RNS Number:4522F
EBTM PLC
10 October 2007
Stock Exchange Announcement
On behalf of: EBTM PLC ("EBTM" or the "Company")
Embargoed for: 07:00 hours, 10 October 2007
Preliminary Results Announcement
Highlights
* Turnover up to #1.354 million (2006- #0.158 million)
* Operating loss of #0.684 million (2006- operating loss #0.426 million).
* Loss before amortisation, depreciation, taxation and the FRS 20 charge for
share incentives of #0.451 million.
* On 31 May 2007, EBTM acquired Core Brands Limited whose main trading
subsidiary is Lowlife Corporation Limited. On 9 July 2007, the
intellectual property rights related to the Atticus clothing brand were also
acquired.
* Post period end, EBTM announced the signing of licenses for the Adeline
Street Clothing (Green Day) and Clandestine Industries (Pete Wentz).
* Post period end, EBTM announced an order of some #800,000 for Atticus
clothing from a major high street retailer in the UK.
The comparative figures for 2006 are for the 62 week period ended 30 April 2006.
Enquiries:
EBTM plc
Richard Breeden, Chief Executive 020 8704 0034
Nominated Adviser
Nabarro Wells & Co. Limited
Hugh Oram
020 7710 7400
City Profile
William Attwell
020 7448 3244
Chairman's Statement
Overview
Music is a key inspiration for lifestyle in modern youth culture. EBTM is an
online only clothing retailer focusing on what we have termed "music inspired
fashion". Young people look to their music icons to help define their identity
and what they wear is an intrinsic part of this.
EBTM retails clothing, footwear and accessories in three categories. We sell
officially licensed music merchandise, branded fashion which has a direct
association with music (for example a clothing brand started by a band) and
finally branded or unbranded fashion enabling fans to get the look of either a
particular artist or a music scene.
The target market is 16 years old upwards, predominantly male but increasingly
female. The geographical focus to date has been the UK market. We have assessed
a number of opportunities in mainland Europe and plan to commence operations in
France in the near future. As a result of the post period end acquisition of
Lowlife described below, we now have a trading business in Spain.
EBTM started trading in July 2005 and was admitted to AIM in March 2006,
following a reverse acquisition by E-Retail plc. EBTM now offers one of the
largest selection of music inspired fashion and accessories on the internet.
Since the year end EBTM has made two key acquisitions creating a vertically
integrated retailer which owns and licenses key clothing brands under the banner
of music inspired fashion, as well as having a significant and fast growing
wholesale distribution network in the UK and Europe and a sophisticated sourcing
network in the Far East.
These acquisitions have given the business both scale and profitability, a
position from which we hope to continue the rapid growth demonstrated since
flotation.
The Market Context
EBTM inhabits a key area in the changing landscape of value creation in the
entertainment industry. The rapid increase in the penetration of music, but its
decline in value due to online file sharing, has led numerous parties to adopt
an increasingly holistic business model as rights owners. Music merchandise is
now seen as a key revenue stream for music artists and the companies which hold
their rights. This area is undergoing a period of rapid sales growth.
In addition artists are increasingly developing their own fashion labels (as
part of an unspoken brand extension strategy) something which usually takes
place outside the context of their merchandise rights agreements. This appears
to be an area of significant future opportunity and potential growth.
EBTM is well placed as online retail continues to grow rapidly despite the
difficulties seen on the high street. IMRG continue to predict very rapid growth
in the sector.
In addition, EBTM's target market is spending more and more of their time on the
internet. Music and the sense of identity and community which it engenders is a
key driver of this online activity and young people are engaging in an
increasingly sophisticated way with many different types of media. This global
connectivity means that the movements which surround music are ever larger in
their reach and quicker to develop.
Operating Review
2006 has been a good year in the continuing development of EBTM. In the six
weeks leading up to Christmas 2006 sales were #350,239, an increase of 275%
year-on-year. Sales for the year to 30 April 2007 were #1.354 million, a
significant increase over the #0.158 million achieved in the previous year. The
operating loss for the year was #0.684 million (2006- #0.426 million). Excluding
amortisation, depreciation, interest, taxation and the non- cash FRS 20 charge
for share incentives, the loss for the year was #0.451 million (2006- #0.240
million) which is broadly in line with market expectations for this metric. This
loss is due to the continued expenditure on marketing to establish the EBTM
brand and on further investment in people and infrastructure to enable continued
rapid growth.
During the year ended 30 April 2007, the Company adopted FRS 20. This relates to
accounting for share based payments. As a result of this the results for the
period ended 30 April 2006 have been restated. The effect of this was that an
additional post tax charge of #49,900 was added to the loss for the period.
This resulted in the loss on ordinary activities after taxation increasing from
#322,383 to #372,283 and the net assets at 30 April 2006 increasing from
#2,344,042 to #2,365,428.
The Company has a number of strategic plans to continue the excellent growth
seen so far. EBTM will deliver to customers the best online retail experience in
the marketplace. The Group will continue to develop revenues from a combination
of online marketing and real world advertising and PR at the same time as
developing partnerships with key online media players. The Board believes that
there remains significant potential for organic growth in the UK by continuing
to build the customer base and enhance the breadth and exclusivity of the
product range.
EBTM also began to develop bespoke clothing product for sale on the site in this
period. We have been particularly successful with a range of jackets inspired by
a band called My Chemical Romance and this is an area we intend to develop
further.
Post year end, the web hosting was changed from Venda to Storefront, maintained
by Maginus Software Solutions. This move was necessary to provide the co-branded
web stores which are part of the growth strategy and to enable a roll-out into
Southern Europe. The new platform also enables the creation of single brand
stores for partners, all run from the central EBTM database and inventory. This
change caused an anticipated slowdown in sales growth as we made the transition.
However, we are now starting to see the benefits of the new platform and are
confident that the new system will enable substantial growth in the product
range, the customer database and most importantly sales.
During the year EBTM has also entered into an agreement with Kerrang.com to run
a co-branded store for their website. Kerrang is a major publication read by
EBTM's target market in the UK.
Post year end we announced two very exciting acquisitions which are
transformational for EBTM in terms of scale and profitability.
Acquisition of Lowlife Corporation Limited
On 31 May 2007, the company entered into a contract to acquire the entire issued
share capital of Core Brands Limited, whose main trading subsidiary is Lowlife
Corporation Limited ("Lowlife"). Lowlife is a wholesaler and on-line retailer of
music inspired clothing and accessories. For the year ended 31 December 2006,
Lowlife reported sales of #3.5m, and profits before tax of #646,000. At that
date it had net assets of #846,000. Lowlife has been growing at a rate of
approximately 50% per annum in the three years prior to the acquisition.
In order to fund the acquisition the Company issued 110,526,315 new ordinary
shares of 0.5 pence each in the capital of the Company at 4.75 pence per share
("the Placing").
EBTM paid #4.75 million to acquire Lowlife, which was settled:
* #1.5 million by way of an issue of 26,785,714 new ordinary shares in the
Company to Dale Masters, who owned 100% of the share capital in Lowlife ; and
* #3.25 million in cash, financed by the Placing.
Lowlife's products are marketed under a variety of brand names, some of which
are the subject of third party ownership and for which it pays royalties for the
right to use the brand name. Lowlife is predominately an accessories brand.
Atticus which is the single largest brand distributed by Lowlife was operated
under license until the subsequent acquisition of the brand IPR, further
detailed below.
Acquisition of Atticus Clothing Brand
The remaining funds from the Placing were used to acquire the intellectual
property rights relating to the Atticus clothing brand for which EBTM paid US
$4.2 m. This transaction was completed on 9 July 2007.
Benefits of the acquisitions
These acquisitions provide scale and a profitable operation for the Group,
creating a platform for continued rapid growth. Both revenue and cost synergies
are available to the Group as well as the benefits of the rights ownership and
the control of distribution.
The acquisition of the intellectual property in Atticus ensures that EBTM
controls the design process in house, no longer has to pay royalties for sales
on the brand and will itself be able to attract royalty income from sales of the
brand by overseas licensees.
The in-house design and sourcing capability (80% of Lowlife's sourcing is from
China) enables the further acceleration of "own brand" product which started in
2006.
In addition EBTM has created online stores for the Lowlife brand and the Atticus
brand on its own platform and will create single brand stores which cover Europe
for all the brands it distributes.
Since acquisition, the business has been trading well. This has been underpinned
by an order of some #800,000 from a major UK high street retailer. We continue
to exploit existing distribution channels and explore new ones both in the UK
and overseas.
The financial and operational management of the Group will be consolidated
creating cost synergies. At the time of writing the integration of the
businesses is going well and is nearly complete.
New Licenses
Post year end, we have also announced the acquisition of the wholesale
distribution rights for Adeline Clothing and Clandestine Industries and have
plans to create single brand online stores for them both. Both brands have
previously been good sellers for EBTM when imported from USA wholesalers.
The Team
We continue to develop an executive and non-executive team of the very highest
quality and with substantial plc board experience.
I joined the board in September 2006 and was appointed as Non-Executive Chairman
on 30th October 2006. Since December 2005 I have been Chairman of Western &
Oriental plc, an AIM quoted luxury travel company, having previously been the
Chief Financial Officer and a Main Board Director of lastminute.com plc until
March 2005. I helped grow lastminute.com from a market value of approximately
#30m to over #600m over a 4 year period.
On 30 July 2007, Simon Hargreaves joined the board as a Non Executive Director.
Simon, aged 44, was a member of the board of Vanco plc for 13 years. He started
his career at Vanco as Group Finance Director and has also been the Chief
Executive of Vanco Solutions, which is the main trading business. Simon was also
a director of the Lowlife Group of companies until their acquisition by EBTM
earlier on 2007. On 26 September 2007, Simon decided to leave Vanco to pursue
his other business interests..
On completion of the acquisition of Lowlife Dale Masters joined the Board. Dale
founded Lowlife Corporation in 2001. He successfully developed, manufactured and
marketed a number of leading music orientated youth culture brands, including
Atticus and Lowlife in the UK, Spain and internationally. Dale previously worked
for The French Connection Group PLC based in London and the Far East for five
years before establishing a successful sourcing and manufacturing company
supplying well known UK youth and street-wear brands.
Outlook
The Board remain confident that the Group will continue to make good progress in
the year ending 30 April 2008 as we move to profitability and cash generation.
The board are encouraged by current trading and expect the outcome for the year
to be in line with market expectations.
David Howell
Chairman
Consolidated Profit and Loss Account
For the year ended 30 April 2007
Note Restated (note 5)
Unaudited Audited
Year ended 62 Weeks to
30 April 2007 30 April 2006
# #
Turnover 1,354,447 158,477
Cost of Sales (704,726) (65,602)
Gross Profit 649,721 92,875
Administrative expenses (1,245,311) (435,968)
Loss before amortisation, depreciation,
interest and taxation (595,590) (343,093)
Amortisation and depreciation (88,218) (82,529)
Operating Loss (683,808) (425,622)
Interest payable (3,745) -
Interest receivable 25,983 31,953
Loss on Ordinary Activities
Before Taxation (661,570) (393,669)
Taxation 36,848 21,386
Loss on Ordinary Activities
After Taxation (624,722) (372,283)
Loss per share 4
Basic (0.61) (0.70)
Fully diluted (0.61) (0.70)
The profit and loss account has been prepared on the basis that all operations
are continuing operations.
There are no recognised gains and losses other than those passing through the
profit and loss account.
Consolidated Balance Sheet at 30 April 2007
Note Restated (note 5)
Unaudited Audited
2007 2007 2006 2006
# # # #
Fixed Assets
Intangible assets 1,432,329 1,511,903
Tangible assets 124,426 5,913
Deferred tax asset 58,234 21,386
1,614,989 1,539,202
Current Assets
Stock 433,643 130,004
Debtors 300,105 206,079
Cash at bank and in hand 617,710 768,942
1,351,458 1,105,025
Creditors: Amounts falling due
within one year (583,140) (255,793)
Net Current Assets 768,318 849,232
Total Assets less Current Liabilities 2,383,307 2,388,434
Creditors: Amounts falling due
after more than one year (16,273) (23,006)
Net Assets 2,367,034 2,365,428
Capital and Reserves
Called up share capital - equity 552,500 486,250
interests
Share premium account 2,617,425 2,180,175
Deferred compensation reserve 194,114 71,286
Profit and loss account (997,005) (372,283)
Shareholders' Funds 2,367,034 2,365,428
Consolidated Statement of Changes in Equity
For the year ended 30 April 2007
Audited Called Up Share Deferred Profit
Share Premium Compensation and loss
Capital Account Reserve account Total
# # # # #
At 18 February 2005 - - - - -
Share issue 486,250 - - - 486,250
Premium on allotment during - 2,180,175 - - 2,180,175
the year
Share options granted - - 71,286 - 71,286
Loss for the period - - - (372,283) (372,283)
At 30 April 2006 486,250 2,180,175 71,286 (372,283) 2,365,428
Unaudited Called Up Share Deferred Profit
Share Premium Compensation and loss
Capital Account Reserve account Total
# # # # #
At 1 May 2006 486,250 2,180,175 71,286 (372,283) 2,365,428
Share issue 66,250 - - - 66,250
Premium on allotment during the - 437,250 - - 437,250
year
Share options granted - - 122,828 - 122,828
Loss for the year - - - (624,722) (624,722)
At 30 April 2007 552,500 2,617,425 194,114 (997,005) 2,367,034
Consolidated Cash Flow Statement
For the year ended 30 April 2007
Note As restated (note 5)
Unaudited Audited
Year ended 62 weeks ended
30 April 30 April
2007 2006
# # # #
Net Outflow from Operating 1 (505,580) (428,662)
Activities
Returns on Investments and
Servicing of Finance
Interest paid (3,745) -
Interest received 25,983 31,953
Net Inflow from Returns on
Investments and Servicing of
Finance 22,238 31,953
Capital Expenditure and Financial
Investments
Purchase of tangible fixed assets (127,157) (7,315)
Net Cash Outflow from Capital
Expenditure and Financial Investments (127,157) (7,315)
Acquisitions and Disposals
Cash acquired on acquisition of
subsidiary - 11,802
Undertaking
Net Cash Flow from Acquisitions and
Disposals - 11,802
Net Cash Outflow before financing (610,499) (392,222)
Financing
Issue of ordinary share capital 503,500 1,166,425
Bank loans repaid (44,233) (72,500)
Bank loans advanced - 67,239
Net Cash Inflow from Financing 459,267 1,161,164
(Decrease)/ Increase in Cash 2,3 (151,232) 768,942
As restated
1 Reconciliation of Operating Loss to Net (note 5)
Cash Outflow from Operating Activities Unaudited Audited
Year ended 62 weeks ended
30 April 30 April
2007 2006
# #
Operating Loss (683,808) (425,622)
Depreciation 8,644 2,955
Amortisation 79,574 79,574
Share options 122,828 71,286
Increase in debtors (94,026) (114,195)
Increase in stock (303,639) (62,441)
Increase in creditors 364,847 19,781
Net Cash Outflow from Operating Activities (505,580) (428,662)
2 Reconciliation of Net Cash Flow to Movement in net (debt)/ cash As restated
(note 5)
Unaudited Audited
Year ended 62 weeks ended
30 April 30 April
2007 2006
# #
(Decrease)/ Increase in cash in the period (151,232) 768,942
Cash inflow from bank loans advanced - (67,239)
Loan acquired on acquisition of subsidiary undertaking - (72,500)
Cash outflow from bank loans repaid 44,233 72,500
Movement in net (debt)/ cash in the period (106,999) 701,703
3
Net cash at 1 May 701,703 -
Net cash at 30 April 594,704 701,703
3 Analysis of Changes in Net (Debt)/ Cash
Unaudited At 1 May Cash Other At 30 April
2006 Flow Movements 2007
# # #
Cash in hand, at bank 768,942 (151,232) - 617,710
Bank loans advanced (44,233) 44,233 (6,733) (6,733)
Bank loans repaid (23,006) - 6,733 (16,273)
701,703 (106,999) - 594,704
4 Loss per Share Unaudited Audited
Year ended 62 weeks ended
30 April 30 April
2007 2006
Pence Pence
Basic loss per share 0.61 0.70
Fully diluted loss per share 0.61 0.70
5 Prior year adjustment
During the year ended 30 April 2007, the Company adopted FRS20. This relates
to accounting for share based payments. As a result of this the results for
the period ended 30 April 2006 have been restated. The effect of this was
that an additional post tax charge of #49,900 was added to the loss for the
period. This resulted in the loss on ordinary activities after taxation
increasing from #322,383 to #372,283 and the net assets at 30 April 2006
increasing from #2,344,042 to #2,365,428.
6 Post balance sheet events
On 31 May 2007, the Company issued 110,526,315 new ordinary shares of 0.5
pence each in the capital of the Company at 4.75 pence per share ("the Placing").
On 31 May 2007, the Company entered into a contract to acquire the entire
issued share capital of Core Brands Limited. The main trading subsidiary of
Core Brands Limited was Lowlife Corporation Limited ("Lowlife"). Lowlife is
wholesaler and on-line retailer of clothing and accessories in the area of
music inspired fashion. For the year ended 31 December 2006, Lowlife
reported sales of #6.7m, and profits before tax of #646,000. At that date it
had net assets of #846,000.
EBTM paid #4.75 million to acquire Lowlife, settled as follows:
* 1.5 million by way of an issue of 26,785,714 new ordinary shares in the
company to Dale Masters, who owned 100% of the share capital in Lowlife;
and
* #3.25 million in cash, to be financed by the Placing.
The remaining US $4.2m raised by the Placing was used to acquire the
intellectual property rights relating to the Atticus clothing brand. This
transaction was completed on 9 July 2007.
7 Status of the financial information
The financial information set out in the announcement does not constitute
the company's statutory accounts within the meaning of section 240 of the
Companies Act 1985 for the year ended 30 April 2007 or the period ended 30
April 2006. The financial information for the period ended 31 April 2006 is
derived from the statutory accounts for that period which have been
delivered to the Registrar of Companies as adjusted as set out in note 5
above.
The auditors reported on those accounts; their report was unqualified and
did not contain a statement under section 237(2) or (3) Companies Act 1985.
The statutory accounts for the year ended 30 April 2007 will be finalised on
the basis of the financial information presented by the directors in the
preliminary announcement and will be delivered to the Registrar of Companies
following the company's Annual General Meeting.
The preliminary announcement has been prepared on the basis of the
accounting policies as stated in the financial statements for the year ended
30 April 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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