7digital subsidiary gets winding up petition from HMRC

Shares in 7digital tumbled on Friday as it emerged that its subsidiary, 7digital Trading, has been served a winding up petition by HMRC.

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The AIM-listed company said it had become aware that HMRC had published a note in the London Gazette of a hearing of a winding up petition on 16 January relating to the sum of around £417,000 owed.

At 1230 GMT, shares were down 51% to 0.92p, even as 7digital insisted that based on expected receipts, the full amount due to HMRC would be paid before the hearing.

"7digital Trading has no other third party trade creditors and so, on satisfaction of the debt due to HMRC, the company is confident that the Petition will be dismissed," it said

7digital said the subsidiary provides only certain human resources and payroll services to the group and is not its main trading business.

The bad news didn’t entered there. 7digital said that in the last two weeks, the group has entered discussions with Juke GmbH, a wholly owned subsidiary of European retailer MediaMarktSaturn (MMS), about the future of the Juke music service. The company has agreements with Juke for some £4m of revenues in 2019.

"MMS has indicated that it may wish to change the current arrangements and this could involve 7digital taking more responsibility for certain aspects of the service or the service being closed with a resulting termination payment becoming due and payable to the company," it said.

Also on Friday, the company confirmed that it completed the planned platform consolidation and re-structuring of its operations in the final quarter of 2018, reducing its cost base by an annualised £6.2m.

Several operations and offices have been closed or discontinued and staff numbers reduced in all locations and 7digital said its operations have remained stable during the restructuring and the move to a single technology platform for its customers.

In addition, it said the final quarter of the year saw several contract wins with US-based technology platforms, major record labels and broadcasters, the details of which are subject to commercial confidentiality especially in the light of the upcoming CES event in Las Vegas.