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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Imagesound | LSE:ISD | London | Ordinary Share | GB0002632569 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 5.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:4517S
Imagesound PLC
07 March 2007
7 March 2007
Imagesound plc
Unaudited Preliminary Results for the 12 months ended 31 December 2006
Imagesound plc (AIM: ISD), one of the UK's leading suppliers of in-store music,
radio and TV services to the branded retail and leisure sectors, today announces
unaudited results for the 12 months ended 31 December 2006.
Financial Highlights
* Turnover up 4% to #8.2m (2005: #7.9m), with recurring revenue up 11% to
#5.1m;
* Adjusted EBITDA up 60% to #1.6m (2005: #1.0m);
* Operating loss of #1.1m (2005: #1.9m);
* Profit before tax, amortisation and non-recurring items of #0.6m (2005:
#nil);
* Reported loss before tax of #0.8m (2005: loss of #2.2m);
Operational Highlights
* Subscriber numbers increased to 13,383 sites (2005: 12,937);
* New customers include: Carphone Warehouse, Uniqlo, Only Two and Stanley
Leisure;
* Major renewals and additional sites with B&Q; Nando's, Next, Wilkinsons
and HBOS;
* Acquisitions of MusicStyling and Impact Automedia performing well;
* New contract announced today to provide music systems to 200 Marriot
Hotels worldwide;
* Group refinancing completed enabling reduction of net bank debt to #1.3m
at year end;
* New banking facilities in place, including #7m of acquisition financing;
* Further strengthening of management team with Oliver Wilson appointed to
the new position of Sales Director from Avanti Screen Media, and Stephen
Yapp, formerly CEO of DCS Group, appointed as a non-executive director.
Derek Mapp, Chairman of Imagesound said:
"We have made good progress in 2006 and successfully reshaped the balance sheet
leaving the company much better placed to take advantage of further
consolidation opportunities as they arise. The business has also responded well
to the operational restructuring we undertook in 2005 and despite stepping away
from certain customer accounts, we have increased both sales and profitability
in the year.
"Whilst retail markets remain challenging, our clients continue to place great
importance on controlling their retail environment and ensuring that they
project the right image in store to support their brand. Music, messaging and TV
play a critical role in this process and establishing a store's or a bar's
atmosphere. We are one of the leading providers in this sector, offering a range
of products that cater for all customer demands.
"We made two further acquisitions in the year, both of which have more than
lived up to our expectations. These businesses have been fully integrated into
our operating platform and we look forward to a full year's contribution from
them in the coming year. We intend to continue to play an active role in
building our market position through further acquisitions and this, together
with our improved operating and finacial position, give us confidence for the
future."
-Ends-
For further information:
Imagesound 01246 572 998
Derek Mapp, Executive Chairman
Hogarth Partnership 020 7357 9477
James Longfield / Georgina Briscoe
Notes to Editors
Imagesound is the UK's leading listed supplier of in-store music, radio and TV
services. It provides music and messaging services to over 45 leading branded
retail and leisure chains reaching over 13,000 subscriber outlets.
Customers include Superdrug, Yates, B&Q, Kwik Save, Foot Locker, Carphone
Warehouse, McDonald's, Subway, Halifax, Next, Focus, Holiday Inn, River Island,
O'Neill's, Fitness First, Pizza Express, Hyatt, Starwood and JJB.
Imagesound is listed on the AIM market of the London Stock Exchange (ISD.L)
Imagesound plc
Preliminary Results for the year ended 31 December 2006
Chairman's Statement
I am pleased to present the third annual report of Imagesound plc.
We have made good progress in 2006 and successfully reshaped the balance sheet
leaving the company much better placed to take advantage of further
consolidation opportunities as they arise. The business has also responded well
to the operational restructuring we undertook in 2005 and we have increased both
sales and underlying profitability in the year.
Total sales were 4% ahead at #8.2m (2005: #7.9m), reflecting our drive to focus
on higher quality business. Adjusted EBITDA, which excludes the one off profit
from the sale of the freehold of our corporate head office, non-recurring costs
and the amortisation of intangible assets, increased 60% to #1.6m (2005: #1.0m),
and demonstrates the improving underlying profitability of the businesses.
The financial restructuring included the sale and leaseback of the company's
head office in Chesterfield for #1.6m before expenses and the injection of a
further #1.5m by means of a convertible loan note from one of our major
investors: Quester plc. Both of these transactions are beneficial to the
company, particularly in light of the two increases to bank rates we have
subsequently experienced. As at the end of the year our total bank debt position
stood at #1.3m compared to the comparative year end, which was #3.3m.
Review of trading
We increased subscriber numbers to 13,383 sites (2005: 12,937), despite the fact
that we have walked away from a number of customers where we were not making an
adequate return. Trading highlights of the year include a major 3 year contract
win to supply over 400 Carphone Warehouse stores with music and sound systems
along with smaller gains at Uniqlo, Only Two and Stanley Leisure. The roll out
of the Carphone Warehouse outlets was completed in a period of only 6 weeks,
once again testament to the expertise and commitment of staff.
Strong incremental subscriber growth and sound system sales were experienced
from a broad range of existing clients including B&Q, Nando's, Next, Wilkinsons
and HBOS. Equipment service and maintenance also made a profitable contribution
to the business throughout the year, reflecting the increased operational
control of the business.
Imagesound has experienced some site attrition over the past 18 months in the
small, but lucrative, young persons venue bar sector. This has now been
addressed and we are now able to provide state of the art audio and audio-visual
players and DJ interfaces potential customers in this arena. We have made two
early contract wins in 2007 with the Yates' estate being scheduled for upgrade
to these new players during the year and a contract to supply 70 new Slug and
Lettuce bars with the service.
The acquisition of MusicStyling, in May, was a major step forward for the
company's international ambitions. MusicStyling provides highly bespoke
localised music content to the branded, luxury hospitality sector with customers
such as Hyatt, Starwood and Marriott. The introduction of Imagesound network
managed players has enabled MusicStyling to more than double the number of
locations it supplies in just six months closing the year with over 1,000 music
zones in international locations from Bora Bora to Tiblisi and Singapore to
Dallas. With a strong order book at the close of 2006, MusicStyling's expansion
is expected to continue throughout 2007 and I am pleased to announce today that
we have secured a contract to provide music systems to 200 Marriott Hotels.
A further small domestic acquisition was made in September with the purchase of
Impact Automedia. This included an instore music service called Brand Radio and
added two major retail chains, Reid Furniture and Toyota, to Imagesound's client
base. As part of this acquisition Imagesound also took ownership of the
established 'Waterfront' production studios, in Glasgow, a recently refurbished
audio recording and editing complex. This facility is leased on a 12-month
rolling agreement. As a consequence of this acquisition, the commercial 'voice
over' work for the majority of Imagesound's in-store radio clients has been
switched to Waterfront. This work was previously subcontracted out, at higher
cost to third party providers, thus making Waterfront a contributor to
Imagesound's results from day one.
We have also been exploring opportunities for further extending our European
presence. Towards the end of the year we signed a distributor agreement with
Sonorizacion y Diseno Musical S.L., based in Barcelona, to supply Imagesound
music and equipment throughout Iberia. This is a new start up company headed by
an experienced management team who have had immediate success in rolling out to
29 Accor Hotels in Portugal and have quickly established an impressive number of
pilot installations which are expected to progress in 2007.
The Copyright Tribunal's review of the proposed PPL licence fee increases for
2006 has still not reached its conclusion. This licence fee is paid by our
customers and therefore does not directly impact the Company, but it is an
important part of the cost of running in-store music. Because the proposed
increases were excessive, we expect that any judgement will lower these proposed
increases and therefore will be positive for end users, but the continuing
uncertainty over this matter is unhelpful. We also expect that responsibility
for site licence payment for all music providers will switch back to PPL and any
such move would significantly improve the transparency of the actual cost of
music provision as opposed to the associated licensing costs.
Management and Board changes
The sales and account management functions of the business have been overhauled
in the period following the appointment of a new, experienced, Sales Director,
Oliver Wilson, who joined the business from Avanti Screen Media in November.
At the end of December 2006, we were pleased to announce that the company had
appointed Stephen Yapp as a non-executive Director. We are very fortunate to
have the benefit of Stephen's experience and he will chair the Audit Committee.
Stephen was formerly Chief Executive of DCS, the software development company
providing services to the Automotive and Logistics industry. Stephen replaces
Charles Fairbairn who stepped down from his non executive directorship with the
group due to other time commitments. Charles was instrumental in the flotation
of the company on AIM in August 2004 and we wish him good fortune in the future.
Outlook
We are pleased with the progress we have made in the business during 2006, which
has put Imagesound on a much firmer financial footing. Whilst retail markets
remain challenging, our clients continue to place great importance on
controlling their retail environment and ensuring that they project the right
image in store to support their brand. Music, messaging and TV play a critical
role in this process and establishing a store's or a bar's atmosphere. We are
one of the leading providers in this sector, offering a range of products that
cater for all customer demands.
Our acquisitions to date have performed well, and we look forward to the full
year effect of MusicStyling in the current financial year. We intend to continue
to play an active role in building our market position through further
acquisitions and this, together with our improved operating and financial
position, give us confidence for the future.
Derek Mapp
Chairman
7 March 2007
Financial review
The group has previously prepared its consolidated financial statements under UK
Generally Accepted Accounting Principles (UK GAAP). For the year ending 31
December 2006, the group and company's financial statements are prepared in
accordance with International Financial Reporting Standards adopted for use in
the EU ('Adopted IFRS'). Consequently all figures in this report (including a
restatement of comparatives for 2005, where appropriate) are under Adopted IFRS.
As part of this, we have retrospectively applied IFRS 3 'Business Combinations'
to all of the company's acquisitions since its flotation date onto AIM in August
2004. The main differences between UK GAAP and Adopted IFRS that impact the
group since that date are detailed on the company's website
(www.imagesound.co.uk). The on-going principal differences from UK GAAP are:
- No requirement to amortise goodwill.
- Restatement of acquisitions with separation of separately identifiable
assets.
- Inclusion of a fair value charge in relation to employee share awards.
Turnover
Total turnover for the year was #8.2m (2005: #7.9m) of which #5.1m (2005: #4.6m)
came from recurring rental income, representing 62% (2005: 59%) of total sales.
Included within this are sales arising from the acquisition of Musicstyling.com
Limited ("Musicstyling") in May 2006 of #417,000. The remaining sales came from
the sale, installation and servicing of audio and audio-visual hardware and
totalled #3.1 m.
Operating result
The group returned an operating loss of #1.1m for the year to 31 December 2006.
The operating loss is inclusive of amortisation of intangible fixed assets, a
charge for 'Share based payments' and one off corporate restructuring and
redundancy expenses.
To demonstrate the underlying profitability of the group, those costs referred
to above are shown separately in the table below. This shows an adjusted
earnings before interest, taxation, depreciation and amortisation ('Adjusted
EBITDA') figure of #1.6m, as set out below:
2006 2005
#'000 #'000
Turnover 8,184 7,897
-------- --------
Adjusted EBITDA 1,630 1,043
Depreciation of tangible assets (561) (672)
Depreciation of intangible assets (1,903) (1,980)
One-off corporate restructuring (109) (216)
Charge for share based payments scheme (145) (111)
-------- --------
Operating Loss (1,088) (1,936)
Gain on sale of property 609 -
Interest (293) (259)
-------- --------
Loss before taxation (772) (2,195)
Taxation 361 -
-------- --------
Loss after taxation (411) (2,195)
======== ========
Interest and taxation
The net interest charge was #0.29m on bank overdrafts, loans and the new loan
notes.
A deferred tax asset of #361,000 was recognised at 31 December 2006 as the
directors believe it is probable that future taxable profits will be available
against which this asset can be utilised.
Dividends and loss per share
No dividend will be declared in respect of the year. Basic and diluted loss per
share amounted to 0.7p (2005: 3.7p)
Cash flow and financing
Proceeds from the sale of assets generated an amount of #1.6m, which along with
the cash injection from the negotiation of a convertible loan note of #1.5m
enabled the repayment of #2.0m of bank debt.
During the year the group acquired Musicstyling.com Limited with cash payments
totalling #0.25m, a further amount of #0.58m is due for payment throughout 2007.
The net debt position at 31 December 2006 was #2.6m (2005: #3.3m).
New debt facilities were negotiated with the Royal Bank of Scotland in December
2006, which allow the company to operate a current account overdraft up to
#1.0m, in addition to which there are additional term loan facilities for
capital expenditure amounting to #1.0m and a further maximum of #7m for
acquisition purposes subject to agreed lending criteria.
Capital expenditure
Fixed asset additions were #0.50m of which #0.32m were additions to the rental
estate. The remainder invested was in enhanced systems and replacement of IT
equipment.
Pension scheme
Imagesound plc has a defined contribution scheme into which it contributes
between 2.5% and 10.0% of salary dependent on employee status. The scheme is
currently provided by Scottish Equitable and is compliant with stakeholder
requirements. Employees may join after six months service with the group
provided they contribute a minimum of 3.0% of salary.
Financial instruments
The group's principal financial instruments comprise cash, bank loans, loan
notes, finance leases and hire purchase contracts. The purpose of these
financial instruments is to finance the group's operations. The main risks
arising from the group's financial instruments are liquidity, foreign currency
and interest rate risk on floating rate financial liabilities. The policies for
managing these risks are as follows.
Liquidity risk
The group's policy is to ensure that cash balances are available for operating
activities and that appropriate funding is in place should the group have a
short term borrowing requirement. The group has a facility of #1.0m with Royal
Bank of Scotland plc. Interest is charged at 1.5% above the Bank's base rate.
Foreign currency hedging
The group has not made use of forward currency contracts, other financial
derivatives or hedging during the year and expects not to in the forthcoming
year. The group does receive and makes substantial payments denominated in
Euros. However these cash flows are relatively predictable, cash neutral and
occur evenly throughout the year. Accordingly the utilisation of a distinct bank
account denominated in Euros provides hedging suitable for the group's current
requirements.
Interest rate risk
Due to the floating nature of the interest charged on the group's loans, there
is a risk arising from potential interest rate movements. Given the current
level of debt within the business the group feels that hedging is not required
at present but continues to review the situation. The group's finance leases and
hire purchase agreements are fixed rate instruments. The convertible loan note
negotiated with Quester Plc is at a fixed rate of 5% with interest payable every
6 months.
Ken Pratt
Finance Director
7 March 2007
Consolidated income statement
for year ended 31 December 2006
Before
Before Amorti- amorti- Amorti-
amortisation sation sation sation
and non- and non- and non- and non-
recurring recurring recurring recurring
costs items Total costs costs Total
2006 2006 2006 2005 2005
#000 #000 #000 #000 #000 #000
Revenue 8,184 - 8,184 7,897 - 7,897
Cost of sales (4,769) - (4,769) (5,120) - (5,120)
------------------------------ ---------------------------
Gross profit 3,415 - 3,415 2,777 - 2,777
Administrative
expenses (2,491) (2,012) (4,503) (2,517) (2,196) (4,713)
------------------------------ ---------------------------
Operating
profit/(loss) 924 (2,012) (1,088) 260 (2,196) (1,936)
Gain on disposal
of property - 609 609 - - -
Financial income - - 8 - 8
Financial expenses (293) - (293) (267) - (267)
------------------------------ ---------------------------
Net financing
costs (293) - (293) (259) - (259)
------------------------------ ---------------------------
Profit/(Loss)
before tax 631 (1,403) (772) 1 (2,196) (2,195)
Taxation 361 - 361 - - -
------------------------------ ---------------------------
Profit/(Loss)
after tax 992 (1,403) (411) 1 (2,196) (2,195)
============================== ===========================
Attributable to:
Equity holders of
the Company (411) (2,195)
======= =======
Loss per share
Basic (0.66)p (3.66)p
Diluted (0.66)p (3.66)p
======= =======
Consolidated statement of recognised income and expense
for the year ended 31 December 2006
2006 2005
#000 #000
Loss after tax for the year (411) (2,195)
-------- --------
Total recognised income and expense for the year (411) (2,195)
-------- --------
Consolidated balance sheets
at 31 December 2006
2006 2005
#000 #000
Non-current assets
Property, plant and equipment 891 2,006
Intangible fixed assets 9,438 10,124
Deferred tax assets 361 -
------- -------
10,690 12,130
------- -------
Current assets
Inventories 440 482
Trade and other receivables 2,510 2,051
Cash and cash equivalents 23 26
------- -------
2,973 2,559
------- -------
Total assets 13,663 14,689
======= =======
Current liabilities
Bank overdraft (1,108) (584)
Interest-bearing loans and borrowings (112) (2,747)
Trade and other payables (3,709) (4,215)
------- -------
(4,929) (7,546)
------- -------
Non-current liabilities
Interest-bearing loans and borrowings (1,437) -
------- -------
(1,437) -
------- -------
Total liabilities (6,366) (7,546)
======= =======
Net assets 7,297 7,143
======= =======
Equity attributable to equity holders of the
parent
Share capital 6,331 6,000
Share premium 5,467 5,464
Other reserve 86 -
Retained earnings (4,587) (4,321)
------- -------
Total equity 7,297 7,143
======= =======
Cash flow statements
for year ended 31 December 2006
2006 2005
#000 #000
Cash flows from operating activities
Loss for the year (411) (2,195)
Adjustments for:
Depreciation and amortisation 2,463 2,652
Financial income - (8)
Financial expense 293 267
Gain on sale of property, plant and equipment (609) (4)
Equity settled share-based payment expenses 145 111
Taxation (361) -
------- -------
Operating profit before changes in working
capital and provisions 1,520 823
(Increase)/decrease in trade and other receivables (316) 168
Decrease in stock 42 54
(Decrease) in trade and other payables (1,183) (1,136)
------- -------
Cash generated from the operations 63 (91)
Interest paid (239) (255)
Tax paid - -
------- -------
Net cash from operating activities (176) (346)
------- -------
Cash flows from investing activities
Proceeds from sale of property, plant and 1,658 71
equipment
Interest received - 8
Acquisition of subsidiary, net of cash acquired (384) (997)
Acquisition of property, plant and equipment (468) (419)
------- -------
Net cash from investing activities 806 (1,337)
------- -------
Cash flows from financing activities
Proceeds from the issue of share capital 50 -
Proceeds from new loan 1,450 750
Repayment of borrowings (2,565) (464)
Payment of finance lease liabilities (27) (78)
Payment of arrangement fees (65) -
------- -------
Net cash from financing activities (1,157) 208
------- -------
Net decrease in cash and cash equivalents (527) (1,475)
Cash and cash equivalents at 1 January (558) 917
------- -------
Cash and cash equivalents at 31 December (1,085) (558)
======= =======
Notes to the financial statements
1. Basis of preparation
The financial information set out above does not constitute the company's
statutory accounts for the year ended 31 December 2006. The financial
information for 2005 is derived from the statutory accounts for the year ended
31 December 2005 that have been delivered to the Registrar of Companies. The
auditors have reported on the 2005 accounts; their report was unqualified and
did not contain a statement under section 237 (2) or (3) of the Companies Act
1985. The statutory accounts for 2006 will be finalised on the basis of the
financial information presented by the directors in this preliminary
announcement and will be delivered to the Registrar of Companies following the
company's annual general meeting.
The Group has prepared its 2006 financial statements in accordance with Adopted
IFRS for the first time and consequently has applied IFRS 1. An explanation of
how the transition to Adopted IFRS has affected the reported financial position,
financial performance and cash flows of the Group and the restated 2005
financial statements under IFRS is available from the company's website
(www.imagesound.co.uk).
2. Acquisitions of subsidiaries
On 11 May 2006, the group acquired all the shares in Musicstyling.com Limited,
which provides bespoke music services to luxury hotels throughout the world.
On 18 September 2006, the group acquired the trade and certain assets of Impact
Audio Media Limited. This business provides bespoke music services in the UK.
Each of these acquisitions has been accounted for using the purchase method of
accounting.
From the dates of acquisition to 31 December 2006, the acquisitions contributed
#474,000 of revenue and profit after tax of #23,000 to the group.
If the acquisitions had occurred on 1 January 2006, group revenue would have
been #862,000 and profit after tax would have been #76,000. These amounts have
been calculated using the group's accounting policies and by adjusting the
results of the acquisitions to reflect the additional amortisation that would
have been charged assuming the fair value adjustments to intangible assets had
applied from 1 January 2006.
The goodwill arising on the acquisitions during the year is attributable to the
anticipated profitability of these acquisitions and the future operating
synergies arising in the enlarged group. These acquisitions bring access to new
markets and product ranges and will provide opportunities to generate additional
profitability and operating efficiencies in respect of existing markets.
Effect of acquisitions
The acquisitions had the following effect on the Group's assets and liabilities.
Acquiree's Fair value Acquisition
book values adjustments amounts
#000 #000 #000
Acquiree's net assets at the
acquisition date:
Property, plant and equipment 3 - 3
Intangible assets - 171 171
Trade and other receivables 143 - 143
Cash and cash equivalents 38 - 38
Trade and other payables (155) (249) (404)
--------- --------- --------
Net identifiable assets and 29 (78) (49)
liabilities ========= =========
Goodwill on acquisition 1,046
--------
997
========
Consideration paid (including
legal fees 422
of #92,000 satisfied in cash)
Deferred and contingent 575
consideration --------
Net cash outflow 997
========
The fair value adjustments above have arisen as follows:
(1) Recognition of intangible assets for customer related and non-compete
arrangements;
(2) Provision has been made for onerous contracts in accordance with IFRS 3;
(3) Recognition of deferred income on pre-acquisition sales in accordance with
group policy.
The additional consideration is in respect of the Musicstyling.com Limited
acquisition:
#000
Deferred consideration 350
Contingent consideration 225
-------
575
=======
The contingent consideration is based on turnover thresholds and is payable
throughout December 2007. The directors estimate these turnover levels will be
met and have provided in full for the contingent consideration.
3. Amortisation and non-recurring costs
2006 2005
#000 #000
Amortisation of intangibles (1,903) (1,980)
Restructuring costs (109) (216)
-------- --------
(2,012) (2,196)
======== ========
Restructuring costs relate to termination payments of senior managers and costs
associated with the closure of London premises.
4. Loss per share
Earnings per share is calculated on 61,945,034 ordinary shares, being the
average number of shares in issue in 2006. This followed share issues of
3,000,000 on 18 May 2006 and 312,500 on 10 October 2006.
(Loss) (Loss) per share
2006 2005 2006 2005
#000 #000 pence pence
Loss attributable to equity
shareholders (411) (2,195) (0.66) (3.66)
====== ====== ====== ======
5. Taxation
Recognised in the income statement
2006 2005
#000 #000
Current tax expense:
Current year - -
Adjustments for prior years - -
--- ---
Deferred tax credit 361 -
--- ---
Total tax in income statement 361 -
=== ===
Reconciliation of the total tax charge
The tax credit in the income statement for the year is higher (2005: lower) than
the standard rate of corporation tax in the UK of 30% (2005: 30%)
Reconciliation of effective tax rate
2006 2005
#000 #000
Loss before tax (772) (2,195)
Tax using the UK corporation tax rate of 30 % (2005: 30 %) (231) (659)
-------- -------
Effects of:
Expenses not deductible for tax purposes 604 642
Gain on disposal of property, plant and equipment (76) -
Utilisation of unrecognised management expenses brought
forward (309) 17
Deferred tax not recognised in prior years (349) -
Total credit in income statement (361) -
======== =======
6. Board approval
This Preliminary statement was approved for release by a committee of the board
of Imagesound plc on 6 March 2007. The Company Annual Report will be made
available to shareholders in May 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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