7digital CEO Simon Cole has responded to Music Ally’s story yesterday about the firm’s latest financial results, and its auditor’s warning over uncertainty about the company’s ability to continue as a going concern.
The results confirmed preliminary 2016 financial results announced by 7digital earlier this year, with its revenues up 15% to £11.9m in 2016, while net losses narrowed from £7.9m in 2015 to £5.3m in 2016.
7digital’s independent auditor reported that besides closing its then-in-process acquisition of rival 24-7 Entertainment, the company would need cost-cutting measures and “contracting with significant new customers” to dispel a “material uncertainty” about its going-concern status.
Cole says all of these areas are in hand.
“The auditor did indeed note that we needed more business. That came as no surprise, and the senior management team has been working diligently on ensuring the continued growth – certainly not just survival – of the company,” he told Music Ally.
“We announced our first quarter of profitability in Q4 2016, which was a big moment for 7digital, and we are committed to 2018 being a full year of profitability.”
The 24-7 acquisition, which closed in mid-June, is playing an important role in this process according to Cole, who cited comments made at 7digital’s recent annual general meeting.
“In our AGM statement, we said that we are increasing the investment in our core platform and accelerating the integration of 7digital with 24-7. This allows for quicker cost reductions and higher profitability in 2018,” he said.
“Our Board now expects 2017 to result in a combined loss before interest, tax, depreciation and amortisation of approximately £1.5m – that is much reduced when compared to that of 2016. 2018 profits are also anticipated to increase significantly.”
“Since the auditor’s comment was made, we have secured £18m from our transaction with European retail giant MediaMarktSaturn. The acquisition of 24-7 from MMS has brought new contracts to the 7digital business, and we have signed deals to develop further new services (worth £6m of that £18m total) for MMS – our newest, largest customer and shareholder.”
Cole added that new customer contracts (for 7digital) from the 24-7 acquisition have contracted revenues of £1m and a total annualised value of £2.7m, with those clients including Danish telco TDC; German retailer Weltbild; Swiss retailer Ex Libris; and Africa-focused streaming service Bambwa, which is based in Sweden.
“Through the deal, we are now the technical backend and catalogue provider for digital music service Juke!, which is delivered by MMS to customers in 3 territories. We have a three year contract for the existing Juke! services totaling £11m,” said Cole.
“Of course, we’ve been continuing to service existing clients and win new business throughout the last few months and will update the financial community shortly on our progress in that respect.”
“We’re in good shape – the best in the company’s history – and excited about the future. We’ve only been able to get here due to the support of labels, publishers and the broader creative community, and for that we are very grateful.”