24th Mar 2015 10:21
LONDON (Alliance News) - 7digital Group PLC Tuesday reported a narrowed loss for 2014, helped by a gain on the sale of a stake in Audioboom Group PLC, while an overall revenue decline was offset by a shift to more profitable business-to-business streaming services sales that helped lift profit margins.
The company is going through a transformation after being created through the merger of UBC Media and 7digital last June. Its revenue is declining due mainly to falling demand for MP3 downloads, and it rapidly trying to replace this business by shifting sales towards providing music streaming services for businesses as well as content production for radio stations and other radio services.
The company reported a pretax loss of GBP2.6 million for 2014, compared with a loss of GBP4.5 million in 2013, even though revenue fell to GBP10.2 million, from GBP11.6 million, as it booked a GBP1.9 million profit on the sale of a stake in Audioboom Group.
Its closely-watched loss before interest, tax, depreciation and amortisation, adjusted to strip out exceptional items and share-based payments, narrowed to GBP3.1 million, from GBP3.9 million, as its gross margin improved to 52%, from 47%, thanks to the increase in sales of its more profitable streaming services.
Overall revenue fell due to a fall in content revenue, driven by the fall in the sale of MP3 downloads as streaming services continue to cannibalise downloads services within the digital music industry. However, high-margin business-to-business revenue rose 7% and monthly recurring revenue increased 14% to GBP4.4 million. The production business added to the combined group through the merger added GBP1.3 million of revenue.
7digital said it had won 25 contracts with a combined annual value of GBP3.4 million over the last 12 months, including with Guvera, i.am+, Spanish Broadcasting System Inc, The Overflow and ROK Mobile. It added that its catalogue now contains over 32 million licensed tracks, of which 2.6 million are in high quality audio formats.
In a separate statement Tuesday, it said it had won a new three-year contract with J Sainsbury PLC to provide the platform and content for the music section of Sainsbury's online entertainment offering. The UK retailer will pay monthly fees. It also won an extension to its deal with Guvera, after the music streaming service was expanded to additional emerging markets, meaning an increased in monthly recurring revenue.
7digital shares were down 0.2% at 13.35 pence Tuesday morning having risen at the open. The stock is down 17% so far in 2015.
By Steve McGrath; [email protected]; @stevemcgrath1
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