20th Jun 2005 07:01
UBC Media Group PLC20 June 2005 Preliminary results for the year ended 31 March 2005 DIGITAL STRATEGY DELIVERS FINANCIAL HIGHLIGHTS - Turnover increased 20% to £15.96 million (2004: £13.29 million). - Operating Profit before goodwill and digital licences more than doubled to £1,075,000 (2004: £405,000), while operating loss after goodwill and digital licences were -£1,093,000 (2004: -£1,016,000). - Retained Loss before goodwill of -£316,000 (2004: -£1,133,000) and loss after goodwill of -£1,020,000 (2004:-£1,474,000). - Advertising revenues from network programming increased 44.1% to £7.55 million (2004: £5.24 million). - Commissioned programme revenue increased 34.4% to £2.93 million (2004: £2.18 million). - Revenues from software sales to the radio industry increase by 45% to £293,000 (2004: £202,000). - At 31 March 2005 UBC had cash in the bank of £3.50 million (2004: £4.32 million). STRATEGIC HIGHLIGHTS - Partnership announced with Channel 4 Television to operate national digital speech station, Oneword Radio. - Rapid increase in the take up of digital radio; 30% of listening to Classic Gold Digital now on digital platforms, with listening in digital only areas up 7% in the last quarter. - The BBC announced that it intends to double the amount of radio programming it commissions from independent radio producers. In the current financial year: - UBC's advertising revenues continue to rise with April to June 2005 revenues up 22% on Q1 last year against industry revenues down around 12%. - Major software contract announced with BT Livetime for supply of EPG. Chief Executive Simon Cole commented: "Our model is not a traditional radio model and the differences are becomingclear. The digital radio world that we have prepared for has arrived. Newrevenues are coming from a substantial increase in network programming as theradio industry adapts to a multi-channel environment, as well as from new areassuch as software sales. In the year to 31 March 2005 we delivered an operating profit before goodwilland digital licences of £1,075,000, which, after deducting digital licence costs(excluding Oneword) of £1,107,000 and adding back other operating costs ofOneword of £195,000, resulted in a profit for the year of £163,000. This isahead of the position indicated in our pre-close statement. Digital take-up is accelerating with sales of digital radios now running at morethan 300,000 a quarter and audiences for digital services on Sky and Freeviewincreasing. UBC will continue to benefit from the fundamental shifts that theswitch to digital brings about. The first quarter has started an increase inadvertising revenues of 22% and we have been able to announce an importantsoftware contract with BT. I am very confident about our prospects." STRATEGIC REVIEW During the year UBC Media Group reported continued strong growth, delivering onits past commitment to shareholders and putting in place a robust foundation forthe next stage in the development of the Company. Digital radio is now a success story, with the UK leading the world. Key skillsfor exploiting the digital marketplace are the supply of content, control ofspectrum and software development. UBC's skills and experience mean that it iswell placed in each of these areas, as is evident from a number of developmentsduring the last year, both in the UK and overseas. The high growth digital radio environment that we anticipated and for which UBChas been strategically positioned is now upon us. DAB is proving to be one ofthe fastest ever new technologies to reach mass market status and the industry'sforecasts for take-up this year are currently being revised upwards. UBC hassought to create the right business mix for an environment that we believe willoperate on different economic models from that of the traditional analogue radioworld. The creation of strong brands is of growing importance in what is anincreasingly competitive marketplace. In this respect, our partnership withChannel 4 Television in our national digital radio station, Oneword Radio, is ofparticular significance, and also demonstrates the increasing value of ownershipof digital radio licences. As we predicted, networking and the ability to generate revenues by providingprogramming to stations owned by others is becoming a key part of the digitalradio economy. It is in this area that we have seen particularly strong growthin the past year. Our networked programmes now reach 34% of the UK populationevery day and revenues grew 44% in the year. The acquisition of the leadingregional independent production company, Smooth Operations, has made animportant contribution to a 34.4% growth in revenues from commissionedprogramming. We continue to be one of the leading suppliers of programmes to theBBC and the value of this position is amplified by the BBC's intention to doublethe programming it commissions from independent production companies. Whilst wewelcome a step that will benefit our production businesses, it will still leaveradio outsourcing significantly behind that of television. We see nojustification for this, and are lobbying government as part of the currentCharter Review process to encourage greater movement from the BBC. Digital radio offers the opportunity to bring for real vision to the radioindustry. UBC Media Group's strategy has been to anticipate how digital radiowill develop, and position the Company to benefit from new opportunities as theyemerge. We believe the ability to transmit data will be one of the key driversof the next stage in the development of DAB digital radio. We already have a 40%UK market share for the provision of software to drive the existing textservices that accompany digital radio broadcasts. This, however, is only thebeginning: devices are now being launched which allow full Electronic ProgrammeGuides (EPG) and facilitate sophisticated services using digital radio's datacapacity. UBC has the only commercially available EPG software in the UK and has alreadylicensed this to major UK broadcasters, including GCap Media and the recentlyannounced BT Livetime datacasting venture. A major part of our investment in2006 will focus on exploring ways to exploit the data capacity that is owned byUBC and, in particular, on the launch of innovative services that allow music tobe downloaded over digital radio. We expect to launch such a service in the nextcalendar year. UBC's aim continues to be to grow the business both organically and byacquisition. We remain committed to investing in the development of ourportfolio of digital assets and to maintain our position at the forefront ofinnovation and technical achievement. Since the start of the new financial year,as has been widely reported elsewhere, the radio advertising market has shownsigns of softening. However, we continue to see advertising revenues higher thanat this time last year. The Group continues to perform in line with expectationand we believe the prospects for the year ahead are positive. FINANCIAL REVIEW Financial Performance by Division Production UBC's Production Division encompasses both the Group's commissioned radioprogramming for the BBC and networked programming for the commercial radioindustry. Commissioned Programming 2005 2004 % Change Turnover £2.93 million £2.18 million +34.4 UBC's commissioned programming business for the BBC comprises the Group'shistoric production business, Unique, and the leading regional independentproduction company, Smooth Operations, which UBC acquired in August 2004. The integration of Smooth Operations, which operates from offices in Manchesterand Cambridge, has progressed well and Unique continues to recover from theexpiry of one of its long-standing commissions at the start of the financialyear. Turnover for the year was ahead by 34.4% at £2.93 million (2004: £2.18million), and includes an 8 months contribution from Smooth Operations ofturnover of £1.14 million. Unique and Smooth Operations produce a wide range of programmes for broadcastacross the BBC's network of national analogue and digital stations. Unique andSmooth Operations produce more than 600 hours of programming for the BBC peryear across a number of genres, with much of their output as long-termcommissions for some of the BBC's flagship radio programmes. As an indication ofthe creative skills within the Group, this year UBC received a record number ofSony Radio Academy nominations for its programmes, including winning twoprestigious Sony Radio Academy Gold Awards. The acquisition of Smooth Operations, which specialises in the Folk and Countrymusic genres, was an important strategic move by UBC in a sector that it knowswell and where prospects for significant organic growth have historically beenlimited. The strategic importance of the acquisition of Smooth Operations wasunderlined by the BBC's announcement in December 2004 of its intention to investsignificantly in production resources in Manchester. In addition, UBC believesboth Unique and Smooth Operations are well positioned to benefit from the BBC'sannouncement during the year that it intends to double the number of hoursallocated to independent radio production by its national radio networks. Networked Programming 2005 2004 % Change Turnover £7.55 million £5.24 million +44.1 UBC operates two networks of syndicated programmes, Entertainment News and theNetwork Drive traffic & travel service, both of which UBC supplies free ofcharge to radio stations across the UK while retaining airtime within eachbulletin which is then available to UBC to sell to national advertisers. Revenues from UBC's airtime sales business were up 44.1% in the year to £7.55million (2004: £5.24 million). The strong performance by the airtime salesbusiness followed a doubling of revenues from networked programming in theprevious year. The significant increase in airtime sales revenues in the year reflects inparticular the substantial growth of the traffic & travel news service in thefirst-half of the financial year. In July 2004 Emap and UBC consolidated theircompeting traffic & travel services into a combined package encompassing over174 commercial radio stations to be sold by UBC. The network was relaunched inAugust as one of the largest network packages in the UK, delivering a weeklyreach of over 15.1 million adults and over 141 million adult impacts. Theconsolidation of competing airtime packages was followed in September 2004 byUBC's appointment of Trafficlink as sole supplier of traffic and travel data tothe Network Drive service. We believe that in the future networked programming will become an increasinglyimportant feature of the commercial radio market. The growth in digital radiowill result in there being more radio stations in each market, and in responseto market fragmentation advertisers will seek advertising properties thatdeliver national reach. One of the main challenges facing radio groups in thischanged environment will be how to provide cost effective, high-qualityprogramming, and in particular programming which can compete against the BBC'soutput. UBC believes that networked programming is likely to form an importantpart of the solution to these competitive challenges. As a consequence, UBC is continuing to explore ways in which to grow itsnetworked programming business. In September 2004 UBC acquired a 12.5%shareholding in Popworld Limited, which owns and controls Channel 4's flagshipmusic-based programme of the same name and which is also broadcast on MTV. Aspart of its investment UBC became Popworld's radio partner with exclusiveresponsibility for exploitation of the Popworld brand through networkedprogramming to commercial radio stations. Radio Stations UBC's two main radio stations are Classic Gold Digital Limited, which broadcastsa Classic Hits format on a network of analogue and digital platforms across theUK, and the national, digital spoken-word radio station, Oneword Radio. Classic Gold Digital 2005 2004 % Change Turnover £4.41 million £4.69 million -6.0 Classic Gold Digital performed in line with expectations in the year to 31 March2005, with revenues down 6% on the previous year, at £4.41 million (2004: £4.69million). Classic Gold Digital's revenues are directly based upon the network's audienceas measured by RAJAR, in the form of an audience fee that GCap Media Group paysto Classic Gold Digital in return for it selling airtime on the network. TheRAJAR results during the year for Classic Gold Digital have shown a modestdecline in audiences. Overall, the long-term decline in audiences common toradio services broadcast on AM frequencies has again been partially compensatedfor by growth in digital audiences. As part of its long-term strategy tomaintain audiences, Classic Gold Digital has continued to invest throughout theyear in high quality programming output and marketing. The RAJAR report for the final quarter of the financial year ended 31 March 2005shows that 30% of Classic Gold Digital's listeners are listening to the stationon digital, up from 25% in the preceding quarter. In addition, the number oflisteners in areas where Classic Gold Digital is only available digitally hasincreased by 7%. With the increasing growth of digital listening, one of the keychallenges facing the radio industry in the forthcoming year will be educatingadvertisers to place equal value on both analogue and digital listening. GCap Media holds an option that it may exercise from October 2005 to increaseits shareholding in Classic Gold Digital from its current 20% to 75%. The priceGCap Media is required to pay UBC to increase its shareholding in Classic GoldDigital is based on a formula agreed in October 2000. UBC has currently receivedno indication from GCap Media of any plans to increase its shareholding inClassic Gold Digital. Oneword Radio The past year was a transitional period for Oneword Radio. In June 2004 UBCincreased its shareholding in Oneword Radio to 100% as a means of ensuring thelong-term future of the station. As a consequence of taking full control ofOneword Radio, the results of UBC for the year to 31 March 2005 include a periodof 9 months when Oneword Radio was treated as a wholly owned subsidiary of theCompany. As a result of a restructuring programme that took place at the same time thatUBC acquired full control of Oneword Radio, the cost of operating Oneword Radiowas closely controlled throughout the year. At the same time it has shown steadyaudience growth year-on-year, with audiences in the first quarter of 2005 up 60%on the same period in 2004. It was UBC's intention when it acquired full control of Oneword Radio toidentify a strategic partner for the station with a shared vision of theprospects for digital radio in the UK. Following the financial year-end, inApril 2005 UBC reached agreement with Channel 4 Television for Channel 4 toacquire a 51% interest in Oneword Radio for a cash consideration of £1 million.It is our expectation that the cost of UBC's investment in Oneword Radio willreduce in the current year following the sale of a shareholding in the station.UBC and Channel 4 are currently working on plans jointly to develop OnewordRadio; building on what we believe is a valuable digital asset that hassignificant growth prospects. Radio Services UBC's Radio Services division comprises the Group's digital software developmentand facilities businesses. 2005 2004 % Change Turnover £1.08 million £1.18 million -8.47 Turnover from Radio Services in the year was £1.08 million (2004: £1.18million), representing a fall of 8.47% on the previous year. The decline inturnover experienced by Radio Services reflects a further fall in turnover fromthe Group's facilities and studios business as we continue to focus on highermargin business in this area. This was partly compensated for in the period by a45% increase in turnover from software sales to the radio industry. Unique Interactive Unique Interactive continues to benefit from the increasing investment by bothUK and overseas radio broadcasters in their digital services. UniqueInteractive's development focus continues to be on the Group's two main softwareproducts: the 'ManDLS' software, which is used to manage the scrolling text(Dynamic Label Segment) of a digital radio service; and the development ofsoftware to operate electronic programme guide (EPG) services which form part ofthe interactive capabilities of an emerging new generation of EPG-enableddigital devices. Unique Interactive's EPG software continues to be the only commerciallyavailable radio EPG, and it was a key element in the launch of the firstEPG-enabled receivers in early 2005. UBC has for a long time believed that thelaunch of EPG-capable digital radios will significantly change the way thatbroadcasters and listeners utilise digital radio, and that in the future digitalradios will incorporate features as standard which will transform thecapabilities of the medium, such as rewind, record and download. These willenable additional access to a significantly enhanced range of informationservices, and will change the current common perception that digital radio isonly about greater listener choice and better sound quality. Unique Interactive is a market leader in software development for digital radioservices as a result of its early investment in this area and it is currentlydeveloping an increasing international profile in the delivery of softwaresolutions to the industry. Unique Interactive is currently working with a numberof leading broadcasting and technology companies in the UK and overseas and webelieve the next 12 months will see major developments that will reinforce UBC'sprominence in this area. Since the year-end UBC has announced its intention to invest approximately£400,000 in the first half of the current financial year on creating aninnovative service which will allow music to be downloaded over digital radio.The music downloading service will utilise data capacity on a number of digitalradio multiplexes that are owned by UBC. The Company has begun negotiation withpartners in the music and radio industries with whom it will work on bringingthis service to market. The Company's plans in this area are still at an earlystage of development, but it is intended that investors will be updated onprogress at the time of the Company's interim announcement in November 2005. Unique Facilities Unique Facilities delivered a satisfactory performance in the year to 31 March2005 and continued for much of the year to grow yields on the back of goodoccupancy rates. Despite operating in a highly competitive market, UBC'sfacilities have operated at full capacity for extended periods during the year.In addition, Unique Facilities has sought to extend its audio creative services,with the successful launch of a number of new products, including thecomposition of theme and incidental music for television programmes and bespokemusic jingles. Acquisitions & Disposals UBC increased its shareholding in Oneword Radio Limited to 100% on 30 June 2004when it acquired the 50% shareholding of USI Holdings Limited for £694,000. Inconsideration, UBC issued approximately 2.44 million new UBC ordinary shares. In July 2004 UBC increased its shareholding in Digital News Network, whichbroadcasts a regional data service on five MXR multiplexes, from 21.95% to28.05% at a cost of approximately £32,000. In August 2004 UBC acquired the business of Smooth Operations, a leading UKindependent regional radio producer. The acquisition consideration comprised aninitial payment of £1.8 million, with a further maximum payment of £1.9 milliondepending upon the profit growth in each of the two years following theacquisition. A cash payment of £1.2 million and the issue of approximately 2.45million new UBC ordinary shares satisfied the initial acquisition considerationplus costs incurred in connection with the acquisition of £79,000. Any furtherconsideration will be payable as to 60% in cash and 40% by the issue of new UBCordinary shares. The first part of the deferred consideration will becomepayable in the second-half of the financial year to 31 March 2006, and thiselement is capped at £665,000 and is payable in a mixture of cash and new UBCordinary shares. In September 2004 UBC announced the acquisition of a 12.5% shareholding inPopworld Limited, which owns and controls the music programme, Popworld,broadcast on Channel 4 and MTV. The consideration of £250,000 was settled incash. UBC had an option to increase its shareholding in Popworld further to 25%at any time up to the end of December 2004 for a further consideration of£250,000. The option was not exercised. In April 2005 UBC sold a 51% interest in Oneword Radio Limited to Channel 4Television Corporation for a cash consideration of £1 million. Channel 4'sinvestment in Oneword Radio represents the first partnership of a nationaltelevision and commercial radio station and potentially mirrors the BBC'sownership of a cross-media brand. UBC and Channel 4 are currently workingtogether on ways to develop Oneword Radio, including cross-promoting OnewordRadio and utilising the Channel 4 brand name. Fund Raising and Use of Proceeds In July 2004 UBC placed approximately 7.8 million new ordinary shares withinstitutional investors, raising an additional £1.8 million (before expenses)for the Company. The net proceeds of the placing were used to satisfy theinitial cash consideration and related costs of the acquisition of SmoothOperations and a 12.5% shareholding in Popworld Limited. The balance of theproceeds will be used to fund the balance of any deferred cash consideration ofthe acquisition. Investment in Digital Radio During the year to 31 March 2005 UBC invested the following amounts in digitallicences: - Investment in subsidiary companies of £1.56 million (2004: £1.52 million), of which £963,000 (2004: £947,000) relates to carriage of Classic Gold Digital on digital multiplexes covering Northern England and Greater London and other areas which broaden Classic Gold Digital's coverage; £454,000 (2004: £436,000) on Oneword Radio; and £144,000 (2004: £133,000) to data licence fees for broadcasting regional data services on five MXR digital multiplexes. - Joint Venture Investment of £165,000 (2004: £614,000) in Oneword Radio, The Digizone and Digital News Network. Cash Flow During the year UBC had a cash inflow from operating activities after digitallicences and before investment in Oneword Radio and working capital of £96,000(2004: -£520,000). Cash At 31 March 2005 UBC had cash in the bank of £3.50 million (2004: £4.32million). International Financial Reporting Standards (IFRS) As a result of a review of its accounting policies it is UBC Media Group'sintention to comply with IFRS standards for the year ended 31 March 2008. Payment of Dividend The Board is not recommending the payment of a dividend. Consolidated Profit and Loss Account For the year ended 31 March 2005 Year ended 31 March 2005 Year ended 31 March 2004 Before Goodwill and Total Before Goodwill and Total Goodwill and Digital Goodwill and Digital Digital Licences Digital Licences Licences Licences *Restated *Restated £'000 £'000 £'000 £'000 £'000 £'000Turnover (including share of jointventures)Continuing operations 14,782 14,782 13,332 13,332Acquisitions 1,188 1,188 - - 15,970 15,970 13,332 13,332Less: Share of turnover of joint (10) (10) (42) (42)venturesGroup turnover 15,960 15,960 13,290 13,290Cost of sales (11,475) (11,475) (9,738) (9,738)Gross profit 4,485 4,485 3,552 3,552Administrative expenses (3,410) (2,168) (5,578) (3,147) (1,421) (4,568)Group operating profit/(loss) 1,075 (2,168) (1,093) 405 (1,421) (1,016) Continuing operations 807 (1,369) (562) 405 (1,421) (1,016)Acquisitions 268 (799) (531) - - - Share of operating (loss) in joint (68) (97) (165) (178) (436) (614)venturesTotal operating profit/(loss):Group and share of joint ventures 1,007 (2,265) (1,258) 227 (1,857) (1,630)Interest receivable 106 - 106 123 - 123Interest payable (3) - (3) (3) - (3)Profit/(loss) on ordinary activitiesbefore taxation 1,110 (2,265) (1,155) 347 (1,857) (1,510)Tax credit/(charge) 4 - 4 (22) - (22)Profit/(loss) on ordinary activitiesafter taxation 1,114 (2,265) (1,151) 325 (1,857) (1,532)Equity minority interest (102) 233 131 (198) 256 58Retained profit/(loss) for the 1,012 (2,032) (1,020) 127 (1,601) (1,474)financial year Profit/(loss) per share Basic-pence - - (0.61) - - (0.95) Diluted-pence - - (0.61) - - (0.95) All activities relate to continuing operations. The group has no recognisedgains and losses other than those included in the profit/(loss) above, andtherefore no separate statement of total recognised gains and losses has beenpresented. * In the prior year, the Group separately analysed Goodwill and DevelopmentItems. This comprised goodwill amortisation, digital licence costs and the totalshare of operating loss in joint ventures. In the current year, the Group hasseparately analysed Goodwill and Digital Licences, which comprises goodwillamortisation and digital licences only. Accordingly, £178,000 of the Share ofoperating loss in joint ventures in the year ended 31 March 2004 previouslycategorised as Development Items has been restated to the results beforegoodwill and digital licences. Consolidated Balance Sheet As at 31 March 2005 As at 31 As at 31 March 2005 March 2004Group £'000 £'000Fixed assets Goodwill and intangible assets 4,059 332Tangible assets 183 210 4,242 542 Investments 266 - Current assetsWork in progress 36 34Debtors- due after more than one year 458 2,300- due within one year 3,282 1,854 3,740 4,154Cash at bank and in hand 3,498 4,324 7,274 8,512Creditors: amounts falling due within one year (4,136) (2,917)Net current assets 3,138 5,595Total assets less current liabilities 7,646 6,137Creditors: amounts falling due after more than one year (1,078) (337)Provisions for liabilities & charges (511) (2,334)Net assets 6,057 3,466 Capital and reservesCalled up share capital 1,707 1,579Shares to be issued 760 -Share premium account 15,034 12,850Other reserves (801) (801)Merger Reserve 670 -Profit and loss account (10,938) (9,918)Equity shareholders' funds 6,432 3,710Equity minority interest (375) (244)Capital employed 6,057 3,466 Consolidated Cash Flow Statement Year ended 31 March 2005 Year ended 31 March 2005 2004 £'000 £'000Net cash (outflow)/inflow from operating activities (862) 91Returns on investments and servicing of financeInterest received 121 107Interest paid (3) (3)Net cash inflow from returns on investment and servicing of finance 118 104 TaxationUK Corporation tax paid (23) (39)Capital expenditure and financial investmentPurchase of tangible fixed assets (77) (158)Purchase of intangible fixed assets - (28)Sale of tangible fixed assets - 6Purchase of fixed asset investment (266) -Loans to joint ventures (90) (695)Net cash (outflow) from capital expenditure and financial investment (433) (875) Acquisitions and disposalsPurchase of interest in joint ventures (32) -Purchase of subsidiary undertakings (1,279) -Net overdrafts acquired with subsidiary undertakings (1) -Net cash (outflow) from acquisitions and disposals (1,312) -Net cash (outflow) before financing (2,512) (719) Management of liquid resourcesIncrease/(decrease) in short-term deposits with banks 1,000 (1,000) FinancingIssue of ordinary share capital 1,800 1,760Expense of share issue (114) (21)Capital element of finance lease - (47)Net cash inflow from financing 2,686 692Increase / (decrease) in cash in the year 174 (27)Cash balances at the beginning of the year 3,324 3,351Cash balances at the end of the year 3,498 3,324 Represented byCash and bank balances 3,498 3,324Short term deposits - 1,000 3,498 4,324 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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