)/profit on ordinary activities after taxation (415) 132 (244)Equity minority interest 68 50 117Retained (loss)/profit for the financial year (347) 182 (127) (Loss)/profit per share Basic-pence (0.20) 0.11 (0.07) Diluted-pence (0.19) 0.10 (0.07) CONSOLIDATED BALANCE SHEETAS AT 30 SEPTEMBER 2006 Unaudited Unaudited Audited As at 30 As at 30 As at September September 31 March 2006 2005 2006Group £'000 £'000 £'000Fixed assets Goodwill and intangible assets 3,417 3,470 3.220Fixed asset investments 306 266 306Tangible assets 278 197 189 4,001 3,933 3,715 Current assetsWork in progress 17 34 36Debtors 5,024 4,210 3,459Cash at bank and in hand 4,218 2,519 4,677 9,259 6,763 8,172Creditors: amounts falling due within one year (4,404) (4,070) (5,529)Net current assets 4,855 2,693 2,643Total assets less current liabilities 8,856 6,626 6,358Creditors: amounts falling due after more than one year (337) (337) (337)Investment in joint venturesShare of gross assets 176 110 143Share of gross liabilities (225) (175) (221)Provisions for liabilities and charges (49) (65) (78)Net assets 8,470 6,224 5,943 Capital and reservesCalled up share capital 1,898 1,717 1,748Shares to be issued 494 494 494Share premium account 18,182 15,325 15,389Other reserves (801) (801) (801)Profit and loss account (10,742) (10,086) (10,395)Equity shareholders' funds 9,031 6,649 6,435Equity minority interest (561) (425) (492)Capital employed 8,470 6,224 5,943 CONSOLIDATED CASH FLOW STATEMENTSIX MONTHS ENDED 30 SEPTEMBER 2006 Six months Six months Year ended 30 ended 30 ended 31 September September March 2006 2005 2006 £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities (2,576) (1,352) 1,312Returns on investments and servicing of financeInterest received 52 62 119Interest paid - (1) (1)Net cash inflow from returns on investment and servicing of finance 52 61 118 TaxationUK Corporation tax received - 8 8 Capital expenditure and financial investmentPurchase of tangible fixed assets (163) (79) (136)Purchase of intangible fixed assets (470) - (326)Sale of tangible fixed assets - 7 11Loans to joint ventures (311) (231) (511)Net cash outflow from capital expenditure and financial investment (944) (303) (962) Acquisitions and disposalsPurchase of subsidiary undertakings - (399) (399)Sale of subsidiary undertakings - 932 932Sale of interest in joint ventures 66 - -Net overdrafts disposed of with subsidiary undertakings - 39 39Net cash inflow from acquisitions and disposals 66 572 572Net cash (outflow)/inflow before financing (3,402) (1,014) 1,048 FinancingIssue of ordinary share capital 3,002 - 96(Expense)/refund of expense of share issue (59) 35 35Net cash inflow from financing 2,943 35 131(Decrease)/increase in cash in the year (459) (979) 1,179Cash balances at the beginning of the year 4,677 3,498 3,498Cash balances at the end of the year 4,218 2,519 4,677 Represented by Cash and bank balances 4,218 2,519 4,677 NOTES 1 Basis of Preparation These financial statements do not constitute statutory accounts within themeaning of the Companies Act 1985 and are unaudited. The figures for the year to31 March 2006 have been extracted from the statutory accounts for that year thathave been delivered to the Register of Companies and contain an unqualifiedaudit report. The financial information contained in this interim statement doesnot constitute accounts as defined by Section 290 of the Companies Act 1985. 2 Accounting Policies The statements have been prepared on the basis of the accounting policiesapplied at the year ended 31 March 2006. 3 (Loss)/profit per share The (loss)/profit per share for the six months ended 30 September 2006 is 0.20pence (2005: 0.11 pence). The (loss)/profit per share has been calculated basedon the (loss)/ profit for the period and the weighted number of shares in issueduring the period. 4 Taxation The group has trading losses for the period 30 September 2006 and has notprovided for taxation for the period. This information is provided by RNS The company news service from the London Stock Exchange