29th Apr 2005 15:53
Music Choice Europe PLC29 April 2005 29 April 2005 Music Choice Europe plc ("Music Choice" or "the Company") Preliminary Results for the year ended 31 December 2004 Chairman's Business Review The year ended 31 December 2004 has seen Music Choice meet its promise to breakeven at the EBITDA level. This key milestone has been achieved by retaining atight control over costs whilst continuing to focus on the needs of customers,consumers and shareholders. Financial Review Music Choice achieved EBITDA of £251,000 for the year (2003: loss of £3.2 million). As a result of underlining growth from existing subscriber bases as well as continued focus on reducing costs, the Company met its financial targets for 2004. As indicated in the interim results released on 28 September 2004 and the trading statement released on 22 February 2005, the Company forecast that increasing pressure on subscriber fees caused by granting greater discounts forbasic content to TV broadcasting platforms would adversely affect turnover and profit levels. Consequently, turnover increased only marginally to £10.0 million (2003: £9.5 million), whilst the operating loss fell to £9,000 (2003: £4.2 million). Pre-tax profit improved to £602,000 (2003: loss of £3.5 million). The Companyrecorded earnings per share of 0.41p (2003: loss per share of 2.40p). Overall costs fell by £3.7 million to £10.0 million reflecting the Company'sclose eye on costs and efficient use of resources, and the net cash outflow fromoperating activities was £457,000 compared with £2.4 million for 2003. In July the Company announced that cash levels were in excess of those requiredto meet the business plan, and as a result £15.0 million was returned toshareholders by way of a reduction of capital. Following this decision, at theyear end the Company held cash and cash equivalents of £3.9 million (2003: £19.8million). In view of current market conditions, the Board will take necessaryaction to ensure sufficient funds are available to meet the ongoing requirementsof the business including reviewing capital expenditure and other operatingcosts. In line with the Company's stated dividend policy, the Board is not recommendinga dividend for the year ended 31 December 2004. Outlook As indicated in the trading update issued on 22 February 2005, the directors arecurrently undertaking a fundamental strategic review of the Group's activities.The outcome of this review remains uncertain but is likely to have asignificant bearing on the scope and nature of the Group's future activities.However, the directors do not consider that the outcome of the strategicreview, and the subsequent implementation of the review's recommendations, willadversely impact the ability of the Group to meet its debts as they fall due forthe foreseeable future. The directors accordingly have adopted the going concernbasis in the preparation of the Group's accounts. - Ends - For further information, please contact: Music Choice Europe plc 020 7014 8700Margot Daly, Chief ExecutiveRebecca Barrett Weber Shandwick Square Mile 020 7067 0700Louise Robson or Helen Thomas Music Choice Europe plc Group Profit and Loss Accountfor the year ended 31 December 2004 2004 2003 Notes £'000 £'000--------------------------------------------------------------------------------------Turnover 2 10,008 9,561Cost of sales (4,355) (5,180)--------------------------------------------------------------------------------------Gross profit 5,653 4,381======================================================================================Distribution costs (2,772) (2,494)Amortisation and impairment of intangible fixed assets - (585)Depreciation and impairment of tangible fixed assets (260) (411)Restructuring costs - (1,004)Property costs - (1,079)Other administrative expenses (2,630) (2,981)Administrative expenses (2,890) (6,060)-------------------------------------------------------------------------------------- (5,662) (8,554)--------------------------------------------------------------------------------------Operating loss 2 (9) (4,173)--------------------------------------------------------------------------------------Profit on disposal of fixed assets - 9Interest receivable 611 651-------------------------------------------------------------------------------------- 611 660======================================================================================Profit/(Loss) on ordinary activities before taxation 3(a) 602 (3,513)Tax on Profit/(Loss) on ordinary activities 4 (211) 580--------------------------------------------------------------------------------------Profit/(Loss) for the year 391 (2,933)======================================================================================Earnings/(Loss) per shareBasic and diluted - pence per share 5 0.41 (2.40)====================================================================================== Group Statement of Total Recognised Gains and Losses 2004 2003 £'000 £'000--------------------------------------------------------------------------------------Profit/(Loss) for the financial year 391 (2,933)Exchange difference on translation of net assets of subsidiary undertakings (11) 22--------------------------------------------------------------------------------------Total recognised gains and losses relating to the financial year 380 (2,911)====================================================================================== Music Choice Europe plc Group Balance Sheetat 31 December 2004 2004 2003 Notes £'000 £'000-------------------------------------------------------------------------------------Fixed assetsTangible assets 1,012 395------------------------------------------------------------------------------------- 1,012 395-------------------------------------------------------------------------------------Current assetsDebtors 2,524 2,190Investments 6 3,026 17,907Cash 6 832 1,923------------------------------------------------------------------------------------- 6,382 22,020-------------------------------------------------------------------------------------Creditors: amounts falling due within one year (5,190) (5,098)-------------------------------------------------------------------------------------Net current assets 1,192 16,922-------------------------------------------------------------------------------------Total assets less current liabilities 2,204 17,317-------------------------------------------------------------------------------------Provisions for liabilities and charges (613) (1,079)------------------------------------------------------------------------------------- 1,591 16,238=====================================================================================Capital and reservesEquity share capital 332 1,229Share premium account 8 - 46,179Other reserves 8 22,922 22,922Profit and loss account 8 (21,663) (54,092)-------------------------------------------------------------------------------------Equity shareholders' funds 1,591 16,238===================================================================================== Music Choice Europe plc Group Statement of Cashflowsfor the year ended 31 December 2004 2004 2003 Notes £'000 £'000------------------------------------------------------------------------------------- Net cash outflow from operating activities 3(b) (457) (2,398)-------------------------------------------------------------------------------------Return on investment and servicing of financeInterest received 609 651Interest element of finance lease rental income 2 -------------------------------------------------------------------------------------- 611 651-------------------------------------------------------------------------------------TaxationTax paid (263) (216)Consortium relief received 64 1,083------------------------------------------------------------------------------------- (199) 867-------------------------------------------------------------------------------------Capital expenditure and financial investmentsPayments to acquire tangible fixed assets (900) (241)Proceeds on disposal of tangible fixed assets - 9------------------------------------------------------------------------------------- (900) (232)------------------------------------------------------------------------------------- Management of liquid resourcesPurchase of interest bearing investments (552) (10,658)Sale of interest bearing investments 15,433 10,593------------------------------------------------------------------------------------- 14,881 (65)-------------------------------------------------------------------------------------FinancingPurchase of own shares (15,027) -------------------------------------------------------------------------------------- (15,027) --------------------------------------------------------------------------------------Decrease in cash in the year 6 (1,091) (1,177)===================================================================================== Reconciliation of Net Cashflow to Movement in Net Funds 2004 2003 £'000 £'000------------------------------------------------------------------------------------- Decrease in cash in the year (1,091) (1,177)Purchase of interest bearing investments 552 10,658Sale of interest bearing investments (15,433) (10,593)-------------------------------------------------------------------------------------Movement in net funds in the year (15,972) (1,112)Net funds at 1 January 19,830 20,942-------------------------------------------------------------------------------------Net funds at 31 December 6 3,858 19,830===================================================================================== Music Choice Europe plc Notes to the Preliminary Statementat 31 December 2004 1 Basis of preparation The accounts are prepared in accordance with the 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. As noted in the chairman's statement, the directors are currently undertaking a fundamental strategic review of the Group's activities. The outcome of this review remains uncertain but is likely to have a significant bearing on the scope and nature of the Group's future activities. However, the directors do not consider that the outcome of the strategic review, and the subsequent implementation of the review's recommendations, will adversely impact the ability of the Group to meet its debts as they fall due for the foreseeable future. The directors accordingly have adopted the going concern basis in the preparation of the Group's accounts. The financial information presented within this preliminary announcement for the years ended 31 December 2004 and 31 December 2003 does not constitute statutory accounts. The 2004 statutory accounts have yet to be delivered to the Registrar, but include the auditors' report which was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The auditors' report on the Statutory Accounts for the 12 months to 31 December 2003 was unqualified and did not contain any statement under section 237(2) or (3) of the Companies Act 1985. These accounts have been delivered to the Registrar of Companies. 2 Turnover, operating loss and net assets Turnover arises from a single continuing activity, being amounts invoiced to third parties for the delivery of digital audio music programmes in Europe. An analysis of turnover, operating loss and net assets by activity and geographical area is given below: 2004 2003 £'000 £'000-------------------------------------------------------------------------------------Area of activity:Provision of digital audio music programmesTurnover 10,008 9,561-------------------------------------------------------------------------------------Operating loss (9) (4,173)-------------------------------------------------------------------------------------Net assets 1,591 16,238=====================================================================================Geographical area:EuropeTurnover 10,008 9,561-------------------------------------------------------------------------------------Operating loss (9) (4,173)-------------------------------------------------------------------------------------Net assets 1,591 16,238===================================================================================== 3 Profit/(Loss) on Ordinary Activities before Taxation a) This is stated after charging/(crediting): 2004 2003 £'000 £'000-------------------------------------------------------------------------------------Satellite and uplinking costs 1,237 1,884Restructuring costs - 1,004Property costs - 1,079Auditors - audit remuneration 77 75 - non-audit services - 3Depreciation of tangible fixed assets 280 411Amortisation of intangible fixed assets - 240Impairment of intangible fixed assets - 345Operating leases - land and buildings 216 589Net foreign exchange losses/(gains) 98 (83)===================================================================================== Restructuring costs include the following items: 2004 2003 £'000 £'000-------------------------------------------------------------------------------------Redundancy costs - 662Other restructuring costs - 342------------------------------------------------------------------------------------- - 1,004===================================================================================== b) Reconciliation of operating loss to net cash outflow from operating activities: 2004 2003 £'000 £'000-------------------------------------------------------------------------------------Operating loss (9) (4,173)Depreciation of tangible fixed assets 280 411Amortisation of intangible fixed assets - 240Impairment of intangible fixed assets - 345Charges relating to onerous property provision - 1,079Cash costs relating to onerous property provision (466) -(Increase)/decrease in debtors (334) 1,380Increase/(decrease) in creditors 72 (1,680)-------------------------------------------------------------------------------------Net cash outflow from operating activities (457) (2,398)===================================================================================== 4 Tax a) Tax on Loss on Ordinary Activities: 2004 2003 £'000 £'000-------------------------------------------------------------------------------------Corporation tax at 30% (253) (168)------------------------------------------------------------------------------------- (253) (168)Double tax relief 253 168------------------------------------------------------------------------------------- - -Foreign taxes (275) (147)-------------------------------------------------------------------------------------Current tax charge (275) (147)Prior year consortium relief credit 64 802Prior year foreign taxes - (75)------------------------------------------------------------------------------------- (211) 580===================================================================================== The Group was a consortium under the provisions of the Income and Corporation Taxes Act 1988 and was entitled to surrender its tax losses to consortium members. Under an agreement with these consortium members the Group was entitled to charge for the surrender of these losses at the prevailing corporation tax rate. On flotation, the Group ceased to fulfil the rules governing consortium companies and hence such surrender ceased. b) Factors affecting current tax charge: 2004 2003 £'000 £'000-------------------------------------------------------------------------------------Profit/(loss) on ordinary activities before tax 602 (3,513)Profit/(loss) on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (2003: 30%) 181 (1,054)Expenses not deductible for tax purposes (including amortisation and impairment of goodwill) 9 179Accelerated capital allowances 58 47Movement in timing differences (201) 217Higher taxes on foreign earnings 54 62Losses arising in the year not relievable against current tax 174 696-------------------------------------------------------------------------------------Total current tax charge (note 4a) 275 147===================================================================================== c) Factors that may affect future tax charges No deferred tax benefit has been recognised in the financial statements relating to brought forward tax losses (see note below). Future profits will not be subject to UK corporation tax, other than the claiming of double tax relief for foreign taxes paid, until such losses, which at the balance sheet date amounted to £38,186,000, have been used up. d) Deferred Tax No deferred tax has been booked relating to the availability of tax losses of approximately £38,186,000 (2003: £37,895,000) available for carrying forward against future profits. There is no potential deferred tax on fixed assets due to accelerated capital allowances, because the tax written down value of eligible assets is higher than the value carried in the balance sheet. 5 Earnings Per Share The calculation of earnings/(losses) per share for the year is in accordance with FRS 14 and is based on the earnings/(losses) for the year of £391,000 (2003: (£2,933,000)) and on 96,234,627 ordinary shares (2003: 122,262,394), being the weighted average number of ordinary shares in issue during the year, excluding 436,083 shares (2003: 554,000) 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 year. In the year ended 31 December 2004, no share options met this condition (2003: nil). 2004 2003 £'000 £'000-------------------------------------------------------------------------------------Profit/(Loss) on ordinary activities after taxation 391 (2,933)===================================================================================== No. '000 No. '000-------------------------------------------------------------------------------------Weighted average number of ordinary shares - basic and diluted 96,235 122,262===================================================================================== Pence per Pence per share share-------------------------------------------------------------------------------------Earnings/(Loss) per share - basic and diluted 0.41 (2.40)===================================================================================== 6 Analysis of Net Funds At At 1 January 31 December 2004 Cashflow 2004Group £'000 £'000 £'000---------------------------------------------------------------------------------------------------Investment in money market fund 6,059 (6,059) -Fixed term deposits 11,848 (8,822) 3,026---------------------------------------------------------------------------------------------------Investments 17,907 (14,881) 3,026Cash at bank and in hand 1,923 (1,091) 832--------------------------------------------------------------------------------------------------- 19,830 (15,972) 3,858=================================================================================================== 7 Post Balance Sheet Events There are no post balance sheet events to be disclosed. 8 Reconciliation of Shareholders' Funds and Movements on Reserves Profit Share Share Other and loss capital premium reserves account TotalGroup £'000 £'000 £'000 £'000 £'000--------------------------------------------------------------------------------------------------------------------At 31 December 2002 1,227 46,160 22,922 (51,160) 19,149On exercise of LTIP share option 2 19 - (21) -Exchange difference on translation of net assets of subsidiary undertaking - - - 22 22Loss for the year - - - (2,933) (2,933)--------------------------------------------------------------------------------------------------------------------Balance at 31 December 2003 1,229 46,179 22,922 (54,092) 16,238Purchase of own shares (897) - - (14,130) (15,027)Cancellation of share premium - (46,179) - 46,179 -Exchange difference on translation of net assets of subsidiary undertaking - - - (11) (11)Profit for the year - - - 391 391--------------------------------------------------------------------------------------------------------------------Balance at 31 December 2004 332 - 22,922 (21,663) 1,591==================================================================================================================== 9 Music Choice will not be paying a dividend in respect of the year to 31 December 2004. The Board will continue to review the Group's dividend policy as appropriate. 10 Copies of the 2004 Report and Accounts will be sent to shareholders in due course. Further copies will be available from the registered office of Music Choice Europe plc, Fleet House, 57-61 Clerkenwell Road, London EC1M 5AR. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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