A business update posted on Polaris/Brighter IR, the investor relations site, and dated 9th April says that the loss of MediaMarktSaturn as a customer has put the future of 7digital in serious doubt and that it will have to urgently raise new capital in order to keep going.
“[T]he Board’s current view is that the business will require material further equity and/or debt funding in the next quarter without which the Company would be unable to continue as a going concern,” is how 7digital referred to the issue of its finances in the filing. This is clearly of grave concern if the company is unsure of its future into the next quarter.
7digital said the loss of the MediaMarktSaturn business had diverted management attention and “led to disruption within the business during the first quarter as well as having a marked effect on customer sentiment”. This has, the company says, “slowed both adoption by new clients and payment by existing debtors”.
In January, it emerged that 7digital was in talks over the future of MediaMarktSaturn’s Juke music service, which it powered. It was eventually resolved at the start of March. “Under the Agreement, 7digital has accepted settlement of, and release from, all outstanding contracts and commitments relating to the Juke music service for an immediate payment by Juke of €4,000,000,” explained 7digital’s announcement to the stock market at the time. “Further, Juke has agreed to write off all interest payments and £250,000 of the principal amount of the convertible loan note issued to Juke (as announced on 26 October 2018). 7digital will pay the balance of the convertible loan note principal amount, £500,000, from the proceeds of the Agreement.”
A review of the company’s budgets in parallel with a strategic overview is ongoing, but it will mean the company will have to take “a more circumspect view of the sales pipeline”. In the same filing, it announced the appointments of John Aalbers as CEO and Julia Hubbard as CFO and their inclusion on the board of directors as of 9th April.
Aalbers will undertake this review of the business while his vision for the company’s future will be presented to shareholders in due course. Part of the €4m settlement from MediaMarktSaturn in March this year may also be recognised in the 2019 financial year rather than the 2018 financial year.
It was announced last month that Simon Cole was stepping down as 7digital CEO and his departure came just a matter of weeks after the exit of Pete Downton, the company’s deputy CEO.
Music Ally contacted 7digital but the company said it was not making any comments for the moment. When they do, we will, of course, cover it.
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