Half Yearly Report

15 November 2010

UBC Media Group plc

Interim Results for the six months ended 30 September 2010

UBC Media Group (AIM: UBC), the multimedia content and services company, reports its Interim Results for the six months ended 30 September 2010.

Operational highlights

·; Content business reduces reliance on BBC and increases revenues from digital video:

o Revenue from video doubles to £0.28m (2009: £0.14m)

o Digital video content now 13% of turnover (2009: 7%);

o Revenues from BBC programming £0.99m (2009: £1.09m): 47% of turnover (2009: 56%);

·; Long term legacy Digital Radio liabilities removed in settlement with Bauer and MXR;

·; Audio book producer Above The Title, acquired in February, now integrated into content business;

·; Strong development pipeline of mobile content 'Apps'.

Financial highlights

·; Group revenue up 8.3% at £2.10m (2009: £1.94m);

·; Profit for the period £0.27m (2009: £0.62m);

·; Underlying operating loss of £0.47m (2009: £0.28m);

·; Cash position Sept 2010 £5.11m, with no debt and after Bauer settlement (2009: £9.69m);

·; Interim Dividend announced of 0.105 pence per ordinary share (2009: 0.102 pence)

Simon Cole, Chief Executive, commented:

"I am pleased that our rise in turnover is fuelled by an increase of business in the areas that we have identified as key for growth. It is particularly encouraging that in this period we have a new Digital Video client in Sky Arts and that our investment in mobile 'apps' is beginning to bear fruit. Growth will entail investment and acquisition and our strong balance sheet enables us to do both."

Enquiries:

Strategic and Operational review

In the last six months, we have moved closer towards our key strategic goal - to become a tightly focused international content and software business - with an increase in this period of our revenues from video content and the imminent launch of our mobile 'apps' network.

We have also removed the last remaining hangover from our legacy digital radio business, with a cash payment to Bauer of £2.2m in order to settle a long-term liability of £3.1m and a release from our spectrum obligations on the MXR multiplexes. This has created a strong balance sheet with over £5m of cash and no debt or significant long-term liabilities.

Divisional report

Our opportunity now is to use that balance sheet to expand the business and create shareholder returns. Our early acquisition - now re-named as Lynx Content - has proved successful, delivering some £0.19m gross profit (2009: £0.05m) or 45% of our gross profit in this period (2009: 8%). Our aim was to use Lynx as the catalyst to grow our revenues from video content and this sector now represents 13% of our revenues, a significant rise in the last twelve months (H1 2009 7%). In this period, Lynx has produced 61 video projects for advertisers from Heineken to Paramount Pictures.

As we had intended, the influence of Lynx in the Group has allowed us also to develop video revenues in all our production companies. Smooth Operations, our Manchester-based content operation, saw its first revenues from Sky Arts in this period, expanding what was previously just our coverage for the BBC of the Cambridge Folk Festival to include 4 one-hour specials for Sky. Key to this expansion into video content is our ability to retain rights to the material we produce and distribute it on a variety of platforms internationally.

We have also in this period produced a pilot for BBC2 featuring Mark Radcliffe and Stuart Maconie and created a television documentary out of our BBC Radio 2 commission following Charles Hazelwood across America on Route 66. Creating more potential customers from each content event that we are involved in holds the prospect of improving margins and opens new markets to the company. A key aim is to reduce the Company's historical reliance on revenues from the BBC. Whilst an important and repeat customer, the BBC itself has been challenged by financial cutbacks in the last twelve months and these are being reflected both in the number of commissioned hours and in the margins we can achieve where BBC Radio is our only customer.

Whilst our Content Division is expanding into video and multimedia content, our Interactive Division has continued to expand our software expertise, from the supply of broadcast software systems to the provision of the new mobile applications ("Apps") needed by both broadcasters and content companies alike. Our network of apps for the radio industry is generating revenues, modest at present but growing as more stations join. We are on target to have 45 stations on our network by the end of the year and expect in the coming weeks to be able to announce our expansion into significant international markets.

These mobile apps are part of a changing broadcast landscape in which the Internet is of increasing importance. The entire UK radio industry, BBC and commercial, has joined together in an unprecedented way to create the 'UK Radio Player' announced last month. UBC's Interactive Division has been appointed to provide key software and support services to the UK Radio Player including the development of the player configuration tool and systems for the management of station schedules.

The acquisition, in February, of Above The Title, a less significant financial transaction than that for Lynx and our entry into the audio book market, has proved challenging. We have spent the last six months working through integration and, although Above The Title did not contribute in the way we had hoped in this period, we are now seeing growth in the production of audio books. In this period, Above The Title have recorded 176 hours of audio books, with current clients including Penguin and Harper Collins. We have also now begun to produce audio books for the US market, gaining our first commission from Audible US in September.

The Future

We are committed to transforming UBC into an internationally based digital content business via organic growth and acquisition. However, we will not be rushed, overpay, or get distracted by small-scale acquisitions. The management distraction can outweigh the benefits quite quickly. The absence in the current economic climate of deals that we feel would with certainty create shareholder return, has caused us to focus much more in this period on internal investment. We have hired staff to boost our online video sales efforts and have also been developing more than 30 mobile apps for our radio station app network and for several advertising clients, including Mercedes Benz and Tourism Australia. Many of these apps will be released in the coming weeks. This investment has depressed our operating margins in this period but we are confident it will lead to contract announcements and revenues in H2.

From a safe and secure financial position, in a turbulent period for the media industry, UBC will continue to expand both by organic growth through investment in our existing divisions and by seeking suitable acquisition opportunities which could transform the scale of our business.

Simon ColeChief Executive

Financial Review

Reconciliation with underlying and reported operating figures

In the period to 30 September 2010 Group revenues from continuing operations grew by 8.3% to £2.10m (H1 2009: £1.94m).

Revenues by segment for the period were as follows:

- Content £1.83m (H1 2009: £1.66m)

- Software and Interactive £0.27m (H1 2009: £0.28m)

Discontinued Operations

On 21 June 2010 UBC announced the sale of its 7.5% stake in MXR for £136,000. As part of the agreement UBC was also released from its spectrum contracts that ran until 2015. This enabled UBC to release the provision held against these future commitments and resulted in a net profit to discontinued operations of £387,000.

On 7 July 2010 UBC settled an early release with Bauer for its multiplex spectrum contracts which ran until 2013. A one off cash payment of £2.2m was paid to Bauer. After releasing the provisions held against these contractual liabilities the net result was a net profit to discontinued operations of £517,000.

Investment in Audioboo

On 7 June 2010 UBC invested £200,000 in a minority holding in Audioboo Limited, an innovative internet technology which allows for the simple recording of high quality audio from any location.

Cash Flow

In the six months to 30 September 2010 UBC had a cash outflow from continuing operations of £333,000 (2009: £410,000).

Cash

At 30 September2010, UBC had cash in the bank of £5.11m (2009: £9.69m).

Loss per Share

In the six months to 30 September 2010 UBC reported a basic loss per share of 0.31 pence (H1 2009: 0.17 pence) and diluted loss per share of 0.31 pence (H1 2009: 0.17 pence) from continuing operations and basic earnings per share of 0.14 pence (H1 2009: 0.32 pence) and diluted earnings per share of 0.13 pence (H1 2009: 0.31 pence ) from continuing and discontinued operations.

Dividend

Subsequent to 30 September 2010, the Board has approved the payment of an interim dividend of 0.105 pence per ordinary share at a total cost of £206,000. The dividend timetable is:

- Ex-dividend date 24 November 2010

- Record date 26 November 2010

- Payment date 17 December 2010

Principal Risks and Uncertainties

The principal risks and uncertainties which could affect the business for the remainder of the financial year remain unchanged from those set out on page 5 of the UBC Media Group plc Annual Report and Financial Statements 2010. Risks include:

- There is a risk that the Group will lose key programming contracts with the BBC, but this is mitigated by the fact that the majority of contracts by value are long-term and the BBC has committed to increase the percentage of its output that is commissioned from the independent radio production sector. The Group is also seeking to increase its revenues from programming commissions from parties other than the BBC;

- There are uncertainties surrounding the ultimate size of the markets for the Groups digital software products. However, the Group believes there is commercial potential for these products and continues to invest in both product and market development; and

- The other main risks to the Group are people, especially key executives. Retention of the key executives of the Group is recognised as a risk and is managed by the incentive and remuneration arrangements referred to on page 10 of the UBC Media Group plc Annual Report and Financial Statements 2010.

Consolidated Income Statement

For the six months ended 30 September 2010

Consolidated Balance Sheet

As at 30 September 2010

Consolidated Cash Flow Statement

For the six months ended 30 September 2010

Consolidated Statement of Changes in Equity

For the six months ended 30 September 2010 (unaudited)

Notes to the Financial Statements

For the six months ended 30 September 2010

1. Presentation of financial information and accounting policies

Basis of preparation

The combined financial information has been prepared in accordance with the UBC Media Group plc accounting policies. The UBC Media Group plc accounting policies are in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and as issued by the International Accounting Standards Board, and are set out in the UBC Media Group plc Annual Reports and Financial Statements 2010 on pages 17 to 20, except as described below.

In the current financial year, the Group has adopted International Financial Reporting Standard 3 "Business Combinations" (revised 2008) and International Accounting Standard 27 "Consolidated and Separate Financial Statements" (revised 2008).

The most significant changes to the Group's previous accounting policies for business combinations are as follows:

·; acquisition related costs which previously would have been included in the cost of a business combination are included in administrative expenses as they are incurred;

·; any pre-existing equity interest in the entity acquired is remeasured to fair value at the date of obtaining control, with any resulting gain or loss recognised in profit or loss;

·; any changes in the Group's ownership interest subsequent to the date of obtaining control are recognised directly in equity, with no adjustment to goodwill; and

·; any changes to the cost of an acquisition, including contingent consideration, resulting from events after the date of acquisition are recognised in profit or loss. Previously, such changes resulted in an adjustment to goodwill.

Any adjustments to contingent consideration for acquisitions made prior to 1 April 2010 which result in an adjustment to goodwill continue to be accounted for under IFRS 3(2004) and IAS 27(2005), for which the accounting policies can be found in the Group's latest annual audited financial statements.

2. Business and Geographical Segments

3. Operating loss is stated after charging the following items to administrative expenses

4. Reconciliation of operating loss to net cash flow from operating activities

5. Provisions

On 21 June 2010 the Group announced the sale of its 7.5% stake in MXR for £136,000. As part of the agreement UBC was also released from its spectrum contracts that ran until 2015. This enabled UBC to release the provision held against these future Digital license commitments and resulted in a net profit to discontinued operations of £387,000.

On 7 July 2010 the Group settled an early release with Bauer for its multiplex spectrum contracts which ran until 2013. A one off cash payment of £2.2m was paid to Bauer. After releasing the provisions held against these Digital license contractual liabilities the net result was a net profit to discontinued operations of £517,000.

On 28 May 2010 the Group concluded an agreement with the seller of Radio Lynx Content, Music Marketing Services Limited, to advance £500,000 of the deferred cash consideration in exchange for the deferred consideration cap being reduced from £800,000 to £700,000.

6. Discontinued operations

Shown below is a summary of discontinued operations:

Net cash outflow from discontinued operations was £2,332,000 (2009: inflow £1,182,000), included within this was cash received in investing activities of £nil (2009: £1,950,000), the other cash flows relate to cash used in operating activities.

(i) Cliq Music Downloading Service

On 21 June 2010 UBC announced the sale of its 7.5% stake in MXR for £136,000. As part of the agreement UBC was also released from its spectrum contracts that ran until 2015. This enabled UBC to release the provision held against these future commitments and resulted in a net profit to discontinued operations of £387,000.

(ii) Classic Gold Digital

On 7 July 2010 UBC settled an early release with Bauer for its multiplex spectrum contracts which ran until 2013. A one off cash payment of £2.2m was paid to Bauer. After releasing the provisions held against these contractual liabilities the net result was a net profit to discontinued operations of £517,000.

7. Goodwill

Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (CGU) that are expected to benefit from that business combination. After recognition of impairment losses, the carrying amount of goodwill has been allocated as follows:

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts of the CGU are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates using benchmark cost of capitals for the sector along with the cost of capital of the group. The growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next year, applies industry growth rates and extrapolates cash flows into perpetuity. The Group then prepares sensitivity analysis on the variables to ensure robustness of the carrying value.

The results of the impairment reviews are available on page 27 of the 2010 Group report and accounts.