Transcript Document
Preliminary Results Presentation March 2008 Agenda 1. Overview 2. Market Background 3. Preliminary Results 4. Outlook 5. Appendix Investment Overview Leading provider of in-store music, messaging and AV Good earnings visibility: – 64% recurring revenues – typical contracts of 3+ years High quality blue chip client base Proven consolidator in highly fragmented sector International growth opportunities - under-developed markets in contrast to UK Experienced, ambitious and proven management team Market Background The Background Music (BGM) sector emerged on the back of the‘branded’ retail and leisure boom of the 80’s and 90’s Background music and messaging are now very established in retail and leisure as brand reinforcement tools • Control the audio environment • Creating a point of differentiation Increasingly being used to make a ‘Foreground’ contribution… • Tactically communicating key offers and promotions • Increasing dwell times and driving customer spend Fragmented market, with 10 identified direct competitors (including two quoted companies – Immedia and Avanti Screenmedia) Imagesound History Established in 1998 to exploit emerging MPEG and low cost satellite airtime opportunities Investment capital secured in 2000 from Quester to develop robust software and operating systems and platform for sector consolidation Six acquisitions completed to date (aggregate value of £22m): – July 04 – – – – June 05 May 06 Sept 06 July 07 - Reverse takeover of ACI plc (AIM listed cash shell) - Acquisition of TTL Music and Rolec - Acquisition of Ideal Music - Acquisition of Music Styling.com - Acquisition of Impact Automedia - Acquisition of TSC Music Systems Ltd Imagesound Today UK’s leading listed supplier of in-store music, radio and AV services Two market leading trading brands: – Imagesound (retail & leisure chains) – MusicStyling (luxury hotels) Offices in Chesterfield and Vancouver 76 staff Growing international presence: – Distributor agreements signed in 2007 covering Portugal/Spain, Middle East and Eastern Europe – 21% revenues currently from international business Refocused management roles Music Styling Acquired May 2006 Consultancy approach 1700 music ‘zones’ 447 hotels 75 countries worldwide Office in Vancouver to serve N. American market 24/7 multi-lingual hotline for worldwide support established Imagesound Offer High Profile Chains “Since introducing FootlockerTV, our customer awareness surveys revealed a 26% increase in Footlocker brand awareness.” Offer Driven Chains “Sales uplifts on advertised lines have been as high as 24.5% and are currently averaging an impressive 16%.” Mainstream Chains “Imagesound help us get the music right for everyone, hour after hour, day after day.” Blue chip client base Imagesound provides music and messaging services to 50+ leading branded retail and leisure chains reaching 17,800 subscriber outlets 2007 Operational Highlights Subscriber outlet growth - 17,800 sites/zones (06: 13,383) Major renewals and additional sites secured with Wickes, Superdrug, Bon Marche, HBOS, Foot Locker, Phase8 and Poundland New contracts signed with Au Naturelle (180 stores), Swarovski (45 stores), Richleys (28 stores), Slug & Lettuce (92 bars), Ha Ha bars (27 bars) MusicStyling 175 site roll-out to Marriott and Rezidor chains completed with continued work with Hyatt, Starwood & Marriott Distributor agreements signed covering Portugal/Spain, Middle East and Eastern Europe Transitioning from satellite to web-based delivery solution offering efficiencies and cost savings 2007 Financial Highlights Revenue up 8% to £8.8m (2006: £8.2m) – Recurring revenues up 10% to £5.6m (£5.1m) – International revenues now 21% of total recurring revenue (2006: 9%) Adjusted* EBITDA up 38% to £2.3m (2006: £1.6m) Adjusted* EBITDA margin increased 6 percentage points to 26% Operating loss reduced by 36% to £0.7m (2006: £1.1m) Reported loss before tax £1.1m (2006: £0.8m) Adjusted* earnings per share up 45% to 1.81p (2006: 1.25p) Cash from operations of £1.5m (2006: £0.1m) * Adjusted to exclude amortisation of intangible assets, non-recurring expenditure, share based payments and tax 2007 FY Results Year ended 31-Dec-07 Year ended 31-Dec-06 (Unaudited) (As restated) Revenue 8,841 8,184 Adjusted EBITDA 2,257 1,630 Depreciation (744) (561) Adjusted Operating Profit 1,513 1,069 Non recurring expenditure (587) (109) (1,494) (1,903) Share based payment charge (133) (145) Operating loss (701) (1,088) - 609 (362) (293) (1,063) (772) 272 932 (791) 160 1.81 1.25 63,312,500 61,945,000 Pro forma Income Statement Amortisation of intangible assets Profit on sale of head office Net financing costs Loss before tax Taxation (Loss)/Profit after Tax Adjusted Earnings per share (p) Weighed average number of shares Consolidated Balance Sheet 2007 2006 £000 £000 15,010 11,262 1,787 891 19 - 16,816 12,153 551 440 3,386 2,510 20,753 15,103 Bank overdraft (624) (1,085) Interest-bearing loans and borrowings (918) (112) Trade and other payables (4,644) (3,807) Current Liabilities (6,186) (5,004) Non current interest-bearing loans and borrowings (6,563) (1,437) (12,749) (6,441) 8,004 8,662 Intangible fixed assets Tangible fixed assets Deferred tax asset Total fixed assets Stock Debtors Total assets Total Liabilities Net assets Consolidated Cash Flow Statement 2007 2006 £000 £000 1,668 1,520 166 (1,457) (336) (239) Capital Expenditure (1,402) 1,190 Acquisitions (5,231) (384) Repayment Loans (107) (2,657) Drawdown on expansion facility 6,035 1,500 461 (527) Operating profit before changes in working capital and provisions Working Capital Interest Paid Net Increase/ (Decrease) in cash equivalents Good earnings visibility 2007 Total Revenues £8.8m 64% Recurring 36% Non-Recurring • Recurring Revenue = the hire of music services and equipment • Non Recurring Revenues = the installation of equipment & servicing costs Geographic Split 2007 Total Recurring Revenues £5.6m 21% International 79% UK • International Revenue = Music Styling + partnership deals in Spain/Portugal, Dubai and Budapest Acquisition of TSC Music Systems Ltd Major supplier of music services to branded fashion retail, coffee chain, fast food and retail financial services sectors Acquired July 2007 and fully integrated within 6 months £4.75m in cash 3,500 outlets across the UK Significant synergies and cost savings realised Organic growth within client base with continued roll-outs across Starbucks, Orange, Caffé Nero, Alliance & Leicester and Gala Bingo Outlook Retail and leisure markets remain challenging – Increasing the importance of brand differentiation Continue to improve operational gearing & profitability – New client wins – Advancements in technology improve margins Large number of outlets still not using a third party provider (c.75%) Opportunities for further international expansion – Roll-out UK customers internationally – Win new clients within underdeveloped markets for BGM Fragmented sector offers opportunities for further consolidation – Re-shaped balance sheet & banking facilities in place Appendix Competitor analysis – UK suppliers Name Outlet Key customers Mood / DMX UK 23,000 Boots, Arcadia Group, H&M Imagesound plc 17,800 50 major retail & leisure clients TSG 4,500 Lloyds No1, Pizza Hut Immedia plc 3,000 Lloyds Chemist, Londis GMS 1,000 MFI Avanti Screenmedia 1,500 Toni & Guy, Translusis Kalidovision 1,200 Venue Bars Creative Retail Entertainment 1,200 M&B, Birthdays Team Talk 1,200 Asda, Allsports C-Burn 1,000 Conran Restaurants, S&N Radio Ga Ga * Source: Management estimates 500 All Bar One Directors Derek Mapp Executive Chairman Founder of Tom Cobleigh plc & Leapfrog Day Nurseries Chairman of Staffline plc and senior NED of Informa plc Michael Clark Managing Director - Sales & Marketing Imagesound founder Ken Pratt Managing Director - Finance & Operations Former FD and co-Director of Tom Cobleigh plc and Eton Group Limited Richard Gregory Non-exec Director Former Managing Director Yorkshire Television Non-exec Director of Yorkshire & Clydesdale Banks and National Australia Group Europe Limited Stephen Yapp Non-exec Director (Chairs Audit Committee) David Clayton-Smith Non-exec Director Chairman of Watermark Plc Previously CEO of DCS Group Management Consultant 12 yrs retail experience with Halfords, Boots, Do It All Previously Group Marketing Director of Courage Imagesound plc. Venture Way Dunston Technology Park Chesterfield S41 8NE T: 01246 572 990 www.imagesound.co.uk