7digital Trading Statement 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 2015.
As the marketplace for the Company's streamed music and radio services continues to grow, the momentum established in the year to December 2014 is continuing. The higher margin earnings from licensing access to our streaming platform and our catalogue of content are replacing revenues from the sales of downloaded music to consumers at a rate that is line with market expectations.
In this period, it is expected that turnover as a whole will have risen 3% to around £5.2m but that turnover from our technology licensing will have risen some 27% to around £3.1m.
This rebalancing of earnings is leading to an improvement in gross margin, which is expected to rise to over 60% compared with 49% in the same period last year. Our cost base remains in line with management's expectation.
The Company has a healthy sales pipeline for 2015 and the Board remains confident of meeting expectations for the full year.
7digital is also pleased to announce several contract wins since its last trading update in April. Growth is coming both from new business and from the expansion of our existing customers into new territories. Taken together, over their duration, the contracts won in the last 3 months have a total value of at least £1.9 million. This figure includes both set up fees and monthly recurring revenues but does not include various options contained within them for possible expansion.
As expected, with the launch of Apple Music, the radio industry globally is being galvanized into change. With its combination of radio and streamed music experience, 7digital is uniquely positioned to benefit from these changes. New radio customers include the UK broadcaster Jazz FM who will use 7digital's platform and plan to launch an international music service.
In mobile, the Company has signed an agreement with music service provider Mariposa Holdings Group, Inc. who are launching new services with Algar Telecom in South America.
We continue to see well funded and innovative new business models emerging in streaming and have signed a contract with Australian company Open Live, who are launching a high-resolution music store featuring exclusive recordings of live performances.
Hardware manufacturers are increasingly looking to bundle "comes with music" propositions and, following our deals with Onkyo and Technics, we are pleased to have signed a contract with leading IT network provider NEC in Australia as well as a new UK consumer electronics business which will launch later this year. The Company has also extended its contract with Technics to deliver high-definition audio to a further territory in the coming months.
Simon Cole, CEO of 7digital commented:
"These fantastic contract wins align with 7digital business priorities, including streaming, radio and high-resolution audio. We are thrilled to be continuing the momentum built up over the last 12 months. There is a lot of activity in this sector and major consumer product launches like that of Apple serve to create business to business demand for us. Companies from radio, mobile and the hardware sector are realizing that they need their own 'comes with music' proposition to compete."
7digital Group - 020 7099 7777 - Holly Ashmore, PR and Client Relations Manager
finnCap (nominated adviser and broker) - 020 7220 0500 - Geoff Nash/ Carl Holmes - Corporate Finance
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Powerscourt - 020 7250 1446 - Juliet Callaghan / Simon Compton
7digital are the power behind innovative digital listening experiences. Their robust, scalable technical infrastructure and extensive global rights are used to create comprehensive music and radio services for leading consumer brands, mobile carriers, broadcasters, automotive systems, retailers, record labels, artists and agencies. Alongside proven product knowledge, 7digital offers award-winning radio production and music curation services, superior editorial strategy and content management expertise, making them a leading partner in this space.
7digital fosters industry growth and innovation by simplifying access to music for clients such as Panasonic, Onkyo, Mariposa, Guvera, OpenLIVE, ROK Mobile, and The Overflow. From years of being the largest independent producer of programming for the BBC, launching Radioplayer in multiple territories and powering services for partners like Samsung, BlackBerry and T-Mobile, 7digital is perfectly positioned to lead innovation at the intersection of digital music and next generation radio services.