7 June 2010 

UBC Media Group plc

Final Results for the year ended 31 March 2010

UBC Media Group (AIM: UBC), the multimedia content and services company, has today published Full Year Results for the year ended 31 March 2010.

Operational highlights

§   Content businesses successfully expand into video and multimedia

o  Lynx Content provided some 67 video productions for use online to clients including Guinness, Braun, the Hong Kong Tourist board, Land Rover and Nestle

o  Revenues from video content quadrupled in last 12 months

o  Across its content businesses UBC supplies over 15% of BBC Radio outsourced production as well as supplying 250 commercial stations

§   iPhone 'app' network for radio stations successfully launched in UK and USA

o  45 stations in UK using Unique Interactive apps for streaming on iPhone

§   iTunes tagging technology launched on Absolute Radio and soon to be extended to other radio stations

Financial highlights

§   Continuing revenue up 40% to £4.9m (2009: £3.5m)

o  Content Division up 51%

o  Acquisitions contributed £1.6m of revenue in the year

§   Gross profit increased by 29% to £1.38m (2009: £1.06m) and administrative expenses flat

§   Underlying* operating loss reduced to £277,000 (2009: loss £676,000).  H2 break even (2009: H2 loss £215,000)

§   Net profit after tax £0.21m (2009: £5.82m)

§   Dividend policy announced and two interim dividends paid, totalling 0.26 pence per share (2009: Nil).

§   Cash at year end £8.41m (2009: £10.47m)

Announced today

§   Investment announced alongside Imagination Technologies and Channel 4 TV in 'Audioboo', a global technology that allows viewers and listeners to contribute high quality audio to broadcasters directly from mobile phones.

§   iPhone 'app' network for radio stations

o  First US station - WQMX in Cincinnati

o  talkSPORT's World Cup focused app is available in iTunes store with advertising inventory already pre-sold to client Blue Sq

* Underlying operating loss is stated after excluding impairments, amortisation of intangible assets and one-off professional and acquisition costs.

Simon Cole, Chief Executive, said:

"We have made significant progress implementing our strategy to develop a compelling combination of content and interactive software for international media markets.

"Our combination of content creation, sponsorship and advertising sales and interactive software skills, puts us in a strong position to serve the rapidly growing and converging multi-platform media and wireless markets in ways that have potential to generate substantial earnings over the coming years.  Software and content are becoming inextricably linked and UBC is increasingly well positioned at the nexus of the two. 

"Today's announcements of the first revenues for our iPhone app network,  our investment in Audioboo  and our first North American radio station signing, are all clear demonstrations of our strategic direction."

Enquiries:

Strategic overview

The year ended 31 March 2010 was one of transformation for UBC, shifting the Group's focus to the production of content and to the development of interactive software for the rapidly growing international digital wireless markets, encompassing both radio and mobile applications.

Having disposed of its Commercial Division at the end of the previous financial year, the Group has made considerable progress in its long-term goal to become an international content and software business.  Today, UBC is providing the mix of technology and multimedia content which is much in demand in today's very changed media marketplace.  The Group's 400 plus customers include some of the world's biggest broadcasters and advertisers in Europe and North America.

The rationale for the Group's shift in focus over the last 18 months is becoming ever more apparent: value in media investment is shifting from distribution platforms to content.  Furthermore, the distinctions between different types of content have broken down and consumers are increasingly engaging with media brands across a variety of content delivery platforms at the same time expecting a richer mix of audio and screen content. 

Whether it is behind Rupert Murdoch's new Times paywall or paid for by advertisers on the Capital FM website, traditional media owners are converging to supply the kind of multimedia content that has been talked of for years. 

While media companies have long recognised the value of repackaging content across multiple channels, it has taken the emergence of the smartphone and tablet computers - portable media devices - to demonstrate the market's true potential. Furthermore, not only do these devices offer physically new distribution channels for content, but the hundreds of thousands of software applications ("apps") being developed for them represent an entirely new and very significant opportunity for advertisers, especially in the creation of 'branded content' rather than traditional spot advertising.

UBC has diversified its content skills across a wide range of platforms, which now include commissioned radio programmes, advertiser-funded audio and video, media sponsorship and mobile advertising. The Group has also expanded its existing software expertise beyond station management software for radio broadcasters, to include innovative applications for mobile devices such as smart phones, which are increasingly emerging as key targets for media content.

With its combination of content creation, sponsorship and advertising sales and interactive software skills, UBC is positioned strongly to serve these rapidly growing and converging markets in ways that have potential to generate substantial earnings over the coming years.

The Group should also benefit from a number of significant market developments including potential regulatory changes in the UK media sector, which are expected to create additional revenue opportunities for UBC as one of the largest independent providers of radio programming to the BBC. 

The Board plans to develop the business through a combination of organic growth and selective acquisitions. It intends to be a consolidator of content providers to broaden and strengthen the Group's offering and deliver incremental value to shareholders. 

Operational review

Content creation

UBC is now a diversified supplier of both audio and video content. The Group's traditional base of supply to the BBC has provided a quality benchmark; UBC was named "Independent Radio Production Company of the Year" at the first ever Radio Production Awards in February 2010.  However, through acquisitions over the last year, the Group has broadened the base of its content offering to include television, online video and audio books. The proportion of Group revenues that come from video content has quadrupled in the last 12 months.

The Group's radio content runs on every BBC Radio Network and also on 250 commercial stations.  Programmes range from award winning Drama like Ronald Harwood's new play An English Tragedy starring Derek Jacobi for BBC Radio 4 to Dale Winton's Pick Of The Pops on BBC Radio 2 and entertainment news for Absolute Radio.  

From this base of strongly recurrent revenues and a reputation for quality, UBC has extended it's business to providing video and interactive content. For example, the Group supplies multimedia content and television coverage of events like last year's Cambridge Folk Festival and the Radio 2 Folk Awards to BBC Television and BBC Online (for which UBC now provides all music reviews).

UBC expanded its video business further in August, with the acquisition of Radio Lynx (renamed Lynx Content).  Lynx this year provided some 67 online video productions for use online to clients including Guinness, Braun, the Hong Kong Tourist board, Land Rover and Nestle.  The company both produces the multimedia content and secures its placement on web portals on behalf of its clients.  Lynx was attractive to UBC as it had also developed from a radio base; it still today provides radio sponsorship programmes to clients ranging from Morrisons to HMV and has placed content on stations in the last year for more than 100 clients.

Lynx Content was purchased for an initial cash consideration of £1.6m and has exceeded the Group's expectations, contributing some £357,000 to gross profit in the seven months since acquisition.

In February 2010, the Group acquired, for a cash consideration of £85,000, Above The Title, a respected producer of speech content for a range of broadcasters, which has recently diversified successfully into the growing audio book market. 

Above The Title owns a number of formats and rights including radio and audio dramatisation rights to Douglas Adams' classic Hitchhikers Guide to the Galaxy books. Above The Title's recent highlights for BBC radio includes Unreliable Evidence presented by Clive Anderson for Radio 4, On the Blog for Radio 2 and The Christian O'Connell Solution for 5 Live.   Recently, Above The Title has developed a new quiz format for BBC Radio 2 with Alex Lowe and is now producing Christian O'Connell's Never Write off the Germans as part of the network's World Cup coverage.

BBC programming now represents 49% of Group revenues, down from 66% in 2009. One of the Board's targets was to reduce the Group's reliance on the BBC below 50%. UBC sees this trend continuing. The Group's production businesses now represent more than 15% of the BBC's overall outsourced content supply in radio and online by value. The BBC only outsources approximately 8% of its radio output by hours and little more than 3% of its radio output by value.  This compares to more than 25% in television.  

The BBC Trust is currently conducting a review of the Corporation's commitment to programme supply in radio.  The recent Liberal Democrat creative manifesto contained a commitment to pressure the BBC to behave in radio as it does in television and thereby stimulate the broader creative community.   UBC has been involved in active lobbying this year around the Trust review and is hopeful of a positive outcome later this year.

Software & Interactive 

UBC's 10 year involvement in the supply of broadcast software to media companies has placed it in an excellent position to capitalise on the rapidly developing demand from broadcasters for interactive tools to take advantage of the new devices - especially in the mobile arena - that are becoming the media players of the future. From the programme data services on the BBC's iPlayer, to text and data software for Sirius XM Satellite Radio in the USA, UBC's software products are familiar to broadcasters around the world giving the Group an embedded relationship with the industry.  

These software products put UBC at the heart of driving data services.  For example, a key highlight of the year was the launch in November of an iTunes tagging service with Absolute Radio. The service enables listeners using iPod Nano players, which have FM radios built in, to "tag" any track being played and preview and purchase it using the main iTunes software.  

This service, which UBC expects to extend to other radio stations in the near future, relies on the 'back office' software supplied by UBC to integrate the radio stations' music playout systems with the iTunes library and then broadcast the resulting codes over the air.

UBC intends to use this lead in broadcast software to capitalise on the emerging market for portable devices that 'stream' radio and TV. Streaming audio has changed the face of the radio industry and is the fastest growing form of radio consumption in virtually every developed country.   UBC believes that the same growth will apply to video consumption as devices become more sophisticated and bandwidth grows.

In April, Unique Interactive launched a new advertising medium for radio stations using the iPhone and purpose-built apps for 45 stations. The first to launch is talkSPORT, operated by UTV, whose World Cup themed app is available in the iTunes store from today. Other stations' apps will follow in the next three months with the full network in place by the end of the year. The purpose-built apps will allow users to listen to their radio station wherever they have wifi or a mobile signal, but importantly will also provide a wide range of additional features such as instant programme reminders, listen again and social network interaction.

Unique is delivering the apps free to radio clients in return for selling advertising space within the apps themselves. Revenue from the advertising, which is being sold by Lynx, is being shared between UBC and the station groups. 

UBC also announced today that the first client for its radio app network has been secured. Gambling portal Blue Sq will take all of the available space on the talkSPORT app for the duration of the World Cup.

Like its broadcast software products, UBC sees the market for the app network as a global one and has today announced its first US radio station, WQMX in Cincinnati.  The inventory collected from US stations will be sold through an agency arrangement with Groove Addicts, a specialist radio services company based in Los Angeles.

Financial review

In the year to 31 March 2010 Group revenues from continuing operations including acquisitions improved by 40% to £4.94m (2009: £3.53m).  The Content division reported revenues up by 51% to £4.44m (2009: £2.95m) while the Software and Interactive division revenues were slightly lower at £0.50m (2009: £0.58m).

Gross profit increased by 29% to £1.38m (2009: £1.06m) and administrative expenses remained flat despite the rise in turnover.

The underlying operating loss, which excludes impairments, amortisation of intangible assets, one-off professional and acquisitions costs, was notably reduced to £277,000 (2009: loss: £676,000). The Group broke even in the second half. Reported operating loss was £536,000 (2009: loss £826,000) - see table below for a reconciliation with underlying and reported operating figures. 

Reconciliation with underlying and reported operating figures:

After interest and dividend income of £91,000 (2009: £121,000), the Group's underlying loss before tax was reduced to £186,000 (2009: loss £555,000).  The Group loss before tax was £445,000 (2009: loss of £705,000).

After the profit of £758,000 from discontinued activities (2009: £6,583,000) and a tax charge of £99,000 (2009: £57,000), the Group's profit for the period was £214,000 (2009: £5,821,000).

Reported earnings per share, including the profit from discontinued operations, was 0.11 pence (2009: 3.02 pence).

The Group paid two dividends during the year totalling £499,000 (2009: Nil), a combined 0.26 pence per share. The Board has not recommended the payment of a final dividend but in the light of the Group's cash balance, growth strategy and outlook on trading, the Board intends to progressively increase the dividend per share.

Acquisitions

On 24 July 2009, UBC acquired the assets of the part of the Commercial Division responsible for Sponsorship, Promotions and Interactive Marketing (trading as 'IntaMedia') from the Global Traffic Network Inc. ("GTN") for a cash consideration of £50,000.

On 20 August 2009, UBC acquired the assets of Radio Lynx, a key player in the growing business of marketing through content. The purchase was satisfied by an initial cash consideration of £1,600,000 and a deferred cash earn out of up to £800,000 based on the operating profit generated by Radio Lynx in the 12 full months immediately following completion.

On 15 February 2010, UBC acquired the assets of Above the Title, a respected producer of content for a range of broadcasters including the BBC. The purchase was satisfied by an initial cash consideration of £85,000 and a deferred earnout to be paid in a mixture of cash and shares which, based on the current share price, would lead to a maximum earnout of £1.0m, which will become payable if an annualised operating profit of £333,333 is achieved in the 24 months immediately following completion.

Cash and cash flow

In the year to 31 March 2010 UBC had a cash outflow of £2.06m (2009: £6.55m inflow) including a cash outflow of £0.06m from operating activities (2009: £0.32m).

At 31 March 2010, UBC had cash in the bank of £8.41 million (2009: £10.47 million).

Discontinued operations

On 24 July 2009, UBC received £1,950,000 cash for the earn out settlement on the sale of the Commercial division to GTN. As at 31 March 2009 this was valued at £811,000, resulting in a gain to the profit and loss of £1,139,000 before costs and the impairment of IntaMedia.

In the year to 31 March 2010, a research & development tax cash credit was received by Cliq Radio for £97,000.

In the year to 31 March 2010, the provision against the contractual obligation to Bauer Radio for the former transmission of Classic Gold Digital on digital multiplexes, primarily covering Northern England, was reassessed resulting in a charge to Discontinued Operations of £411,000.

In the year to 31 March 2010, the provision against the contractual obligation to MXR Limited for digital multiplexes was reassessed resulting in a credit to Discontinued Operations of £167,000.

Profit/(loss) attributable to discontinued operations:

Investment in 4 Digital Group

UBC received a final cash payment of £40,000 from the 4 Digital Groups members voluntary liquidation in the period to 31 March 2010.

Capital reduction

A resolution was passed at the Annual General Meeting held on 24 July 2009, and subsequently confirmed by the Court, to reduce the share premium account by £16,104,000 to enable dividends or distributions to be made to shareholders.

Current trading and outlook

The Group is now in a much stronger position as its strategy to develop as a unique provider of multimedia content and services internationally gains momentum. The Group has re-signed many of its key recurring radio programming strands with the BBC as well as building on a strong pipeline of advertiser-funded content and applications. The Board remains confident that UBC will continue to make good progress in

the coming year.

Consolidated statement of comprehensive income

Year ended 31 March 2010

Certain costs previously disclosed in administrative costs have been reclassified for the prior year as cost of sales to provide an equivalent comparison. There is no impact on operating loss or loss before tax as a

result of this reclassification.