7digital confident in 2018 profitability

Digital music and radio services company 7digital performed well in the first half of the year, it reported on Friday, with total group revenue up 13% to £5.93m.

The AIM-traded firm said it saw growth across the high margin licensing and creative revenue streams, with licensing revenues rising by 25% and the key monthly recurring revenues up by 27%.

Its cash balance at 30 June 2017 was £1.3m.

During the first half of 2017, 7digital was awarded contracts with a combined value of approximately £5.0m, including set up fees and monthly recurring revenues, the board highlighted.

They included contracts with DTS for work in the automotive sector, the world's first full MQA high quality streamed music service with HDtracks and the re-launch of TriPlay's eMusic service in the US.

MediaMarktSaturn, Europe's largest retailer of consumer electronics, also became a new 7digital customer after the completion of the acquisition of 24-7 Entertainment on 20 June.

The company has a three-year contract for existing ‘Juke’ music services in Germany and the Netherlands totalling £11m, and a new contract for development of future services worth £6m.

7digital said the acquisition was expected to add approximately £5m to 7digital revenues in 2017 and more than £8m in 2018.

“We have made a strong start to the year, at a time when we were also concluding our deal with MediaMarktSaturn to acquire the 24-7 business,” said chief executive Simon Cole.

“That acquisition is already making a contribution and, as previously announced, we expect it to make a significant contribution to our full year revenues.”

The company also announced on Friday that it signed a two-year deal with Global Eagle Entertainment.

It said Global Eagle is a “leading worldwide provider” of inflight entertainment content to the airline industry and offers Wi-Fi, movies, television, music, interactive software and portable inflight entertainment services to a number of regional and flagship carriers.

Customers of Global Eagle include Southwest Airlines, Norwegian Air, Emirates, Japan Airlines, Singapore Airlines, Qatar Airways, Air France and flydubai.

7digital would provide Global Eagle with technology, access to music, web development expertise, and rights holder reporting for new inflight services launching in the fourth quarter across a number of territories.

The company also agreed a three-year deal with French company Deedo SAS to power a new streaming service across 27 markets.

It said the focus of the service, due to launch in the fourth quarter, is to cater for listeners in Africa and the African diaspora with Pan African music catalogues.

7digital would provide technology, access to music and web app development for the service.

In addition, 7digital signed a deal with US-based company Fan Label, which it described as a “dynamic new music fan engagement platform” set for release in September, to provide access to the company's preview clip catalogue for a new service.

7digital would also handle licensing and rights holder reporting. The contract is for a minimum initial term of two years.

As it detailed at the recent annual general meeting, the board now expected 2017 to result in a “much reduced loss” when compared to that of 2016.

The board said it remained “confident” of substantial revenue growth in the second half of this year and expected that 2018 would be a year of profitability and positive operating cash flow as the full benefits of the 24-7 acquisition were realised.

“It is also pleasing to see, amongst our recent customer wins, a new area of business opening up with the addition of our first in-flight entertainment client,” Simon Cole added.

“As the digital music industry continues to expand into new areas of current music consumption, 7digital is well positioned to be the provider to the many new services which will emerge.”