Trading Update and Contract Wins

7digital

("7digital" or "the Company")

Trading Update and Contract Wins

7digital (AIM:7DIG), the digital music and radio services company, today issues a trading update for the half-year ended 30 June 2016.

The Company has a healthy sales pipeline for the second half of 2016, demonstrated by the contract wins announced today, and the Board remains confident of meeting expectations for the full year and continues to anticipate achieving profitability by the end of 2016.

Total monthly recurring revenues ("MRR") for the first half rose by 4% against the comparative period last year. Improving sales momentum during the period saw the annualized exit MRR for the period rise by 10% and licensing revenues in June rose by 17% compared with 2015. However, due to termination payments from the legacy BlackBerry contract being included in the prior period and the planned reduction in low margin content revenues, overall turnover was broadly unchanged at approximately £5m.

With over 50% of 2016 revenues expected to be denominated in foreign currencies (predominantly US$), the effect of recent currency fluctuations is expected to benefit the Company in the second half of the year.

7digital is also pleased to announce that it has in the second quarter been awarded contracts with a combined value of approximately £1.1m, including set up fees and monthly recurring revenues, with growth coming both from new customer wins and from existing or prior customers to whom 7digital is providing additional services.

The recent acquisition of leading French digital streaming music provider Snowite (now fully incorporated into 7digital) has, as expected, resulted in new business. The Company has reached an agreement with Cdiscount, a leading e-commerce retailer in France, to launch a new music service in the coming months. Cdiscount enjoys a 34.4% total share of e-commerce in France.

In line with a strategic emphasis on further developing commercial relationships with rights holders, 7digital has reached new agreements with two of the world's major music labels. In addition to continuing to license and provide access to their catalogues for its customers, 7digital will also now provide new services to the labels, which will contribute to the Company's revenues for 2016 and full details will be disclosed in the Company's Interim Results announcement.

7digital is also pleased today to announce its first contract using MQA, the high resolution audio technology. The Company has been contracted to develop desktop and mobile applications and handle rights holder reporting, end user management and payment processing for a customer which will launch an MQA service later this year. High resolution audio was identified by the Company a year ago as an important growth segment within digital music and today's announcement builds upon 7digital's early implementation of MQA download stores, in January 2016.

Also in the area of high resolution music files and following the administration of a leading competitor, 7digital is pleased to announce it will now be providing the high resolution downloads for Neil Young's Ponomusic.com music platform. Commercial details are being finalised.

In June this year Guvera, a customer of 7digital, announced a group restructure and put one of its subsidiaries, Guvera Australia Pty Ltd, into administration. Prior to the administration, 7digital worked closely with Guvera to restructure the debt owed to the Company within the Guvera group and to agree a repayment plan. An initial payment of £77,000 has already been made, with the Company expecting the balance of £818,000 to be repaid over 8 months under the revised repayment plan, pursuant to the restructure.

Simon Cole, Chief Executive of 7digital, said:

"Our momentum towards break even and profit continues with over £1m of business closed in the last 12 weeks alone. Although we have only included a few weeks of our Snowite acquisition in the first half's numbers, it is clear from the contract wins that our new French operations will deliver significant business for us. It is particularly pleasing also to see a new relationship with the major music labels and that high resolution audio is beginning, as we expected, to command a premium and that we are reaping rewards for our pioneering work with MQA."

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7digital is a B2B digital music and radio services company. The core of its business is the provision of robust and scalable technical infrastructure and extensive global music rights used to create music streaming and radio services for a diverse range of customers - including consumer brands, mobile carriers, broadcasters, automotive systems, record labels and retailers. 7digital also offers radio production and music curation services, editorial strategy and content management expertise.

7digital fosters industry growth and innovation by simplifying access to music for clients such as Onkyo, Fnac, Musical.ly, Global Radio and E.Leclerc. From years of being the largest independent producer of programming for the BBC, launching Radioplayer in multiple territories, and powering services for partners like HMV, Panasonic and ROK Mobile, 7digital is perfectly positioned to lead innovation at the intersection of digital music and next-generation radio services.