RNS Number:3996D
Music Choice Europe PLC
28 September 2004
28 September 2004
Music Choice Europe plc
("Music Choice" or "the Company")
Interim Results for the six months ended 30 June 2004
Music Choice Europe plc, Europe's leading digital audio broadcaster, is pleased
to announce interim results for the six months ended 30 June 2004
Interims Interims
2004 2003
Turnover #5.0m #4.9m
Operating profit/(loss) #145,000 (#2.2m)
Profit/(loss) before tax #505,000 (#1.9m)
Earnings/(loss) per share - basic and diluted 0.3p (1.17p)
Highlights for the year
* Delivered on promise to break even with profit before tax of #505,000
* Total costs reduced by 33% to #4.8 million (2003: #7.1 million)
* Net cash outflow from operating activities reduced by 98% to #31,000
(2003: #1.9 million)
* #15 million returned to shareholders on 23 September 2004
* New three year distribution contracts secured with Premiere and Cablecom
* Partnerships entered with Hewlett Packard and BT Rich Media
* Strategy to develop the offering into a virtual digital music library
for consumers
* Innovative marketing and promotional campaign
- Air Guitar Aerobics rolled out to Spain and Germany
- 11 territory pan-European Best Song Ever campaign
- inaugural Music Choice stage at this year's V Festivals
Mike Thomas, Chairman of Music Choice, commented:
"Music Choice has had a strong financial performance in the first half of the
year, reaching break even in line with the commitment made in March 2003.
However, reduced income from interest, and stronger competition in the
marketplace will certainly affect turnover and profit levels during the second
half.
"With new opportunities for revenue diversification in DTV and broadband and the
continued tight stewardship of costs, Music Choice nevertheless remains in good
shape to build on its previous successes and strengthen its position as one of
the leading music file delivery businesses in the world."
- 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 Helen Thomas
Music Choice Europe plc
("Music Choice" or "the Company")
Interim Results for the six months ended 30 June 2004
28 September 2004
The first six months of 2004 has seen Music Choice successfully deliver on its
promise to break even at the EBITDA level. This key milestone has been achieved
through focusing on prudent financial stewardship, whilst still identifying and
exploiting new business opportunities in the UK, continental Europe and emerging
Asian markets.
FINANCIAL REVIEW
Turnover increased marginally to #5.0 million (2003: #4.9 million), despite the
reduction in the license fee received from BSkyB in the distribution deal
announced in September 2003. Lower satellite delivery costs negotiated at the
same time contributed to improved gross margin which rose strongly to 50% (2003:
27%). Overall costs fell by 33% to #4.8 million (2003: #7.1 million), while the
Company reduced its net cash outflow from operating activities by 98% to #31,000
(2003: #1.9 million).
Consequently, the Company made its first operating profit of #145,000, reversing
losses of #2.2 million for the same period last year. Pre-tax profits were
#505,000 (2003: pre-tax loss of #1.9 million), resulting in earnings per share
of 0.3p against a loss of 1.17p in 2003. At 30 June 2004, Music Choice held cash
and cash equivalents of #19.8 million (2003: #19.8 million).
In line with the Company's stated dividend policy, the Board is not recommending
an interim dividend for the six months ending 30 June 2004.
However, in view of the Company's performance over the past six months and the
growth prospects, the Company announced in July that cash levels were in excess
of those required to meet the existing business plan. As a result, the Company
proposed to return #15 million to shareholders. Following an Extraordinary
General Meeting on 18 August approving the proposal, 73% of each shareholder's
holding of ordinary shares in the Company was cancelled on 14 September, with
each shareholder receiving 16.75 pence per share cancelled.
OPERATING REVIEW
Distribution
Digital television ("DTV") remains at the heart of the Music Choice business.
The Company followed up last year's launch of the compilations packaging concept
in the UK with the debut of a similar service in interactive TV ("iTV") homes on
the Sky Italia network in July. Music Choice will seek to roll out further iTV
applications with major customers across Europe over the coming year.
Music Choice continues to secure long term revenue through the completion of
deals with many of Europe's leading TV platforms. Last month, the Company signed
a new three year distribution deal with Germany's leading multichannel broadcast
platform, Premiere. The new contract will see Music Choice offered direct to
consumers, as well as to business customers for hotels, bars, restaurants and
other commercial premises. A new three year contract with Cablecom,
Switzerland's biggest cable operator, was agreed in July and further deal
extensions were finalised with Com Hem (Sweden) and Essent (Netherlands).
Technology development
As the Company progressively looks beyond Europe and its traditional Astra
footprint, it must increase its investment in technology to assure world-class
content delivery. As part of this commitment, Music Choice has chosen to work
with Hewlett Packard ("HP") to examine options for developing the playout
platform to provide high quality low-cost tailored music provision through both
satellite and telecoms delivery to Europe, Asia and beyond. In conjunction with
Music Choice's experience technology team, HP's Digital Media Solutions group
will review Music Choice's technology base to ensure that the Company remains at
the cutting edge of music delivery for years to come.
Broadband
Broadband remains a key focus for the business over the next twelve months. The
Company already provides streaming products on ntl (UK) and Club Internet
(France), and is currently building a fully integrated streams-and-downloads
broadband product. Download licensing terms have been agreed in principle with
AIM, EMI and Warner Music, and Music Choice anticipates agreeing licence terms
with the other major record labels in the coming weeks.
To facilitate the building of the broadband product, Music Choice has entered
into a three year strategic partnership with BT Rich Media ("BT"), a
joint-venture between the BT Retail and BT Wholesale divisions of BT Group plc.
Under the terms of the agreement, BT will develop, build and support Music
Choice's online music download platform, providing the Company with a
world-class technology partner to facilitate an aggressive rollout of the
product across the world.
Competition in the downloads sector is fierce. However, Gallup research,
commissioned by Music Choice, shows that the ability to listen to a track is the
prime reason for purchasing it, demonstrating a clear consumer need for a
broadband music product that enables listeners to hear the whole song rather
than a short clip. The Music Choice broadband product fulfils this demand, and
the Company will look to roll out the integrated broadband product on major ISP
platforms over the next twelve months.
Music across all platforms
The broadband product forms part of the Company's commitment to offering a
"triple play" of music delivery and interactivity, enabling customers to offer
their consumers music channels via digital television, streams and downloads on
their computers, as well as ringtones and downloads ordered via mobile phone
text message. By offering music across all areas of the home network, Music
Choice aims to become the virtual digital music library for consumers, turning
its listeners into buyers and speeding its development as a genuine worldwide
"must-have" brand.
Reaching the consumer
The Company continues to reach out to consumers through innovative marketing and
promotional campaigns. Fitness phenomenon Air Guitar Aerobics, launched in the
UK in January, has since been rolled out to Spain and Germany. The 11 territory
pan-European Best Song Ever campaign in May saw Europe vote in its tens of
thousands for their favourite songs of all time, while new acts including Hope
Of The States and The Stands wowed more than 150,000 people at the inaugural
Music Choice stage at this year's V Festivals in Essex and Staffordshire.
Cost-effective, high-impact promotional campaigns will continue to drive both
audience numbers and brand awareness over the coming year.
Overview
Having established the Company as Europe's leading packager of music, developing
the power of the Music Choice brand is critical to future success. While 2004
has seen the completion of the rationalisation of Music Choice, the Company's
financial performance in the second half of the year is likely to be less
impressive than in the first half. Interest income will be reduced after the
return of cash to shareholders, while the Company believes increasingly strong
competition in the audio delivery market on both DTV and broadband will affect
turnover and profit levels during the second half of the year.
However, with new opportunities for revenue diversification in both DTV and
broadband, the continued tight stewardship of costs under experienced
leadership, and an increasingly powerful brand, the Board believes Music Choice
is in good shape to build on its successes of the last twelve months and
strengthen its position as one of the leading music file delivery businesses in
the world.
- 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 Helen Thomas
Music Choice Europe plc
Group Profit and Loss Account
For the 6 months ending 30 June 2004
6 months to 6 months to 12 months to
30 June 30 June 31 December
2004 2003 2003
Notes #'000 #'000 #'000
Turnover 4,957 4,910 9,561
Cost of sales (2,455) (3,605) (5,180)
--------- --------- ---------
Gross profit 2,502 1,305 4,381
--------- --------- ---------
Distribution costs (1,077) (803) (2,494)
Amortisation and impairment of
intangible fixed assets - (120) (585)
Depreciation and impairment of
tangible fixed assets (137) (286) (411)
Restructuring costs - (803) (1,004)
Property costs - - (1,079)
Other administrative expenses (1,143) (1,516) (2,981)
Administrative expenses (1,280) (2,725) (6,060)
--------- --------- ---------
(2,357) (3,528) (8,554)
--------- --------- ---------
Operating profit/(loss) 145 (2,223) (4,173)
--------- --------- ---------
Interest receivable 360 353 651
Profit on disposal of fixed
assets - 5 9
--------- --------- ---------
360 358 660
--------- --------- ---------
Profit/(loss) on ordinary
activities before taxation 505 (1,865) (3,513)
--------- --------- ---------
Taxation on profit/(loss)
on ordinary activities 3 (139) 439 580
--------- --------- ---------
Profit/(loss) for the
period/year 366 (1,426) (2,933)
--------- --------- ---------
Profit/(loss) per share
Basic and diluted
- pence per share 4 0.30 (1.17) (2.40)
--------- --------- ---------
Group Statement of Total Recognised Gains and Losses
6 months to 6 months to 12 months to
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
Profit/(loss) for the financial
period/year 366 (1,426) (2,933)
--------- --------- ---------
Exchange difference on translation
of net assets of subsidiary
undertakings 28 (42) 22
--------- --------- ---------
Total recognised gains and losses
relating to the financial period/
year 394 (1,468) (2,911)
--------- --------- ---------
Music Choice Europe plc
Group Balance Sheet
As at 30 June 2004
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
Fixed assets
Intangible assets - 465 -
Tangible assets 444 384 395
--------- --------- ---------
444 849 395
--------- --------- ---------
Current assets
Debtors 2,267 2,840 2,190
Investments 18,138 18,642 17,907
Cash 1,681 1,180 1,923
--------- --------- ---------
22,086 22,662 22,020
--------- --------- ---------
Creditors: amounts falling due within one
year (5,044) (5,830) (5,098)
--------- --------- ---------
Net current assets 17,042 16,832 16,922
--------- --------- ---------
Total assets less current liabilities 17,486 17,681 17,317
--------- --------- ---------
Provision for liabilities and charges (854) - (1,079)
--------- --------- ---------
16,632 17,681 16,238
--------- --------- ---------
Capital and reserves
Equity share capital 1,229 1,229 1,229
Share premium account 46,179 46,179 46,179
Other reserve 22,922 22,922 22,922
Profit and loss account (53,698) (52,649) (54,092)
--------- --------- ---------
Equity shareholders' funds 16,632 17,681 16,238
--------- --------- ---------
Music Choice Europe plc
Group Statement of Cashflows
For the 6 months ending 30 June 2004
Notes 30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
Net cash outflow from
operating activities 5 (31) (1,860) (2,398)
--------- --------- ---------
Returns on investment and
servicing of finance
Interest received 360 353 651
--------- --------- ---------
360 353 651
--------- --------- ---------
Taxation
Tax paid (137) (63) (216)
Consortium relief received - 558 1,083
--------- --------- ---------
(137) 495 867
--------- --------- ---------
Capital expenditure and
financial investment
Payments to acquire
tangible fixed assets (203) (115) 9
Proceeds on disposal of
tangible fixed assets - 7 (241)
--------- --------- ---------
(203) (108) (232)
--------- --------- ---------
Net cash outflow before
management of liquid
resources and financing (11) (1,120) (1,112)
Management of liquid resources
Purchase of interest bearing
investments (4,371) (800) (10,658)
Sale of interest bearing
investments 4,140 - 10,593
--------- --------- ---------
(231) (800) (65)
--------- --------- ---------
(Decrease)/Increase in cash
in the period/year (242) (1,920) (1,177)
--------- --------- ---------
Reconciliation of net cashflows to movement in net funds
For the 6 months ending 30 June 2004
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
(Decrease)/increase in cash in
the period/year (242) (1,920) (1,117)
Purchase of interest bearing
investments 4,371 800 10,658
Sale of interest bearing
investments (4,140) - (10,593)
--------- --------- ---------
Movement in net funds in the
period/year (11) (1,120) (1,112)
Net funds at 1 January 2004 19,830 20,942 20,942
--------- --------- ---------
Net funds at 30 June 2004 19,819 19,822 19,830
--------- --------- ---------
Music Choice Europe plc
Notes to the Interim Statement
1 Status of Interim Report
The unaudited Interim Statement was approved by the Board on 23 September 2004.
2 Basis of preparation
The unaudited Interim Accounts for the 6 months to 30 June 2004 have been
prepared in accordance with accounting policies adopted in the preparation of
the accounts for the year to 31 December 2003 and which are set out in the
Company's annual report. The abridged results for the 12 months to 31 December
2003 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 2003 was unqualified and did not contain any statement under Section
237 of that Act. These accounts have been delivered to the Registrar of
Companies.
3 Taxation
During the period, the Group charged #139,000 in foreign taxes.
4 Earnings per share
The calculation of earnings (loss) per share is in accordance with FRS 14 and is
based on the earnings (loss) for the period of #366,000 (6 months to 30 June
2003: (#1,426,000)) and on 122,344,860 ordinary shares (6 months 30 June 2003:
122,193,672), being the weighted average number of ordinary shares in issue
during the period, excluding 554,400 shares held by the Employee Benefit Trust
which are treated as cancelled.
In the case of diluted earnings per share, the weighted average number of
ordinary shares in issue is further adjusted to assume conversion of all
potential dilutive ordinary shares. These represent share options granted to
employees where the exercise price is less than the average market price of the
Company's ordinary shares during the period. In the period to 30 June 2004,
there were no share options (6 months to 30 June 2003: nil) which met this
condition.
5 Reconciliation of operating loss to net cash flow from operating activities
6 months to 6 months to 12 months to
30 June 30 June 31 December
2004 2003 2003
#'000 #'000 #'000
Operating loss 145 (2,223) (4,173)
--------- --------- ---------
Depreciation of tangible fixed assets 137 248 411
Impairment of tangible fixed assets - 38 -
Amortisation of intangible fixed assets - 120 240
Impairment of intangible fixed assets - - 345
Foreign exchange adjustment to tangible
fixed assets 17 (51) -
Property costs (225) - 1,079
(Increase)/decrease in debtors (77) 1,011 1,380
Decrease in creditors (28) (1,003) (1,680)
--------- --------- ---------
Net cash outflow from operating
activities (31) (1,860) (2,398)
--------- --------- ---------
6 Post Balance Sheet Events
On 18 August 2004, an Extraordinary General Meeting of the shareholders
unanimously approved the resolution to reduce the share capital of the company
by cancelling 73% of the Company's existing issued share capital and the
cancellation of the Company's share premium account, and paying 16.75 pence per
cancelled share to the shareholders.
Further copies are available from the registered office of Music Choice Europe
plc, Fleet House, 57-61 Clerkenwell Road, London EC1M 5AR.
Music Choice Europe plc
Report of the Auditors
Introduction
We have been instructed by the Company to review the financial information for
the 6 months ended 30 June 2004 which comprises the Group Profit and Loss
Account, Group Balance Sheet, Group Statement of Cashflows, Group Statement of
Total Recognised Gains and Losses and the related notes 1 to 6. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 "Review of interim financial information" issued by the
Auditing Practices Board. To the fullest extent permitted by the law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
"Review of interim financial information" issued by the Auditing Practices board
for the United Kingdom. A review consists principally of making enquiries of
group management and applying analytical procedures to the financial information
and underlying financial data, and based thereon, assessing whether the
accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 6 months ended
30 June 2004.
Ernst & Young LLP,
London,
23 September 2004
This information is provided by RNS
The company news service from the London Stock Exchange
END
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