Transcript Document

Preliminary Results Presentation
March 2008
Agenda
1. Overview
2. Market Background
3. Preliminary Results
4. Outlook
5. Appendix
Investment Overview
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Leading provider of in-store music, messaging and AV

Good earnings visibility:
– 64% recurring revenues
– typical contracts of 3+ years
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High quality blue chip client base
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Proven consolidator in highly fragmented sector
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International growth opportunities - under-developed markets in contrast to UK
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Experienced, ambitious and proven management team
Market Background

The Background Music (BGM) sector emerged on the back of the‘branded’
retail and leisure boom of the 80’s and 90’s
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Background music and messaging are now very established in retail and leisure
as brand reinforcement tools
• Control the audio environment
• Creating a point of differentiation

Increasingly being used to make a ‘Foreground’ contribution…
• Tactically communicating key offers and promotions
• Increasing dwell times and driving customer spend
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Fragmented market, with 10 identified direct competitors (including two
quoted companies – Immedia and Avanti Screenmedia)
Imagesound History
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Established in 1998 to exploit emerging MPEG and low cost satellite airtime
opportunities
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Investment capital secured in 2000 from Quester to develop robust software and
operating systems and platform for sector consolidation
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Six acquisitions completed to date (aggregate value of £22m):
– July 04
–
–
–
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June 05
May 06
Sept 06
July 07
- Reverse takeover of ACI plc (AIM listed cash shell)
- Acquisition of TTL Music and Rolec
- Acquisition of Ideal Music
- Acquisition of Music Styling.com
- Acquisition of Impact Automedia
- Acquisition of TSC Music Systems Ltd
Imagesound Today

UK’s leading listed supplier of in-store music, radio and AV services
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Two market leading trading brands:
– Imagesound (retail & leisure chains)
– MusicStyling (luxury hotels)
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Offices in Chesterfield and Vancouver
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76 staff
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Growing international presence:
– Distributor agreements signed in 2007 covering Portugal/Spain,
Middle East and Eastern Europe
– 21% revenues currently from international business
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Refocused management roles
Music Styling
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Acquired May 2006
Consultancy approach
1700 music ‘zones’
447 hotels
75 countries worldwide
Office in Vancouver to serve
N. American market
24/7 multi-lingual hotline for
worldwide support
established
Imagesound Offer
High Profile Chains
“Since introducing FootlockerTV, our customer
awareness surveys revealed a 26% increase in
Footlocker brand awareness.”
Offer Driven Chains
“Sales uplifts on advertised lines have been
as high as 24.5% and are currently averaging
an impressive 16%.”
Mainstream Chains
“Imagesound help us get the music right for
everyone, hour after hour, day after day.”
Blue chip client base
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Imagesound provides music and messaging services to 50+ leading branded
retail and leisure chains reaching 17,800 subscriber outlets
2007 Operational Highlights
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Subscriber outlet growth - 17,800 sites/zones (06: 13,383)
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Major renewals and additional sites secured with Wickes, Superdrug, Bon
Marche, HBOS, Foot Locker, Phase8 and Poundland
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New contracts signed with Au Naturelle (180 stores), Swarovski (45 stores),
Richleys (28 stores), Slug & Lettuce (92 bars), Ha Ha bars (27 bars)
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MusicStyling 175 site roll-out to Marriott and Rezidor chains completed with
continued work with Hyatt, Starwood & Marriott
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Distributor agreements signed covering Portugal/Spain, Middle East and Eastern
Europe
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Transitioning from satellite to web-based delivery solution offering efficiencies
and cost savings
2007 Financial Highlights
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Revenue up 8% to £8.8m (2006: £8.2m)
–
Recurring revenues up 10% to £5.6m (£5.1m)
–
International revenues now 21% of total recurring revenue (2006: 9%)
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Adjusted* EBITDA up 38% to £2.3m (2006: £1.6m)
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Adjusted* EBITDA margin increased 6 percentage points to 26%
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Operating loss reduced by 36% to £0.7m (2006: £1.1m)
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Reported loss before tax £1.1m (2006: £0.8m)
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Adjusted* earnings per share up 45% to 1.81p (2006: 1.25p)
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Cash from operations of £1.5m (2006: £0.1m)
* Adjusted to exclude amortisation of intangible assets, non-recurring expenditure, share based payments and tax
2007 FY Results
Year ended
31-Dec-07
Year ended
31-Dec-06
(Unaudited)
(As restated)
Revenue
8,841
8,184
Adjusted EBITDA
2,257
1,630
Depreciation
(744)
(561)
Adjusted Operating Profit
1,513
1,069
Non recurring expenditure
(587)
(109)
(1,494)
(1,903)
Share based payment charge
(133)
(145)
Operating loss
(701)
(1,088)
-
609
(362)
(293)
(1,063)
(772)
272
932
(791)
160
1.81
1.25
63,312,500
61,945,000
Pro forma Income Statement
Amortisation of intangible assets
Profit on sale of head office
Net financing costs
Loss before tax
Taxation
(Loss)/Profit after Tax
Adjusted Earnings per share (p)
Weighed average number of shares
Consolidated Balance Sheet
2007
2006
£000
£000
15,010
11,262
1,787
891
19
-
16,816
12,153
551
440
3,386
2,510
20,753
15,103
Bank overdraft
(624)
(1,085)
Interest-bearing loans and borrowings
(918)
(112)
Trade and other payables
(4,644)
(3,807)
Current Liabilities
(6,186)
(5,004)
Non current interest-bearing loans and borrowings
(6,563)
(1,437)
(12,749)
(6,441)
8,004
8,662
Intangible fixed assets
Tangible fixed assets
Deferred tax asset
Total fixed assets
Stock
Debtors
Total assets
Total Liabilities
Net assets
Consolidated Cash Flow Statement
2007
2006
£000
£000
1,668
1,520
166
(1,457)
(336)
(239)
Capital Expenditure
(1,402)
1,190
Acquisitions
(5,231)
(384)
Repayment Loans
(107)
(2,657)
Drawdown on expansion facility
6,035
1,500
461
(527)
Operating profit before changes in working capital and provisions
Working Capital
Interest Paid
Net Increase/ (Decrease) in cash equivalents
Good earnings visibility
2007 Total Revenues £8.8m
64%
Recurring
36%
Non-Recurring
• Recurring Revenue = the hire of music services and equipment
• Non Recurring Revenues = the installation of equipment & servicing costs
Geographic Split
2007 Total Recurring Revenues £5.6m
21%
International
79%
UK
• International Revenue = Music Styling + partnership deals in
Spain/Portugal, Dubai and Budapest
Acquisition of TSC Music Systems Ltd
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Major supplier of music services to branded fashion retail, coffee chain, fast
food and retail financial services sectors
Acquired July 2007 and fully integrated within 6 months
£4.75m in cash
3,500 outlets across the UK
Significant synergies and cost savings realised
Organic growth within client base with continued roll-outs across Starbucks,
Orange, Caffé Nero, Alliance & Leicester and Gala Bingo
Outlook
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Retail and leisure markets remain challenging
– Increasing the importance of brand differentiation
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Continue to improve operational gearing & profitability
– New client wins
– Advancements in technology improve margins
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Large number of outlets still not using a third party provider (c.75%)
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Opportunities for further international expansion
– Roll-out UK customers internationally
– Win new clients within underdeveloped markets for BGM
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Fragmented sector offers opportunities for further consolidation
– Re-shaped balance sheet & banking facilities in place
Appendix
Competitor analysis – UK suppliers
Name
Outlet
Key customers
Mood / DMX UK
23,000
Boots, Arcadia Group, H&M
Imagesound plc
17,800
50 major retail & leisure clients
TSG
4,500
Lloyds No1, Pizza Hut
Immedia plc
3,000
Lloyds Chemist, Londis
GMS
1,000
MFI
Avanti Screenmedia
1,500
Toni & Guy, Translusis
Kalidovision
1,200
Venue Bars
Creative Retail Entertainment
1,200
M&B, Birthdays
Team Talk
1,200
Asda, Allsports
C-Burn
1,000
Conran Restaurants, S&N
Radio Ga Ga
* Source: Management estimates
500
All Bar One
Directors
Derek Mapp
Executive Chairman
Founder of Tom Cobleigh plc & Leapfrog Day Nurseries
Chairman of Staffline plc and senior NED of Informa plc
Michael Clark
Managing Director - Sales & Marketing
Imagesound founder
Ken Pratt
Managing Director - Finance & Operations
Former FD and co-Director of Tom Cobleigh plc and Eton
Group Limited
Richard Gregory
Non-exec Director
Former Managing Director Yorkshire Television
Non-exec Director of Yorkshire & Clydesdale Banks and
National Australia Group Europe Limited
Stephen Yapp
Non-exec Director (Chairs Audit Committee)
David Clayton-Smith
Non-exec Director
Chairman of Watermark Plc
Previously CEO of DCS Group
Management Consultant
12 yrs retail experience with Halfords, Boots, Do It All
Previously Group Marketing Director of Courage
Imagesound plc.
Venture Way
Dunston Technology Park
Chesterfield
S41 8NE
T: 01246 572 990
www.imagesound.co.uk