RNS Number:8635W
Music Choice Europe PLC
24 March 2004
Music Choice Europe plc
("Music Choice" or "the Company")
Preliminary Results for the year ended 31 December 2003
24 March 2004
Music Choice Europe plc, Europe's leading digital audio broadcaster, is pleased
to announce preliminary results for the year ended 31 December 2003.
Prelims Final
2003 2002
Turnover #9.6m #9.8m
EBITDA loss #3.2m #7.3m
Operating loss #4.2m #8.2m
Loss before tax #3.5m #7.3m
Loss per share - basic and diluted 2.40p 6.09p
Highlights for the year
* EBITDA loss reduced 56% to #3.2 million (2002: #7.3 million); on
track to reach break even at EBITDA level in Q1 2004
* Focus on growing and diversifying revenues across multiple platforms,
while maintaining close control of costs
* Successful completion of two broadband distribution contracts in the
UK and France
* Three year contracts secured with Sky Italia and BSkyB
* Launch of SMS return path on digital television ("DTV") service
* Growth in subscriber base by 200,000 to 14.4 million (2002: 14.2
million)
* Cash and cash equivalents of #19.8 million (2002: #20.9 million)
Mike Thomas, Chairman of Music Choice, commented:
"We are delighted to announce that for the first time in its ten year operating
history, through careful financial stewardship and the diversification of
revenue, Music Choice will break even at EBITDA level in the opening quarter of
the current financial year. With plans to build on our initial successes in
broadband and secure further DTV contracts, the next twelve months will see us
strengthen our position as a pioneer of visual audio products across all areas
of the home network. We anticipate 2004 to be a year of growth for Music
Choice."
- Ends -
For further information, please contact:
Music Choice Europe plc 020 7014 8700
Margot Daly, Chief Executive
Dylan Jones
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Helen Thomas
Music Choice Europe plc
("Music Choice" or "the Company")
Preliminary Results for the year ended
31 December 2003
24 March 2004
Chief Executive's Report
During 2003 Music Choice focused on controlling costs and its commitment to
growing and diversifying revenues in digital music delivery across multiple
platforms. The Board is pleased that Music Choice now has the financial
structure and operating processes in place to ensure profitability in line with
the Company's commitment in March 2003 to break even at an EBITDA level within
12 months.
Financials
The new contract with BSkyB reduced license fee revenue but at the same time
lowered the satellite capacity costs associated with delivering the service
across Europe. Overall revenuewas therefore down slightly to #9.6 million
(2002: #9.8 million), but gross margin has increased to 46% (2002: 22%). Overall
costs are down by 24% to #13.7 million (2002: #18.0 million), while net cash
outflow from operating activities has been lowered by 70% to #2.4 million (2002:
#8.0 million). The Company's operating loss has now been reduced to #4.2 million
(2002: #8.2 million), which includes #1.0 million of restructuring costs (2002:
#0.5 million). Loss before tax for the year ended 31 December 2003 improved to
#3.5 million (2002: #7.3 million), with the resultant loss per share of 2.40p
(2002: 6.09p). Such strong financial stewardship will result in breakeven at an
EBITDA level by the end of the first quarter of the current financial year.
At the end of the financial year, the Company held cash and cash equivalents of
#19.8 million (2002: #20.9 million). With the improvements in cash flow expected
to continue, the Company is actively considering the on-going cash requirements
of the business. In line with the Company's stated dividend policy, the Board is
not recommending a dividend for the year ended 31 December 2003.
Under the financial leadership of Jeff Clarkson, who recently joined the Company
from the international division of computer games developer Acclaim
Entertainment, Music Choice will continue its tight control on costs, while at
the same time aggressively pursuing revenue opportunities both in Europe and
beyond.
The Music Choice experience
TheCompany has spent 2003 further developing its products to strengthen its
position as the pioneer of "visual audio" products in Europe, and to spread the
Music Choice experience across all platforms.
The Company repackaged its music content in November, with screens designed to
reflect CD compilation artwork. With compilations forming around 25% of all
album sales in Europe, the service provides viewers with an instantly
recognisable and attractive user experience linked with an "all killer, no
filler" musical policy. Music Choice will be rolling out the compilations
concept to the Company's major digital television ("DTV") and broadband
platforms over the coming year.
The consumer communications strategy of the Company continues to seek to inject
personality into the brand through innovative campaigns that key into popular
musical trends and events in new and interesting ways. Over the last twelve
months, initiatives have included the branding of a herd of cows in the fields
surrounding the roads leading to the Glastonbury festival, as well as the
creation of a new exercise phenomenon known as Air Guitar Aerobics. Routines for
this craze were carried on the Music Choice consumer website, while the DTV
service played the perfect songs to exercise to. With coverage in media
including The Sun, the Daily Express, and The Richard & Judy Show, as well as
interest from Pakistan, Germany, Australia and even Jay Leno's Tonight Show,
unique campaigns such as this allow Music Choice to extend reach, while building
a closer brand relationship with the consumer.
Building on this, Music Choice has begun to use Short Messaging Service ("SMS")
as an interactive tool on its DTV offering. Interactive mechanics such as SMS
help to generate a heightened sense of community around the Music Choice brand.
Viewers in the UK can now respond to on-screen competitions via SMS for the
chance to win prizes. Although not expected to be a material revenue generator,
such campaigns strengthen brand recognition and increase interaction with the
consumer. The Company will seek to roll out SMS response throughout its European
DTV and broadband footprint by the end of the year.
Channels to market
Music Choice continues to diversify revenue streams through consistent product
innovation and development, and turn listeners into buyers wherever possible.
The Company is committed to touching consumers through music wherever and
whenever they need it, delivering music to all areas of the home network as
technology continues to converge.
Broadband
One of the key areas for expansion during 2003 was broadband music delivery,
following the successful completion of two new distribution contracts. In the
UK, Music Choice launched a 16 channel streaming service on the ntl Broadband+
platform in December, alongside offerings from other content providers including
the BBC, MTV, Download 365 and Encyclopaedia Britannica. According to initial
figures, nearly a quarter of total usage across the portal is on the Music
Choice player, making the 16 channel streaming service one of the top three
content areas on the portal.
Music Choice also launched a broadband product in France during 2003, with the
completion of a deal with Club Internet, the French arm of Europe's biggest
broadband provider T-Online.
After proving the consumer appeal of the service to broadband internet service
providers ("ISPs") and consumers alike, Music Choice will look to build on this
success during 2004, with the launch of Europe's first genuinely integrated
streams-and-downloads music service.
Having successfully rolled out a DTV service to all major platforms around
Europe, Music Choice will replicate this B2B2C model in the European broadband
sector. Initial customer response to the test service has been extremely
positive, and the Company anticipates signing a number of distribution deals
during the course of the year.
While a stand-alone downloads service would notbe a differentiating offering,
the hybrid streams and downloads product clearly fulfils both a platform and
consumer need, and can create an incremental revenue stream for Music Choice.
Services from American outlets can be expected to join the limited European
offerings over the next six months, but Music Choice believes that the power of
its brand, and its experience of unique music packaging over the last ten years
and of working with the key European platforms will provide a solid platform for
broadband growth in the next twelve months.
Digital television
DTV continues to form the backbone of Music Choice revenue. The Company
concluded a long-term contract with Sky Italia in 2003, distributing the service
to 2.4 million homes in Italy, and will launch an interactive TV application
there later this year. As such, the Company will place increasing efforts on
reaching and interacting with Italian consumers over the coming months.
While the majority of Music Choice's revenue now comes from outside the UK, the
Company announced earlier this year that it had secured a new three year
contract with BSkyB, guaranteeing distribution to Sky's current 7.2 million
homes in Britain and Ireland. As part of the deal, Music Choice nowderives
significantly higher revenue from the premium service on Sky digital. While the
shift in the financial emphasis of the deal has caused a dip in revenues this
year, the Company anticipates that this will be reversed by direct marketing
campaigns to Sky customers to encourage premium take-up. Such activity has
markedly raised premium revenue over the last six months, and will now continue
throughout 2004.
Music Choice's DTV subscriber base has grown by 1.4% to 14.4 million over the
last year, with 18 countries throughout Europe and the Middle East continuing to
receive the Music Choice service. While a few European contracts still remain
available, the Company believes that there is now a clear opportunity to
roll-out its distribution to key territories in Asia. The Company has already
secured distribution in Taiwan through its acquisition of Multimusic in 2002,
and Asia will become a key focus for DTV plans in 2004.
Mobile
Music Choice this year began supplying streaming channels to TJNet, one of
Italy's biggest mobile entertainment providers with customers including Telecom
Italia and Wind. The deal fulfils a valuable research role, allowing the Company
to investigate consumer behaviour within the mobile music space in real time.
Streaming on 3G networks is still a premature concept at this point, but deals
such as that with TJ Net will allow Music Choice to be ideally positioned once
technology catches up with consumer demand.
Consumer website (www.musicchoice.co.uk)
As part of the commitment to heighten interactivity and foster a greater sense
of community among Music Choice users, the Company relaunched its consumer
facing website at the end of 2003. The site demonstrates the emotional and
atmospheric benefits of using Music Choice on both DTV and broadband, and offers
features, competitions, polling and music clips. The site will also be used as a
focus for Music Choice's annual promotions including the Home Music Census and
the irreverent awards The Naomi's, and provides editorial context to events
including Air Guitar Aerobics. In 2004, the Company will focus on driving
traffic to the site from the DTV services, as well as looking for potential
revenue generating opportunities suchas ringtones.
Consumer research
2003 has seen increasing competition in the UK, with a total of 25 music
services now available on Sky digital. Despite this environment, Music Choice's
BARB results continue to show success across the key areas,with all monitored
audiences watching Music Choice for longer than in 2002. Importantly, the
audience profile has shifted towards the core 25-44 year old demographic. This
group is watching for an average of 49% longer in 2003 than 2002 (2003: 31.1
minutes). In addition, the average share of music television viewing in this
audience is up 29% from 2002.
In 2004, Music Choice will seek to drive audiences even further, and increase
audience share, frequency and reach.
Technology innovation
As the Company expands outside its European footprint, Music Choice will
increase its investment in technology over the next twelve months to allow it
to:
* achieve rapid cost-effective roll-out of its music products on DTV and
broadband;
* move to a more automated system with remote monitoring tools to ensure
product quality around the world;
* use a flexible mix of satellite and telecoms links to deliver tailored
music products to diverse geographic and cultural markets; and
* move uplink facilities to the most rights friendly territory if
necessary
Music Choice in 2004
Music Choice will continue to maintain a strict control on costs, invest
prudently, and seek to grow revenues through both DTVand broadband in the UK
and continental Europe, and the emerging Asian market. The DTV and music worlds
are slowly emerging from a prolonged period of uncertainty, and although the
landscape remains competitive, Music Choice is optimistic that its DTV dominance
and packaging expertise will enable sustained growth across all areas of the
business.
The Company is well funded, and is delivering on the promise made in March 2003
to bring about breakeven at an EBITDA level within twelve months. This success
is due in no small part to the talent and determination of the people in the
business. Given the changes that have taken place, I would like to thank all
employees for their hard work and dedication over the past 12 months.
With long-term revenue assured through multi-year contracts with Europe's key
DTV platforms, and the potential for revenue growth and diversification through
the launch of an integrated streams-downloads broadband product, there is a
clear opportunity for MusicChoice to become a profitable, pioneering and world
class digital music provider.
- Ends -
For further information, please contact:
Music Choice Europe plc 020 7014 8700
Margot Daly, Chief Executive
Dylan Jones
Weber Shandwick Square Mile 020 7067 0700
Louise Robson or Helen Thomas
Music Choice Europe plc
Group Profit and Loss Account
For the year ending 31 December 2003
Notes Year to Year to
31 December 31 December
2003 2002
#'000 #'000
Turnover 9,561 9,776
Cost of sales (5,180) (7,607)
----------- -----------
Gross profit 4,381 2,169
=========== ===========
Distribution costs (2,494) (4,472)
--------------------------------------------------------------------------------
Amortisation and impairment of
intangible fixed assets (585) (100)
Depreciation and impairment of
tangible fixed assets (411) (814)
Restructuring costs (1,004) (450)
Property costs (1,079) -
Other administrative expenses (2,981) (4,547)
--------------------------------------------------------------------------------
Administrative expenses (6,060) (5,911)
----------- -----------
(8,554) (10,383)
----------- -----------
Operating loss (4,173) (8,214)
=========== ===========
Loss on disposal of fixed assets 9 -
Interest receivable 651 941
----------- -----------
660941
=========== ===========
Loss on ordinary activities before taxation (3,513) (7,273)
Taxation on loss on ordinary activities 3 580 (162)
----------- -----------
Loss for the year (2,933) (7,435)
=========== ===========
Loss per share
Basic & diluted - pence per share 4 (2.40) (6.09)
=========== ===========
Derivation of EBITDA
Operating loss (4,173) (8,214)
----------- -----------
Amortisation and impairment of intangible
fixed assets 585 100
Depreciation and impairment of
tangible fixed assets 411 814
----------- -----------
EBITDA (3,177) (7,300)
=========== ===========
Music Choice Europe plc
Statement of Total Recognised Gains and Losses
For the year ending 31 December 2003
Year to Year to
31 31
December December
2003 2002
#'000 #'000
Loss for the financial year (2,933) (7,435)
----------- ----------
Exchange difference on translation of net assets of
subsidiary undertakings 22 23
----------- ----------
Total recognised gains and losses relating to the
financial year (2,911) (7,412)
=========== ==========
Music Choice Europe plc
Group Balance Sheet
As at 31 December 2003
Notes 31 December 31 December
2003 2002
#'000 #'000
Fixed assets
Intangible assets - 585
Tangible assets 395 539
Investments - -
----------- ----------
395 1,124
----------- ----------
Current assets
Debtors 2,190 3,851
Investments 5 17,907 17,842
Cash 5 1,923 3,100
----------- ----------
22,020 24,793
----------- ----------
Creditors: amounts falling due within
one year (5,098) (6,768)
----------- ----------
Net current assets 16,922 18,025
----------- ----------
Total assets less current liabilities 17,317 19,149
----------- ----------
Provision for liabilities and charges (1,079) -
----------- ----------
16,238 19,149
=========== ===========
Capital and reserves
Equity share capital 1,229 1,227
Share premium account 6 46,179 46,160
Other reserve 6 22,922 22,922
Profit and loss account 6 (54,092) (51,160)
----------- ----------
Equity shareholders' funds 16,238 19,149
=========== ===========
Music Choice Europe plc
Group Statement of Cashflows
For the year ending 31 December 2003
Notes 31 December 31 December
2003 2002
#'000 #'000
Net cash outflow from operating
activities 2 (2,398) (8,017)
---------- ----------
Returns on investment and servicing
of finance
Interest received 651 941
---------- ----------
651 941
---------- ----------
Taxation
Tax paid (216) (174)
Consortium relief received 1,083 54
---------- ----------
867 (120)
---------- ----------
Capital expenditure and financial
investment
Payments to acquire tangible fixed
assets (241) (209)
Proceeds on disposal of tangible
fixed assets 9 -
---------- ----------
(232) (209)
---------- ----------
Acquisitions and disposals
Payment to acquire subsidiary undertaking - (1,056)
---------- ----------
- (1,056)
---------- ----------
Net cash outflow before management
of liquid resourcesand financing (1,112) (8,461)
Management of liquid resources
Purchase of interest bearing investments (10,658) (28,877)
Sale of interest bearing investments 10,593 40,303
---------- ----------
(65) 11,426
---------- ----------
Increase/(decrease) in cash in the year 5 (1,177) 2,965
========== ==========
Music Choice Europe plc
Reconciliation of Net Cashflows to Movement in Net Funds
For the year ending 31 December 2003
31 December 31 December
2003 2002
#'000 #'000
Increase/(decrease) in cash in the year (1,177) 2,965
Purchase of interest bearing investments 10,658 28,877
Sale of interest bearing investments (10,593) (40,303)
----------- ----------
Movement in net funds in the year (1,112) (8,461)
Net funds at 1 January 2003 20,942 29,403
----------- ----------
Net funds at 31 December 2003 19,830 20,942
=========== ==========
Music Choice Europe plc
Notes to the Preliminary Statement
1. Basis of preparation
The accounts are prepared in accordance with accounting policies adopted in the
preparation of the accounts for the year to 31 December 2002 and which are set
out in the Company's Annual Report.
The abridged results for the 12 months to 31 December 2003 do not constitute
statutory accounts within the meaning of the Companies Act 1985. The auditor's
report on the Statutory Accounts for the 12 months to 31 December 2002 was
unqualified and did not contain any statement under Section 237 of that Act.
These accounts have been delivered to the Registrar of Companies.
2. Reconciliation of operating loss to net cash flow from operating activities
12 months to 12 months to
31 December 31 December
2003 2002
#'000 #'000
Operating loss (4,173) (8,214)
--------- ----------
Depreciation of tangible fixed assets 411 350
Impairment of tangible fixed assets - 464
Amortisation of goodwill 240 100
Impairment of intangible fixed assets 345 -
Property costs 1,079 -
Decrease in debtors 1,380 1,018
Decrease in creditors (1,680) (1,735)
--------- ----------
Net cash outflow from operating activities (2,398) (8,017)
========= ==========
3. Tax
a) Tax on loss on ordinary activities
2003 2002
#000 #000
Corporation tax at 30%(168) (146)
Double tax relief 168 146
Foreign taxes (147) (162)
--------- ----------
(147) (162)
Prior year consortium relief credit 802 -
Prior year foreign corporation taxes (75) -
--------- ----------
580 (162)
========= ==========
The group was a consortium under the provisions of the Income and Corporation
Taxes Act 1998 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
2003 2002
#000 #000
Loss on ordinary activities before tax (3,513) (7,273)
-------- --------
Loss on ordinary activities multiplied by the standard
rate of corporation tax in the UK of 30% (2002: 30%) (1,054) (2,182)
-------- --------
Expenses not deductible for tax purposes (including
amortisation and impairment of goodwill) 396 202
Accelerated capital allowances 47 (130)
Higher taxes on foreign earnings 62 14
Losses arising in the year not relievable against current tax 696 2,258
-------- --------
Total current tax charge (note 3a) 147 162
======== ========
c) Factors that may affect future tax charges
Since no deferred tax has been recognised in the financial statements, 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 #37 million, have been used up.
d) Deferred tax
No deferred tax has been booked due to the availability of tax losses of
approximately #37 million (2002: #33 million) 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.
4. Loss per share
The calculation of loss per ordinary share for the year is based onlosses of
#2,933,000 and on 122,262,394 ordinary shares being the weighted average number
of ordinary shares in issue during the year after excluding the 554,400 shares
owned by the Music Choice Europe plc Employee Benefit Trust.
The calculation of loss per ordinary share for the year to 31 December 2002 is
based on losses of #7,435,000 and on 122,129,859 ordinary shares being the
weighted average number of ordinary shares in issue during the year after
excluding the 554,400 shares owned by the Music Choice Europe plc Employee
Benefit Trust.
The loss attributable to ordinary shareholders and weighted average number of
ordinary shares for the purpose of calculating the diluted earnings per ordinary
share are identical to those used for basic earnings per ordinary share. This is
because the exercise of share options would have the effect of reducing the loss
per ordinary share and is therefore not dilutive under the terms of FRS14.
2003 2002
#000 #000
Loss on ordinary activities after taxation (2,933) (7,435)
-------- ---------
No. 000 No. 000
Weighted average number of ordinary shares 122,262 122,130
-------- ---------
Pence per share Pence per share
Loss per share - basic and diluted (2.40) (6.09)
-------- ---------
5. Analysis of net funds
At 31
At 1 January December
2003 Cashflow 2003
Group #000 #000 #000
Investment in money market fund 1,713 4,346 6,059
Fixed term deposits 16,129 (4,281) 11,848
--------- -------- ---------
Investments 17,842 65 17,907
Cash at bank and in hand 3,100 (1,177) 1,923
--------- -------- ---------
20,942 (1,112) 19,830
========= ======== =========
6. Reconciliation of shareholders' funds
Profit
Share Share Other and Loss
Capital Premium Reserve Account Total
Group #'000 #'000 #'000 #'000 #'000
At 31 December 2002 1,227 46,160 22,922 (51,160) 19,149
On exercise of LTIP share
option 2 19 - (21) -
Exchange difference on
translation of net assets of
subsidiary undertaking - - - 22 22
Loss for the year - - - (2,933) (2,933)
------------------------------------------------
Balance at 31 December 2003 1,229 46,179 22,922 (54,092) 16,238
------------------------------------------------
7. Post Balance Sheet Events
There are no post balance sheet events to be disclosed.
8. Music Choice will not be paying a dividend in respect of the
year to 31 December 2003. The Board will continue to review the Group's dividend
policy as appropriate.
9. Copies of the 2003 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 Exchange
END
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