RNS Number:2064Q
Music Choice Europe PLC
26 September 2003
Music Choice Europe plc
Interim Results for the six months ended
30 June 2003
26 September 2003
Music Choice Europe plc ("Music Choice" or "the Company"),
Europe's leading digital audio broadcaster, is pleased to
announce interim results for the six months ended 30 June
2003.
Interim Interim
2003 2002
Turnover #4.9m #4.4m
Operating loss #2.2m #4.7m
Loss before tax #1.9m #4.3m
Loss per share - basic 1.17p 3.57p
and diluted
SUMMARY HIGHLIGHTS
- Successful renewal of BSkyB contract
- Roll-out of the new streamed music broadband product
- Significant reduction in losses by 53%
- Completion of restructuring and reduction in cost base
- Cash burn reduced by 58% from #2.6m to #1.1m
- Cash and cash equivalents of #19.8m
Mike Thomas, Chairman, commented:
"During the year we have reduced costs significantly and
secured long-term revenue through the completion of key
distribution contracts, particularly with BSkyB in the UK.
With the launch of broadband and commercial music services,
and the potential to expand the digital television product in
Asia and Europe, we are beginning to see considerable
opportunities for revenue diversification. Under the
leadership of Margot Daly, Music Choice is now in good shape
to reach monthly breakeven in line with market expectations."
- Ends -
For further information, please contact:
Music Choice Europe plc 020 7014 8700
Margot Daly, Chief Executive
Dylan Jones, Head of Public
Relations
020 7067 0700
Weber Shandwick Square Mile
Louise Robson or Becky Haywood
Music Choice Europe plc
("Music Choice" or "the Company")
Interim Results for the six months ended
30 June 2003
26 September 2003
CHAIRMAN'S STATEMENT
Over the last six months, Music Choice has fulfilled its
promise of reducing the Company's cash burn significantly
while securing long-term revenue. As such, the Company has
made substantial progress towards breakeven and sustainable
profitability. Key milestones have included:
- Successful renewal of the BSkyB contract
- Completion of restructuring and reduction in cost base
- Roll-out of the new streamed music broadband product
- Cash burn reduced by 58% from #2.6m to #1.1m
Financial Review
During the first half of the year Music Choice restructured
its cost base to ensure continued progress towards sustainable
profitability, and in doing so made run rate savings of
approximately #2 million per year. In addition, the Company
secured long-term contracts with key customers in digital TV
('DTV'), whilst beginning to diversify revenue streams through
the roll-out of its broadband music service and the expansion
of a commercial music offering to pubs and clubs.
Turnover has grown by 11% to #4.9 million (2002: #4.4
million), with operating losses reduced to #2.2 million (2002:
loss of #4.7 million). Loss before tax has further reduced to
#1.9 million (2002: loss of #4.3 million). The loss per share
has more than halved to 1.17p (2002: loss of 3.57p).
At 30 June Music Choice had 13.4 million subscribers, a
reduction of 6% during the period. Much of this reduction can
be attributed to the Company's decision not to pursue the
renewal of a distribution contract in Turkey, owing to the
platform's economic problems. While the consolidation of the
digital TV industry in developing European markets continues,
albeit at a slower rate, the Company believes that there are
opportunities for further DTV distribution now emerging
outside Europe.
Gross profit margins have improved as the management continue
to seek increases in the return from existing and new
contracts, and further diversify revenue streams.
Distribution costs and administrative expenses have been
reduced by 54% in the period, excluding one-off costs relating
to the restructuring announced earlier in the year.
Management continues to optimise cash resources with a
substantial reduction in cash outflow from #2.6 million in the
previous six months to #1.1 million in the latest six month
period, resulting in cash and cash equivalent balances of
#19.8 million at 30 June 2003.
Operating Review
Despite increased competition in the UK music TV market, the
Company has now signed a new three year contract with BSkyB
guaranteeing distribution to Sky's current 6.8 million homes
on terms that are broadly neutral. Sky's stated aim is to
significantly cut the costs paid to all third party
broadcasters on its platform. In line with this, the per
person licence fee payable has been lowered, however Music
Choice will now derive a significantly higher percentage of
the revenue from the premium service, which the Company plans
to promote actively in the future. The new contract also
includes substantially lower satellite fees, allowing Music
Choice to reduce the costs associated with broadcasting to all
its European platforms.
The Company increased its reach in the Italian market when it
started to broadcast on the newly merged Sky Italia platform
at the end of July, giving former Telepiu subscribers access
to Music Choice's service for the first time. Over the next
twelve months, the Company will develop its interactive TV
application for broadcast to Sky Italia's current 1.4 million
homes. Giving viewers access to information on tracks and
albums, the interactive TV application will provide Music
Choice both branding opportunities and consumer interaction
(polling and competitions) via an SMS return path. SMS return
path interactivity was recently launched in the UK, and will
be expanded in the coming months.
The interactive TV service gives viewers the opportunity to
create the perfect musical atmosphere in the home. The clear
majority of all music consumption acts as an accompaniment to
day-to-day activities, with recent research in Europe showing
that almost a quarter of the record-buying public turn to
compilations to provide their musical backdrop. To reflect
this, the new look interactive TV service launching in the UK
later this year will provide viewers with ten constantly
updated 'compilation' channels. With new screens styled to
emulate CD compilations, the service will give viewers an
instantly recognisable, attractive and easy-to-use music
package.
With the service now targeting a tightly defined audience (25-
44 year olds), and driven by more focused and populist
playlists, viewing figures in the UK have improved markedly
over the first half of the year and continue to show growth
against this central demographic as well as among all Sky
digital adults. In July and August in the UK, the service
achieved record figures for time spent viewing, viewing reach,
and share of the music TV market.
As part of the drive to diversify its revenue base, Music
Choice is now expanding its services into commercial
properties (pubs and clubs) in partnership with key customers.
Since 2000, Music Choice has entered into commercial
distribution agreements in Switzerland, Belgium and the Gulf,
but is now expanding its activities with the launch of new
commercial music deals with Premiere in Germany and Canal
Digital in Scandinavia. As digital TV markets become more
mature, and providers have assurance of their main residential
business income, so the opportunities to expand the offering
into commercial properties increase. This allows the creation
of greater revenue from the same cost base whilst also
increasing consumer awareness of the service. Over the next
twelve months the Company will be looking to expand the
commercial service further with the key European platforms.
In August this year, Music Choice completed two significant
broadband deals, with ntl in the UK and with T-Online's French
venture, Club Internet. With this indication that broadband
platforms are now becoming more clear about their content
strategies, management's aim is to use the bundled Music
Choice broadband product to secure a significant proportion of
the emerging broadband market in Europe. The broadband
offering is part of management's objective to derive a
significant proportion of revenue from new, non-interactive TV
products over the next three years.
Outlook
Music Choice has reduced its costs significantly and secured
long-term revenue through the completion of key distribution
contracts. Opportunities for revenue diversification are now
being realised, particularly with the launch of broadband and
commercial music services, and with the potential to expand
the digital television product in Asia and Europe. The
management aim to increase shareholder value through a clear
commitment to steady growth by leveraging the company's core
assets in current and new products across all markets. Under
the leadership of Margot Daly, Music Choice is now in good
shape to reach monthly breakeven in line with market
expectations.
For further information, please contact:
Music Choice Europe plc 020 7014 8700
Margot Daly, Chief Executive
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Becky Haywood
Group Profit and Loss Account
For the six months ending 30 June 2003
6 months to 6 months to 12 months to
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Turnover 4,910 4,424 9,776
Cost of sales (3,605) (3,312) (7,607)
------- ------- -------
Gross profit 1,305 1,112 2,169
------- ------- -------
Distribution costs (803) (2,900) (4,472)
Impairment of intangible fixed assets (120) - (100)
Depreciation and impairment of tangible
fixed assets (286) (614) (814)
Restructuring cost (803) - (450)
Other administrative expenses (1,516) (2,316) (4,547)
Administrative expenses (2,725) (2,930) (5,911)
------- ------- -------
(3,528) (5,830) (10,383)
------- ------- -------
Operating loss (2,223) (4,718) (8,214)
------- ------- -------
Bank interest receivable 353 430 941
Profit on disposal of fixed assets 5 - -
------- ------- -------
358 430 941
------- ------- -------
Loss on ordinary activities before taxation (1,865) (4,288) (7,273)
Taxation on loss on ordinary activities 3 439 (72) (162)
------- ------- -------
Loss for the period/year (1,426) (4,360) (7,435)
------- ------- -------
Loss per share
Basic - pence per share 4 (1.17) (3.57) (6.09)
Diluted - pence per share 4 (1.17) (3.57) (6.09)
------- ------- -------
Statement of Total Recognised Gains and Losses
6 months 6 months 12 months
to to to
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Loss for the financial period/year (1,426) (4,360) (7,435)
--------- ---------- ----------
Exchange difference on translation of
net assets of subsidiary undertakings (42) 23 23
--------- --------- ----------
Total recognised gains and losses
relating to the financial period/year (1,468) (4,337) (7,412)
--------- --------- ----------
Group Balance Sheet
As at 30 June 2003
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
Fixed assets
Intangible assets 465 - 585
Tangible assets 384 283 539
----------- --------- ----------
849 283 1,124
----------- --------- ----------
Current assets
Debtors 2,840 4,596 3,851
Investments 18,642 23,736 17,842
Cash 1,180 69 3,100
----------- --------- ----------
22,662 28,401 24,793
----------- --------- ----------
Creditors: amounts falling due
within one year (5,830) (6,482) (6,768)
----------- --------- ----------
Net current assets 16,832 21,919 18,025
----------- --------- ----------
Total assets less current liabilities 17,681 22,202 19,149
----------- --------- ----------
Capital and reserves
Equity share capital 1,229 1,227 1,227
Share premium account 46,179 46,160 46,160
Other reserve 22,922 22,922 22,922
Profit and loss account (52,649) (48,107) (51,160)
----------- --------- ----------
Equity shareholders' funds 17,681 22,202 19,149
----------- --------- ----------
Group Statement of Cashflows
For the six months ending 30 June 2003
Notes 30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
---------- --------- ---------
Net cash outflow from
operating activities 5 (1,860) (6,214) (8,017)
---------- --------- ---------
Returns on investment and
servicing of finance
Interest received 353 430 941
---------- --------- ---------
353 430 941
---------- --------- ---------
Taxation
Tax paid (63) (23) (174)
Consortium relief received 558 54 54
---------- --------- ---------
495 31 (120)
---------- --------- ---------
Capital expenditure and
financial investment
Payments to acquire
tangible fixed assets (115) (145) (209)
Proceed on disposal of
tangible fixed assets 7 - -
---------- --------- ---------
(108) (145) (209)
---------- --------- ---------
Acquisitions and disposals
Payment to acquire subsidiary
undertaking - - (1,056)
---------- --------- ---------
- - (1,056)
---------- --------- ---------
Net cash outflow before
management of liquid
resources and financing (1,120) (5,898) (8,461)
Management of liquid resources
Purchase of interest bearing
investments (800) - (28,877)
Sale of interest bearing
investments - 5,532 40,303
---------- --------- ---------
(800) 5,532 11,426
---------- --------- ---------
(Decrease)/Increase in cash
in the period/year (1,920) (366) 2,965
---------- --------- ---------
Reconciliation of Net Cashflows to Movement in Net Funds
30 June 30 June 31 December
2003 2002 2002
#'000 #'000 #'000
(Decrease)/Increase in cash in
the period/year (1,920) (366) 2,965
Purchase of interest bearing
investments 800 - 28,877
Sale of interest bearing
investments - (5,532) (40,303)
--------- ---------- ----------
Movement in net funds in the
period/year (1,120) (5,898) (8,461)
Net funds at 1 January 2003 20,942 29,403 29,403
--------- ---------- ----------
Net funds at 30 June 2003 19,822 23,505 20,942
--------- ---------- ----------
Notes to the Interim Statement
1 Status of Interim Report
The unaudited Interim Statement was approved by the Board on 25 September 2003.
2 Basis of preparation
The unaudited Interim Accounts for the 6 months to 30 June 2003 have been
prepared in accordance with accounting policies adopted in the preparation of
the accounts for the year to 31 December 2002 and which are set out in the
Company's Annual Report. The abridged results for the 12 months to 31 December
2002 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 2002 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 received #558,000 in respect of the surrender of
losses as Consortium Relief from a period prior to flotation. Additionally, the
Group charged #119,000 in foreign taxes.
4 Loss per share
The calculation of loss per share is in accordance with FRS 14 and is based on
the loss for the period of #1,426,000 (6 months to 30 June 2002: #4,360,000) and
the average number of shares in issue during the period 122,193,672 (6 months to
30 June 2002: 122,129,860).
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
2003 2002 2002
#'000 #'000 #'000
Operating loss (2,223) (4,718) (8,214)
--------- ---------- ---------
Depreciation of tangible
fixed assets 248 400 350
Impairment of tangible
fixed assets 38 214 464
Amortisation of intangible
fixed assets 120 - 100
Foreign exchange
adjustment to tangible
fixed assets (51) - (11)
(Increase)/decrease in
debtors 1,011 (136) 1,018
Decrease in creditors (1,003) (1,974) (1,724)
--------- ---------- ---------
Net cash outflow from
operating activities (1,860) (6,214) (8,017)
--------- ---------- ---------
Further copies are available from the registered office of Music Choice Europe
plc, Fleet House, 57-61 Clerkenwell Road, London EC1M 5AR.
Report of the Auditors
Introduction
We have been instructed by the Company to review the financial information for
the 6 months ended 30 June 2003 which comprises the Group Profit and Loss
Account, Group Balance Sheet, Group Statement of Cashflows, Statement of Total
Recognised Gains and Losses and the related notes 1 to 5. 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 2003.
Ernst & Young LLP, London, 25 September 2003
This information is provided by RNS
The company news service from the London Stock Exchange
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