26th Jun 2006 07:02
UBC Media Group PLC26 June 2006 26 June 2006 UBC Media Group plcPreliminary results for the year ended 31 March 2006 PROFITING FROM DIGITAL RADIO Financial Highlights - Revenues up 21.8% at £19.44 million (2005: £15.96 million). - Advertising revenues from networked programming up 45.8% at £11.01 million (2005: £7.55 million). - Digital Software revenues up 13.9% at £1.23 million (2005: £1.08 million). - Operating profit before Goodwill amortisation of £349,000 (2005: £427,000 loss). This is the first time the company has shown profit at this level since IPO. Operating loss of £193,000 (2005: £1,093,000). - Loss before taxation for the year was £234,000 (2005: £1.16 million) - Increase in cash position at 31 March 2006 to £4.68 million (2005: £3.5 million). - Successful fundraising announced on 26 June 2006 raising £3.0 million gross, subject to EGM, for development of digital radio music downloading service Strategic Highlights - Successful technical trial and launch of digital radio device, which allows listeners to buy music from digital stations. - UBC's advertising business based around network programmes outperforms the commercial radio market significantly with like for like growth of 20.7% against an industry decline in the same period of 6.8%. - Digital Content Division launches successful Internet audio on demand business, winning contracts from The Times, The Sun, The Daily Telegraph and the News of The World and Channel 4. - Partnership with Channel 4 in their launch of 'Channel 4 Radio'. Jointly owned digital station Oneword begins broadcasting Channel 4 programming and benefiting from cross promotion. - Successful launch of UBC software products in USA digital radio market with Harris Corporation representation agreement expected to deliver contracts and revenue in Q1 this year. Chief Executive, Simon Cole, commented, "This is a company that understands the digital radio business. Our resultsshow that the investments we have made in the last four years are now deliveringprofit as the face of the radio industry changes. We believe that the pace of change will accelerate and particularly that theopportunities provided by our successful trials of music purchase from digitalradio stations have the potential to create transforming business models. I am delighted that our existing investors and some new investors have todaybacked our vision of this future and that we are funded to realise the fullpotential of an exciting medium." There will be a presentation to analysts and investors this morning at 9.00amBST at The London Stock Exchange, Forum 2, 10 Paternoster Square, London, EC4M7LS Enquiries: Simon Cole, CEO, UBC Media Group plc Tel: 020 7453 1600Tim Allan or Diane Barnes, Portland for UBC Tel: 020 7404 5344 REVIEW OF OPERATIONS Networked Programming UBC continues to grow its share of the radio advertising market During the year UBC reported strong growth from our Network Programmingbusiness, with advertising revenues up 45.8% year-on-year at £11.01 million(2005: £7.55 million). UBC's Network Programming business continues to benefitfrom the structural changes occurring in the radio industry as a result of thegrowth of digital listening and the fragmentation of audiences. The performanceof advertising revenues in UBC's network business stands out in sharp contrastto that of the commercial radio industry overall, which in the year to March2006 experienced a 6.8% decline in advertising revenues. Networked programmes are proving to be a solution to one of the main challengesresulting from the growth in digital radio. They enable advertisers to continueto reach significant national audiences, whilst at the same time providing radiostations with a cost effective means of delivering 'must have' programming. During the year, our network programming business benefited from both strongadvertiser demand and an increase in the network of stations taking ourservices. UBC continues to invest in building its advertising business. Duringthe year, we launched a Network News advertising package based on the Sky RadioNews Service, which we believe is capable of delivering strong growth. Wecontinue to actively explore other ways of extending our radio advertisingbusiness. 2006 2005 % Change Revenues £11.01 million £7.55 million +45.8% Digital Stations UBC's Digital Stations benefit from the growth in digital radio We believe successful national media brands will be genuinely multi-platform,allowing audiences to be built by cross promotion. Our partnership with Channel4 Television in Oneword Radio is one of the most significant milestones in thedevelopment of digital radio to date. Channel 4's investment in Oneword Radiorepresents the first major involvement by a commercial television broadcaster inthe commercial radio sector and Oneword has recently begun to introducecross-promoted Channel 4 programming into its schedule Sales of DAB digital radios are growing rapidly and are forecast to reach 5million by the end of the year*. With 6.4 million people (13% of the population)now living in a DAB household and 36% of the population reporting they listen todigital services every week, digital radio is on the point of becoming amass-market product. In partnership with Channel 4 we believe we can buildOneword Radio into one of the prime assets in digital radio. * source: Digital Radio Development Bureau Classic Gold Digital continues to grow its digital audience, which now stands at34% of all listeners to the network. The increase in Classic Gold Digital'sdigital audiences during the year reinforces our long-standing belief that anational, branded classic hits format stands to benefit disproportionately fromthe growth in digital radio. As part of our overall strategy to manage thedecline in analogue audiences while we grow the number of digital listeners, wecontinue to invest in marketing and quality programming. The long-term growth of Classic Gold Digital depends upon building its digitalaudiences. In the short term we will continue to face the challenges of adeclining AM audience. During the year Classic Gold Digital was also held backby a depressed local sponsorship and promotions market. However, the firstquarter of the new financial year has seen some recovery in this area and we arehopeful this trend will build as the current year progresses. Classic GoldDigital's revenues in the year to 31 March 2006 were down 6.4% at £4.12 million(2005: £4.40 million), which was in line with our expectations. 2006 2005 % Change Revenues £4.12 million £4.4 million -6.4% Digital Content UBC's Digital Content Division moves into audio on demand As has been the case in television, we believe that the digital radio marketwill see a shift from live delivery of content to one in which content isincreasingly available 'on demand'. There will always be a place for live radiobringing live entertainment and time-sensitive information, but customers willalso use their devices to listen to other content at a time of their choosing.In this environment, the value of content and brands becomes more important thanthe value of individual broadcast licences. We can expect to see content brandowners that have not previously been involved in radio - such as newspapers -entering the market. UBC's programming business is very well positioned to takeadvantage of this market and in the last year UBC has won contracts to producepodcasts for The Times, The Sun, The Daily Telegraph and the News of The World. Together with the Group's existing business of production for BBC Radio, thishas led to an increase in revenues for the year of 5.1% at £3.08million (2005:£2.93 million). This performance also reflects a particularly strongcontribution from our regional and specialist music business, Smooth Operations,which continues to benefit from the BBC's decision to increase the amount ofprogramming it commissions from outside London. Overall, our productionbusinesses remain well positioned to benefit from any future growth in theprogramming budgets of the BBC's national digital radio stations. During theyear, UBC was commissioned to produce the first new network chart programmelaunched by the commercial radio sector in 22 years. 2006 2005 % Change Revenues £3.08 million £2.93 million +5.1% Digital Software Software sales growing strongly UBC's Digital Software division reported revenues up 13.9% at £1.23 million(2005: £1.08 million). UBC is the market leader in the development of softwaresolutions for digital radio. During the year our software development businessestablished a growing presence in a number of key overseas markets. UBC has two main software products: 'ManDLS' software, which is used to managethe scrolling text (Dynamic Label Segment) element of a digital radio service;and a software programme used to operate electronic programme guide (EPG)services on EPG-enabled digital devices. Sales of both software productscontinue to benefit from growing levels of investment by radio broadcasters indigital services. During the year UBC announced two major developments that webelieve have long-term benefits for our software business. The first was anagreement with BT Movio (formerly BT Livetime) to supply and implement an EPGfor the new Movio entertainment service soon to be launched on the Virgin mobilenetwork; and, secondly, a tie-up with Harris Corporation, the US market leaderin radio broadcasting equipment, to incorporate UBC's ManDLS software into itsHD(TM) radio product range. 2006 2005 % Change Revenues £1.23 million £1.08 million +13.9% Music Downloading The growth of digital radio in the UK continues to gather pace. We believe thekey driver for the next phase of development and innovation will be theconvergence of digital radio with other forms of mass communication. A milestonein this process was the launch by BT Movio and Virgin Mobile of the firstdigital radio enabled mobile phones broadcasting digital television and radioservices over digital radio spectrum. This will be followed by the first digitalradio/MP3 products, which are due to be launched later this year. These productswill transform how consumers use their radios. Our leadership in software development and our ownership of a large part of theavailable digital radio data spectrum (which is a key component for broadcastinginteractive services) has enabled us to develop an exciting new service thatwill allow consumers to download and purchase music on mobile devices as theyhear it on the radio. During the year, we successfully completed the first stage in developing thisservice. We are currently undertaking field studies. Depending upon thesuccessful completion of the next stages in the development programme, we planto launch a full consumer service in the next 12 months. We believe that musicdownloading over radio has the potential to be one of the most significantinnovations undertaken by the industry in recent times. As a pioneer indeveloping digital radio in the UK, we believe this is an opportunity that UBCis ideally placed to exploit. Prospects As digital listening grows it is increasingly apparent that it is also changingthe business model on which the radio industry in the UK has operated since thelaunch of commercial radio in 1973. The performance of the past year shows thatUBC is well positioned across all its businesses to benefit from the growth ofdigital radio - whether satisfying demand for low-cost, high quality networkedprogramming; developing the software that operates new digital services;operating radio stations that benefit from the growth in digital audiences; ordeveloping entirely new business models - such as music downloading - that arisefrom the capabilities of digital radio. The year ahead will be an exciting and challenging one for the Group. However,UBC has shown that digital radio is an opportunity that no one is better placedto exploit. FINANCIAL REVIEW In the year to 31 March 2006 Group revenues grew 21.8% to £19.44 million (2005:£15.96 million). This growth was driven in particular by strong demand for our NetworkProgramming business, where UBC generates its revenues from selling advertisingwithin the 'must have' radio programmes that it supplies to the commercial radioindustry. Network programming delivered revenues up 45.8% at £11.01 million(2005: £7.55 million). Revenues from the Classic Gold Digital network of radio stations were down 6.4%at £4.12 million (2005: £4.40 million), caused partly by a poor localsponsorship and promotions market. Continuing strong growth in Classic GoldDigital's digital audiences compensated in part for the continuing long-termdecline in AM listeners. Revenues from our Digital Content business, which includes our programmeproduction business supplying the BBC, were 5.1% ahead at £3.08 million (2005:£2.93 million), reflecting a strong contribution from our regional andspecialist music business. UBC's Digital Software operation delivered revenues up 13.9% at £1.23 million(2005: £1.08 million), with strong growth from software sales compensating forour decision to withdraw from certain of our low margin radio facilitiesactivities. Adjusted operating profit* for the year increased to £1.56 million (2005: £1.08million) and our total investment in the year developing a music downloadingservice on digital radio was £396,000 (2005: nil.), of which £326,000 wascapitalised. The operating loss was £193,000 (2005: £1,093,000). Continued tight cost control helped the Group achieve an improvement in adjustedoperating profit margin from 6.74% to 8.05%. UBC reported a loss on ordinary activities before taxation in the year of£234,000 (2005: £1.16 million loss) * Adjusted operating profit represents operating profit before goodwillamortisation of £542,000 (2005: £667,000); digital licences of £1.15 million(2005: £1.5 million) and £70,000 of spend on developing a music downloadingservice. Investment in digital radio UBC continues to invest heavily in the development of its digital radiostrategy. During the year UBC spent £2.04 million (2005: £1.79 million),comprising the following amounts: - £977,000 million (2005: £963,000) on transmitting Classic Gold Digital on digital multiplexes covering Northern England and London, which significantly increases Classic Gold Digital's coverage area. - Joint venture investment of £503,000 (2005: £680,000) in Oneword Radio. UBC's investment in Oneword Radio in 2005 includes investment in the station as a subsidiary. - £396,000 (2005: nil) in Digital Music Downloading, of which £326,000 was capitalised; - and £168,000 (2005: £144,000) in data licence fees for broadcasting regional data services on five MXR digital multiplexes. We expect our investment in the development of digital radio will grow in theforthcoming year. Including the current field trials being undertaken of themusic downloading service, UBC is planning to continue its investment in thedevelopment of its music downloading service. As a result of this investment theGroup is expecting to be able to launch a commercial music downloading serviceusing digital radio within the next 12 months. Strategic Objectives In the year ahead UBC has set itself the following five strategic objectives: i) to launch a consumer music downloading service within the next 12 months; ii) to increase digital listeners to Oneword Radio to 200,000 in the Q1 2007 RAJAR survey; iii) that our Network Programming Division will continue to outperform the radio sector in advertising sales; iv) to achieve US$0.5 mil. of digital software revenues from North America; and v) to achieve the Group's first subscription revenues from audio services. Disposal In April 2005, UBC sold a 51% interest in Oneword Radio Limited to Channel 4Television for a cash consideration of £1 million, giving rise to a profit onthe sale of £629,000. Cash Flow During the year, UBC had a cash inflow from operating activities of £1,312,000(2005: £862,000 outflow), which included a working capital inflow during theperiod of £840,000 (2005: £565,000 outflow). Cash At 31 March 2006 UBC had cash in the bank of £4.68 million (2005: £3.50million). Loss per Share In the year to 31 March 2006 we increased our EPS to -0.07p (2005: -0.61p). Dividend The Board is not recommending the payment of a dividend. CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 MARCH 2006 2005 £'000 £'000 Turnover (including share of joint ventures) 19,484 15,970Less: Share of turnover of joint ventures (49) (10)Group turnover 19,435 15,960Cost of sales (14,352) (11,475)Gross profit 5,083 4,485 Administrative expenses before digital licence costs, development costs and goodwill (3,519) (3,381)amortisationDigital licence costs (1,145) (1,501)Development costs (70) (29)Goodwill amortisation (542) (667)Total administrative expenses (5,276) (5,578)Operating loss (193) (1,093)Share of operating loss in joint ventures (522) (165)Total operating loss: Group and share of joint ventures (715) (1,258)Exceptional non-operating items 363 -Interest receivable 119 106Interest payable (1) (3)Loss on ordinary activities before taxation (234) (1,155)Tax (charge)/credit (10) 4Loss on ordinary activities after taxation (244) (1,151)Equity minority interest 117 131Retained loss for the financial year (127) (1,020) Loss per share Basic pence (0.07) (0.61) Diluted pence (0.07) (0.61) CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 31 MARCH 2006 2005 £'000 £'000 Profit/(loss) for the financial year Group 395 (855) Joint ventures (522) (165)Retained loss for the financial year (127) (1,020) Release of merger reserve 670 -Total recognised gains and losses for the year 543 (1,020) All activities relate to continuing operations. CONSOLIDATED BALANCE SHEETAS AT 31 MARCH 2006 2005Group £'000 £'000Fixed assets Goodwill and intangible assets 3,220 4,059Fixed asset investments 306 266Tangible assets 189 183 3,715 4,508 Current assetsWork in progress 36 36 Debtors 3,459 3,282 Cash at bank and in hand 4,677 3,498 8,172 6,816Creditors: amounts falling due within one year (5,529) (4,136)Net current assets 2,643 2,680Total assets less current liabilities 6,358 7,188Creditors: amounts falling due after more than one year (337) (1,078)Provisions for liabilities and charges (78) (53)Net assets 5,943 6,057 Capital and reservesCalled up share capital 1,748 1,707Shares to be issued 494 760Share premium account 15,389 15,034Other reserves (801) (801)Merger reserve - 670Profit and loss account (10,395) (10,938)Equity shareholders' funds 6,435 6,432Equity minority interest (492) (375)Capital employed 5,943 6,057 CONSOLIDATED CASH FLOW STATEMENTYEAR ENDED 31 MARCH 2006 2005 £'000 £'000Net cash inflow/(outflow) from operating activities 1,312 (862)Returns on investments and servicing of financeInterest received 119 121Interest paid (1) (3)Net cash inflow from returns on investment and servicing of finance 118 118 TaxationUK Corporation tax received/(paid) 8 (23)Capital expenditure and financial investmentPurchase of tangible fixed assets (136) (77)Purchase of intangible fixed assets (326) -Sale of tangible fixed assets 11 -Purchase of fixed asset investment - (266)Loans to joint ventures (511) (90)Net cash outflow from capital expenditure and financial investment (962) (433) Acquisitions and disposalsPurchase of interest in joint ventures - (32)Purchase of subsidiary undertakings (399) (1,279)Sale of subsidiary undertakings 932 -Net cash/(overdrafts) disposed of/acquired with subsidiary undertakings 39 (1)Net cash inflow/(outflow) from acquisitions and disposals 572 (1,312)Net cash inflow/(outflow) before financing 1,048 (2,512) Management of liquid resourcesIncrease in short-term deposits with banks - 1,000 FinancingIssue of ordinary share capital 96 1,800Refund of expense of share issue 35 (114)Net cash inflow from financing 131 2,686Increase in cash in the year 1,179 174Cash balances at the beginning of the year 3,498 3,324Cash balances at the end of the year 4,677 3,498 Represented byCash and bank balances 4,677 3,498 The financial information contained in this Preliminary Announcement does notconstitute the Company's statutory accounts for the years ended 31 March 2006and 2005. The financial information for the year ended 31 March 2005 is derivedfrom the statutory accounts for that year which have been delivered to theRegistrar of Companies. The auditors reported on those accounts; their reportwas unqualified and did not contain a statement under s237 (2) or (3) Companies Act 1985. The statutory accounts for the year ended 31 March 2006will be finalised on the basis of the financial information presented by thedirectors in this preliminary announcement and will be delivered to theRegistrar of Companies following the company's annual general meeting. Copieswill be available from the Company's registered office at 50 Lisson Street,London NW1 5DF. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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