Annual
Report and
Accounts
2019
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7digital Group plc
Lower Lock
Water Lane
London
NW1 8JZ
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7digital Group plc
7digital Group plc
7digital Group plc
We are the Global Leader
in end-to-end digital
solutions
We partner with our clients to create unique captivating
music experiences that keep users connected and engaged.
Our Music Platform-as-a-Service and Branded music
solutions effortlessly remove complexity and keep our
clients ahead of the innovation curve.
Contents
2019 Overview
Chairman’s Statement
Chief Executive Officer’s Review
Chief Financial Officer’s Review
Strategic Report
Section 172 Statement
Board of Directors
Directors’ Report
Corporate Governance Statement
Directors’ Remuneration Report
Independent Auditors’ Report to the Members of 7digital Group plc
Consolidated Income Statement and Statement of Comprehensive Income for the Group
Consolidated Statement of Financial Position
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Parent Company Statement of Financial Position
Parent Company Statement of Changes in Equity
Notes to Parent Company Financial Statements
General Information and Advisors
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc2019 OVERVIEW2ND LINE
7digital Group plc
7digital Group plc
2019 OVERVIEW
2019 OVERVIEW
FINANCIAL HIGHLIGHTS
Year ended 31 December 2019
Group Revenue
£9.3 million
(2018: £19.9m)
Gross Margin
67.7 per cent
(2018: 74.0 per cent)
Group Revenue from
On-going Operations*
£8.2 million
(2018: £9.3m)
Gross Margin from
On-going Operations*
64.0 per cent
2018: 62.0 per cent
Gross Profit
£6.3 million
(2018: £14.7m)
Operating Loss
£5.6 million
(2018: £12.1m)
Adjusted EBITDA Loss
£2.8 million
(2018: £2.5m)
(see note 6 page 55 for definition)
Loss Per Share
0.47 pence
(2018: 2.97p)
*after excluding the
termination of Juke
contract (major customer)
during the year
NEW BOARD, INVESTMENT AND MANAGEMENT CHANGES
Newly appointed board leaders Tamir Koch and David Lazarus widely recognised for
technology entrepreneurship and executive leadership
£4.1 million funding in 2019, in cash and conversion of shareholders loans, to
reposition the company, stabilise the business and secure future growth
Paul Langworthy promoted to CEO and Michael Juskiewicz appointed CFO to
oversee implementation of new strategy
SUCCESSFULLY EXECUTING THE NEW STRATEGY
Repositioned 7digital as a music technology company and the global leader in B2B
music solutions
Streamlining the technology offering – supporting both established markets and
new business models and verticals with greater profit margins
Successfully delivered annualised cost savings of over £6.0 million, reducing
operational cost run rate by over 50% since beginning of the year
2
2
7digital Group PLC Annual Report and Accounts 2019
digital music services in new entertainment formats
7digital Group PLC Annual Report and Accounts 2019
New contract wins, contract expansions and renewals show growing demand for
2
7digital Group plc
CHAIRMAN’S STATEMENT
With a more stable financial platform in place, the Group has
been able to focus on delivering a world-leading, cloud-
based, music platform-as-a-service that provides true global
coverage at scale. By moving from bespoke modular
solutions to a highly productised technology offering, we are
now able to support a myriad of business use cases while
operating with much greater profit margins.
STAKEHOLDER ENGAGEMENT
Regular engagement, dialogue with and feedback from
7digital’s material internal and external stakeholders are
important to the success of 7digital and a core element of its
business model.
Understanding stakeholders’ views informs and assists the
decision-making processes and helps us to achieve our aims,
objectives and strategy. In keeping with the requirements of
Section 172 (1) of the UK Companies Act 2006, pages 10 to
11, record 7digital’s key stakeholder groups, their material
issues and how the Group engages with them. Each
stakeholder group requires a tailored engagement approach
to foster effective communication and mutually beneficial
relationships.
COVID-19
The rapid spread of the coronavirus and resulting COVID-19
global pandemic has had a small impact on the Group,
primarily on cash-in; management have taken action to
mitigate and minimise the effect. The Group was already
fully operational from home as a result of existing
infrastructure. 7digital is now showing strong commercial
momentum, a clearer and more defined strategy with
significant refinancing.
Finally, I would like to thank Paul Langworthy, our CEO,
Michael Juskiewicz, our CFO, and our Executive Team for
their efforts. Many thanks to my Board colleagues for their
considerable contribution. We all appreciate the dedication,
skills and professionalism of our employees.
Mostly, I would like to thank our loyal shareholders for their
ongoing support.
We all are committed to creating substantial value for our
shareholders. 7digital is well positioned to benefit from
growing markets, and I look forward to reporting on our
progress.
7digital Group plc
CHAIRMAN’S STATEMENT
Tamir Koch
Chairman
28 September 2020
I am pleased to present my maiden Annual Report and
Accounts which sets out how we’ve significantly advanced
7digital as a business by refocusing the strategy, securing the
financial support and putting in place the right management
team to execute on this strategy. Our excellent executive
team and employees deserve the credit for delivering the
financial and strategic results set out in this Annual Report.
We are proud of being a growing business and of the
important contributions we make to the industry and wider
society. At a time of uncertainty in the global economy, we
believe business has an important role to play in creating
opportunities across the globe. By growing and sustaining an
economically strong and responsible business over the long-
term, guided by a clear purpose, we make a positive and
significant impact not just for our clients and our people, but
also for the economy and society.
INVESTMENT AND REFOCUSED STRATEGY
I was proud to lead a group of successful entrepreneurs and
business leaders in providing the required financial support
to move the business forward. We have provided a cash
injection of £5m in the first 12 months of taking charge of
the Group. However, we also recognised that a change of
strategy and management team was required to suit the
changing business environment. We were pleased to
promote Paul Langworthy, the Group’s former COO to take
this business to the next level as the Chief Executive Officer.
He has not disappointed us. Working together, we set about
a plan to bring the business to break even as quickly as
possible.
This new strategy, as described in greater detail on pages 8
to 9, saw us considerably reduce our cost base by moving
away from the development and support of bespoke,
customer-specific services. From an operational standpoint,
this has enabled us to streamline our technology estate as
well as the associated costs and staffing levels. We also
retired a number of legacy radio technology services that
were no longer strategic for 7digital and improved our
technology efficiency through the use of cloud-based
services. As a result, we were able to reduce the Group’s
operational cost run rate by over 50% since the beginning of
the year and successfully deliver annualised cost savings of
over £6.0 million.
7digital Group PLC Annual Report and Accounts 2019
3
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7digital Group plc
7digital Group plc
2019 OVERVIEW
2019 OVERVIEW
FINANCIAL HIGHLIGHTS
Year ended 31 December 2019
Group Revenue
£9.3 million
(2018: £19.9m)
Gross Margin
67.7 per cent
(2018: 74.0 per cent)
Group Revenue from
On-going Operations*
£8.2 million
(2018: £9.3m)
Gross Margin from
On-going Operations*
64.0 per cent
2018: 62.0 per cent
Gross Profit
£6.3 million
(2018: £14.7m)
Operating Loss
£5.6 million
(2018: £12.1m)
Adjusted EBITDA Loss
£2.8 million
(2018: £2.5m)
(see note 6 page 55 for definition)
Loss Per Share
0.47 pence
(2018: 2.97p)
*after excluding the
termination of Juke
contract (major customer)
during the year
NEW BOARD, INVESTMENT AND MANAGEMENT CHANGES
Newly appointed board leaders Tamir Koch and David Lazarus widely recognised for
technology entrepreneurship and executive leadership
£4.1 million funding in 2019, in cash and conversion of shareholders loans, to
reposition the company, stabilise the business and secure future growth
Paul Langworthy promoted to CEO and Michael Juskiewicz appointed CFO to
oversee implementation of new strategy
SUCCESSFULLY EXECUTING THE NEW STRATEGY
Repositioned 7digital as a music technology company and the global leader in B2B
music solutions
Streamlining the technology offering – supporting both established markets and
new business models and verticals with greater profit margins
Successfully delivered annualised cost savings of over £6.0 million, reducing
operational cost run rate by over 50% since beginning of the year
New contract wins, contract expansions and renewals show growing demand for
digital music services in new entertainment formats
7digital Group PLC Annual Report and Accounts 2019
2
7digital Group plc
CHAIRMAN’S STATEMENT
With a more stable financial platform in place, the Group has
been able to focus on delivering a world-leading, cloud-
based, music platform-as-a-service that provides true global
coverage at scale. By moving from bespoke modular
solutions to a highly productised technology offering, we are
now able to support a myriad of business use cases while
operating with much greater profit margins.
STAKEHOLDER ENGAGEMENT
Regular engagement, dialogue with and feedback from
7digital’s material internal and external stakeholders are
important to the success of 7digital and a core element of its
business model.
Understanding stakeholders’ views informs and assists the
decision-making processes and helps us to achieve our aims,
objectives and strategy. In keeping with the requirements of
Section 172 (1) of the UK Companies Act 2006, pages 10 to
11, record 7digital’s key stakeholder groups, their material
issues and how the Group engages with them. Each
stakeholder group requires a tailored engagement approach
to foster effective communication and mutually beneficial
relationships.
COVID-19
The rapid spread of the coronavirus and resulting COVID-19
global pandemic has had a small impact on the Group,
primarily on cash-in; management have taken action to
mitigate and minimise the effect. The Group was already
fully operational from home as a result of existing
infrastructure. 7digital is now showing strong commercial
momentum, a clearer and more defined strategy with
significant refinancing.
Finally, I would like to thank Paul Langworthy, our CEO,
Michael Juskiewicz, our CFO, and our Executive Team for
their efforts. Many thanks to my Board colleagues for their
considerable contribution. We all appreciate the dedication,
skills and professionalism of our employees.
Mostly, I would like to thank our loyal shareholders for their
ongoing support.
We all are committed to creating substantial value for our
shareholders. 7digital is well positioned to benefit from
growing markets, and I look forward to reporting on our
progress.
7digital Group plc
CHAIRMAN’S STATEMENT
Tamir Koch
Chairman
28 September 2020
I am pleased to present my maiden Annual Report and
Accounts which sets out how we’ve significantly advanced
7digital as a business by refocusing the strategy, securing the
financial support and putting in place the right management
team to execute on this strategy. Our excellent executive
team and employees deserve the credit for delivering the
financial and strategic results set out in this Annual Report.
We are proud of being a growing business and of the
important contributions we make to the industry and wider
society. At a time of uncertainty in the global economy, we
believe business has an important role to play in creating
opportunities across the globe. By growing and sustaining an
economically strong and responsible business over the long-
term, guided by a clear purpose, we make a positive and
significant impact not just for our clients and our people, but
also for the economy and society.
INVESTMENT AND REFOCUSED STRATEGY
I was proud to lead a group of successful entrepreneurs and
business leaders in providing the required financial support
to move the business forward. We have provided a cash
injection of £5m in the first 12 months of taking charge of
the Group. However, we also recognised that a change of
strategy and management team was required to suit the
changing business environment. We were pleased to
promote Paul Langworthy, the Group’s former COO to take
this business to the next level as the Chief Executive Officer.
He has not disappointed us. Working together, we set about
a plan to bring the business to break even as quickly as
possible.
This new strategy, as described in greater detail on pages 8
to 9, saw us considerably reduce our cost base by moving
away from the development and support of bespoke,
customer-specific services. From an operational standpoint,
this has enabled us to streamline our technology estate as
well as the associated costs and staffing levels. We also
retired a number of legacy radio technology services that
were no longer strategic for 7digital and improved our
technology efficiency through the use of cloud-based
services. As a result, we were able to reduce the Group’s
operational cost run rate by over 50% since the beginning of
the year and successfully deliver annualised cost savings of
over £6.0 million.
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019
3
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7digital Group plc
7digital Group plc
CHIEF EXECUTIVE OFFICER’S REVIEW
CHIEF EXECUTIVE OFFICER’S REVIEW
Paul Langworthy
Chief Executive Officer
28 September 2020
Like the Chairman, I am also pleased to be reporting my
maiden Annual Report and Accounts
following my
appointment as Chief Executive Officer in July 2019. The
second half of 2019 was a period of critical changes and
refocused resources required to make a turnaround for the
company, customers and employees. By taking advantage of
the core technology and
industry relationships, the
management team and the Board successfully worked
together to lay the foundation for how we position, sell,
develop and deliver our technology to current and future
clients. The Group won new business, streamlined
operations and is on a path to financial stability.
By contrast, in the first half of 2019, the Group was
significantly impacted by the loss of our largest contract with
European retailer MediaMarktSaturn to provide the music
streaming service for its wholly owned subsidiary, Juke
Entertainment Gmbh (“Juke”). The Group had to take
immediate action and agreed the sale of select technology
from the company, and the transfer of staff to TDC Group
for a total consideration of €1.375m. This technology, which
was only used by one customer, had become unprofitable to
maintain.
As a result of the changes and progress made in the second
half, I am pleased to report that the Group’s revenue from
operations (after adjusting for the loss of the Juke contract)
declined only by 12% in 2019 to £8.2m. However, gross
profit%, on the same basis, increased by 2% to £5.2m. The
statutory operating loss for 2019 decreased 54% to £5.6m
(2018: £12.1m).
WINNING NEW BUSINESS AND RENEWING IMPORTANT
CONTRACTS
In spite of a difficult year and poor market sentiment, we
were able to renew existing customer contracts and sign
new deals with a number of innovative companies in fast-
growing sectors.
We signed an initial one-year deal with Dubset, a rights
technology company that identifies and collects royalties
within mix content. The Group also entered significant
partnerships in other fast-growing sectors.
In a key validation of our technology platform, Fender and
7digital worked together to bring Fender Songs to market.
Launched in October 2019, this new mobile app from global
music instruments manufacturer Fender allows aspiring
musicians to practice and play along with chords and lyrics
to millions of their favourite songs. The app uses 7digital’s
platform and audio fingerprinting service and global music
catalogue to identify and access the music being played,
extracting the chords for users in real time.
We were also awarded an initial one year-long contract to
provide our music-as-a-service platform in support of an
innovative new music streaming company. The full premium
service was launched in a single European market and is in
the process of rolling out to several additional countries.
This commercial momentum accelerated post year-end as
the Group’s music platform-as-a-service was used to launch
jazzed, the world’s first dedicated audio-visual streaming
jazz-influenced music. This deal
service for
epitomises the growing opportunity for premium streaming
services catering to more specific tastes, genres and
geographies.
jazz and
In addition to jazzed, we have signed multiple new contracts
and contract renewals. This includes a new contract to
power Single Music, a Shopify-integrated, direct-to-fan
distribution platform, as well as a contract renewal with
GrandPad, the first purpose-built tablet for people over the
age of 75. The Group has also renewed its contract with
Universal Music France to support its streaming service
through French MVNO La Poste Mobile, and fan-facing
music playlist service Digster.
7digital Group plc
CHIEF EXECUTIVE OFFICER’S REVIEW
COVID-19 AND OUTLOOK
7digital Group plc
CHIEF EXECUTIVE OFFICER’S REVIEW
As the gravity and impact of the COVID-19 public health
In addition to new diversification of streaming services and
emergency became clear, our
shift
to virtualised
models, we are seeing a number of trends emerge for which
applications and cloud-based storage ensured a seamless
we have a strong product-market fit and we see meaningful
and secure transition to remote working. As a result, we
growth and revenue opportunities from well-funded and
retained our full client roster, although some new contracts
enterprise businesses that consider music a vital component
and renewals in the pipeline were shifted from Q2 to Q3 or
in their own customer engagement and growth strategies.
Q4 2020. The Group also took the prudent step to
implement
further cost-saving measures, which are
These sectors include:
expected to generate in-year savings of approximately
•
Fitness and health: we are currently engaging with
£500k in 2021.
Looking to the future, I am upbeat about 7digital’s prospects
and the growing number of opportunities for us to capitalise
on with our best-in-breed music platform. Streaming is
being adopted by consumers at a staggering pace,
accounting for 56% of all music sales in 2019 and driving a
fifth consecutive year of growth, according to the IFPI. The
lockdowns implemented as a result of the coronavirus
pandemic have only further accelerated this adoption,
leading to a rise in home entertainment streaming as well as
other formats.
a number of fitness companies
looking to
incorporate new licensing models, digital content
and music services, ranging from virtual cycling
and running to more traditional gyms.
•
Social media platforms: following the success of
TikTok and the popularity of video and audio user-
generated
content, we
are
discussing
opportunities with several global companies that
are either similar services or more disruptive
variances to the existing offering.
•
Virtual-live market: the rapidly emerging live
stream market is attracting much attention and
we expect servicing operators in this space to
become a valuable new pillar in the 7digital
ecosystem.
7digital’s leading technology offering, global music
catalogue and industry expertise makes the Group well
placed to capitalise on the growing demand for digital
music services to improve existing customer offerings
and power new entertainment formats. With financially
supportive majority shareholders and an extensive
pipeline of deals, we are on track to achieve operational
profitability in the second half of 2020 and deliver value
for our shareholders.
4
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019
4
7digital Group PLC Annual Report and Accounts 2019
5
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7digital Group plc
CHIEF EXECUTIVE OFFICER’S REVIEW
7digital Group plc
CHIEF EXECUTIVE OFFICER’S REVIEW
COVID-19 AND OUTLOOK
shift
As the gravity and impact of the COVID-19 public health
emergency became clear, our
to virtualised
applications and cloud-based storage ensured a seamless
and secure transition to remote working. As a result, we
retained our full client roster, although some new contracts
and renewals in the pipeline were shifted from Q2 to Q3 or
Q4 2020. The Group also took the prudent step to
implement
further cost-saving measures, which are
expected to generate in-year savings of approximately
£500k in 2021.
Looking to the future, I am upbeat about 7digital’s prospects
and the growing number of opportunities for us to capitalise
on with our best-in-breed music platform. Streaming is
being adopted by consumers at a staggering pace,
accounting for 56% of all music sales in 2019 and driving a
fifth consecutive year of growth, according to the IFPI. The
lockdowns implemented as a result of the coronavirus
pandemic have only further accelerated this adoption,
leading to a rise in home entertainment streaming as well as
other formats.
7digital Group plc
CHIEF EXECUTIVE OFFICER’S REVIEW
In addition to new diversification of streaming services and
models, we are seeing a number of trends emerge for which
we have a strong product-market fit and we see meaningful
growth and revenue opportunities from well-funded and
enterprise businesses that consider music a vital component
in their own customer engagement and growth strategies.
These sectors include:
•
•
•
Fitness and health: we are currently engaging with
a number of fitness companies
looking to
incorporate new licensing models, digital content
and music services, ranging from virtual cycling
and running to more traditional gyms.
Social media platforms: following the success of
TikTok and the popularity of video and audio user-
generated
discussing
opportunities with several global companies that
are either similar services or more disruptive
variances to the existing offering.
Virtual-live market: the rapidly emerging live
stream market is attracting much attention and
we expect servicing operators in this space to
become a valuable new pillar in the 7digital
ecosystem.
content, we
are
7digital’s leading technology offering, global music
catalogue and industry expertise makes the Group well
placed to capitalise on the growing demand for digital
music services to improve existing customer offerings
and power new entertainment formats. With financially
supportive majority shareholders and an extensive
pipeline of deals, we are on track to achieve operational
profitability in the second half of 2020 and deliver value
for our shareholders.
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019
5
5
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7digital Group plc
7digital Group plc
CHIEF FINANCIAL OFFICER’S REVIEW
CHIEF FINANCIAL OFFICER’S REVIEW
Michael Juskiewicz
Chief Financial Officer
28 September 2020
INTRODUCTION
On 4 January 2019, the Group announced that its largest
customer, MediaMarktSaturn (“MMS”), had indicated that it
may wish to change the current arrangements and that 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 Group. On 1 March 2019, 7digital announced that it
had accepted settlement of, and release
from, all
outstanding contracts and commitments relating to the Juke
music service for an immediate payment by Juke of
€4,000,000. Further, Juke agreed to write off all interest
payments and £250,000 of the principal amount of the
convertible loan note issued to Juke (as announced on 26
October 2018). 7digital settled a further £500,000 balance of
the convertible loan note principal amount from the
proceeds of the Agreement.
Following the loss of the MMS contracts, the platform was
used by only one customer and had become unprofitable for
the Group to maintain. On 2 May 2019, the Group
announced the sale of bespoke technology from the Danish
business and transfer of staff to TDC Group (“TDC”), the
largest telecommunications company in Denmark. The sale
transferred control of bespoke technology, and the
resources to maintain it, to TDC.
The consideration was €1.375m, of which £1.0m was paid to
7digital in cash during 2019 being equivalent to the net value
of the assets sold. The remainder of the cash consideration
was retained by TDC to cover certain potential liabilities of
which £47k was released by TDC to the Group in April 2020
to the extent that it is not required to meet such liabilities
and is subject to customary post-closing adjustments. The
annualised losses eliminated from the business totalled
around £1.6m. This sale meant that 7digital would focus its
resources on its productised, cloud-hosted technology.
On 13 May 2019, Magic Investments S.A. (a technology
investment holding company)
the
remaining loans from the existing shareholders at face value
of £0.6m.
("Magic") bought
of, 634,132,641 shares at 0.01 pence per share, to raise £1.3
million (before expenses). On the same date, Magic agreed
to capitalise the outstanding £585,932 principal and accrued
interest of the Convertible Loan Notes at the Exchange Price
of 0.02p into 332,915,704 shares with a discount of 12%. A
number of changes to the Board were proposed, conditional
upon the passing of the Resolutions at the General Meeting
held on 25 June 2019.
On 18 July 2019, Paul Langworthy, the Group's current Chief
Operating Officer and key contributor to the revised
business strategy, succeeded John Aalbers as Chief
Executive Officer and as a Director of the Group. With my
background as the CFO of eMusic, I took on the role of Chief
Financial Officer and was appointed to the Board on 20
September 2019.
On 20 September 2019, the Group announced that it had
raised a
further £1.88m through a subscription of
937,900,000 new Ordinary shares of 0.01 pence to new and
existing shareholders.
On 25 September 2019, the Group announced that it had
completed an oversubscribed conditional Placing. The
Placing of 130,848,460 new Ordinary Shares raised
approximately £0.3 million (before expenses) at an issue
price of 0.01 pence per share on 4 October 2019.
During the year the Group secured a total of £4.1 million
(gross) in funding.
RESULTS AND FINANCIAL KEY PERFORMANCE INDICATORS
The Group’s revenue from operations (after adjusting for
the loss of the Juke contract as shown on the table on page
7) declined by 12% in 2019 to £8.2m (2018: £9.3m).
On-going gross profit% increased to 64.0%, a rise of 2
percentage points to £5.2m, as a result of growth in high-
margin B2B licensing revenues which now represents a
greater share of the total sales mix. The statutory operating
loss for 2019 decreased 54% to £5.6m (2018: £12.1m). The
adjusted EBITDA loss for 2019 increased 10% to £2.8m
(2018: £2.5m) and this is reconciled to the operating loss in
note 6 on page 55.
The decrease in 2019 statutory operating loss is due to
decrease in administration expenses by 52.1% largely due to
the significant payroll and technology cost reductions
implemented by the new management under Paul
Langworthy, the incoming CEO, to align the business with
the new strategy going forward.
On 7 June 2019, a consortium, comprising Magic and Shmuel
Koch Holdings Limited (“SKH”) subscribed for, an aggregate
The loss per share decreased by 84% to 0.47 pence (2018:
2.97 pence).
7digital Group plc
7digital Group plc
CHIEF FINANCIAL OFFICER’S REVIEW
CHIEF FINANCIAL OFFICER’S REVIEW
Revenue
2019 reported
2019
ongoing*
2018 reported
£’000
2018
ongoing*
Change
ongoing*
Change
ongoing*
£’000
5,341
2,390
1,572
9,303
6,297
68.0%
£’000
4,227
2,390
1,572
8,189
5,239
64.0%
13,410
3,933
2,569
19,912
14,727
74.0%
£’000
4,046
2,704
2,569
9,319
5,816
62.0%
%
4%
-12%
-39%
-12%
-10%
181
-314
-997
-1,130
-577
+2.0%
Licensing revenue
Content
Creative
Total Revenues
Gross Margin
Gross Margin%
Expenditure
Administrative expenses
2019 £’000
2018 £’000
Underlying Administrative Expenses
Other Adjusted Administrative Expenses
Total Administrative expenses
11,235
1,802
13,037
19,918
7,305
27,223
Change
-8,683
-5,503
14,186
%
-43.6%
-52.1%
* after excluding the termination of Juke contract (major customer) during the year
OTHER ADJUSTING ITEMS
Other adjusting items for the year total £1.8m of which
holder in respect of a tranche of the Facility, due to non-
£0.7m relates to corporate restructuring, £0.5m to legal fees
payment of interest. The Notice related to outstanding
relating to fund raising and contingency planning, £0.4m of
Facility and interest amounting to £325,570. Following
expenses and provisions relating to the closure of the Danish
receipt of the Notice, the outstanding amount became due
business and £0.2m as a legal provision for an ongoing
and payable by 3 May 2019. The remaining tranche under
On 11 April 2019 the Group received a notice from the
litigation issue.
DIVIDEND
current year.
SHAREHOLDER LOANS
During the year, 7digital did not pay an interim or final 2019
dividend (2018: no interim or final 2018 dividend). The
Board of directors is not proposing a final dividend in the
On 8 February 2019, the Group received notice of
conversion from one holder
in respect of £193,858
(including interest) of the Facility at a conversion price of 1p
pursuant to which 19,385,843 ordinary shares were issued.
Following conversion an aggregate of £1,311,691 of the
facility remained outstanding.
On 1 March 2019, the Group agreed to a €4m settlement
from MMS under the MMS Settlement Agreement noted
above. Out of the loan payable of £0.75m plus accrued
interest of £27k, £0.5m was settled against the above €4m
and £0.25m, together with the accrued interest of £27k, was
forgiven by MMS. Following settlement of MMS’s share of
the Facility, an aggregate of £561,691 of the facility
remained outstanding.
the Facility of £0.25m plus accrued interest remained
outstanding to another loan note holder.
On 13 May 2019 the remaining Facility was sold to Magic.
Magic entered into a standstill agreement with the Group
pursuant to which it agreed not to seek early redemption or
conversion of the Facility before 30 June 2019 except in
certain limited circumstances (including a major equity
issuance or the insolvency of the Group).
On 7 June 2019 Magic agreed to capitalise the outstanding
£585,932 principal and accrued interest of the Facility held
by it into 332,915,704 new Ordinary Shares (at a 12 per cent.
discount to the Issue Price).
CASH AND CASH FLOW
As of 31 December 2019, the Group had a cash balance of
£0.1m (2018: £0.5m).
Net cash outflows in 2019 totalled £0.3m (2018: outflow
£6.4m). The reduction was largely driven from a decrease in
operating cash outflow of 38% as a result of the effective
cost
reduction efforts
implemented by
the new
management team,
issuance of share capital to the
consortium and the sale of the Danish platform.
6
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7digital Group plc
CHIEF FINANCIAL OFFICER’S REVIEW
7digital Group plc
CHIEF FINANCIAL OFFICER’S REVIEW
7digital Group plc
CHIEF FINANCIAL OFFICER’S REVIEW
Revenue
2019 reported
£’000
Licensing revenue
Content
Creative
Total Revenues
Gross Margin
Gross Margin%
Expenditure
5,341
2,390
1,572
9,303
6,297
68.0%
2019
ongoing*
£’000
4,227
2,390
1,572
8,189
5,239
64.0%
2018 reported
£’000
13,410
3,933
2,569
19,912
14,727
74.0%
2018
ongoing*
£’000
4,046
2,704
2,569
9,319
5,816
62.0%
Change
ongoing*
%
4%
-12%
-39%
-12%
-10%
Change
ongoing*
181
-314
-997
-1,130
-577
+2.0%
Administrative expenses
2019 £’000
2018 £’000
Underlying Administrative Expenses
Other Adjusted Administrative Expenses
Total Administrative expenses
11,235
1,802
13,037
19,918
7,305
27,223
Change
-8,683
-5,503
14,186
%
-43.6%
-52.1%
* after excluding the termination of Juke contract (major customer) during the year
OTHER ADJUSTING ITEMS
Other adjusting items for the year total £1.8m of which
£0.7m relates to corporate restructuring, £0.5m to legal fees
relating to fund raising and contingency planning, £0.4m of
expenses and provisions relating to the closure of the Danish
business and £0.2m as a legal provision for an ongoing
litigation issue.
DIVIDEND
During the year, 7digital did not pay an interim or final 2019
dividend (2018: no interim or final 2018 dividend). The
Board of directors is not proposing a final dividend in the
current year.
SHAREHOLDER LOANS
On 8 February 2019, the Group received notice of
in respect of £193,858
conversion from one holder
(including interest) of the Facility at a conversion price of 1p
pursuant to which 19,385,843 ordinary shares were issued.
Following conversion an aggregate of £1,311,691 of the
facility remained outstanding.
On 1 March 2019, the Group agreed to a €4m settlement
from MMS under the MMS Settlement Agreement noted
above. Out of the loan payable of £0.75m plus accrued
interest of £27k, £0.5m was settled against the above €4m
and £0.25m, together with the accrued interest of £27k, was
forgiven by MMS. Following settlement of MMS’s share of
the Facility, an aggregate of £561,691 of the facility
remained outstanding.
On 11 April 2019 the Group received a notice from the
holder in respect of a tranche of the Facility, due to non-
payment of interest. The Notice related to outstanding
Facility and interest amounting to £325,570. Following
receipt of the Notice, the outstanding amount became due
and payable by 3 May 2019. The remaining tranche under
the Facility of £0.25m plus accrued interest remained
outstanding to another loan note holder.
On 13 May 2019 the remaining Facility was sold to Magic.
Magic entered into a standstill agreement with the Group
pursuant to which it agreed not to seek early redemption or
conversion of the Facility before 30 June 2019 except in
certain limited circumstances (including a major equity
issuance or the insolvency of the Group).
On 7 June 2019 Magic agreed to capitalise the outstanding
£585,932 principal and accrued interest of the Facility held
by it into 332,915,704 new Ordinary Shares (at a 12 per cent.
discount to the Issue Price).
CASH AND CASH FLOW
As of 31 December 2019, the Group had a cash balance of
£0.1m (2018: £0.5m).
Net cash outflows in 2019 totalled £0.3m (2018: outflow
£6.4m). The reduction was largely driven from a decrease in
operating cash outflow of 38% as a result of the effective
cost
the new
management team,
issuance of share capital to the
consortium and the sale of the Danish platform.
reduction efforts
implemented by
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
7digital Group plc
STRATEGIC REPORT
STRATEGIC REPORT
Strategy and Business model
Principal risks and uncertainties
7digital is the global leader in B2B end-to-end digital music solutions. The core of our business is the provision of robust and scalable
technical infrastructure combined with extensive global music rights used to create music streaming and radio services for a diverse
range of customers – including consumer and social media brands, online fitness companies, mobile carriers, broadcasters,
automotive systems, record labels and retailers. We also offer radio production and music curation services.
Our strategy is to grow revenues, profitability and shareholder returns through:
• Offering flexible, productised, end-to-end music solutions;
•
•
•
•
•
Increasing the number of clients we serve in strategic, well-funded market verticals;
Improving the financial quality of our business by driving recurring SaaS and PaaS revenues;
Expanding and leveraging our geographic coverage;
Continued investment in market leading technology to meet shifting technology trends, user consumption, and client needs;
Applying strict control of our cost base to ensure that revenue growth is quickly reflected in improved overall Group
profitability; and
Establishing and maintaining a partner channel program for scaling sales into the identified target market verticals.
•
7digital’s core platform provides its customers with access to cloud-based software. 7digital operates business–to–business
technology and music services (Licensing revenue), business–to–consumer music services under the 7digital brand (Content
revenue), and content production under the 7digital Creative brand.
Licensing
7digital’s core business is to provide an API for third parties that wish to create digital
music services, either standalone or bundled within their own device or product
offering. 7digital’s platform simplifies access to music by offering a combination of a
licensed music catalogue alongside the cloud-based technology platform and client-
side software, being software hosted by 7digital’s clients. These are needed to create
on-demand music streaming and download services, radio style services and other
services. The 7digital platform is open, with open-source code to reduce complexity
and time to market for its potential customers and can be used for building products
on any type of connected device
The Group’s revised strategy has seen it aggressively target enterprise customers with
large, existing consumer bases of their own. 7digital’s primary offering to these
customers would be an API-based “turn-key” music services platform, which enterprises can leverage to service any model or
business needs.
Typically, customers pay a set-up fee and monthly licence fees for using the 7digital platform and 7digital will also take a revenue
share of any music-based revenue generated by the service, including transaction or subscription revenues.
In addition to providing an open API-based platform from which third parties can build their own services 7digital has obtained
music licences in many countries in regions including North America, Latin America, Europe, Asia-Pacific and Africa. These licences
are obtained from hundreds of individual record labels, music publishers and music collecting societies. Music licences vary from
country to country and by usage type.
Content
7digital.com is a licensed digital music store available in almost 20 countries. The 7digital.com music download store offers a
catalogue of high-quality digital music from the major labels and independent aggregators in Europe, North America and parts of
Asia-Pacific. Users have the option to download their purchases as zip files or by using the 7digital download manager to input
directly into their media player of choice. 7digital has apps for different devices as well as an HTML5, mobile optimised web store.
Creative
7digital produces approximately 1,200 hours of video and audio content every year. The content companies benefit from regular
commissions from BBC’s national radio networks as well as one-off commissions from other broadcasters, such as Sky Television.
Key programmes include ‘Sounds of the Sixties’ and ‘Pick of the Pops’ on Radio 2, ‘Radcliffe and Maconie Show’ on Radio 6 and
‘Folk Show’ on Radio 2. Our Entertainment News content is distributed to around 150 commercial radio stations.
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7digital Group plc
STRATEGIC REPORT
7digital Group plc
STRATEGIC REPORT
The Group has received significant funding since the middle of 2019 and early 2020. On 3 September 2020, the Group raised £6m
(gross) of new equity financing and on 28 September 2020 secured a revolving credit facility of £1m. This money will see the
business reach profitability in the second half of 2020.
There is a risk that the global pandemic could slow the anticipated demand for the Group’s services or that customers may
terminate their contracts. However, with the execution of the revised strategy, the directors believe that the Group is well placed
to grow the business, even with a focus on reducing costs.
The Group is a “b2b” provider of services to customers that may be in competition with companies that are seen as industry
leaders. It is possible that developments by either the direct competition, or the competitors to customers, will render the Group’s
current and proposed products and services obsolete. However, 7digital’s position in the market and strong relationship with the
major record companies mean we have huge support to help grow the market by significantly lowering the barriers to entry for
new services and formats for music consumption outside of the £9.99 All You Can Eat subscription service. The Group’s product
roadmap is regularly evaluated against the developing marketplace to ensure that we remain competitive.
The market in which the Group operates has seen a number of significant changes, such as the shift from physical sales, to digital
downloads, and then onto streaming. The Group’s competitors, or the competitors of the Group’s customers, may announce or
develop new products, services or enhancements that better meet the needs of customers or the end consumers. Further, new
competitors, or alliances among competitors, could emerge. Increased competition may cause price reductions, reduced gross
margins and loss of market share, any of which could have a material adverse effect on the Group’s business, financial condition
and results of operations.
The directors believe that the overall market for the Group’s products and services will continue to grow and that its success will
be driven by how well it can execute in the market. The Group subscribes to the leading music market research service MIDiA and
holds regular meetings with their leading analyst to monitor trends in the marketplace and therefore anticipate developments.
There can, however, be no assurance that growth in the market for its products and services will occur at the rate envisaged by
the Group.
7digital Group PLC Annual Report and Accounts 2019
9
7digital Group plc
STRATEGIC REPORT
7digital Group plc
STRATEGIC REPORT
Principal risks and uncertainties
7digital Group plc
STRATEGIC REPORT
The Group has received significant funding since the middle of 2019 and early 2020. On 3 September 2020, the Group raised £6m
(gross) of new equity financing and on 28 September 2020 secured a revolving credit facility of £1m. This money will see the
business reach profitability in the second half of 2020.
There is a risk that the global pandemic could slow the anticipated demand for the Group’s services or that customers may
terminate their contracts. However, with the execution of the revised strategy, the directors believe that the Group is well placed
to grow the business, even with a focus on reducing costs.
The Group is a “b2b” provider of services to customers that may be in competition with companies that are seen as industry
leaders. It is possible that developments by either the direct competition, or the competitors to customers, will render the Group’s
current and proposed products and services obsolete. However, 7digital’s position in the market and strong relationship with the
major record companies mean we have huge support to help grow the market by significantly lowering the barriers to entry for
new services and formats for music consumption outside of the £9.99 All You Can Eat subscription service. The Group’s product
roadmap is regularly evaluated against the developing marketplace to ensure that we remain competitive.
The market in which the Group operates has seen a number of significant changes, such as the shift from physical sales, to digital
downloads, and then onto streaming. The Group’s competitors, or the competitors of the Group’s customers, may announce or
develop new products, services or enhancements that better meet the needs of customers or the end consumers. Further, new
competitors, or alliances among competitors, could emerge. Increased competition may cause price reductions, reduced gross
margins and loss of market share, any of which could have a material adverse effect on the Group’s business, financial condition
and results of operations.
The directors believe that the overall market for the Group’s products and services will continue to grow and that its success will
be driven by how well it can execute in the market. The Group subscribes to the leading music market research service MIDiA and
holds regular meetings with their leading analyst to monitor trends in the marketplace and therefore anticipate developments.
There can, however, be no assurance that growth in the market for its products and services will occur at the rate envisaged by
the Group.
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7digital Group plc
STRATEGIC REPORT
Section 172
Cost control and cash management
7digital Group plc
STRATEGIC REPORT
Section 172
As part of the comprehensive cost reduction programme and the Group reorganisation, headcount was reduced through employee
redundancies and termination of contractors. Operational expenses were further reduced by the rationalisation of external
vendors.
Approved by the Board of Directors and signed on behalf of the Board,
Paul Langworthy
CEO
28 September 2020
Lower Lock, Water Lane, London, NW1 8JZ
7digital Group plc
7digital Group plc
STRATEGIC REPORT
STRATEGIC REPORT
Section 172
Section 172
Section 172 of the Companies Act requires that a director of the Group is managing in the best interests of all stakeholders –
Customers, Suppliers, Employees and Shareholders.
In the spirit of above, the Directors of 7digital, strive to maintain a reputation for high but fair standards in the best interest of its
stakeholders.
Our primary focus is on our customers and here we regard our relationships and channels of communications of paramount
importance. We operate in a sensitive environment between Right holders and Service Providers, Commercial Entities and Brands,
and as such ensure that we meet all the standards required by our Customers and our Suppliers, such as Privacy, Information
Governance, Reporting and Rights Compliance.
The Board is focused on delivering value for Shareholders underpinned by motivated Employees delivering "ahead of the curve"
technology solutions to market and above average delivery of service to customers. In achieving the foregoing, the Group focuses
on continued strategic innovation via a policy of market validation and product development funded through organic investment
plus capital raises, as agreed at shareholder meetings, and supported by clearly communicated vision and direction.
In our communication to Shareholders the Board is clear in terms of its short, medium and long-term strategy and maintains an
open-door approach to Shareholders seeking additional clarity on any issue. The Board release notices on a regular basis informing
Shareholders of developments in areas of business progress, non-confidential strategic decisions and any change to Group policy.
Risks and opportunities are set out in this strategic review.
Employees
The Group is small and, while clear management structures are in place, all Employees, if required, have direct access to the
Executive Directors daily and, if necessary, to the Chairman. The Group retains HR services to ensure the fair and equitable
treatment of Employees. The Group promotes a policy of promoting from within supported by training and mentorship. We
encourage diverse thinking and recognise strengths and contribution to the business. Finally, we recognise that as a responsible
organisation we identify and deliver on our social responsibility. In late 2019, we have established an approach to engaging with
colleagues to take their perspectives into account in our decision making and planning and share with them our strategy and
progress in regular all hands meetings. Our employee opinion survey, first launched in 2019, told us that:
-
-
-
93% of employees say that they feel their colleagues are at a “high” or “good” engagement
84% of employees say they feel valued
85% feel that their work fits their strengths
The results from our employee opinion survey help shape how we run the business and the focus on areas that will make a real
difference to our colleagues, such as managing stress, networking cross-company, and take advantage of 360 reviews to improve
cross-level communication. Finally, we recognise that as a responsible organisation we identify and deliver on our social
responsibility.
Customers
We engage and build our relationships with our customers in a number of ways, from tech- and product-driven updates that
improve efficiency and transparency in operations and standards of performance, to our face-to-face interactions with our “white
glove” standard customer service. In the last 12 months, we developed new services to improve our engagement with clients
including quarterly business reviews to report on account performance, user and account level analytics, technology roadmap, and
new partnerships supported. In addition, we have introduced a questionnaire to gather important feedback from the QBR and gain
further insight into 7digital’s performance to further deliver on specific customer interests.
Fundraising
During the year, as detailed in the Chief Financial Officer’s Review on pages 6 to 7, the Group raised £4.1m through funding; £3.3m
of which was received in cash and £0.8m was funded by the conversion of the principal and accrued interest balances of the
Shareholder loans.
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
STRATEGIC REPORT
Section 172
7digital Group plc
STRATEGIC REPORT
Section 172
Cost control and cash management
7digital Group plc
STRATEGIC REPORT
Section 172
As part of the comprehensive cost reduction programme and the Group reorganisation, headcount was reduced through employee
redundancies and termination of contractors. Operational expenses were further reduced by the rationalisation of external
vendors.
Approved by the Board of Directors and signed on behalf of the Board,
Paul Langworthy
CEO
Lower Lock, Water Lane, London, NW1 8JZ
28 September 2020
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7digital Group plc
7digital Group plc
GOVERNANCE
GOVERNANCE
Board of Directors
Board of Directors
7digital Group plc
GOVERNANCE
Board of Directors
7digital Group plc
GOVERNANCE
Board of Directors
EXECUTIVE DIRECTORS (presently in office):
INDEPENDENT NON‐EXECUTIVE DIRECTORS (presently in office):
Paul Langworthy, Chief Executive Officer (appointed 18 July 2019)
Paul Langworthy was appointed CEO of 7digital in July 2019, to lead the restructuring and
repositioning of the Group as a global leader in B2B music solutions. Under his leadership, the
Group has refocussed to capitalize on the flexibility and scalability of the 7digital platform
technology and catalogue to power unique and diversified customer experiences on behalf of
enterprises and brands in the music streaming space. Previously COO, Paul was responsible for
organizing the business to meet its strategic goals and objectives. Paul joined 7digital in April 2013
and has become a driving force in the Group's operations. Initially managing the Group's content
supply chain, he later took leadership of 7digital's Client Operations teams. Paul also oversaw
operations within the Production businesses that became part of 7digital Group plc following the
2014 merger with UBC Media. With 18 years of experience in digital and content operations, Paul
has worked across all aspects of the digital supply chain including metadata, rights, scheduling, asset
management and distribution. Prior to 7digital, Paul oversaw Content Operations at digital TV
service YouView. He also spent over nine years with Universal Music Group within the label's
International Digital Supply Chain Management division.
Michael Jusekwicz, Chief Financial Officer (appointed 20 September 2019)
Michael is an experienced technology, media and finance executive who currently also holds the
position of CFO & Head of Corporate Development at eMusic. Michael spent over 10 years working
in investment banking, mergers & acquisitions, and capital markets at the TMT groups of Bank of
America Merrill Lynch, Nomura, and Cyndx. Michael has also acted as interim CFO of Export Now, a
cross border focused e-commerce company, and gained experience working for the international
accounting firm BDO. He holds an MBA from the University of Chicago Booth School of Business and
a Bachelor of Science with a double major in both Accounting and Economics from Tel Aviv
University. Michael was appointed the Group Company Secretary on 25 September 2019.
.
NON-EXECUTIVE DIRECTORS (presently in office):
Tamir Koch, Chair (appointed 14 July 2019)
Koch is President TriPlay Inc. an online music and audiobook store and brand which started trading
in 1998 and is focused on discovery and sales of independent music and artists. Most recently Tamir
has led the eMusic Blockchain Project, seeking to provide a decentralised approach to music
distribution and rights management to facilitate the utilisation of blockchain within the music
industry. Tamir has previously founded several successful start-ups including Orca Interactive and
Dotomi. Orca was sold to Emblaze Systems in 2000, which then floated Orca on AIM. It was
subsequently acquired by France Telecom in 2008. Dotomi was acquired by ValueClick in 2011.
David Lazarus, (appointed 14 July 2019)
David is an industrialist and international entrepreneur. David spent six years at Lloyds of London as
an accredited Lloyds Broker attending to Insurance and Re‐Insurance. David is currently an Executive
Director of the RAM Hand‐to‐Hand Couriers Group, a leader in the Courier, Logistics and Express
Parcel Industry in Southern Africa. The RAM Group operates from approximately 40 hubs, with
approximately 1,700 vehicles and over 2,800 staff across Southern Africa. David is also a member of
the Young Presidents Organisation. David has been involved in several international businesses,
including having knowledge of the various investments of Magic.
Mark Foster
Mark has spent much of his career in the music industry, in a succession of Marketing and
International roles for all three major labels, including time in Paris as Marketing Director
for Warner Music France. Returning to London as Vice President of European Marketing, Foster
oversaw pan‐regional marketing strategy before founding Warner Music International’s New
Media Division. After leaving Warner, he launched and ran Deezer in the UK and Ireland, then was
appointed CEO for Arts Alliance, a leading global player in Event Cinema. Since 2015, he has
developed a portfolio of NED and chair roles for a range of businesses, including highly respected
entertainment analysts MIDiA Research, and has led the digital transformation strategy for Moat
Homes, a major Housing Association. In addition, he acts as advisor and brand ambassador for a
number of start‐ups and scale‐ups in the digital entertainment and creative industries.
Helen Patricia Gilder (appointed 6 February 2020)
Helen brings a wealth of experience from her time as CFO at AIM‐listed ZOO Digital Group plc,
where she was part of the team taking the business from tech start up to success in the
international entertainment industry. Since leaving ZOO in 2018 Helen has built a portfolio of NED
and advisory roles in a range of businesses and is chairperson of a small charity. Helen qualified
with the Institute of Chartered Accountants in England and Wales in 1991.
PREVIOUS EXECUTIVE DIRECTORS (who served during part of the year):
John Aalbers, Chief Executive Officer (appointed April 2019 resigned 18 July 2019)
John has an extensive track record, specialising in building early and mid‐stage technology companies. His most recent role was as
CEO of Arts Alliance Media where he established the company as the undisputed leader in operational support software for the
cinema industry, before managing the successful sale to Luxin Rio of China. Prior to that, John was in the Telecommunications
sector where he held roles including CEO of Volubill and numerous senior positions with CGI and Intec Telecom Systems (now CSG
International).
among others.
Julia Hubbard, Chief Financial Officer (appointed April 2019 resigned 19 September 2019)
She is an accomplished CFO with experience in building high‐growth companies and managing strategic turnarounds. Julia has
valuable expertise in business direction, financial strategy, debt and equity fundraising, investor and stakeholder relationship
management, and M&A management. Julia has held senior positions throughout the TMT, travel, construction, engineering and
publishing sectors, including roles at AIM‐listed Amino Technologies, lastminute.com Group, CSC Media and TV Travel Group,
Simon Cole, Chief Executive Officer (resigned 1 April 2019)
Simon co‐founded The Unique Broadcasting Company Limited in 1989 in partnership with Tim Blackmore, having pioneered the
market for national sponsored programmes whilst at Piccadilly Radio, where he was Head of Programmes. Unique floated on the
London Stock Exchange as part of UBC Media Group plc with Simon as Chief Executive and in 2014, UBC merged with 7digital via a
reverse takeover. Simon has been awarded a fellowship of the Radio Academy and is also a Non‐executive Director at Melody VR
which is a part of EVR Holdings plc. Simon was appointed as an advisor of the Group from 1 June 2020.
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7digital Group plc
GOVERNANCE
Board of Directors
7digital Group plc
GOVERNANCE
Board of Directors
7digital Group plc
GOVERNANCE
Board of Directors
INDEPENDENT NON‐EXECUTIVE DIRECTORS (presently in office):
Mark Foster
Mark has spent much of his career in the music industry, in a succession of Marketing and
International roles for all three major labels, including time in Paris as Marketing Director
for Warner Music France. Returning to London as Vice President of European Marketing, Foster
oversaw pan‐regional marketing strategy before founding Warner Music International’s New
Media Division. After leaving Warner, he launched and ran Deezer in the UK and Ireland, then was
appointed CEO for Arts Alliance, a leading global player in Event Cinema. Since 2015, he has
developed a portfolio of NED and chair roles for a range of businesses, including highly respected
entertainment analysts MIDiA Research, and has led the digital transformation strategy for Moat
Homes, a major Housing Association. In addition, he acts as advisor and brand ambassador for a
number of start‐ups and scale‐ups in the digital entertainment and creative industries.
Helen Patricia Gilder (appointed 6 February 2020)
Helen brings a wealth of experience from her time as CFO at AIM‐listed ZOO Digital Group plc,
where she was part of the team taking the business from tech start up to success in the
international entertainment industry. Since leaving ZOO in 2018 Helen has built a portfolio of NED
and advisory roles in a range of businesses and is chairperson of a small charity. Helen qualified
with the Institute of Chartered Accountants in England and Wales in 1991.
PREVIOUS EXECUTIVE DIRECTORS (who served during part of the year):
John Aalbers, Chief Executive Officer (appointed April 2019 resigned 18 July 2019)
John has an extensive track record, specialising in building early and mid‐stage technology companies. His most recent role was as
CEO of Arts Alliance Media where he established the company as the undisputed leader in operational support software for the
cinema industry, before managing the successful sale to Luxin Rio of China. Prior to that, John was in the Telecommunications
sector where he held roles including CEO of Volubill and numerous senior positions with CGI and Intec Telecom Systems (now CSG
International).
Julia Hubbard, Chief Financial Officer (appointed April 2019 resigned 19 September 2019)
She is an accomplished CFO with experience in building high‐growth companies and managing strategic turnarounds. Julia has
valuable expertise in business direction, financial strategy, debt and equity fundraising, investor and stakeholder relationship
management, and M&A management. Julia has held senior positions throughout the TMT, travel, construction, engineering and
publishing sectors, including roles at AIM‐listed Amino Technologies, lastminute.com Group, CSC Media and TV Travel Group,
among others.
Simon Cole, Chief Executive Officer (resigned 1 April 2019)
Simon co‐founded The Unique Broadcasting Company Limited in 1989 in partnership with Tim Blackmore, having pioneered the
market for national sponsored programmes whilst at Piccadilly Radio, where he was Head of Programmes. Unique floated on the
London Stock Exchange as part of UBC Media Group plc with Simon as Chief Executive and in 2014, UBC merged with 7digital via a
reverse takeover. Simon has been awarded a fellowship of the Radio Academy and is also a Non‐executive Director at Melody VR
which is a part of EVR Holdings plc. Simon was appointed as an advisor of the Group from 1 June 2020.
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7digital Group plc
GOVERNANCE
GOVERNANCE
Board of Directors
Board of Directors
7digital Group plc
GOVERNANCE
Directors’ Report
7digital Group plc
GOVERNANCE
Directors’ Report
Pete Downton, Deputy Chief Executive Officer (resigned 8 March 2019)
Pete joined 7digital in June 2014, assuming overall responsibility for its commercial strategy. He brings over 20 years of operational
and strategic experience within the heart of the nascent digital music and consumer technology businesses to the role. Prior to
7digital, Pete held key leadership roles at Imagination Technologies, including responsibility for content and consumer experiences
across both the Imagination Technologies and PURE businesses. Before joining Imagination, Pete spent over a decade working for
Warner Music Group, holding senior management positions in the company's International Marketing and Business Development
teams.
PREVIOUS INDEPENDENT NON-EXECUTIVE DIRECTORS
(who served during part of the year):
The Board of Directors present their annual report and the audited financial statements for the year ended 31 December 2019.
The Corporate Governance Statement on pages 20 to 22 forms part of this report.
Business review and future developments
The Chief Executive’s Review is contained on pages 4 to 5, the Chief Financial Officer’s Review is contained on pages 6 to 7 and
Governance Report on pages 20 to 22; these reviews and reports, together with the information contained within the Directors’
Report constitute the Business Review. The Business Review has been prepared solely to provide additional information to
shareholders to assess the Group’s strategies and the potential for these strategies to succeed.
The Business Review contains certain forward-looking statements. These statements are made by the directors in good faith based
on the information available to them up to the time of their approval of this report and such statements should be treated with
caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking
Sir Donald Cruickshank, Chair (resigned 26 June 2019)
Don has served as a director of Qualcomm Incorporated from June 2005 to June 2016. Don’s career has included assignments at
McKinsey & Co. Inc., Times Newspapers, Virgin Group plc, Wandsworth Health Authority and the National Health Service in
Scotland. He served as Director General of Oftel from 1993 to 1998. He has been chair of the following: Action 2000 (1997-2000),
SMG plc (1999-2004), The London Stock Exchange (2000-2003), Clinovia Group Limited (2004-2007), Formscape Group Limited
(2003- 2006). Don was a member of the Financial Reporting Council (2001-2007). He holds an MA degree in Law and an honorary
LLD degree from the University of Aberdeen and an MBA degree from Manchester Business School.
The Group’s financial results for the year are shown in the Consolidated Income Statement on page 33. As in the previous year, the
Board of Directors is not proposing a final dividend for the year ended 31 December 2019.
The Group has made qualifying third-party indemnity provisions for the benefit of its directors that were made during the year and
remain in force at the date of this report. Directors’ and officers’ indemnity insurance with an annual limit of £1 million is
Eric Cohen (resigned 26 June 2019)
Eric is currently Chief Development Officer at InterDigital, Inc. Previously, he served as Senior Vice President, Corporate
Development at Dolby Laboratories, Inc., where he oversaw corporate development, mergers and acquisitions activities, and
corporate strategy. Prior to that, Eric was formerly a Managing Director and senior member of the technology investment banking
team at Cowen and Company. Eric, held the position of Managing Director at J.P.Morgan and also worked for 11 years at Credit
Suisse First Boston. Eric holds a BS degree from Brown University and an MBA degree from Stanford University.
Anne de Kerckhove (resigned 31 August 2019)
Anne has over 15 years' experience in leading some of the fastest growing technology, media and entertainment companies in
Europe. Anne is currently the CEO of Freespee, the conversation platform company. Previously, Anne was CEO of Iron Group and
Iron Capital an investment fund and payment enabler in the subscription economy. Before that Anne was the Managing Director
EMEA for Videology, one of world’s largest ad technology platforms where she drove expansion in over 16 countries in just under
3 years and was Global Director of Reed Elsevier, responsible for the B2B Entertainment Division, which included leading events
such as MIPCOM. From 2003 to 2009, Anne was COO and International Managing Director at Inspired Gaming Group, overseeing
the company from its launch to IPO and expansion into 12 countries. Anne has a Bachelor of Commerce from McGill University and
an MBA from INSEAD. Anne is an angel investor in over 20 companies, including Andela and metail. Anne also sits on the board
of 888.com.
information.
Results and dividends
Directors’ indemnities
maintained.
Substantial shareholders
Magic Investments S.A. Limited
Shmuel Koch Holdings
Mr Joseph D Samberg
Hargreaves Lansdown PLC
Interactive Investor Trading
LAS Investments
Mr Noam Band
Capital structure
At 23 September 2020 notification of beneficial interests in 3% or more of the Company’s issued share capital are as follows:
Number of Shares % of issued share capital
% of voting rights
742,436,219
445,012,126
445,000,000
169,364,181
93,260,915
89,000,000
89,000,000
27.41%
16.43%
16.43%
6.25%
3.44%
3.29%
3.29%
27.41%
16.43%
16.43%
6.25%
3.44%
3.29%
3.29%
The Group is primarily funded through readily available cash and working capital management.
Details of the authorised and issued share capital, together with details of the movements in the Company’s issued share capital
during the year, are shown in note 21.
During 2019, the Company carried out a Capital subdivision of shares. This created new class of Ordinary 0.01p shares that carry
full voting rights; and Deferred 0.99p shares, along with the existing Deferred 9p shares, that carry limited voting rights. The
Ordinary shares carry no right to fixed income. Each Ordinary share carries the right to one vote at general meetings of the
Company. Details of the share capital can be found in note 21.
There are no specific restrictions on the size of a holding or on the transfer of shares, which are both governed by the general
provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders
of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights. Details of employee share
schemes are set out in note 26.
No person has any special right of control over the Company’s share capital and all issued shares are fully paid.
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GOVERNANCE
Board of Directors
7digital Group plc
GOVERNANCE
Directors’ Report
7digital Group plc
GOVERNANCE
Directors’ Report
The Board of Directors present their annual report and the audited financial statements for the year ended 31 December 2019.
The Corporate Governance Statement on pages 20 to 22 forms part of this report.
Business review and future developments
The Chief Executive’s Review is contained on pages 4 to 5, the Chief Financial Officer’s Review is contained on pages 6 to 7 and
Governance Report on pages 20 to 22; these reviews and reports, together with the information contained within the Directors’
Report constitute the Business Review. The Business Review has been prepared solely to provide additional information to
shareholders to assess the Group’s strategies and the potential for these strategies to succeed.
The Business Review contains certain forward-looking statements. These statements are made by the directors in good faith based
on the information available to them up to the time of their approval of this report and such statements should be treated with
caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking
information.
Results and dividends
The Group’s financial results for the year are shown in the Consolidated Income Statement on page 33. As in the previous year, the
Board of Directors is not proposing a final dividend for the year ended 31 December 2019.
Directors’ indemnities
The Group has made qualifying third-party indemnity provisions for the benefit of its directors that were made during the year and
remain in force at the date of this report. Directors’ and officers’ indemnity insurance with an annual limit of £1 million is
maintained.
Substantial shareholders
At 23 September 2020 notification of beneficial interests in 3% or more of the Company’s issued share capital are as follows:
Magic Investments S.A. Limited
Shmuel Koch Holdings
Mr Joseph D Samberg
Hargreaves Lansdown PLC
Interactive Investor Trading
LAS Investments
Mr Noam Band
Number of Shares % of issued share capital
% of voting rights
742,436,219
445,012,126
445,000,000
169,364,181
93,260,915
89,000,000
89,000,000
27.41%
16.43%
16.43%
6.25%
3.44%
3.29%
3.29%
27.41%
16.43%
16.43%
6.25%
3.44%
3.29%
3.29%
Capital structure
The Group is primarily funded through readily available cash and working capital management.
Details of the authorised and issued share capital, together with details of the movements in the Company’s issued share capital
during the year, are shown in note 21.
During 2019, the Company carried out a Capital subdivision of shares. This created new class of Ordinary 0.01p shares that carry
full voting rights; and Deferred 0.99p shares, along with the existing Deferred 9p shares, that carry limited voting rights. The
Ordinary shares carry no right to fixed income. Each Ordinary share carries the right to one vote at general meetings of the
Company. Details of the share capital can be found in note 21.
There are no specific restrictions on the size of a holding or on the transfer of shares, which are both governed by the general
provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders
of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights. Details of employee share
schemes are set out in note 26.
No person has any special right of control over the Company’s share capital and all issued shares are fully paid.
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
GOVERNANCE
GOVERNANCE
Directors’ Report
Directors’ Report
(continued)
With regards to the appointment and replacement of directors, the Company is governed by its Articles of Association, the
Companies Act 2006 and related legislation. The Articles themselves may be amended by special resolution of the shareholders.
The powers of directors are described in the Main Board Terms of Reference, copies of which are available on request and the
Corporate Governance Statement on pages 20 to 22.
Please refer to the post balance sheet note 27.
Financial risk management
Consideration of principal risks and uncertainties are included on pages 8 to 9 of the Strategic Report including the management
of financial risks. These are also outlined further in note 28.
Re-election of directors
The directors who retire by rotation in accordance with the Articles of Association will offer themselves for re-election at the
Company’s Annual General Meeting (“AGM”). The Board has considered the requirements of the QCA Corporate Governance Code
in respect of these matters and believes that these members continue to be effective and to demonstrate their commitment to
their role, the Board and the Group. Brief particulars of all directors can be found on pages 12 to 14.
Going concern
Summary
On 21 February 2020, a short term loan of £500k was signed with CSS Alpha (BVI) Limited. The loan is repayable over 12 months
in equal parts starting from 28 March 2020 with interest based on 1.5% of the outstanding balance. The loan is guaranteed by
one of the Directors.
On 3 September 2020, 7digital annouced the placing of 266,666,667 new Ordinary Shares of 0.01p each, which raised £6m at an
issue price of 2.25 pence per share. The net proceeds of the fundraising will be used to meet the immediate working capital
requirements of the Group and support immediate and medium term commercial growth opportunities, in particular within home
fitness, artist monetisation, and social media.
Background to and reasons for the placing and subscription
The music industry is undergoing a period of change and opportunity whereby revenue sources are changing. and growing.
Whereas five years ago revenues were dominated mainly by music sales and live performances, today streaming has displaced
download music sales and COVID-19 has shut down live performances for much of 2020 and is likely to continue to impact live
performances in the medium term. In addition, as music streaming has gained in popularity, music listening on social video
platforms has begun to outpace DSP streaming services.
7digital has an advanced, scalable, cloud-based platform and the Directors believe that the Company is positioned to take
advantage of new sources of growth brought on by the changing industry as well as the new opportunities and models accelerated
by the COVID-19 pandemic. This is supported by a number of renewals and new contracts over the last year, including with Triller,
eMusic and a global technology company in August 2020. In particular 7digital has identified potentially significant emerging
opportunities within social media, home fitness and artist monetisation channels.
Social Media
Music is becoming the driving force behind the growth of user-generated content ("UGC") social media platforms and the global
success of Tik Tok is shifting the paradigm in how fans discover, share and create music. The Directors believe that social media
enterprises will continue to develop new models to extend their reach and in doing so will need a partner in providing new user
experiences.
7digital is able to provide access to its global catalogue, platform scale, rights and reporting to serve the sizeable and rapidly-
growing user demand for world-wide social enterprises. Its platform enables users of social media platforms to access, sample and
stream from its global catalogue while also ensuring accurate reporting back to record labels and rights holders.
7digital Group plc
GOVERNANCE
Directors’ Report
7digital Group plc
GOVERNANCE
Directors’ Report
(continued)
Home Fitness
companies.
Artist Monetisation
The Company recently announced a new contract with Triller and the Directors believe that the platform will be of interest to other
social media enterprises as music is integrated into new services.
The fitness industry is a $94 billion global industry with an estimated 183 million paying subscribers. Hardware and digital bundled
offerings like Peloton have popularised app-based training, and, as COVID-19 has closed gyms, there has been an accelerated shift
to on-demand online fitness. This has presented a trend for which the Company has a strong product-market fit. The Directors also
anticipate the pandemic will create interest from non-traditional companies in fitness and sport/leisure retail wanting to
participate in digital music services to drive loyalty.
7digital's offering is a total fitness solution that includes a pre-licensed fitness music catalogue, content delivery, reporting and
rightsholder payments, curation and playback of playlists for recording live classes. The Directors expect to announce a
platform/licensing contract with in-home cycling providers and have a pipeline of potential additional high-profile global
With the shutdown of the live music industry in 2020 in response to the spread of COVID-19, 7digital and eMusic are partnering to
create a platform that creates new ways for artists to engage with music fans and recoup the income lost from ticket sales. eMusic
Live, a new livestream platform built to make online performances commercially viable for music artists, will appeal to artists,
managers and labels looking for new ways to monetise music consumption through sponsorships, music and merchandise. eMusic
Live will be powered using 7digital's technology platform, which provides access to the Company's global catalogue of music tracks
in standard and hi-res audio. As the platform expands it is expected to also utilise 7digital's expertise in B2B music solutions and
flexible services, combined with eMusic's B2C technology and functionality, to introduce new solutions for the live music industry.
The platform will offer an integrated artist-specific 7digital storefront to enable artists to sell their music catalogue or promote
their latest release, thereby facilitating more exposure for their music and more value from sales.
On 28 September 2020, the Group secured a £1m overdraft facility with Investec for a period of 36 months guaranteed by two of
the Directors; this attracts 6% interest above Investec bank rate on the drawn portion of the facilty and 2% on the undrawn
portion.
COVID-19
Brexit
In March 2020, the World Health Organisation declared a global pandemic due to the COVID-19 virus that has spread across the
globe, causing different governments and countries to enforce restrictions on people movements, a stop to international travel,
and other precautionary measures. This has had a widespread impact economically and a number of industries have been heavily
impacted. This has resulted in impacts on certain industries and a more general need to consider whether budgets and targets
previously set are realistic in light of these events.
As described on page 5, the COVID-19 pandemic has had a minimal impact on our business and the Board believes that the business
is well positioned to be able to navigate through the impact of COVID-19 due to the strength and flexibility of its service proposition.
The United Kingdom (‘UK’) formally left the European Union (‘EU’) on 30 January 2020. The period of time from when the UK voted
to exit the EU on 23 June 2016 and the formal process initiated by the UK government to withdraw from the EU, or Brexit, created
volatility in the global financial markets. The UK now enters a transition period, being an intermediary arrangement covering
matters like trade and border arrangements, citizens’ rights and jurisdiction on matters including dispute resolution, taking account
of The EU (Withdrawal Agreement) Act 2020, which ratified the Withdrawal Agreement, as agreed between the UK and the EU.
The transition period is currently due to end on 31 December 2020 and ahead of this date, negotiations are ongoing to determine
and conclude a formal agreement between the UK and EU on the aforementioned matters.
The Group operates subsidiaries in many countries. The Directors currently deem that the effects of the UK’s current transitional
period outside the EU and the impact of ongoing discussions with the EU will not have a significant impact on the Group’s
operations due to the global geographical footprint of the business and the nature of is operations.
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GOVERNANCE
Directors’ Report
7digital Group plc
GOVERNANCE
Directors’ Report
(continued)
7digital Group plc
GOVERNANCE
Directors’ Report
The Company recently announced a new contract with Triller and the Directors believe that the platform will be of interest to other
social media enterprises as music is integrated into new services.
Home Fitness
The fitness industry is a $94 billion global industry with an estimated 183 million paying subscribers. Hardware and digital bundled
offerings like Peloton have popularised app-based training, and, as COVID-19 has closed gyms, there has been an accelerated shift
to on-demand online fitness. This has presented a trend for which the Company has a strong product-market fit. The Directors also
anticipate the pandemic will create interest from non-traditional companies in fitness and sport/leisure retail wanting to
participate in digital music services to drive loyalty.
7digital's offering is a total fitness solution that includes a pre-licensed fitness music catalogue, content delivery, reporting and
rightsholder payments, curation and playback of playlists for recording live classes. The Directors expect to announce a
platform/licensing contract with in-home cycling providers and have a pipeline of potential additional high-profile global
companies.
Artist Monetisation
With the shutdown of the live music industry in 2020 in response to the spread of COVID-19, 7digital and eMusic are partnering to
create a platform that creates new ways for artists to engage with music fans and recoup the income lost from ticket sales. eMusic
Live, a new livestream platform built to make online performances commercially viable for music artists, will appeal to artists,
managers and labels looking for new ways to monetise music consumption through sponsorships, music and merchandise. eMusic
Live will be powered using 7digital's technology platform, which provides access to the Company's global catalogue of music tracks
in standard and hi-res audio. As the platform expands it is expected to also utilise 7digital's expertise in B2B music solutions and
flexible services, combined with eMusic's B2C technology and functionality, to introduce new solutions for the live music industry.
The platform will offer an integrated artist-specific 7digital storefront to enable artists to sell their music catalogue or promote
their latest release, thereby facilitating more exposure for their music and more value from sales.
On 28 September 2020, the Group secured a £1m overdraft facility with Investec for a period of 36 months guaranteed by two of
the Directors; this attracts 6% interest above Investec bank rate on the drawn portion of the facilty and 2% on the undrawn
portion.
COVID-19
In March 2020, the World Health Organisation declared a global pandemic due to the COVID-19 virus that has spread across the
globe, causing different governments and countries to enforce restrictions on people movements, a stop to international travel,
and other precautionary measures. This has had a widespread impact economically and a number of industries have been heavily
impacted. This has resulted in impacts on certain industries and a more general need to consider whether budgets and targets
previously set are realistic in light of these events.
As described on page 5, the COVID-19 pandemic has had a minimal impact on our business and the Board believes that the business
is well positioned to be able to navigate through the impact of COVID-19 due to the strength and flexibility of its service proposition.
Brexit
The United Kingdom (‘UK’) formally left the European Union (‘EU’) on 30 January 2020. The period of time from when the UK voted
to exit the EU on 23 June 2016 and the formal process initiated by the UK government to withdraw from the EU, or Brexit, created
volatility in the global financial markets. The UK now enters a transition period, being an intermediary arrangement covering
matters like trade and border arrangements, citizens’ rights and jurisdiction on matters including dispute resolution, taking account
of The EU (Withdrawal Agreement) Act 2020, which ratified the Withdrawal Agreement, as agreed between the UK and the EU.
The transition period is currently due to end on 31 December 2020 and ahead of this date, negotiations are ongoing to determine
and conclude a formal agreement between the UK and EU on the aforementioned matters.
The Group operates subsidiaries in many countries. The Directors currently deem that the effects of the UK’s current transitional
period outside the EU and the impact of ongoing discussions with the EU will not have a significant impact on the Group’s
operations due to the global geographical footprint of the business and the nature of is operations.
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
GOVERNANCE
Directors’ Report
7digital Group plc
GOVERNANCE
Directors’ Report
(continued)
• make an assessment of the Company’s ability to continue as a going concern.
In preparing the Parent Company financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
explained in the financial statements; and
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Approved by the Board of Directors and signed on behalf of the Board,
Mark Foster
Director
Lower Lock, Water Lane, London, NW1 8JZ
28 September 2020
7digital Group plc
7digital Group plc
GOVERNANCE
GOVERNANCE
Directors’ Report
Directors’ Report
(continued)
Conclusion
The Directors have reviewed 7digital’s going concern position taking account of its current business activities, financial forecasts
and factors likely to affect its future financial position, as set out in this Annual report which include 7digital’s objectives, policies
and processes for managing its capital and its financial risk management objectives. Considering the global coronavirus (COVID-19)
pandemic, the global economic uncertainties and impact on delayed sales cycles, the Directors have undertaken an elevated
scrutiny to the cashflow forecasts covering a period of at least 12 months from the date of approval of the financial statements.
Cashflow forecasts have been prepared based on a range of scenarios including, but not limited to, no further debt or equity
funding, existing customer churn, no new contracted sales revenue and cost reductions.
Having assessed the sensitivity analysis on cashflows including the funding of £6m and the security of the newly agreed credit
facility, together with the significant current business momentum from new customers such as Triller, the launch of eMusic Live
and growing demand for streaming and digital music solutions, the Directors strongly believe 7digital will continue to operate as a
going concern for the foreseeable future, being 12 months from their signing of their financial statements.
Environmental policy
In appreciating the importance of good environmental practice, the Group seeks to ensure that its operations cause minimum
detrimental impact on the environment. The Group’s objective is to comply with all relevant environmental legislation and to
promote effective environmental management throughout its businesses.
Policy and practice on payment of creditors
Each Group Company is responsible for agreeing the details of terms and conditions relating to transactions with its suppliers
where goods and services have been supplied in accordance with the relevant terms and conditions of the contract. Trade creditors
for the Group at 31 December 2019 represented 241 days of purchases (31 December 2018: 171 days of purchases).
Auditor
BDO LLP were reappointed as the auditors for the year ended 31 December 2019.
Directors’ statement as to the disclosure of information to the auditor
Each of the persons who is a director at the date of approval of this annual report confirms that:
•
•
so far as the directors are aware, there is no relevant audit information of which the Group’s auditor is unaware; and
the directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any
relevant audit information and to establish that the Group’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare Group and Parent Company financial statements for each financial year. Under that
law, the directors are required to prepare Group financial statements in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the Parent
Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). The Parent Company financial statements are required by law to give a true and fair
view of the state of affairs of the Company. Under company law, the directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company
for that period. In preparing the Group financial statements, International Accounting Standard 1 requires that directors:
7digital Group plc
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
GOVERNANCE
• provide additional disclosures when compliance with the specific requirements in IFRS are insufficient to enable users to
Directors’ Report
understand the impact of particular transactions, other events and conditions on the entity's financial position and financial
performance; and
understandable information;
• make an assessment of the Company’s ability to continue as a going concern.
(continued)
7digital Group PLC Annual Report and Accounts 2019
18
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19
7digital Group PLC Annual Report and Accounts 2019
In preparing the Parent Company financial statements, the directors are required to:
18
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
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continue in business.
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The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Approved by the Board of Directors and signed on behalf of the Board,
Mark Foster
Director
Lower Lock, Water Lane, London, NW1 8JZ
28 September 2020
7digital Group PLC Annual Report and Accounts 2019
19
7digital Group plc
GOVERNANCE
Directors’ Report
7digital Group plc
GOVERNANCE
Directors’ Report
7digital Group plc
GOVERNANCE
Directors’ Report
• make an assessment of the Company’s ability to continue as a going concern.
(continued)
In preparing the Parent Company financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Approved by the Board of Directors and signed on behalf of the Board,
Mark Foster
Director
Lower Lock, Water Lane, London, NW1 8JZ
28 September 2020
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
7digital Group plc
GOVERNANCE
Governance
Corporate Governance Statement
Corporate Governance Statement
For the purposes of AIM Rule 26, the recognised corporate governance code that the Board has decided to apply is the Quoted
Companies Alliance Corporate Governance Code 2018 (‘QCA Code’). The Board believes the QCA Code provides the most
appropriate framework of governance arrangements for the Company, considering the size and stage of development of the
Company’s business. The following information is provided to explain how the Company complies with the QCA Code.
The Board supports the principles and aims of the Code and intends to ensure that the Group observes the provisions of the Code
as it grows, as far as is practical.
Board Composition
The Company is controlled through a Board of Directors, which at 31 December 2019 comprised four directors: two executive
directors, one non-executive director and one independent non-executive director. Short biographies of each director are set out
on pages 12 to 14. The role of the Chair and that of the Chief Executive are separate. Mark Foster and Helen Gilder (appointed post
year-end) are considered independent by the Board.
Tamir Koch, the Chair, is not considered by the Board to be independent by virtue of the fact that he is Executive Chair of Triplay
Inc. which is a substantial shareholder. David Lazarus is not considered by the Board to be independent by virtue of the fact that
he is Executive Chair of Magic Investments SA which is a substantial shareholder.
Board Role
The chair is responsible for the leadership of the Board, ensuring its effectiveness in all aspects of its role and setting its agenda.
The chair also ensures that the directors receive accurate, timely and clear information and that there is effective communication
with shareholders. The chair also facilitates the effective contribution of the other non-executive directors and ensures
constructive relations between executive and non-executive directors. The Chief Executive’s responsibilities are concerned with
managing the Group’s business and implementing Group strategy.
The Board’s role is to provide entrepreneurial leadership of 7digital within the framework of prudent and effective controls that
enable risk to be assessed and managed. The Board is responsible for setting the Company’s strategic aims and for ensuring the
financial and human resources are in place for the Company to meet its objectives and to review management performance. The
Board is also responsible for setting the Company’s values and standards and ensuring that its obligations to its shareholders are
understood and met. The Board dispatches its role by holding regular meetings, at which:
the monthly management accounts, including budgets and prior year comparatives, are reviewed;
strategy is set and policy is debated;
•
•
• all significant investment and acquisition opportunities are reviewed and, if appropriate, approval is given; and
• any proposed changes to internal control and operating policies are debated.
Skills and Expertise
The non-executive directors bring a wide range of experience and expertise to the Group’s affairs, which allow them to
constructively challenge and help develop proposals and strategy, scrutinise performance and controls and take decisions
objectively in the interests of the Group.
Strategy and Corporate Governance
An updated description of the Company’s business model is provided in the strategic report and is included in this report at pages
8 to 9. The Company’s Board composition and the areas of skill and expertise detailed above have been designed to support the
Company’s next stage of growth.
The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’ investments and the
Company’s assets. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and
can provide only reasonable and not absolute assurance against material misstatement or loss. The Board has considered the need
for an internal audit function and has concluded that the internal control systems in place are appropriate for the size and
complexity of the Company.
The Board is also responsible for the identification and evaluation of major risks faced by the Group and for determining the
appropriate course of action to manage those risks. The Board has put in place the procedures necessary to implement and comply
with the guidance; Internal Control: Guidance for Directors as issued by the Financial Reporting Council (Revised). The directors
performed an informal review of the Group’s control systems during the financial year.
7digital Group plc
Governance
Corporate Governance Statement
(continued)
7digital Group plc
Corporate Governance Statement
GOVERNANCE
The Group carries insurance to indemnify directors for claims made against them in relation to their duties, with the exception of
any losses incurred as a result of their wilful negligence. Cover with an annual limit of £1 million is maintained.
Board Evaluation and Re-election
Procedures around performance evaluation of the Board are conducted informally while individual director evaluation is conducted
formally by the chair. The Board continues to evaluate the current balance of skills and determine whether the Board composition
is appropriate for the business, and in order to propel the Company to further growth as anticipated. Progress as to this process
will be reported in due course to shareholders, and further updates provided.
One-third of the directors must retire from office by rotation at each annual general meeting (AGM) and all directors appointed
since the date of the last AGM must put themselves forward for re-election.
During the year, the total number of formal meetings of the Board of 7digital Group plc was 20. The attendance at formal scheduled
Meeting Frequency
meetings of the Board was as follows:
Number of Board
Number of eligible Board Meetings
Meetings
attended
2
1
4
3
19
12
12
5
3
14
12
14
4
12 Appointed April 2019; Resigned July 2019
13 Appointed April 2019; Resigned September 2019
2 Appointed July 2019
1 Appointed September 2019
4 Appointed July 2019
4 Appointed July 2019
19
5 Resigned April 2019
4 Resigned March 2019
16 Resigned June 2019
16 Resigned June 2019
18 Resigned August 2019
4 Resigned April 2019
In addition, there were a number of informal meetings of the Board.
The Company has adopted the Market Abuse Regulation for Directors’ dealings as applicable to AIM companies.
The Executive Directors are full time employees and the Non-Executive Directors are required to devote sufficient time to discharge
The Board places considerable emphasis on ensuring that all communications with shareholders present a balanced and
transparent assessment of the Group’s position and prospects. The Board or a subcommittee of the Board reviews and approves
results announcements, interim reports, annual reports, the chair’s AGM statement and trading updates prior to their release. The
Statement of Directors’ Responsibility in respect of the preparation of financial statements is set out on pages 18 to 19 and the
auditor’s statement on the respective responsibilities of directors and the auditor is included within their report on pages 26 to 32.
The Board has two standing committees, being the Audit Committee and the Remuneration Committee each of which operates
Committees of the Board
within defined terms of reference.
P Langworthy
M Juskiewisz
T Koch
D Lazarus
M Foster
J Aalbers
J Hubbard
S Cole
P Downton
D Cruickshank
E Cohen
A de Kerckhove
D Holmwood
the duties of their office.
Financial reporting
20
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7digital Group PLC Annual Report and Accounts 2019
20
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7digital Group plc
GOVERNANCE
Corporate Governance Statement
7digital Group plc
Governance
Corporate Governance Statement
(continued)
7digital Group plc
GOVERNANCE
Corporate Governance Statement
The Group carries insurance to indemnify directors for claims made against them in relation to their duties, with the exception of
any losses incurred as a result of their wilful negligence. Cover with an annual limit of £1 million is maintained.
Board Evaluation and Re-election
Procedures around performance evaluation of the Board are conducted informally while individual director evaluation is conducted
formally by the chair. The Board continues to evaluate the current balance of skills and determine whether the Board composition
is appropriate for the business, and in order to propel the Company to further growth as anticipated. Progress as to this process
will be reported in due course to shareholders, and further updates provided.
One-third of the directors must retire from office by rotation at each annual general meeting (AGM) and all directors appointed
since the date of the last AGM must put themselves forward for re-election.
Meeting Frequency
During the year, the total number of formal meetings of the Board of 7digital Group plc was 20. The attendance at formal scheduled
meetings of the Board was as follows:
P Langworthy
M Juskiewisz
T Koch
D Lazarus
M Foster
J Aalbers
J Hubbard
S Cole
P Downton
D Cruickshank
E Cohen
A de Kerckhove
D Holmwood
Number of Board
Meetings
attended
2
1
4
3
19
12
12
5
3
14
12
14
4
Number of eligible Board Meetings
2 Appointed July 2019
1 Appointed September 2019
4 Appointed July 2019
4 Appointed July 2019
19
12 Appointed April 2019; Resigned July 2019
13 Appointed April 2019; Resigned September 2019
5 Resigned April 2019
4 Resigned March 2019
16 Resigned June 2019
16 Resigned June 2019
18 Resigned August 2019
4 Resigned April 2019
In addition, there were a number of informal meetings of the Board.
The Company has adopted the Market Abuse Regulation for Directors’ dealings as applicable to AIM companies.
The Executive Directors are full time employees and the Non-Executive Directors are required to devote sufficient time to discharge
the duties of their office.
Financial reporting
The Board places considerable emphasis on ensuring that all communications with shareholders present a balanced and
transparent assessment of the Group’s position and prospects. The Board or a subcommittee of the Board reviews and approves
results announcements, interim reports, annual reports, the chair’s AGM statement and trading updates prior to their release. The
Statement of Directors’ Responsibility in respect of the preparation of financial statements is set out on pages 18 to 19 and the
auditor’s statement on the respective responsibilities of directors and the auditor is included within their report on pages 26 to 32.
Committees of the Board
The Board has two standing committees, being the Audit Committee and the Remuneration Committee each of which operates
within defined terms of reference.
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
7digital Group plc
GOVERNANCE
Governance
Corporate Governance Statement
Corporate Governance Statement
(continued)
As an AIM-listed company, 7digital Group plc is not required to disclose a Directors’ Remuneration Report; however, the Company
Audit Committee
The Audit Committee consists of Mark Foster (the Chair until February 2020) and Helen Gilder (appointed February 2020; Chair
from February 2020). The Audit Committee has primary responsibility for monitoring the integrity of the financial statements of
the Group; reviewing the Group’s internal financial controls; ensuring that the financial performance of the Group is properly
measured and reported on; and for reviewing reports from the Group’s auditor relating to the Group’s accounting and internal
financial controls. The Chief Financial Officer and other senior management also attend committee meetings by invitation. The
Committee has unrestricted access to the Company’s auditor. The Audit Committee met formally three times during the period.
The Committee reviews arrangements by which staff of the Company may raise in confidence concerns about improprieties in
matters of financial reporting or other matters and investigates appropriate follow-up action.
The Audit Committee recommends to the Board the appointment, re-appointment or removal of the external auditor. During 2019
the Audit Committee made the decision to re-engage BDO for a third year of service.
Remuneration Committee
The Remuneration Committee consists of Tamir Koch, as chairman, Mark Foster and Helen Gilder (appointed February 2020).
Further details of the Committee’s remit are contained in the Directors’ Remuneration Report on pages 23 to 24. The Remuneration
Committee did not formally meet during the period.
Risk Register
A risk register has been implemented in Q1 2020 to improve process, enhance and strengthening internal controls and managing
risk.
Relations with shareholders
The Company recognises that shareholder support is instrumental in the future growth of the Company. The Board is committed
to maintaining and further developing communications with shareholders. The Chief Executive and Chairman maintained a regular
dialogue with institutional shareholders throughout the year, with further opportunities for shareholder contact during the
presentation rounds prior to the cash fundraise. In addition, the executive directors give presentations to analysts and hold one-
to-one formal meetings with the Group’s key shareholders immediately following the announcement of the Group’s full year and
interim results. The Group obtains independent feedback on these meetings through its corporate brokers, and this feedback is
disclosed to the Board.
The Company responds formally to all queries and requests for information from existing and prospective shareholders. In addition,
the non-executive directors are available to shareholders to ensure that any potential concerns can be raised directly. The Group’s
Annual Report and Accounts, final and interim announcements, trading statements and press releases are available on its website
at about.7digital.com.
Further, the Company has invested in shareholder analysis by analysts Orient Capital to enable further shareholder outreach and
dialogue.
Constructive use of the AGM
The Board uses the Annual General Meeting to communicate with both institutional and private shareholders. Resolutions are
proposed on each substantially separate issue and the agenda includes a resolution to adopt the Group’s Annual Report and
Accounts. Details of the proxy votes for and against each resolution are announced after the result of the hand votes is known.
Before the formal business of the AGM is undertaken, the Chair invites shareholders’ questions to the Board.
7digital Group plc
Governance
Directors’ Remuneration Report
has opted to make a voluntary disclosure.
Remuneration Committee
7digital Group plc
Directors’ Remuneration Report
GOVERNANCE
The Board has established a Remuneration Committee with formally delegated duties and responsibilities. The Remuneration
Committee consists of Tamir Koch, as chairman, Mark Foster and Helen Gilder (appointed February 2020). The provisions of the
QCA Code recommend that as Company Chairman, Tamir Koch, should not be a member of the Committee. However, it was
considered that Tamir’s experience and knowledge is of considerable value to the Committee and as a result he has been appointed
a member of the Committee. The Remuneration Committee has responsibility for determining executive directors’ terms and
conditions of service, including remuneration and grant of options under the Share Option Schemes.
Remuneration policy for executive directors
The Company’s policy on executive director remuneration is to:
• Attract and retain high-quality executives by paying competitive remuneration packages relevant to each director’s role,
experience and the external market; and
•
Incentivise directors to maximise shareholder value through share options and the payment of an annual bonus.
The remuneration of each of the directors (as audited) for the year ended 31 December 2019 for the 7digital Group was as follows:
Salary &
Share based
Fees
£'000
payments
£’000
Settle-
ment
£’000
Taxable
benefits
£'000
Pension
contribution
£'000
Total
2019
£'000
Total
2018
£'000
Executive
P Langworthy
S.A. Cole
J Aalbers
J Hubbard
P Downton
M Juskiewicz
Non-executive
M Foster (1)
D Cruickshank (2)
A de Kerckhove (3)
E Cohen (4)
H Gilder (5)
Total
101
197
193
143
110
54
37
27
27
4
6
899
Bonus
£'000
45
25
-
-
-
-
-
-
-
-
-
-
-
-
15
10
-
-
-
-
-
55
210
-
-
-
-
15
-
-
3
-
283
-
-
-
-
5
-
-
-
-
-
-
5
4
12
7
5
4
-
-
-
-
-
-
205
444
200
163
129
54
52
27
27
7
6
251
177
-
-
-
-
33
79
45
33
-
618
25
70
32
1,314
(1) M Foster received a fee of £36,875; his annual fee rose from £27.5k to £50k per annum in August 2019. He is owed a fee
payable in shares of £25,000 (4,166,667 shares).
(2) D Cruickshank received a fee of £27,125 for the period 1 January 2019 up to his date of resignation.
(3) A de Kerckhove received a fee of £21,667 and a non-executive fee of £5,200 for her role as President of 7digital SAS, both
were for the period 1 January 2019 up to her date of resignation.
(4) E Cohen received a fee of £4,063 for the period 1 January 2019 up to his date of resignation. He is owed a fee payable
in shares of £7,500 (1,250,000 shares)..
(5) H Gilder received a fee of £5,833 for the last two months of the year prior to appointment in February 2020.
P McGowan, a director who resigned in 2018, has a fee payable in shares of £28,482 (4,747,024 shares).
Total employer national insurance contributions relating to Directors’ remuneration were £127,426.70.
22
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019
22
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7digital Group plc
GOVERNANCE
Corporate Governance Statement
7digital Group plc
Governance
Directors’ Remuneration Report
7digital Group plc
GOVERNANCE
Directors’ Remuneration Report
As an AIM-listed company, 7digital Group plc is not required to disclose a Directors’ Remuneration Report; however, the Company
has opted to make a voluntary disclosure.
Remuneration Committee
The Board has established a Remuneration Committee with formally delegated duties and responsibilities. The Remuneration
Committee consists of Tamir Koch, as chairman, Mark Foster and Helen Gilder (appointed February 2020). The provisions of the
QCA Code recommend that as Company Chairman, Tamir Koch, should not be a member of the Committee. However, it was
considered that Tamir’s experience and knowledge is of considerable value to the Committee and as a result he has been appointed
a member of the Committee. The Remuneration Committee has responsibility for determining executive directors’ terms and
conditions of service, including remuneration and grant of options under the Share Option Schemes.
Remuneration policy for executive directors
The Company’s policy on executive director remuneration is to:
• Attract and retain high-quality executives by paying competitive remuneration packages relevant to each director’s role,
experience and the external market; and
Incentivise directors to maximise shareholder value through share options and the payment of an annual bonus.
•
The remuneration of each of the directors (as audited) for the year ended 31 December 2019 for the 7digital Group was as follows:
Salary &
Fees
£'000
Share based
payments
£’000
Settle-
ment
£’000
Bonus
£'000
Taxable
benefits
£'000
Pension
contribution
£'000
Executive
P Langworthy
S.A. Cole
J Aalbers
J Hubbard
P Downton
M Juskiewicz
Non-executive
M Foster (1)
D Cruickshank (2)
A de Kerckhove (3)
E Cohen (4)
H Gilder (5)
Total
101
197
193
143
110
54
37
27
27
4
6
899
55
210
-
-
-
-
15
-
-
3
-
283
-
-
-
15
10
-
-
-
-
-
25
45
25
-
-
-
-
-
-
-
-
-
70
-
-
-
-
5
-
-
-
-
-
-
5
4
12
7
5
4
-
-
-
-
-
-
32
Total
2019
£'000
205
444
200
163
129
54
52
27
27
7
6
1,314
Total
2018
£'000
-
251
-
-
177
-
33
79
45
33
-
618
(1) M Foster received a fee of £36,875; his annual fee rose from £27.5k to £50k per annum in August 2019. He is owed a fee
payable in shares of £25,000 (4,166,667 shares).
(2) D Cruickshank received a fee of £27,125 for the period 1 January 2019 up to his date of resignation.
(3) A de Kerckhove received a fee of £21,667 and a non-executive fee of £5,200 for her role as President of 7digital SAS, both
were for the period 1 January 2019 up to her date of resignation.
(4) E Cohen received a fee of £4,063 for the period 1 January 2019 up to his date of resignation. He is owed a fee payable
in shares of £7,500 (1,250,000 shares)..
(5) H Gilder received a fee of £5,833 for the last two months of the year prior to appointment in February 2020.
P McGowan, a director who resigned in 2018, has a fee payable in shares of £28,482 (4,747,024 shares).
Total employer national insurance contributions relating to Directors’ remuneration were £127,426.70.
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
Governance
Directors’ Remuneration Report
7digital Group plc
2019 OVERVIEW
2ND LINE
FINANCIAL
STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
7digital Group plc
7digital Group plc
GOVERNANCE
Governance
Directors’ Remuneration Report
Directors’ Remuneration Report
(continued)
Directors and their interests
The directors who held office at 31 December 2019 had the following interest in the ordinary share capital of the Company at the
end of the year:
D Lazarus (1)
T Koch (2)
M Foster
P Langworthy
2019
2018
Number of
ordinary shares
Ordinary shares
under options
Number of
ordinary shares
Ordinary shares
under options
742,436,219
445,012,126
587,943
25,572
-
-
-
2,783,334
-
-
587,943
21,146
-
-
-
2,977,734
At 31 December 2019, the following directors’ interests were also noted:
1. 742,436,219 were held by Magic Investments SA of which D Lazarus is a director.
2. 445,012,126 were held by a Shmuel Koch Holdings, of which T Koch is a director.
During the year no shares were issued to Non-executive Directors in lieu of remuneration. At 31 December 2019 5,416,667 (2018:
989,011) shares are due to be issued.
Accrued gross
number of ordinary
shares remaining
due at 31 Dec 2018
549,451
109,890
54,945
274,725
989,011
D Cruickshank
A de Kerckhove
M Foster
E Cohen
Total
Shares issued
during year in lieu
of remuneration
Shares forfeited
during year due
to resignations
-
-
-
-
-
(549,451)
(109,890)
-
-
(659,341)
Shares accrued
during the year in
lieu of
remuneration
-
-
4,111,722
975,275
5,086,997
Accrued gross
number of ordinary
shares remaining
due at 31 Dec 2019
-
-
4,166,667
1,250,000
5,416,667
The Company has established a tax efficient EMI option scheme, an “unapproved” share option scheme and a French Share Award
Scheme pursuant to which the CEO, CFO and other members of staff have been or may be granted share options. Options granted
under these schemes have a vesting schedule and for Senior Management, performance criteria are defined.
The number, exercise price and earliest and latest dates of exercise of options over ordinary shares in the Company held by
Directors at the end of the year were as follows:
P Langworthy
S A Cole
Share Options
2,783,334
4,933,334
Currently
Exercisable
0
0
Exercise
price
0.0p
0.0p
Earliest
exercise date
08 Aug 2020
08 Aug 2020
Latest exercise
date
29 Aug 2021
29 Aug 2021
There are a number of performance conditions relating to the financial periods ending December 2016, 2017, 2018 and 2019
attached to these options. Of these options granted, the table below shows the options issued, exercised, lapsed or forfeited during
2019:
Paul Langworthy
Share Options
held at 31
December 2018
2,977,734
Issued
Forfeited
Lapsed
-
(153,333)
(41,067)
Share Options
held at 31
December 2019
2,783,334
24
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019
24
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
GOVERNANCE
Directors’ Remuneration Report
7digital Group plc
Governance
Directors’ Remuneration Report
7digital Group plc
2019 OVERVIEW
2ND LINE
FINANCIAL
STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
7digital Group PLC Annual Report and Accounts 2019
25
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7digital Group plc
7digital Group plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
7digital Group plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
7digital Group plc
Opinion
Conclusions relating to going concern
We have audited the financial statements of 7digital Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 December 2019 which comprise the consolidated income statement and statement of comprehensive income, the
consolidated statement of financial position, the consolidated cash flow statement, the consolidated statement of changes in equity,
the parent company statement of financial position, the parent company statement of changes in equity and notes to the financial
statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has
been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted
Accounting Practice).
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31
December 2019 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate;
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the group or the parent company’s ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
or
•
•
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Revenue Recognition
See accounting policy in note 1 and note 2 Revenue
How we addressed the key audit matter in the audit
As explained in the accounting policy, the group has a
Our
audit
procedures
included
assessing
the
number of revenue streams for which the accounting
appropriateness of the revenue recognition policies
treatment must be individually considered.
The majority of the revenues are from licences for B2B
implemented in accordance with adoption of applicable
accounting standards over the different revenue streams.
streaming contracts held, where the significant risk of
For licence revenue a sample of key contracts were
material misstatement arises from the existence of revenue
selected for testing, assessing whether the revenue existed
recognised for set up fees and monthly recurring fees due
by agreeing to contract and licence keys issued and
to the
judgement requirement
in determining when
determining whether
revenue was
recognised
in
performance obligations are satisfied.
With content revenue the significant risk is over-statement
of revenue recognised.
accordance with the contractual terms, the group’s revenue
recognition policy and applicable accounting standards.
For content revenue, we agreed a sample of receipts from
the third party service providers’ statements to the relevant
With creative revenue, the significant risk is cut-off at the
year-end, with judgement being applied to the amount of
bank statements.
revenue to be recognised and accrued or deferred at the
For creative revenue, for a sample of contracts entered into
year-end.
during the current period we calculated a revenue
expectation and compared to the revenue recognised by
the group. For revenue spanning the year end, the accrued
and deferred revenue elements were recalculated by
reference to the contract and the actual work completed at
the year- end date.
Key observations:
Based on the procedures performed we consider that
revenue has been recognised appropriately in accordance
with the group’s revenue recognition accounting policy.
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7digital Group plc
7digital Group plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
•
•
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate;
or
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the group or the parent company’s ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Revenue Recognition
See accounting policy in note 1 and note 2 Revenue
As explained in the accounting policy, the group has a
number of revenue streams for which the accounting
treatment must be individually considered.
The majority of the revenues are from licences for B2B
streaming contracts held, where the significant risk of
material misstatement arises from the existence of revenue
recognised for set up fees and monthly recurring fees due
to the
in determining when
performance obligations are satisfied.
judgement requirement
With content revenue the significant risk is over-statement
of revenue recognised.
With creative revenue, the significant risk is cut-off at the
year-end, with judgement being applied to the amount of
revenue to be recognised and accrued or deferred at the
year-end.
How we addressed the key audit matter in the audit
audit
procedures
Our
the
appropriateness of the revenue recognition policies
implemented in accordance with adoption of applicable
accounting standards over the different revenue streams.
assessing
included
For licence revenue a sample of key contracts were
selected for testing, assessing whether the revenue existed
by agreeing to contract and licence keys issued and
determining whether
in
accordance with the contractual terms, the group’s revenue
recognition policy and applicable accounting standards.
revenue was
recognised
For content revenue, we agreed a sample of receipts from
the third party service providers’ statements to the relevant
bank statements.
For creative revenue, for a sample of contracts entered into
during the current period we calculated a revenue
expectation and compared to the revenue recognised by
the group. For revenue spanning the year end, the accrued
and deferred revenue elements were recalculated by
reference to the contract and the actual work completed at
the year- end date.
Key observations:
Based on the procedures performed we consider that
revenue has been recognised appropriately in accordance
with the group’s revenue recognition accounting policy.
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
7digital Group plc
Valuation of content cost of sales and related content
accruals
See key estimates and judgements in note 1.1
The group’s content cost comprises amounts payable to
music label suppliers and publishers. This is an area with a
high level of complexity in calculating and monitoring the
royalty rates payable to the artists or writers of the songs
played/sold, due to varied pricing structures, resulting in a
blended rate being applied. Consequently, there is a risk
that the
is
incorrectly estimated leading to the content cost in the
consolidated income statement and the content cost
accrual at the year-end being materially misstated.
liability within the financial statements
The accrued balance for content costs is £1.96m (2018:
£1.1m).
We have assessed managements estimates in calculating
the content cost of sale and associated accrual by:
•
•
•
•
•
reference to the prior year, checking a
consistent estimation approach was adopted by
management
verifying the reasonableness of the blended
gross margin rate applied to arrive at the
content cost of sale, based on historical label
content invoices received
assessing the accuracy and completeness of the
content sales by comparing to the sales reports
from the third party service providers and cash
receipts testing on a sample basis
Recalculating the content costs of sales using
the above blended gross margin rate and total
content sales
For a sample of content supplier invoices
received during the year and post year end,
compared the invoice to the subsequent
utilisation or estimated content accrual
respectively to assess the valuation of the
content accrual.
Key observations:
Based on the procedures performed, we found the
estimates relating to the contest cost and related accrual to
be reasonable.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
7digital Group plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
7digital Group plc
Going Concern
As detailed in note 1, the Group has undertaken a
significant fundraise during the year and subsequent to the
balance sheet date. The unprecedented impact of COVID-
19 on the business and wider world economies has resulted
in uncertainties on the ability of companies to continue
operating as going concerns, and has raised additional audit
risks. As a result, the Directors have considered the impact
of the recent Covid-19 outbreak as part of the Group’s going
concern analysis and have modelled a range of reasonably
possible outcomes with the new fundraising and bank
overdraft facility obtained during the time of the pandemic,
including an extreme stress test scenario.
Considering, the recent pandemic and the group continuing
to incur losses, the directors have successfully secured a
fundraise of £5.65m
(net) through placement and
subscription of shares and a £1m overdraft facility to
sustain its immediate working capital needs.
Due to the significance of this matter and given the
judgements involved in forecasting cash flows of the group
we determined that going concern is a key audit matter.
We challenged management’s modelled scenarios covering
a period of at least 12 months form the date of approval of
the financial statements including the stress test scenario,
which was based on significantly reduced trading for a
period of 12 months.
We agreed the cash of £ 5.65 million received on 16 Sept
2020, following the Group’s fundraise through placement
and subscription of shares to the bank statement.
We examined the terms of the new £1m overdraft facility
secured by the Group, focusing on the convents per the
agreement, to check that the Group could remain
compliant for the next 12 months, when considering the
stress test model prepared.
We assessed the integrity of the cash flow model and
agreed cash at hand within the Group at 28 September
2020 to bank statement, supporting the modelled scenarios
prepared by management.
We assessed the assumptions made for the renewal of
for
customer
contracts and new
reasonableness, by reference to historical renewal rates
and new wins.
contract wins
We reviewed the mitigating actions being undertaken by
directors to manage and conserve cash for reasonableness.
We assessed management’s disclosures in relation to the
COVID-19 pandemic and its potential impact checking that
these are consistent with management’s stress test
scenario and the Board’s view of the current market
conditions.
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7digital Group plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
7digital Group plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
7digital Group plc
Our application of materiality
Other information
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. For
planning, we consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level
the probability that any misstatements exceed materiality, we use a lower materiality, performance materiality, to determine the
extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also
take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Materiality
Materiality for the group as a whole was set at £95k (2018: £198k), which represents 1% (2018:1%) of group revenue. For the Group,
revenue provides a consistent year on year basis for determining materiality due to the group making losses each year and has been
determined to be the most relevant performance measure to the stakeholders of the group.
Materiality for the parent company was set at £39k (2018: £46k), which represents 1% (2018: 1%) of adjusted expenditure (2018:
revenue). The basis for materiality has been amended as the parent company is no longer a trading entity and is purely the holding
company for the group.
Performance Materiality
Based upon our assessment of the risks within the group and the group’s control environment, performance materiality for the group
financial statements was set at £66k (2018: £ 139k), being 70% (2018: 70%) of materiality. Performance materiality for the parent
company was set at £27k (2018 : 32k), being 70% of materiality.
Component materiality levels applied ranged from £15k to £66k (2018: £26k to £112k).
Reporting Threshold
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £4k (2018: £8k),
which is 4% (2018: 4%) of materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of
other relevant qualitative considerations in forming our opinion.
An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the group and its environment, including the group’s system of internal
control, and assessing the risks of material misstatement in the financial statements at the group level.
Responsibilities of directors
In determining the scope of our audit we considered the size and nature of each component within the group to determine the level
of work to be performed at each in order to ensure sufficient assurance was gained to allow us to express an opinion on the financial
statements of the group as a whole.
We obtained an understanding of the internal control environment related to the financial reporting process and assessed the
appropriateness, completeness and accuracy of group journals and other adjustments performed on consolidation.
The group consists of six trading entities. Four of the trading entities, one being the holding company, are based in the UK and were
considered significant components for the purposes of our audit. Full scope audits were performed for these entities. Further to this
there are two non-significant trading entities, one within the US and one in France as well as other non-trading entities for which
analytical procedures were performed. All audit procedures were performed by the group audit team. The significant components
audited for the group reporting purposes accounted for 91% of the group’s revenue and 100% of the group’s total assets.
The directors are responsible for the other information. The other information comprises the information included in the annual
report and accounts other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
•
•
•
•
•
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative
but to do so.
statements.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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7digital Group plc
7digital Group plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report and accounts other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
•
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
7digital Group plc
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
7digital Group plc
7digital Group plc
CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2019
Year ended 31 December 2019
Use of our report
Year to 31 Dec 2019
Year to 31 Dec 2018
This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the parent company and the parent company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Nicole Martin (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
28 September 2020
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Revenue
Cost of sales
Gross profit
Other Income
Administrative expenses
Adjusted operating loss
- Share based payments
- Foreign exchange
- Other adjusting items
Operating loss
Finance income
Finance cost
Loss before tax
Notes
2
5
6
26
3
4
9
9
10
11
Notes
£’000
9,303
(3,006)
6,297
1,103
(13,037)
(3,358)
(239)
(238)
(1,802)
(5,637)
-
(172)
(5,809)
(3)
(5,812)
£’000
(5,812)
184
(5,628)
£'000
19,912
(5,185)
14,727
371
(27,223)
(4,599)
(173)
(48)
(7,305)
(12,125)
31
(101)
(12,195)
334
(11,861)
£'000
(11,861)
(43)
(11,904)
Taxation on continuing operations
Loss for the year attributable to owners of the parent
company
Loss per share (pence)
Basic and diluted
Consolidated Statement of Comprehensive Income
Loss for the year
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
22
Other comprehensive loss
(0.47)
(2.97)
Year to 31 Dec 2019
Year to 31 Dec 2018
Total comprehensive loss attributable to owners of the
parent company
(5,628)
(11,904)
The notes from pages 38 to 70 form part of the financial statements.
7digital Group PLC Annual Report and Accounts 2019 33
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF 7DIGITAL GROUP PLC
7digital Group plc
7digital Group plc
CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2019
CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2019
Revenue
Cost of sales
Gross profit
Other Income
Administrative expenses
Adjusted operating loss
- Share based payments
- Foreign exchange
- Other adjusting items
Operating loss
Finance income
Finance cost
Loss before tax
Taxation on continuing operations
Loss for the year attributable to owners of the parent
company
Loss per share (pence)
Basic and diluted
Consolidated Statement of Comprehensive Income
Notes
2
5
6
26
3
4
9
9
10
11
Notes
Loss for the year
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive loss
22
Year to 31 Dec 2019
Year to 31 Dec 2018
£’000
9,303
(3,006)
6,297
1,103
(13,037)
(3,358)
(239)
(238)
(1,802)
(5,637)
-
(172)
(5,809)
(3)
(5,812)
£'000
19,912
(5,185)
14,727
371
(27,223)
(4,599)
(173)
(48)
(7,305)
(12,125)
31
(101)
(12,195)
334
(11,861)
(0.47)
(2.97)
Year to 31 Dec 2019
Year to 31 Dec 2018
£’000
(5,812)
184
(5,628)
£'000
(11,861)
(43)
(11,904)
Total comprehensive loss attributable to owners of the
parent company
(5,628)
(11,904)
The notes from pages 38 to 70 form part of the financial statements.
7digital Group PLC Annual Report and Accounts 2019 33
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7digital Group plc
7digital Group plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2019
31 December 2019
7digital Group plc
CONSOLIDATED CASHFLOW STATEMENT
Year ended 31 December 2019
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Current assets
Trade and other receivables
Contract assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Loans and borrowings
Derivative liability
Contract liabilities
Lease liability
Provisions for liabilities and charges
Net current liabilities
Non-current liabilities
Other payables
Contract liabilities
Lease liability
Provisions for liabilities and charges
Total liabilities
Net liabilities
Equity
Share capital
Share premium account
Other reserves
Retained earnings
Total deficit
Notes
12
13
14
16
2
17
18
18
2
14
19
17
2
14
19
21
21
22
2019
£'000
-
51
1,321
1,372
1,631
255
149
2,035
3,407
(7,009)
-
-
(335)
(472)
(768)
(8,584)
(6,549)
(676)
(7)
(1,186)
-
(1,869)
(10,453)
(7,046)
14,817
12,043
(2,845)
(31,061)
(7,046)
2018
£'000
1,175
128
-
1,303
5,784
458
461
6,703
8,006
(9,739)
(1,306)
(257)
(1,149)
-
(303)
(12,754)
(6,051)
(1,066)
(141)
-
(125)
(1,332)
(14,086)
(6,080)
14,420
8,294
(3,268)
(25,526)
(6,080)
The financial statements were approved by the Board and authorised for issue on 28 September 2020 and are signed on its
behalf by:
The notes from pages 38 to 70 form part of the financial statements.
28 September 2020
Director
The notes from pages 38 to 70 form part of the financial statements.
7digital Group PLC Annual Report and Accounts 2019 34
34
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7digital Group plc
CONSOLIDATED CASHFLOW STATEMENT
Year ended 31 December 2019
Year to 31 Dec
Year to 31 Dec
Notes
(5,812)
(11,861)
2019
£'000
3
172
(125)
238
228
415
77
-
-
239
340
(1,190)
3,793
(2,658)
(4,280)
19
-
(31)
(4,292)
-
1,073
1,073
3,313
-
(352)
2,961
(258)
461
(54)
149
2018
£'000
(334)
101
(11)
48
1,839
-
251
3,946
131
173
(9)
(3,639)
778
1,732
(6,855)
(44)
1
(39)
(6,937)
(1,000)
11
(989)
-
-
1,500
1,500
(6,426)
6,978
(91)
461
Loss for the year
Adjustments for:
Taxation
Finance Cost
Profit on sale of fixed assets
Foreign exchange
Amortisation of intangible assets
Amortisation of right-of-use asset
Depreciation of fixed assets
Impairment of intangible fixed assets
Impairment of tangible fixed assets
Share based payments
Increase/(decrease) in provisions
Decrease in accruals and deferred income
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Cash flows used in operating activities
Taxation
Interest income received
Interest expense paid
Net cash used in operating activities
Investing activities
Purchase of property, plant and equipment, and intangible assets
Proceeds from sale of intangible and tangible fixed assets
Net cash generated/(used) in investing activities
Financing activities
Proceeds from issuance of share capital (net)
Proceeds from issuance of shareholder loans
Principal paid on lease liabilities
Net cash generated from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
10
9
4
12
14
13
12
13
26
19
10
9
9
18
14
7digital Group PLC Annual Report and Accounts 2019 35
7digital Group plc
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2019
7digital Group plc
CONSOLIDATED CASHFLOW STATEMENT
Year ended 31 December 2019
7digital Group plc
CONSOLIDATED CASHFLOW STATEMENT
Year ended 31 December 2019
Year to 31 Dec
2019
Year to 31 Dec
2018
Notes
10
9
4
12
14
13
12
13
26
19
10
9
9
18
14
Loss for the year
Adjustments for:
Taxation
Finance Cost
Profit on sale of fixed assets
Foreign exchange
Amortisation of intangible assets
Amortisation of right-of-use asset
Depreciation of fixed assets
Impairment of intangible fixed assets
Impairment of tangible fixed assets
Share based payments
Increase/(decrease) in provisions
Decrease in accruals and deferred income
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Cash flows used in operating activities
Taxation
Interest income received
Interest expense paid
Net cash used in operating activities
Investing activities
Purchase of property, plant and equipment, and intangible assets
Proceeds from sale of intangible and tangible fixed assets
Net cash generated/(used) in investing activities
Financing activities
Proceeds from issuance of share capital (net)
Proceeds from issuance of shareholder loans
Principal paid on lease liabilities
Net cash generated from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of year
The notes from pages 38 to 70 form part of the financial statements.
£'000
(5,812)
3
172
(125)
238
228
415
77
-
-
239
340
(1,190)
3,793
(2,658)
(4,280)
19
-
(31)
(4,292)
-
1,073
1,073
3,313
-
(352)
2,961
(258)
461
(54)
149
£'000
(11,861)
(334)
101
(11)
48
1,839
-
251
3,946
131
173
(9)
(3,639)
778
1,732
(6,855)
(44)
1
(39)
(6,937)
(1,000)
11
(989)
-
1,500
-
1,500
(6,426)
6,978
(91)
461
7digital Group PLC Annual Report and Accounts 2019 35
7digital Group PLC Annual Report and Accounts 2019
35
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7digital Group plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2019
7digital Group plc
7digital Group plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2019
Notes
Share
capital
£'000
Share
premium
account
£'000
Reverse
acquisition
reserve
(note 22)
£'000
Foreign
exchange
translatio
n reserve
(note 22)
£'000
Merger
reserve
(note 22)
£'000
Shares to
be issued
(note 22)
£'000
Retained
earnings
£'000
Total
£'000
At 31 December 2018
14,420
8,294
(4,430)
35
959
168
(25,526)
(6,080)
Comprehensive income/(loss) for the year
Loss for the year
Other comprehensive income
Total comprehensive income/(loss) for the year
Contributions by and distributions to owners
Share issued (net of costs)
Share based payments
Capital contribution
Total contributions by and distributions to
owners
21
26
18
-
-
-
397
-
-
397
-
-
-
3,749
-
-
3,749
-
-
-
-
-
-
-
-
184
184
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
239
-
239
(5,812)
-
(5,812)
-
-
-
277
277
(5,812)
184
(5,628)
4,146
239
277
4,662
At 31 December 2019
14,817
12,043
(4,430)
219
959
407
(31,061)
(7,046)
The notes from pages 38 to 70 form part of the financial statements.
7digital Group PLC Annual Report and Accounts 2019 36
36
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7digital Group plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2019
7digital Group plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2019
7digital Group plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2019
Notes
At 31 December 2017 as previously stated
Adjustment on the adoption of IFRS 15
Prior year adjustments
1 January 2018 as restated
Comprehensive loss for the year
Loss for the year
Other comprehensive loss
Total comprehensive loss for the year
Contributions by and distributions to
owners
Share issued
Share based payments
Total contributions by and distributions to
owners
21
26
Share
capital
£'000
14,404
-
-
14,404
-
-
-
16
-
16
Share
premium
account
£'000
8,232
-
-
8,232
-
-
-
62
-
62
Reverse
acquisition
reserve
(note 21)
£'000
(4,430)
-
-
(4,430)
-
-
-
-
-
-
Foreign
exchange
translatio
n reserve
(note 21)
£'000
Merger
reserve
(note 21)
£'000
Shares to
be issued
(note 21)
£'000
78
-
-
78
-
(43)
(43)
-
-
-
959
-
-
959
-
-
-
-
-
-
Retained
earnings
£'000
(12,837)
(344)
(484)
(13,665)
(11,861)
-
(11,861)
-
-
-
-
Total
£'000
6,432
(344)
(484)
5,604
(11,861)
(43)
(11,904)
78
142
220
(25,526)
(6,080)
26
-
-
26
-
-
-
-
142
142
168
At 31 December 2018
14,420
8,294
(4,430)
35
959
The notes from pages 38 to 70 form part of the financial statements.
7digital Group PLC Annual Report and Accounts 2019 37
7digital Group PLC Annual Report and Accounts 2019
37
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
1.
Accounting policies
General information
7digital Group plc is a public company, limited by shares and incorporated in the United Kingdom (England and Wales) under
the Companies Act 2006. The address of the registered office is given on page 82.
The Group prepares its consolidated financial statements in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the EU. The financial statements have been prepared on the historical cost basis, except for the
revaluation of financial instruments. The principal accounting policies set out below have been consistently applied to all
the periods presented in these financial statements; except as stated below.
Basis of Preparation
Statutory accounts for the year ended 31 December 2019 have been delivered to the Registrar of Companies. The financial
information for the year ended 31 December 2019 contained in these results has been audited.
The financial information contained in these results has been prepared using the recognition and measurement
requirements of International Financial Reporting Standards (IFRSs) as adopted by the EU. The accounting policies adopted
in these results have been consistently applied to all the years presented and are consistent with the policies used in the
preparation of the financial statements for the year ended 31 December 2019. New standards, amendments and
interpretations to existing standards, which have been adopted by the Group for the year ended 31 December 2019, have
been listed below.
New standards and interpretations
a) New standards, interpretations and amendments effective from 1 January 2019.
New standards impacting the Group that have been adopted in the annual financial statements for the year ended 31
December 2019, and which have given rise to changes in the Group’s accounting policies are:
• IFRS 16 Leases (IFRS 16) refer note 14
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on
the date of initial application (1 January 2019), without restatement of comparative figures. The Group elected to apply
the practical expedient to not reassess whether a contract is or contains a lease at the date of initial application.
Contracts entered into before the transition date that were not identified as leases under IAS 17 and IFRIC 4 were not
reassessed. The definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1
January 2019.
b) New standards, interpretations and amendments not yet effective.
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB
that are effective in future accounting periods that the group has decided not to adopt early. The most significant of
these is:
• IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors (Amendment – Definition of Material)
• IFRS 3 Business Combinations (Amendment – Definition of Business)
• Revised Conceptual Framework for Financial Reporting
New and amended standards and Interpretations issued by the IASB that will apply for the first time in the next annual
financial statements are not expected to impact the Group as they are either not relevant to the Group’s activities or
require accounting which is consistent with the Group’s current accounting policies.
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
Going concern
Summary
On 21 February 2020, a short term loan of £500k was signed with CSS Alpha (BVI) Limited. The loan is repayable over 12
months in equal parts starting from 28 March 2020 with interest based on 1.5% of the outstanding balance. The loan is
guaranteed by one of the Directors.
On 3 September 2020, 7digital annouced the placing of 266,666,667 new Ordinary Shares of 0.01p each, which raised £6m
at an issue price of 2.25 pence per share. The net proceeds of the fundraising will be used to meet the immediate working
capital requirements of the Group and support immediate and medium term commercial growth opportunities, in
particular within home fitness, artist monetisation, and social media.
Background to and reasons for the placing and subscription
The music industry is undergoing a period of change and opportunity whereby revenue sources are changing. and growing.
Whereas five years ago revenues were dominated mainly by music sales and live performances, today streaming has
displaced download music sales and COVID-19 has shut down live performances for much of 2020 and is likely to continue
to impact live performances in the medium term. In addition, as music streaming has gained in popularity, music listening
on social video platforms has begun to outpace DSP streaming services.
7digital has an advanced, scalable, cloud-based platform and the Directors believe that the Company is positioned to take
advantage of new sources of growth brought on by the changing industry as well as the new opportunities and models
accelerated by the COVID-19 pandemic. This is supported by a number of renewals and new contracts over the last year,
including with Triller, eMusic and a global technology company in August 2020. In particular 7digital has identified
potentially significant emerging opportunities within social media, home fitness and artist monetisation channels.
In March 2020, the World Health Organisation declared a global pandemic due to the COVID-19 virus that has spread across
the globe, causing different governments and countries to enforce restrictions on people movements, a stop to
international travel, and other precautionary measures. This has had a widespread impact economically and a number of
industries have been heavily impacted. This has resulted in impacts on certain industries and a more general need to
consider whether budgets and targets previously set are realistic in light of these events.
As described on page 5, the COVID-19 pandemic has impacted our business but the Board believes that the business is well
positioned to be able to navigate through the impact of COVID-19 due to the strength and flexibility of its service
COVID-19
proposition.
Brexit
The United Kingdom (‘UK’) formally left the European Union (‘EU’) on 30 January 2020. The period of time from when the
UK voted to exit the EU on 23 June 2016 and the formal process initiated by the UK government to withdraw from the EU,
or Brexit, created volatility in the global financial markets. The UK now enters a transition period, being an intermediary
arrangement covering matters like trade and border arrangements, citizens’ rights and jurisdiction on matters including
dispute resolution, taking account of The EU (Withdrawal Agreement) Act 2020, which ratified the Withdrawal Agreement,
as agreed between the UK and the EU. The transition period is currently due to end on 31 December 2020 and ahead of
this date, negotiations are ongoing to determine and conclude a formal agreement between the UK and EU on the
aforementioned matters.
The Group operates subsidiaries in many countries. The Directors currently deem that the effects of the UK’s current
transitional period outside the EU and the impact of ongoing discussions with the EU will not have a significant impact on
the Group’s operations due to the global geographical footprint of the business and the nature of is operations.
Facility
the undrawn portion.
On 28 September 2020, the Group secured a £1m overdraft facility with Investec for a period of 36 months guaranteed
by two of the Directors; this attracts 6% interest above Investec bank rate on the drawn portion of the facilty and 2% on
38
7digital Group PLC Annual Report and Accounts 2019 38
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019 39
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
Going concern
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Summary
On 21 February 2020, a short term loan of £500k was signed with CSS Alpha (BVI) Limited. The loan is repayable over 12
months in equal parts starting from 28 March 2020 with interest based on 1.5% of the outstanding balance. The loan is
guaranteed by one of the Directors.
On 3 September 2020, 7digital annouced the placing of 266,666,667 new Ordinary Shares of 0.01p each, which raised £6m
at an issue price of 2.25 pence per share. The net proceeds of the fundraising will be used to meet the immediate working
capital requirements of the Group and support immediate and medium term commercial growth opportunities, in
particular within home fitness, artist monetisation, and social media.
Background to and reasons for the placing and subscription
The music industry is undergoing a period of change and opportunity whereby revenue sources are changing. and growing.
Whereas five years ago revenues were dominated mainly by music sales and live performances, today streaming has
displaced download music sales and COVID-19 has shut down live performances for much of 2020 and is likely to continue
to impact live performances in the medium term. In addition, as music streaming has gained in popularity, music listening
on social video platforms has begun to outpace DSP streaming services.
7digital has an advanced, scalable, cloud-based platform and the Directors believe that the Company is positioned to take
advantage of new sources of growth brought on by the changing industry as well as the new opportunities and models
accelerated by the COVID-19 pandemic. This is supported by a number of renewals and new contracts over the last year,
including with Triller, eMusic and a global technology company in August 2020. In particular 7digital has identified
potentially significant emerging opportunities within social media, home fitness and artist monetisation channels.
COVID-19
In March 2020, the World Health Organisation declared a global pandemic due to the COVID-19 virus that has spread across
the globe, causing different governments and countries to enforce restrictions on people movements, a stop to
international travel, and other precautionary measures. This has had a widespread impact economically and a number of
industries have been heavily impacted. This has resulted in impacts on certain industries and a more general need to
consider whether budgets and targets previously set are realistic in light of these events.
As described on page 5, the COVID-19 pandemic has impacted our business but the Board believes that the business is well
positioned to be able to navigate through the impact of COVID-19 due to the strength and flexibility of its service
proposition.
Brexit
The United Kingdom (‘UK’) formally left the European Union (‘EU’) on 30 January 2020. The period of time from when the
UK voted to exit the EU on 23 June 2016 and the formal process initiated by the UK government to withdraw from the EU,
or Brexit, created volatility in the global financial markets. The UK now enters a transition period, being an intermediary
arrangement covering matters like trade and border arrangements, citizens’ rights and jurisdiction on matters including
dispute resolution, taking account of The EU (Withdrawal Agreement) Act 2020, which ratified the Withdrawal Agreement,
as agreed between the UK and the EU. The transition period is currently due to end on 31 December 2020 and ahead of
this date, negotiations are ongoing to determine and conclude a formal agreement between the UK and EU on the
aforementioned matters.
The Group operates subsidiaries in many countries. The Directors currently deem that the effects of the UK’s current
transitional period outside the EU and the impact of ongoing discussions with the EU will not have a significant impact on
the Group’s operations due to the global geographical footprint of the business and the nature of is operations.
Facility
On 28 September 2020, the Group secured a £1m overdraft facility with Investec for a period of 36 months guaranteed
by two of the Directors; this attracts 6% interest above Investec bank rate on the drawn portion of the facilty and 2% on
the undrawn portion.
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019 39
39
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
1.
Accounting policies (continued)
Conclusion
The Directors have reviewed 7digital’s going concern position taking account of its current business activities, financial
forecasts and factors likely to affect its future financial position, as set out in this Annual report which include 7digital’s
objectives, policies and processes for managing its capital and its financial risk management objectives. Considering the
global coronavirus (COVID-19) pandemic, the global economic uncertainties and impact on delayed sales cycles, the
Directors have undertaken an elevated scrutiny to the cashflow forecasts covering a period of at least 12 months from the
date of approval of the financial statements. Cashflow forecasts have been prepared based on a range of scenarios
including, but not limited to, no further debt or equity funding, existing customer churn at different churn rates, no new
contracted sales revenue, delayed sales, cost reductions, both limited and extensive, and a combination of these different
outcomes.
Having assessed the sensitivity analysis on cashflows including the funding of £6m and the security of the newly agreed
credit facility, together with the significant current business momentum from new customers including Triller, the launch
of eMusic Live and growing demand for streaming and digital music solutions, the Directors strongly believe 7digital will
continue to operate as a going concern for the foreseeable future, being 12 months from their signing of their financial
statements.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31
December 2019.
All subsidiaries are controlled by the Group and are included in the consolidated financial statements; the Group controls
an investee if, and only if, the Group has:
•
•
•
Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities
of the investee)
Exposure, or rights, to variable returns from its involvement with the investee
The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when
the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:
•
•
•
The contractual arrangement(s) with the other vote holders of the investee
Rights arising from other contractual arrangements
The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over
the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the
Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of OCI are attributed to the equity holders of the parent of the Group and to the non-
controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary,
adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s
accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-
controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any
investment retained is recognised at fair value.
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The
consideration transferred In the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase Is recognised in profit or loss
immediately. Transaction costs are expensed as incurred, except If related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-exlstlng relationships, such
amounts are generally recognised In profit or loss.
Any contingent consideration payable is measured at fair value at the acquisition date, if an obligation to pay contingent
consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and
settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each
reporting date and subsequent changes in the fair value of the contingent consideration are recognised In profit or loss.
Subsidiaries are entitles controlled by the Group, the Group controls an entity when it is exposed to, or has rights to,
variable returns from its Involvement with the entity and has the ablity to affect those returns through its power over the
entity. The financial statements of subsidiaries are included In the consolidated financial statements from the date on
which control commences until the date on which control ceases.
Subsidiaries
Loss of control
When the Group loses control over a subsidiary, it de-recognlses the assets and liabilities of the subsidiary, and any non-
controllng interests and other components of equity. Any resulting gain or loss is recognised in the profit or loss. Any
interest retained in the former subsidiary is measured at fair value when control is lost.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the
investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated In the same way as
unrealised gains, but only to the extent that there is no evidence of impairment.
Revenue
The group comprises of mainly three types of revenues
1)
Licencing fees (also known as B2B sales)
a.
Setup Fees
c. Usage fees
b. Monthly development and support fees
2) Content (“download”) revenues (also know as B2C sales)
3) Creative revenues
7digital Group PLC Annual Report and Accounts 2019 40
40
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The
consideration transferred In the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase Is recognised in profit or loss
immediately. Transaction costs are expensed as incurred, except If related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-exlstlng relationships, such
amounts are generally recognised In profit or loss.
Any contingent consideration payable is measured at fair value at the acquisition date, if an obligation to pay contingent
consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and
settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each
reporting date and subsequent changes in the fair value of the contingent consideration are recognised In profit or loss.
Subsidiaries
Subsidiaries are entitles controlled by the Group, the Group controls an entity when it is exposed to, or has rights to,
variable returns from its Involvement with the entity and has the ablity to affect those returns through its power over the
entity. The financial statements of subsidiaries are included In the consolidated financial statements from the date on
which control commences until the date on which control ceases.
Loss of control
When the Group loses control over a subsidiary, it de-recognlses the assets and liabilities of the subsidiary, and any non-
controllng interests and other components of equity. Any resulting gain or loss is recognised in the profit or loss. Any
interest retained in the former subsidiary is measured at fair value when control is lost.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the
investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated In the same way as
unrealised gains, but only to the extent that there is no evidence of impairment.
Revenue
The group comprises of mainly three types of revenues
1)
Licencing fees (also known as B2B sales)
Setup Fees
a.
b. Monthly development and support fees
c. Usage fees
2) Content (“download”) revenues (also know as B2C sales)
3) Creative revenues
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
1.
Accounting policies (continued)
Each type of revenue is detailed below
Revenue comprises of:
I. Licensing revenues
7digital defines licensing revenues as fees earned both for access to the company’s platform and for development
work on that platform in order to adapt functions to customer needs. The Board considers that the provision of
Technology Licensing Services comprises three separately identifiable components:
The description of the licence fees compromise three categories;
1.
Set-up fees : Set up fees which grant initial access to the platform, allow use of our catalogue and
associated metadata and mark the start of work to define a client’s exact requirements and create the
detailed specifications of a service.
2. Monthly development and support fees which cover the costs of developer and customer support time.
These are usually fixed and are paid monthly once a service has been specified in detail; they are
calculated at commercial rates based on the number of developer or support days required.
3. Usage fees which cover certain variable costs like bandwidth which can be re-charged to clients with an
administrative margin are recognised at point in time based on usage.
II. Content (“download”) revenues
Content revenues are recognised at the value of services supplied and on delivery of the content. The group
manages a number of content stores and the income is recognised in the month it relates to. Majority of the
revenue converts directly to cash; any accrued revenue converts to trade receivables within 30days.
III. Creative revenues
Creative revenues relate to the sale of programmes and other content. 7digital also undertakes bespoke radio
programming for its customers. As the programmes are being created the associated revenue is accrued/deferred
until such time as the programme is delivered and accepted by the client. At this time the accrued revenue coverts
to trade receivables. These mainly include the production of weekly radio programmes, as well as the one-off
production of episodes. In case of one-off productions which required the Group to provide progress reports to its
customers and where the company has no alternative use of the program produced, the group recognises revenue
over the period i.e. based on percentage of completion, for
the rest of the regular programs and contents, where the company does not own the IP, the group measures the
revenue based on delivery of the content i.e. at a point in time.
Contracts with multiple performance obligations
Many of the Group's contracts include a variety of performance obligations, including Licencing revenue (set-up fees,
monthly revenue for using 7digital’s API licence platform and usage fees), however may not be distinct in nature. Under
IFRS 15, the Group evaluates the segregation of the agreed goods or services based on whether they are 'distinct'. If both
the customer benefits from them either on its own or together with other readily available resources, and it is 'separately
identifiable' within the contract.
To determine whether to recognise revenue, the Group follows a 5-step process:
-
-
-
-
-
Identifying the contract with customers
Identifying the performance obligations
Determining the transaction price
Allocating the transaction price to the performance obligations
Recognising revenue when/ as performance obligations are satisfied.
Performance Obligations and timing of revenue recognition
Revenue generated from B2B customer contracts often identify separate goods/services, with these generally being the
access of the API license platform, and the associated monthly licence maintenance fees and content usage fees.
7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
The list of obligations as per the contract that are deemed to be one performance obligation in case of licencing revenue
are (B2B):
-
-
-
The licenses provide access to the 7D platform
The development and support fees which cover the costs of developer and customer support time
Usage fees which cover certain variable costs like bandwidth and content.
A key consideration is whether licencing fees give the customer the right to use the API Licence as it exists when the licence
is granted, or access to API which will, amongst other considerations, be significantly updated during the API licence period.
The group grants the customer a limited, revocable, non-exclusive and non-transferable licence in the Territory during the
Term, to use the 7digital API and the content to enable the provision of the Music Service to the End Users via Application.
Set-up fees represent an obligation under the contract, which is not a distinct performance obligation, as the customer is
not able to access the platform without them. These are therefore spread over the period of the contract agreed initially
with the customers.
Monthly licence maintenance fees indicate service contracts that provide ongoing support over a period of time. Revenue
is recognised over the term of the contract on a straight-line basis.
In the case of Creative Revenue, the sole performance obligation is to deliver the content specified as per contract, whether
this be the delivery of regular content throughout the year (e.g. a radio series), or the production of a longer, one-off
episode.
The only obligation for the group is to deliver the content production agreed in the contract. Control and risks are passed
to the customer on delivery of the episode produced, news bulletins etc. The right to the IP varies from project to project.
If the customer suggests a specific programme idea to tender, they will then own the underlying rights of the recordings
and the IPR is exclusive to customer; 7digital’s only performance obligation would be to produce the content.
In the case of one-off productions for an identifiable customer contract where 7digital is required to update the client on
the progress of work completed, the Group applies an output method to determine the stage of completion and amount
of revenue to recognize.
Payment terms vary depending on the specific product or service purchased. With licence fees, the set-up fees element is
invoiced and paid upfront, while monthly maintenance revenues and usage fees are normally invoiced on a monthly basis.
In the case of download sales, the cost is paid immediately by the customer upon download of the music/songs content
from the 7digital platform. In the case of creative revenues, the payment terms are generally 50% on signing with the
balance on delivery. All contracts are subject to these standard payment terms, to the extent that the parties involved
expressly agree in writing that the conflicting terms of any agreement shall take precedence.
In the case of fixed-price contracts, the customer pays the fixed amount based on a monthly schedule. If the services
rendered by the company exceed the payment, a contract asset (Accrued Income) is recognised; if the payments exceed
the services rendered, a contract liability (Deferred Revenue) is recognised.
Determine transaction price and allocating to each performance obligation
The transaction price for licencing fees (set-up fees and monthly licence fee) is fixed as per contract and is explicitly noted
in the contract. In the case of usage fees, the per gigabyte fee is determined and agreed in the contract. In the case of
creative revenue, the transaction fees for radio services and one-off series is determined by taking into account the length
of the production (this may vary for commercials, radio programs, tv shows, series, etc.). Any variations in transaction price
are agreed and charged additionally depending on the obligations to be performed. None of the five factors (i.e. variable
consideration, constraining estimates of variable consideration, the existence of a significant financing component in the
contract, non-cash consideration, and consideration payable to a customer identified) are particularly relevant to 7digital’s
customer contracts. The transaction price included in 7digital’s contracts is generally easily identifiable and is for cash
consideration.
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
The list of obligations as per the contract that are deemed to be one performance obligation in case of licencing revenue
are (B2B):
-
-
-
The licenses provide access to the 7D platform
The development and support fees which cover the costs of developer and customer support time
Usage fees which cover certain variable costs like bandwidth and content.
A key consideration is whether licencing fees give the customer the right to use the API Licence as it exists when the licence
is granted, or access to API which will, amongst other considerations, be significantly updated during the API licence period.
The group grants the customer a limited, revocable, non-exclusive and non-transferable licence in the Territory during the
Term, to use the 7digital API and the content to enable the provision of the Music Service to the End Users via Application.
Set-up fees represent an obligation under the contract, which is not a distinct performance obligation, as the customer is
not able to access the platform without them. These are therefore spread over the period of the contract agreed initially
with the customers.
Monthly licence maintenance fees indicate service contracts that provide ongoing support over a period of time. Revenue
is recognised over the term of the contract on a straight-line basis.
In the case of Creative Revenue, the sole performance obligation is to deliver the content specified as per contract, whether
this be the delivery of regular content throughout the year (e.g. a radio series), or the production of a longer, one-off
episode.
The only obligation for the group is to deliver the content production agreed in the contract. Control and risks are passed
to the customer on delivery of the episode produced, news bulletins etc. The right to the IP varies from project to project.
If the customer suggests a specific programme idea to tender, they will then own the underlying rights of the recordings
and the IPR is exclusive to customer; 7digital’s only performance obligation would be to produce the content.
In the case of one-off productions for an identifiable customer contract where 7digital is required to update the client on
the progress of work completed, the Group applies an output method to determine the stage of completion and amount
of revenue to recognize.
Payment terms vary depending on the specific product or service purchased. With licence fees, the set-up fees element is
invoiced and paid upfront, while monthly maintenance revenues and usage fees are normally invoiced on a monthly basis.
In the case of download sales, the cost is paid immediately by the customer upon download of the music/songs content
from the 7digital platform. In the case of creative revenues, the payment terms are generally 50% on signing with the
balance on delivery. All contracts are subject to these standard payment terms, to the extent that the parties involved
expressly agree in writing that the conflicting terms of any agreement shall take precedence.
In the case of fixed-price contracts, the customer pays the fixed amount based on a monthly schedule. If the services
rendered by the company exceed the payment, a contract asset (Accrued Income) is recognised; if the payments exceed
the services rendered, a contract liability (Deferred Revenue) is recognised.
Determine transaction price and allocating to each performance obligation
The transaction price for licencing fees (set-up fees and monthly licence fee) is fixed as per contract and is explicitly noted
in the contract. In the case of usage fees, the per gigabyte fee is determined and agreed in the contract. In the case of
creative revenue, the transaction fees for radio services and one-off series is determined by taking into account the length
of the production (this may vary for commercials, radio programs, tv shows, series, etc.). Any variations in transaction price
are agreed and charged additionally depending on the obligations to be performed. None of the five factors (i.e. variable
consideration, constraining estimates of variable consideration, the existence of a significant financing component in the
contract, non-cash consideration, and consideration payable to a customer identified) are particularly relevant to 7digital’s
customer contracts. The transaction price included in 7digital’s contracts is generally easily identifiable and is for cash
consideration.
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
1.
Accounting policies (continued)
Other adjusting items
Other adjusting items are those items the Group considers to be non-recurring or material in nature that should be brought
to the readers’ attention in understanding the Group’s financial statements. Other adjusting items consist of one-off
acquisition costs, costs related to non-recurring legal and statutory events, restructuring costs and other items which are
not expected to re-occur in future years.
Foreign currency
For the purpose of the consolidated financial statements, the results and financial position of each Group company are
expressed in Pounds Sterling, which is the functional currency of the Company, and the presentation currency for the
consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at
the rates prevailing on the balance sheet date. Non-monetary items that are measured in terms of historical cost in a
foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items, are included
in profit and loss for the year.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations
are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the
average monthly rate of exchange ruling at the date of the transaction, unless exchange rates fluctuate significantly during
that month, in which case the exchange rates at the date of transactions are used.
Intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis
over their useful economic lives.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to
contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques.
Intangible assets (Bespoke Applications) arising from the internal development phase of projects is recognised if, and only
if, all of the following have been demonstrated:
-
-
-
-
-
The technical feasibility of completing the intangible asset so that it will be available for use or sale
The intention to complete the intangible asset and use or sell it
The ability to use or sell the intangible asset
How the intangible asset will generate probable future economic benefits
The availability of adequate technical, financial and other resources to complete the development and to use or sell
the intangible asset; and
The ability to measure reliably the expenditure attributable to the intangible asset during its development.
-
The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible
asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.
Internally generated intangible assets are amortised over their useful economic lives on a straight-line basis, over 3 years.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchased price, cost includes directly
attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The
corresponding liability is recognised within provisions.
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Depreciation is provision on all items of property, plant and equipment, so as to write off their carrying value over their
expected useful economic lives. It is provided at the following rates:
Property
Computer equipment
Fixtures and fittings
- 20% per annum straight line
- 33.33% per annum straight line
- 33.33% per annum straight line
Impairment of tangible and other intangible assets
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at
the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds
its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down
accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on
the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating
units ('CGUs'). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from
a business combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other
comprehensive income. An impairment loss recognised for goodwill is not reversed.
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term, highly liquid investments
that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Government grants, including research and development credits are recognised when it is reasonable to expect that the
grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Grants
of a revenue nature are credited to income so as to match them with the expenditure to which they relate.
Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of
Cash and cash equivalent
Government grants
Financial instruments
the instruments.
Initial Recognition:
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at
fair value through profit or loss and ancillary costs related to borrowings) are added to or deducted from the fair value of
the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through
profit or loss are charged to the Statement of Profit and Loss over the tenure of the financial assets or financial liabilities.
Classification and Subsequent Measurement: Financial Assets
The Company classifies financial assets as subsequently measured at amortised cost, Fair Value through Other
Comprehensive Income (“FVOCI”) or Fair Value through Profit or Loss (“FVTPL”) on the basis of following:
• the entity’s business model for managing the financial assets and
• the contractual cash flow characteristics of the financial asset.
Amortised Cost:
cash flows and
A financial asset shall be classified and measured at amortised cost if both of the following conditions are met:
• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Depreciation is provision on all items of property, plant and equipment, so as to write off their carrying value over their
expected useful economic lives. It is provided at the following rates:
Property
Computer equipment
Fixtures and fittings
- 20% per annum straight line
- 33.33% per annum straight line
- 33.33% per annum straight line
Impairment of tangible and other intangible assets
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at
the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds
its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down
accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on
the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating
units ('CGUs'). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from
a business combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other
comprehensive income. An impairment loss recognised for goodwill is not reversed.
Cash and cash equivalent
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term, highly liquid investments
that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Government grants
Government grants, including research and development credits are recognised when it is reasonable to expect that the
grants will be received and that all related conditions will be met, usually on submission of a valid claim for payment. Grants
of a revenue nature are credited to income so as to match them with the expenditure to which they relate.
Financial instruments
Financial assets and financial liabilities are recognised when a Company becomes a party to the contractual provisions of
the instruments.
Initial Recognition:
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at
fair value through profit or loss and ancillary costs related to borrowings) are added to or deducted from the fair value of
the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through
profit or loss are charged to the Statement of Profit and Loss over the tenure of the financial assets or financial liabilities.
Classification and Subsequent Measurement: Financial Assets
The Company classifies financial assets as subsequently measured at amortised cost, Fair Value through Other
Comprehensive Income (“FVOCI”) or Fair Value through Profit or Loss (“FVTPL”) on the basis of following:
• the entity’s business model for managing the financial assets and
• the contractual cash flow characteristics of the financial asset.
Amortised Cost:
A financial asset shall be classified and measured at amortised cost if both of the following conditions are met:
• the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual
cash flows and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
1.
Accounting policies (continued)
In case of financial assets classified and measured at amortised cost, any interest income, foreign exchange gains or losses
and impairment are recognised in the Statement of Profit and Loss.
Fair Value through OCI:
A financial asset shall be classified and measured at fair value through OCI if both of the following conditions are met:
• the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows
and selling financial assets and
• the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Fair Value through Profit or Loss:
A financial asset shall be classified and measured at fair value through profit or loss unless it is measured at amortised cost
or at fair value through OCI.
All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending
on the classification of the financial assets.
For financial assets at FVTPL, net gains or losses, including any interest or dividend income, are recognised in the Statement
of Profit and Loss.
Classification and Subsequent Measurement: Financial liabilities
Financial liabilities are classified as either financial liabilities at FVTPL or ‘other financial liabilities’.
Financial Liabilities at FVTPL:
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is a derivative (except for
effective hedge) or are designated upon initial recognition as FVTPL.
Gains or Losses, including any interest expense on liabilities held for trading, are recognised in the Statement of Profit and
Loss.
Other Financial Liabilities:
Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised
cost using the effective interest method.
The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points
paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortised cost on initial
recognition.
Interest expense (based on the effective interest method), foreign exchange gains and losses, and any gain or loss on
derecognition is recognised in the Statement of Profit and Loss.
hierarchy’):
Impairment of financial assets:
Expected credit losses are recognized for all financial assets subsequent to initial recognition other than financial assets in
FVTPL category. For financial assets other than trade receivables, as per IFRS 9, the Group recognises 12 month expected
credit losses for all originated or acquired financial assets if at the reporting date the credit risk of the financial asset has
not increased significantly since its initial recognition. The expected credit losses are measured as lifetime expected credit
losses if the credit risk on financial asset increases significantly since its initial recognition.
Impairment provisions for trade receivables are recognised based on the simplified approach within IFRS 9 using the
lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is
assessed. Thus probability is then multiplied by the amount of the expected loss arising from default to determine the
lifetime expected credit loss for the trade receivables For trade receivables, which are reported net, such provisions are
recorded in a separate provision account with the loss being recognised within cost of sales in the consolidated
statement of comprehensive Income. On confirmation that the trade receivable will not be collectable, the gross carrying
value of the asset is written off against the associated provision.
The impairment losses and reversals are recognised in Statement of Profit and Loss.
De-recognition of financial assets and financial liabilities:
The Company de-recognises a financial asset when the contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the
Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the
transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may
have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the
Company continues to recognise the financial asset and also recognises an associated liability for amounts it has to pay.
On de-recognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration
received and receivable and the cumulative gain or loss that had been recognised in OCI and accumulated in equity is
recognised in the Statement of Profit and Loss.
The Company de-recognises financial liabilities when and only when, the Company’s obligations are discharged, cancelled
or have expired. The difference between the carrying amount of the financial liability de-recognised and the consideration
paid and payable is recognised in the Statement of Profit and Loss.
Financial liabilities and equity instruments:
• Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
• Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by a Company are recognised at the proceeds received.
Derivative financial instruments:
The Company enters into derivative financial instruments viz. a residual of the convertible loan instrument. The Company
does not hold derivative financial instruments for speculative purposes. Derivatives are initially recognised at fair value at
the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each
reporting period. The resulting gain or loss is recognised in profit or loss immediately.
Fair value measurement
of, fair value.
A number of assets and liabilities included in the Group’s financial statements require measurement at, and/or disclosure
The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels
based on how observable the inputs used in the valuation technique utilised are (the ‘fair value
- Level 1: Quoted prices in active markets for identical items (unadjusted)
- Level 2: Observable direct or indirect inputs other than Level 1 inputs and
- Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant
effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they
occur.
Valuation techniques used to determine fair values
Specific valuation techniques used to value financial instruments Include
•
current liabilities (level 3) – Monte-Carlo model
7digital Group PLC Annual Report and Accounts 2019 46
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
The impairment losses and reversals are recognised in Statement of Profit and Loss.
De-recognition of financial assets and financial liabilities:
The Company de-recognises a financial asset when the contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the
Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the
transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may
have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the
Company continues to recognise the financial asset and also recognises an associated liability for amounts it has to pay.
On de-recognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration
received and receivable and the cumulative gain or loss that had been recognised in OCI and accumulated in equity is
recognised in the Statement of Profit and Loss.
The Company de-recognises financial liabilities when and only when, the Company’s obligations are discharged, cancelled
or have expired. The difference between the carrying amount of the financial liability de-recognised and the consideration
paid and payable is recognised in the Statement of Profit and Loss.
Financial liabilities and equity instruments:
• Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
• Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by a Company are recognised at the proceeds received.
Derivative financial instruments:
The Company enters into derivative financial instruments viz. a residual of the convertible loan instrument. The Company
does not hold derivative financial instruments for speculative purposes. Derivatives are initially recognised at fair value at
the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each
reporting period. The resulting gain or loss is recognised in profit or loss immediately.
Fair value measurement
A number of assets and liabilities included in the Group’s financial statements require measurement at, and/or disclosure
of, fair value.
The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observable
inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels
based on how observable the inputs used in the valuation technique utilised are (the ‘fair value
hierarchy’):
- Level 1: Quoted prices in active markets for identical items (unadjusted)
- Level 2: Observable direct or indirect inputs other than Level 1 inputs and
- Level 3: Unobservable inputs (i.e. not derived from market data).
The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant
effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they
occur.
Valuation techniques used to determine fair values
Specific valuation techniques used to value financial instruments Include
•
current liabilities (level 3) – Monte-Carlo model
7digital Group PLC Annual Report and Accounts 2019 47
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
1.
Accounting policies (continued)
Share-based payments
The fair value determined at the grant date is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of shares that will eventually vest. Fair value is measured by use of an appropriate valuation model. The
Black-Scholes option pricing model has been used to value the share options plans.
Taxation
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except that a charge
attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other
comprehensive income.
The deferred tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted
by the reporting date in the countries where the company operates and generates taxable income.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements and on unused tax losses or tax credits in the company. Deferred income tax
is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date.
The carrying amount of deferred tax assets are reviewed at each reporting date. Recognition of deferred tax assets is
restricted to those instances where it is probable that taxable profit will be available against which the difference can be
utilised.
Leases
All leases are accounted for by recognising a right‐of‐use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a duration of 12 months or less.
IFRS 16 was adopted 1 January 2019 without restatement of comparative figures.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in the lease.
On initial recognition, the carrying value of the lease liability also includes:
• amounts expected to be payable under any residual value guarantee;
• the exercise price of any purchase option granted in favour of the group if it is reasonably certain to assess that option;
and
• any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination
option being exercised.
Right‐of‐use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and
increased for:
• lease payments made at or before commencement of the lease;
• initial direct costs incurred; and
• the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the
leased asset.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right‐of‐use assets are amortised on a straight‐line basis over the
remaining term of the lease.
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
The effect of adoption of IFRS 16 as at 1 January 2019 :
£'000
1,862
(126)
1,736
(1,862)
(1,862)
£'000
2,902
(719)
2,183
7.0%
1,862
1,862
Assets
Right-of-use asset
Less accruals (net)
Total assets
Liabilities
Lease liability
Total liabilities
The present value of the lease payments is based on applying a discount rate which is either the interest rate implicit in
the lease or the incremental borrowing rate. The lease liabilities as at 1 January 2019 can be reconciled to the operating
lease commitments as of 31 Decemer 2018 as follows:
Operating lease commitments as at 31 December 2018
Removal of elements not relevant to IFRS16 (service charges)
Weighted average incremental borrowing rate as at 1 January 2019
Discounted operating lease commitments at 1 January 2019
Lease liability recognised at 1 January 2019
1.1
Critical accounting judgements and key areas of estimation uncertainty
In the application of the Company accounting policies, which are described above, the directors are required to make
judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period which the estimate is revised if the revisions affect only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
Content cost of sales is determined at an average rate of sales and is consistent with previous years. The directors believe
that this calculation is deemed to be the most effective method of determining the true cost of content considering varied
pricing structures agreed with all the label suppliers and publishers.
Content cost of sales
Creative revenue
Management considers the detailed criteria for the recognition of creative revenue as set out in the Group’s accounting
policy, in particular whether the Group determines the appropriate apportionment of revenue to the correct accounting
period and subsequent amount accrued or deferred at the year end.
Impairment of accounts receivables
The management and directors have made certain estimates and judgements in the application of IFRS 9 when measuring
expected credit losses and the assessment of expected credit loss provisions required for accounts receivable balances.
(see note 16).
7digital Group PLC Annual Report and Accounts 2019 48
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
The effect of adoption of IFRS 16 as at 1 January 2019 :
Assets
Right-of-use asset
Less accruals (net)
Total assets
Liabilities
Lease liability
Total liabilities
£'000
1,862
(126)
1,736
(1,862)
(1,862)
The present value of the lease payments is based on applying a discount rate which is either the interest rate implicit in
the lease or the incremental borrowing rate. The lease liabilities as at 1 January 2019 can be reconciled to the operating
lease commitments as of 31 Decemer 2018 as follows:
Operating lease commitments as at 31 December 2018
Removal of elements not relevant to IFRS16 (service charges)
Weighted average incremental borrowing rate as at 1 January 2019
Discounted operating lease commitments at 1 January 2019
Lease liability recognised at 1 January 2019
£'000
2,902
(719)
2,183
7.0%
1,862
1,862
1.1
Critical accounting judgements and key areas of estimation uncertainty
In the application of the Company accounting policies, which are described above, the directors are required to make
judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period which the estimate is revised if the revisions affect only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
Content cost of sales
Content cost of sales is determined at an average rate of sales and is consistent with previous years. The directors believe
that this calculation is deemed to be the most effective method of determining the true cost of content considering varied
pricing structures agreed with all the label suppliers and publishers.
Creative revenue
Management considers the detailed criteria for the recognition of creative revenue as set out in the Group’s accounting
policy, in particular whether the Group determines the appropriate apportionment of revenue to the correct accounting
period and subsequent amount accrued or deferred at the year end.
Impairment of accounts receivables
The management and directors have made certain estimates and judgements in the application of IFRS 9 when measuring
expected credit losses and the assessment of expected credit loss provisions required for accounts receivable balances.
(see note 16).
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
1.
Accounting policies (continued)
2.
Revenue (continued)
1.1
Critical accounting judgements and key areas of estimation uncertainty (continued)
Other adjusting items
The management and directors considers items of income and expenses as other adjusting items where the nature of the
item, or its magnitude, is material and likely to be non-recurring in nature so as to assist the user of the financial statements
to better understand then results of the core operations of the group. Details of other adjusting items are shown in note
3.
2.
Revenue
2.1 Revenue from contracts with customer
The Group has disaggregated revenue into various categories in the following table which is intended to:
•
•
depict how the nature, amount, timing and uncertainity of revenue and cash flows are affected by economic
data; and
enable users to understand the relationship with revenue segments information provided in 2.2 below
Licensing
2019
£'000
2018
£'000
Content
2019
£'000
2018
£'000
Creative
2019
£'000
2018
£'000
Total
2019
£'000
2018
£'000
Primary Geographical Markets
UK
807
USA
2,198
Germany
1,397
Denmark
-
France
35
Other
904
5,341
773
2,279
7,333
1,388
299
1,338
13,410
621
592
117
-
-
1,060
2,390
1,278
632
70
1,038
-
915
3,933
1,549
-
-
-
-
23
1,572
2,099
88
-
-
-
382
2,569
2,977
2,790
1,514
-
35
1,987
9,303
4,150
2,999
7,403
2,426
299
2,635
19,912
Product Type
Set-up fees
Monthly service fees
and usage fee
Production
Download/streaming
Contract Counterparties
Direct to consumer
(online)
B2B
528
211
-
-
-
-
528
211
4,813
-
-
5,341
13,199
-
-
13,410
-
-
2,390
2,390
-
-
3,933
3,933
-
1,572
-
1,572
-
2,569
-
2,569
4,813
1,572
2,390
9,303
13,199
2,569
3,933
19,912
-
5,341
5,341
-
13,410
13,410
2,390
-
2,390
3,933
-
3,933
-
1,572
1,572
-
2,569
2,569
2,390
6,913
9,303
3,933
15,979
19,912
2.1 Revenue from contracts with customer (continued)
Contract
balances
At 1 January
Cumulative catch‐up
adjustment
1 January (Restated)
Transfers in the period from the contract
assets to trade receivables
Amounts included in contract liabilities that
were recognised as revenue during the
period
period
period
Cash received in advance of performance
and not recognised as revenue during the
Contract
Contract
Assets
2019
£’000
Assets
2018
£’000
Contract
Liabilities
Contract
Liabilities
2019
£’000
2018
£’000
458
100
(1,289)
(4,492)
458
100
(1,289)
(4,836)
-
-
‐
‐
(441)
(469)
-
-
-
(344)
‐
‐
1,174
3,835
-
‐
(227)
(289)
255
458
(342)
(1,290)
Excess of revenue recognised over cash (or
rights to cash) being recognised during the
238
827
The aggregate amount of the transaction price of the remaining performance obligations amounting to £335k (2018:
£1,149k) are all expected to be released within the next 12 months; £7k (2018: £141k) released in the following year.
Timing of transfer of goods and services
Over time
Point in Time (on
delivery)
5,341
13,410
-
13,410
-
5,341
-
-
-
48
5,341
13,458
2,390
2,390
3,933
3,933
1,572
1,572
2,521
2,569
3,962
9,303
6,454
19,912
7digital Group PLC Annual Report and Accounts 2019 50
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
2.
Revenue (continued)
2.1 Revenue from contracts with customer (continued)
Contract
balances
At 1 January
Cumulative catch‐up
adjustment
1 January (Restated)
Transfers in the period from the contract
assets to trade receivables
Amounts included in contract liabilities that
were recognised as revenue during the
period
Excess of revenue recognised over cash (or
rights to cash) being recognised during the
period
Cash received in advance of performance
and not recognised as revenue during the
period
Contract
Assets
2019
Contract
Assets
2018
Contract
Liabilities
2019
Contract
Liabilities
2018
£’000
£’000
£’000
£’000
458
100
(1,289)
(4,492)
-
‐
-
(344)
458
100
(1,289)
(4,836)
(441)
(469)
-
‐
-
‐
1,174
3,835
238
827
-
‐
-
‐
(227)
(289)
255
458
(342)
(1,290)
The aggregate amount of the transaction price of the remaining performance obligations amounting to £335k (2018:
£1,149k) are all expected to be released within the next 12 months; £7k (2018: £141k) released in the following year.
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
2.
Revenue (continued)
2.2 Business segments
For management purposes, the Group is organised into three continuing operating divisions – Licensing, Content and
Creative. The principal activity of Licensing is the creation of software solutions for managing and delivering digital content.
The principal activity of the Content division is the sales of digital music direct to consumers. The principal activity of
Creative is the production of audio and video programming for broadcasters. These divisions comprise the Group’s
operating segments for the purposes of reporting to the Group’s chief operating decision maker, the Chief Executive
Officer.
Licensing
Content
Creative
Total
2019
£'000
2018
£'000
2019
£'000
2018
£'000
2019
£'000
2018
£'000
2019
£'000
2018
£'000
5,341
13,410
2,390
3,933
1,572
2,569
9,303
19,912
4,993
12,739
469
849
835
1,139
6,297
14,727
Revenue from external
customers
Segment's result (gross
profit)
Depreciation
(50)
(218)
(22)
(14)
(5)
(19)
(77)
(251)
Amortisation
(228)
(1,839)
Impairment
-
(4,077)
Other adjusted cost–
development costs
expensed (see note 3)
Settlement income
included in Other
Income
(162)
(2,715)
1,000
-
-
-
‐
‐
‐
-
-
-
‐
‐
‐
(228)
(1,839)
-
(4,077)
(162)
(2,715)
1,000
‐
Segment profit/(loss)
5,553
3,890
447
835
830
1,120
6,830
5,845
Remainder of other
income
Amortisation of right to
use asset
Corporate expenses
Financing income
Financing costs
Tax charge
Loss for the year
Other segment items:
Capital additions
103
371
(415)
‐
(12,155)
(18,341)
-
(172)
(3)
31
(101)
334
(5,812)
(11,861)
£'000
-
£'000
1,000
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
2.
Revenue (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Revenue from the Group’s largest customer in the year was £1.0m (2018: £7.7m) and revenue from the second largest
customer in the year was £0.5m (2018: £2.4m) . There were no other customers that formed greater than 10% of external
revenues within the years ended 31 December 2019 and 2018.
The Group’s revenue from external customers and information about its segments by geographical location is detailed
2.3 Geographical information
below:
Continuing Operations
United Kingdom
United States of America
Germany
Denmark
France
Rest of Europe
Rest of World
Revenue
Non-current assets
2019
£'000
2,977
2,790
1,514
-
35
1,366
621
9,303
2018
£'000
4,150
2,999
7,403
2,426
299
1,553
1,082
2019
£'000
1,498
-
-
-
-
-
-
2018
£'000
1,304
-
-
-
-
-
-
19,912
1,498
1,304
All revenues are derived from the provision of services.
3.
Other adjusting items
Impairment of intangibles (i)
Costs/impairment relating to closure of French business (ii)
Costs/impairment relating to closure of Denmark business (iii)
Development costs expensed on legacy Denmark platform (iv)
Corporate restructuring releases/(provision) (v)
Exceptional legal fees (vi)
Legal provision (vii)
2019
£'000
-
-
(254)
(162)
(694)
(464)
(228)
2018
£'000
(2,135)
(992)
(1,237)
(2,715)
(226)
-
-
(1,802)
(7,305)
(i)
In 2018 the Group tested intangibles annually for impairment, or more frequently if there are indications that
the assets might be impaired. Accordingly, certain bespoke applications have been impaired during the year
resulting in a charge of £2,135k.
(ii)
In 2018, due to the cessation of the French operations in Snowite SAS, a provision of £287k has been made for
closing down the operations and an impairment of £705k for the intangible assets, as the directors consider
these have a zero fair value.
(iii)
In May 2019 the Group sold select technology from the Parent Company and its Denmark subsidiary, 24 ‐7
Entertainment ApS, and transferred staff to TDC Group, a large telecommunications company based in Denmark
(see note 12). In 2019, a provision of £254k has been made for the closing down of the Danish operations. In
2018, fair value adjustments relating to goodwill of £688k and to customer lists of £418k were made (see note
12) and the 24-7 Entertainment ApS tangible assets of £131k were fully impaired (see note 13).
7digital Group PLC Annual Report and Accounts 2019 52
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
2.
Revenue (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Revenue from the Group’s largest customer in the year was £1.0m (2018: £7.7m) and revenue from the second largest
customer in the year was £0.5m (2018: £2.4m) . There were no other customers that formed greater than 10% of external
revenues within the years ended 31 December 2019 and 2018.
2.3 Geographical information
The Group’s revenue from external customers and information about its segments by geographical location is detailed
below:
Revenue
Non-current assets
Continuing Operations
United Kingdom
United States of America
Germany
Denmark
France
Rest of Europe
Rest of World
2019
£'000
2,977
2,790
1,514
-
35
1,366
621
9,303
2018
£'000
4,150
2,999
7,403
2,426
299
1,553
1,082
19,912
2019
£'000
1,498
-
-
-
-
-
-
1,498
2018
£'000
1,304
-
-
-
-
-
-
1,304
All revenues are derived from the provision of services.
3.
Other adjusting items
Impairment of intangibles (i)
Costs/impairment relating to closure of French business (ii)
Costs/impairment relating to closure of Denmark business (iii)
Development costs expensed on legacy Denmark platform (iv)
Corporate restructuring releases/(provision) (v)
Exceptional legal fees (vi)
Legal provision (vii)
2019
£'000
-
-
(254)
(162)
(694)
(464)
(228)
(1,802)
2018
£'000
(2,135)
(992)
(1,237)
(2,715)
(226)
-
-
(7,305)
(i)
(ii)
(iii)
In 2018 the Group tested intangibles annually for impairment, or more frequently if there are indications that
the assets might be impaired. Accordingly, certain bespoke applications have been impaired during the year
resulting in a charge of £2,135k.
In 2018, due to the cessation of the French operations in Snowite SAS, a provision of £287k has been made for
closing down the operations and an impairment of £705k for the intangible assets, as the directors consider
these have a zero fair value.
In May 2019 the Group sold select technology from the Parent Company and its Denmark subsidiary, 24 ‐7
Entertainment ApS, and transferred staff to TDC Group, a large telecommunications company based in Denmark
(see note 12). In 2019, a provision of £254k has been made for the closing down of the Danish operations. In
2018, fair value adjustments relating to goodwill of £688k and to customer lists of £418k were made (see note
12) and the 24-7 Entertainment ApS tangible assets of £131k were fully impaired (see note 13).
7digital Group PLC Annual Report and Accounts 2019 53
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
3.
Other adjusting items (continued)
6.
Reconciliation of non-IFRS financial KPIs
(iv)
(v)
(vi)
(vii)
During the normal course of business the group would have capitalised £162k (2018: £2,715k) in respect of
development costs associated with the Denmark platform, which was sold in 2019 as described in (iii) above. Due
to the sale of this platform these costs have not been capitalised and are reflected in the profit and loss account.
During 2019, the Group incurred costs of £649k (2018: £226k) to former directors on garden leave and for
employee redundancies all relating to organisational restructuring.
In 2019 the Group incurred legal fees in relation to funding of £264k, legal costs relating to planning for supposed
insolvency £120k and finalisation of the settlement agreement with Media‐Saturn‐Holding £80k.
During 2018 a civil action was brought by a former US customer against the parent company for failure to
deliver services specified in their Term Sheet. No contract was ever put in place with this customer. The breach
of contract claim is for: i) consequential damages for loss of future profits in an amount to be determined at
trial; ii) compensatory damages including but not limited to the contract amount of USD200k; iii) punitive
damages in an amount to be determined by a jury; (iv) attorney’s fees, costs, and expenses; and (v) pre‐and
post‐judgment interest. 7digital’s legal team made a motion to dismiss the claims, however in the event that
the claims are upheld, the Group estimates that damages would be in the region of USD300k/£228k, with an
appropriate provision being made.
£1,582k (2018: £3,228k) of the Other adjusting items for the year ended 31 December 2019 are deductible for corporation
tax purposes.
4.
Operating loss for the year
Operating loss for the year has been arrived at after charging:
Net foreign exchange loss
Amortisation of intangible assets
Amortisation of right to use asset (see note 14)
Depreciation of property, plant & equipment
Profit on sale of fixed assets
Operating lease payments ‐ land and buildings (see note 23)
Share‐based payment expense (see note 26)
5.
Other operating income
2019
£'000
238
228
415
77
(125)
-
239
2018
£'000
48
1,839
‐
251
(11)
1,290
173
Fees payable to the Company's auditor for the audit of the Company's annual
Fees payable to the Company's auditor for other services to the Group
The audit of the Company's subsidiaries pursuant to legislation
accounts
Total audit fees
Non-audit fees:
Other services
Total non-audit fees
Total fees payable to Company's auditor
A description of the work of the Audit Committee is set out in the Corporate Governance Statement and includes an
explanation of how auditor’s objectivity is safeguarded when non‐audit services are provided by the auditor.
In 2019, the Group agreed a settlement of €4m/£3.4m with Media‐Saturn‐Holding GmbH, of which £0.5m was used as
payment for Shareholders fund (see note 18) and £1.9m cleared down outstanding trade‐related balances; resulting in a
net settlement income of £1,000k. As part of the settlement agreement Media‐Saturn‐Holding GmbH agreed to forgive
£250k of outstanding loans plus associated unpaid interest of £27k. The total amount forgiven was £277k which is
disclosed as a capital contribution (see note 18).
The remaining other operating income earned by the Group in the current year of £103k (2018: £371k) relates to
Research & Development tax credits.
7digital Group PLC Annual Report and Accounts 2019 54
54
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This note reconciles the adjusted operating loss to the adjusted EBITDA loss. This note reconciles these key performance
indicators to individual lines in the financial statements. In the Directors’ view it is important to consider the underlying
performance of the business during the year. Therefore, the directors have used certain alternative performance measures
(AMPs) which are not IFRS compliant metrics. The main effect has been that the APMs exclude other adjusting items,
amortisation, foreign exchange, depreciation and share based payments to reflect the underlying cash utilisation for the
performance of the business. The APMs are consistent with those established within the prior year annual report and their
derivation is set out in the table below.
Reconciliation of adjusted operating loss and adjusted EBITDA loss
Statutory operating loss
Other adjusting items (see note 3)
Foreign exchange
Share-based payment expense
Adjusted operating loss
Profit on sale of fixed assets
Depreciation and amortisation
Adjusted EBITDA loss
7.
Auditor’s remuneration
2019
£'000
(5,637)
1,802
238
239
(3,358)
(125)
720
(2,763)
2019
£'000
120
120
-
-
-
120
2018
£'000
(12,125)
7,305
48
173
(4,599)
-
2,090
(2,509)
2018
£'000
120
120
-
-
-
120
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
6.
Reconciliation of non-IFRS financial KPIs
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
This note reconciles the adjusted operating loss to the adjusted EBITDA loss. This note reconciles these key performance
indicators to individual lines in the financial statements. In the Directors’ view it is important to consider the underlying
performance of the business during the year. Therefore, the directors have used certain alternative performance measures
(AMPs) which are not IFRS compliant metrics. The main effect has been that the APMs exclude other adjusting items,
amortisation, foreign exchange, depreciation and share based payments to reflect the underlying cash utilisation for the
performance of the business. The APMs are consistent with those established within the prior year annual report and their
derivation is set out in the table below.
Reconciliation of adjusted operating loss and adjusted EBITDA loss
Statutory operating loss
Other adjusting items (see note 3)
Foreign exchange
Share-based payment expense
Adjusted operating loss
Profit on sale of fixed assets
Depreciation and amortisation
Adjusted EBITDA loss
7.
Auditor’s remuneration
Fees payable to the Company's auditor for the audit of the Company's annual
accounts
Fees payable to the Company's auditor for other services to the Group
The audit of the Company's subsidiaries pursuant to legislation
Total audit fees
Non-audit fees:
Other services
Total non-audit fees
Total fees payable to Company's auditor
2019
£'000
(5,637)
1,802
238
239
(3,358)
(125)
720
(2,763)
2019
£'000
120
-
120
-
-
120
2018
£'000
(12,125)
7,305
48
173
(4,599)
-
2,090
(2,509)
2018
£'000
120
-
120
-
-
120
A description of the work of the Audit Committee is set out in the Corporate Governance Statement and includes an
explanation of how auditor’s objectivity is safeguarded when non‐audit services are provided by the auditor.
7digital Group PLC Annual Report and Accounts 2019 55
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
8.
Staff costs
10.
Tax
The average monthly number of persons employed by the Group during the year, including executive directors, was 81
(2018: 147). Staff costs in the Group are presented in administrative expenses.
Corporation tax is calculated at 19% (2018: 19.25%) of the estimated assessable profit for the year.
Number of production, R&D, and sales staff
Number of management and administrative staff
Wages and salaries
Redundancy payments
Social security costs
Other pension costs
Share-based payments (note 26)
2019
No.
65
16
81
2019
£'000
4,659
259
573
159
239
5,889
Details of the directors’ remuneration are provided in the Directors Remuneration Report on pages 23 to 24.
9.
Finance income and cost
Bank interest receivable
Rental deposit retained
Other income
Finance income
Shareholders interest payable
Other charges similar to interest
Interest expenses on leased liability (see note 14)
2019
£'000
-
-
-
-
2019
£'000
(7)
(17)
(148)
(172)
2018
No.
121
26
147
2018
£'000
6,294
97
854
511
173
7,929
2018
£'000
1
19
11
31
2018
£'000
(64)
(37)
-
(101)
Current tax
UK corporation tax on the results for the year
Foreign tax suffered
Adjustment in respect of prior period
Total current tax charge/(credit)
Deferred tax
Origination and reversal of timing differences
Adjustments in respect of prior periods
Total deferred tax charge/(credit)
Tax on loss on ordinary activities
2019
£'000
2019
£'000
-
3
-
3
-
-
-
3
2019
£'000
-
136
(30)
(34)
22
-
-
-
(40)
979
3
(8)
79
-
3
2018
£'000
-
35
(61)
(26)
2018
£'000
(374)
66
(308)
(334)
2018
£'000
2
940
(208)
(133)
-
(61)
66
752
(651)
1,459
35
(219)
309
(308)
(334)
The charge for the year can be reconciled to the profit per statement of comprehensive income as follows:
Loss before tax
(5,809)
(12,195)
Tax at UK corporation tax rate of 19% (2018: 19.25%)
(1,104)
(2,317)
Fixed asset differences
Expenses not deductible for tax purposes
Income not taxable for tax purposes
Additional deduction for R&D expenditure
Adjustments to R&D in respect of previous periods
Adjustments to tax charge in respect of previous periods
Adjustments to tax charge in respect of previous periods - deferred tax
Adjust closing deferred tax to average rate of 19% (2018: 19%)
Adjust opening deferred tax to average rate of 19% (2018: 19%)
Deferred tax not recognised
Foreign taxation
Difference in tax rates
Tax credit receivable
Deferred tax movement on business combinations
Tax credit / (credit)
At the balance sheet date, the Group has unrecognised deferred tax assets of £5,880,728 at a rate of 17% (2018: £6,393,798
(17%)) in respect of unused trading tax losses which have not been recognised on the grounds that there is insufficient
evidence that these will be recoverable. These assets will be recovered when future tax charges are sufficient to absorb
these tax benefits.
7digital Group PLC Annual Report and Accounts 2019 56
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
10.
Tax
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Corporation tax is calculated at 19% (2018: 19.25%) of the estimated assessable profit for the year.
Current tax
UK corporation tax on the results for the year
Foreign tax suffered
Adjustment in respect of prior period
Total current tax charge/(credit)
Deferred tax
Origination and reversal of timing differences
Adjustments in respect of prior periods
Total deferred tax charge/(credit)
2019
£'000
-
3
-
3
2019
£'000
-
-
-
2018
£'000
-
35
(61)
(26)
2018
£'000
(374)
66
(308)
Tax on loss on ordinary activities
3
(334)
The charge for the year can be reconciled to the profit per statement of comprehensive income as follows:
Loss before tax
2019
£'000
2018
£'000
(5,809)
(12,195)
Tax at UK corporation tax rate of 19% (2018: 19.25%)
(1,104)
(2,317)
Fixed asset differences
Expenses not deductible for tax purposes
Income not taxable for tax purposes
Additional deduction for R&D expenditure
Adjustments to R&D in respect of previous periods
Adjustments to tax charge in respect of previous periods
Adjustments to tax charge in respect of previous periods - deferred tax
Adjust closing deferred tax to average rate of 19% (2018: 19%)
Adjust opening deferred tax to average rate of 19% (2018: 19%)
Deferred tax not recognised
Foreign taxation
Difference in tax rates
Tax credit receivable
Deferred tax movement on business combinations
Tax credit / (credit)
-
136
(30)
(34)
22
-
-
-
(40)
979
3
(8)
79
-
3
2
940
(208)
(133)
-
(61)
66
752
(651)
1,459
35
(219)
309
(308)
(334)
At the balance sheet date, the Group has unrecognised deferred tax assets of £5,880,728 at a rate of 17% (2018: £6,393,798
(17%)) in respect of unused trading tax losses which have not been recognised on the grounds that there is insufficient
evidence that these will be recoverable. These assets will be recovered when future tax charges are sufficient to absorb
these tax benefits.
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
11.
Earnings per share
12.
Intangibles (continued)
Basic earnings per share is calculated by dividing the loss attributable to shareholders by the weighted average number of
ordinary shares in issue during the year. IAS 33 requires presentation of diluted EPS when a company could be called upon
to issue shares that would decrease earnings per share, or increase the loss per share. For a loss‐making company with
outstanding share options, net loss per share would be decreased by the exercise of options. Therefore the antidilutative
potential ordinary shares are disregarded in the calculation of diluted EPS. Total potential ordinary shares which are
outstanding at 31 December 2019 are 19,059,858 (2018: 13,912,308) which relate to the employee share options and
shares to be issued to the non‐executive directors under the terms of their service contracts (see Directors Report, Directors
Remuneration Report and note 26).
Amortisation charges are included within the administrative expenses within the Income Statement. The useful life of each
group of intangible assets varies according to the underlying length of benefit expected to be received.
On 29 May 2019 the Danish Platform, with a carrying value of £948k was sold to a Danish communications company, TDC
Group for £951k. The customer list and goodwill, initially originating from the acquisition of Danish Platform, were deemed
disposed.
Reconciliation of the profit and weighted average number of shares used in the calculation are set out below:
13.
Property, plant and equipment
Basic and Diluted EPS
Loss attributable to shareholders:
Basic and Diluted EPS
Loss attributable to shareholders:
12.
Intangibles
Loss
£'000
(5,812)
£'000
(11,861)
31 Dec 2019
Weighted average
number of shares
Thousand
1,244,214
31 Dec 2018
Thousand
399,430
Bespoke
applications
£'000
Customer list
£'000
Goodwill
£'000
Cost
At 1 January 2018
Additions
At 31 December 2018
Disposals
At 31 December 2019
and
Amortisation
Accumulated
impairment
At 1 January 2018
Charge for the year
Impairment losses
At 31 December 2018
Charge for year
Disposals
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
Useful lives
8,215
803
9,018
(5,813)
3,205
3,167
1,836
2,840
7,843
228
(4,866)
3,205
-
1,175
5,048
509
-
509
(509)
-
88
3
418
509
-
(509)
-
-
-
421
3-5 years
3-5 years
688
-
688
(688)
-
-
-
688
688
-
(688)
-
-
-
688
Per share amount
Pence
(0.47)
Pence
(2.97)
Total
£'000
9,412
803
10,215
(7,010)
3,205
3,255
1,839
3,946
9,040
228
(6,063)
3,205
-
1,175
6,157
Property
£'000
Computer
equipment
£'000
Fixture
and
fittings
£'000
Vehicle
£'000
125
19
Accumulated depreciation
Cost
At 1 January 2018
Additions
Acquisitions
Released on disposals
At 31 December 2018
Released on disposals
At 31 December 2019
and amortisation
At 1 January 2018
Charge for year
Impairment losses
Released on disposals
At 31 December 2018
Charge for year
Released on disposals
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
404
-
-
-
404
-
404
368
36
404
-
-
-
-
404
-
-
36
1,795
197
-
(15)
1,977
(443)
1,534
1,522
210
131
(14)
1,849
77
(443)
1,483
51
128
273
-
-
-
125
(5)
120
120
5
-
-
-
125
(5)
120
-
-
5
(19)
-
-
-
-
-
(9)
9
-
-
-
-
-
-
-
-
10
Total
£'000
2,343
197
-
(34)
2,506
(448)
2,058
2,019
251
131
(23)
2,378
77
(448)
2,007
51
128
324
7digital Group PLC Annual Report and Accounts 2019 58
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
12.
Intangibles (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Amortisation charges are included within the administrative expenses within the Income Statement. The useful life of each
group of intangible assets varies according to the underlying length of benefit expected to be received.
On 29 May 2019 the Danish Platform, with a carrying value of £948k was sold to a Danish communications company, TDC
Group for £951k. The customer list and goodwill, initially originating from the acquisition of Danish Platform, were deemed
disposed.
13.
Property, plant and equipment
Property
£'000
Computer
equipment
£'000
Fixture
and
fittings
£'000
Vehicle
£'000
Cost
At 1 January 2018
Additions
Acquisitions
Released on disposals
At 31 December 2018
Released on disposals
At 31 December 2019
Accumulated depreciation
and amortisation
At 1 January 2018
Charge for year
Impairment losses
Released on disposals
At 31 December 2018
Charge for year
Released on disposals
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
404
-
-
-
404
-
404
368
36
-
-
404
-
-
404
-
-
36
1,795
197
-
(15)
1,977
(443)
1,534
1,522
210
131
(14)
1,849
77
(443)
1,483
51
128
273
125
-
-
-
125
(5)
120
120
5
-
-
125
-
(5)
120
-
-
5
19
-
-
(19)
-
-
-
9
-
-
(9)
-
-
-
-
-
-
10
Total
£'000
2,343
197
-
(34)
2,506
(448)
2,058
2,019
251
131
(23)
2,378
77
(448)
2,007
51
128
324
7digital Group PLC Annual Report and Accounts 2019 59
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
14.
Leases
16.
Trade and other receivables (continued)
The Group leased a property that originally ran until April 2023. In February 2020, on agreement with the landlord the lease
was terminated, and the Group vacated the premises. The Group has adopted IFRS 16 on the date of application and
determined the value of the lease and the right to use asset based on the rental payments from the period 1 January 2019
to April 2023.
Right-of-use asset
Right‐of‐use asset
Less accruals (net)
As at 1 January 2019
Amortisation
At 31 December 2019
Lease liability
As at 1 January 2019
Interest expense
Lease payments
At 31 December 2019
Analysed:
Current
Non‐current
Total
Land and
buildings
£’000
1,862
(126)
1,736
(415)
1,321
Land and
buildings
£’000
1,862
148
(352)
1,658
472
1,186
1,658
The group terminated the existing lease contract in February 2020 and in August 2020, it signed a new lease for 3 years
(see note 27).
Customers that represent more than 5% of the total balance of trade receivables are:
15.
Investment in subsidiary undertakings
A list of the significant investments in subsidiaries, including the name, country of incorporation and proportion of
ownership interest is given in note E to the Parent Company financial statements.
16.
Trade and other receivables
Trade receivable for the sale of goods
Less: Provision for impairment of trade receivables
Net trade receivables
Other debtors
R&D credits receivable
Prepayments
Total financial assets at amortised cost (excluding cash & cash
equivalents)
2019
£’000
1,851
(1,014)
837
382
412
-
1,631
2018
£’000
4,610
(408)
4,202
667
815
100
5,784
7digital Group PLC Annual Report and Accounts 2019 60
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The average credit period taken on sales of goods and services is 33 days (2018: 79 days). No interest is charged on
receivables. Trade receivables are provided for based on estimated irrecoverable amounts from the sale of goods and
services, determined by reference to past default experience and likelihood of recovery as assessed by the directors. Before
accepting any new material customer, the Group uses an external credit scoring system to assess the potential customer’s
credit quality and defines credit limits by customer. The directors believe that the trade receivables that are past due but
not impaired are of a good credit quality. The Group adopts a policy that each new customer is analysed individually for
credit worthiness before the Group’s standard payment and delivery terms and conditions are offered.
The management assessed the requirement for general bad debt provision under IFRS 9. The expected loss rates are based
on the combination of the Group’s historical credit losses experienced over the three‐year period prior to the period end
coupled with forward looking information. Management also note that the Group generally has a consistent recovery rate
on trade and other receivables, due to a significant amount of work being completed for reputable businesses. However,
Management does note that dealings with smaller businesses can be difficult at times to recover funds owed and as such,
provisions have been raised based on historic knowledge of each client’s credit risk. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Included in the Group’s trade receivable balance are debtors with a carrying amount of £0.3m (2018: £2.3m), which are
past due at the reporting date for which the Group has not provided as there has not been a significant change in credit
quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The
average age of these receivables is 97 days (2018: 60 days). During the year the Group provided for certain accounts
receivable balances relating to revenue recognised during 2019, where the collection of the outstanding amounts is
uncertain.
As at 31 December 2019 the lifetime expected loss provision for trade receivables is:
More than
30 days
days past
More
than 60
More
than 120
days past
Current
past due
2%
274
7
7%
275
18
due
20%
296
59
due
92%
1,006
930
Total
£'000
1,851
1,014
Expected loss rate
Gross carrying amount
Loss provision
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
Movement in the allowance for doubtful debts:
Balance at the beginning of the period
Impairment losses recognised
Written off as bad debt
Balance at the end of the period
2019
£'000
350
209
162
136
117
101
2019
£'000
408
717
(111)
1,014
2018
£'000
2,329
381
261
200
192
‐
2018
£'000
1,943
408
(1,943)
408
In determining the recoverability of trade receivables the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the reporting date.
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
16.
Trade and other receivables (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
The average credit period taken on sales of goods and services is 33 days (2018: 79 days). No interest is charged on
receivables. Trade receivables are provided for based on estimated irrecoverable amounts from the sale of goods and
services, determined by reference to past default experience and likelihood of recovery as assessed by the directors. Before
accepting any new material customer, the Group uses an external credit scoring system to assess the potential customer’s
credit quality and defines credit limits by customer. The directors believe that the trade receivables that are past due but
not impaired are of a good credit quality. The Group adopts a policy that each new customer is analysed individually for
credit worthiness before the Group’s standard payment and delivery terms and conditions are offered.
The management assessed the requirement for general bad debt provision under IFRS 9. The expected loss rates are based
on the combination of the Group’s historical credit losses experienced over the three‐year period prior to the period end
coupled with forward looking information. Management also note that the Group generally has a consistent recovery rate
on trade and other receivables, due to a significant amount of work being completed for reputable businesses. However,
Management does note that dealings with smaller businesses can be difficult at times to recover funds owed and as such,
provisions have been raised based on historic knowledge of each client’s credit risk. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Included in the Group’s trade receivable balance are debtors with a carrying amount of £0.3m (2018: £2.3m), which are
past due at the reporting date for which the Group has not provided as there has not been a significant change in credit
quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The
average age of these receivables is 97 days (2018: 60 days). During the year the Group provided for certain accounts
receivable balances relating to revenue recognised during 2019, where the collection of the outstanding amounts is
uncertain.
As at 31 December 2019 the lifetime expected loss provision for trade receivables is:
Expected loss rate
Gross carrying amount
Loss provision
More than
30 days
past due
7%
275
18
More
than 60
days past
due
20%
296
59
More
than 120
days past
due
92%
1,006
930
Current
2%
274
7
Total
£'000
1,851
1,014
Customers that represent more than 5% of the total balance of trade receivables are:
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
Movement in the allowance for doubtful debts:
Balance at the beginning of the period
Impairment losses recognised
Written off as bad debt
Balance at the end of the period
2019
£'000
350
209
162
136
117
101
2019
£'000
408
717
(111)
1,014
2018
£'000
2,329
381
261
200
192
‐
2018
£'000
1,943
408
(1,943)
408
In determining the recoverability of trade receivables the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the reporting date.
7digital Group PLC Annual Report and Accounts 2019 61
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
18.
Financial Liabilities (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
On 4 January 2019, Juke GmbH, a wholly owned subsidiary of Media-Saturn-Holding GmbH, decided to discontinue their
music services and their contract with the Group. On 1 March 2019, a settlement was agreed on the termination of all
outstanding contracts and commitments relating to the Juke music service for an immediate payment by Juke of
€4.0m. Further, Juke agreed to forgive £250,000 of the principal amount of the convertible loan, the balance of the
principal amount of £500,000 was paid from the proceeds of the termination settlement and all associated interest
payments totalling £27,239 were forgiven. The total amount forgiven of £277k is accounted and disclosed as a capital
contribution in the statement of changes in equity.
On 7 June 2019, the remaining £585,932 (including interest £24,241) of the £1.5 million facility was converted to
332,915,704 ordinary shares of 0.01p each.
19.
Provisions
Dilapidation
£'000
Provision for
closure of
business
£'000
Legal
provision
£'000
Other
provisions
£'000
At 1 January 2019
Increase in provision
Release of provision
At 31 December 2019
Of which is: current
Of which is: non-current
125
-
-
125
125
-
288
255
(234)
309
309
-
228
-
-
228
228
-
15
91
-
106
106
-
Total
£'000
428
574
(234)
768
768
-
A dilapidations provision is held to cover the estimated costs of returning the Group’s main office space to as it was at the
commencement of the lease (see note 14).
On 4 October 2019, the Danish entity was liquidated by the local authorities; a provision has been made of £255k for
possible associated outstanding liabilities.
In 2018 a provision of £288k relating to the closing of operations in Snowite SAS was made; during 2019 £234k of this
provision has been utilised.
During 2018 a civil action was brought by a former US customer against the parent company for failure to deliver services
specified in their Term Sheet. No contract was ever put in place with this customer. The breach of contract claim is for: i)
consequential damages for loss of future profits in an amount to be determined at trial; ii) compensatory damages including
but not limited to the contract amount of USD200k; iii) punitive damages in an amount to be determined by a jury; (iv)
attorney’s fees, costs, and expenses; and (v) pre-and post-judgment interest. 7digital’s legal team made a motion to dismiss
the claims, however in the event that the claims are upheld, estimate that damages would be in the region of
7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
17.
Trade and other payables
Current Liabilities
Trade payables
Other taxes and social security
Other payables
Accrued costs
Corporation tax
Non-Current Liabilities
Other payables
2019
£'000
3,101
565
674
2,669
-
7,009
676
676
2018
£'000
4,990
984
500
3,246
19
9,739
1,066
1,066
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 241 (2018: 171 days). The Group has financial risk management policies in place
to ensure that all payables are paid within the credit time frame.
In March 2016 the Group acquired Snowite SAS (now 7digital France SAS). As part of the acquisition it negotiated a
reduction in the amount of some of the existing liabilities within Snowite SAS, at the time of the purchase, to €1.7m (£1.5m).
Terms of repayment were also agreed to be over 8 years starting on 7th April 2017. For the first two years repayments
were set at 8% of the debt and then at 14% for each year thereafter. No interest is payable. The parent company has
guaranteed the repayments of £245k.
A total amount of £1.0m (2018: £1.1m) remains repayable under this agreement at the balance sheet date. Of this balance,
£0.7m (2018: £0.9m) falls due for repayment after more than one year. On 16 September 2020 the Group received
confirmation that the long term portion of £676K was forgiven by the French authorities.
The directors consider that the carrying amount of trade payables approximates to their fair value.
18.
Financial Liabilities
Current
Convertible debt
Embedded derivative
2019
£'000
-
-
-
2018
£'000
1,306
257
1,563
During the year the convertible loan from shareholders including the derivative instrument have been converted and
forgiven, through the below series of events:
USD300k/£228k.
On 8 February 2019, £193,858 (including interest of £5,549) of the £1.5 million Shareholder loan facility was converted to
19,385,843 ordinary shares of 1p each.
7digital Group PLC Annual Report and Accounts 2019 62
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
18.
Financial Liabilities (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
On 4 January 2019, Juke GmbH, a wholly owned subsidiary of Media-Saturn-Holding GmbH, decided to discontinue their
music services and their contract with the Group. On 1 March 2019, a settlement was agreed on the termination of all
outstanding contracts and commitments relating to the Juke music service for an immediate payment by Juke of
€4.0m. Further, Juke agreed to forgive £250,000 of the principal amount of the convertible loan, the balance of the
principal amount of £500,000 was paid from the proceeds of the termination settlement and all associated interest
payments totalling £27,239 were forgiven. The total amount forgiven of £277k is accounted and disclosed as a capital
contribution in the statement of changes in equity.
On 7 June 2019, the remaining £585,932 (including interest £24,241) of the £1.5 million facility was converted to
332,915,704 ordinary shares of 0.01p each.
19.
Provisions
Dilapidation
£'000
Provision for
closure of
business
£'000
Legal
provision
£'000
Other
provisions
£'000
At 1 January 2019
Increase in provision
Release of provision
At 31 December 2019
Of which is: current
Of which is: non-current
125
-
-
125
125
-
288
255
(234)
309
309
-
-
228
-
228
228
-
15
91
-
106
106
-
Total
£'000
428
574
(234)
768
768
-
A dilapidations provision is held to cover the estimated costs of returning the Group’s main office space to as it was at the
commencement of the lease (see note 14).
On 4 October 2019, the Danish entity was liquidated by the local authorities; a provision has been made of £255k for
possible associated outstanding liabilities.
In 2018 a provision of £288k relating to the closing of operations in Snowite SAS was made; during 2019 £234k of this
provision has been utilised.
During 2018 a civil action was brought by a former US customer against the parent company for failure to deliver services
specified in their Term Sheet. No contract was ever put in place with this customer. The breach of contract claim is for: i)
consequential damages for loss of future profits in an amount to be determined at trial; ii) compensatory damages including
but not limited to the contract amount of USD200k; iii) punitive damages in an amount to be determined by a jury; (iv)
attorney’s fees, costs, and expenses; and (v) pre-and post-judgment interest. 7digital’s legal team made a motion to dismiss
the claims, however in the event that the claims are upheld, estimate that damages would be in the region of
USD300k/£228k.
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
20.
Deferred tax
21.
Share capital (continued)
The deferred taxation provision included in the Statement of Financial Position, together with the charge/(credits) made
to the Income Statement is set out below:
v.
On 20 September 2019, 937,900,000 shares of 0.01p each were issued to the market to raise £1,875k (before
expenses); share premium was increased £1,780,504.
At 1 January 2019
Charge/(credit) to income
At 31 December 2019
At 1 January 2018
Credit to income
At 31 December 2018
21.
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.01p each
Ordinary shares of £0.01 each
Deferred shares of 0.99p each
Deferred shares of £0.09 each
Allotted, called up and fully paid
At 1 January
Shares issued in the period
Capital fundraising
Issued to employees/directors in lieu of salary
Share options exercised
At 31 December
Deferred tax
liability
£'000
-
-
-
308
(308)
-
2019
2018
No. of shares
No. of shares
2,455,419,294
-
-
400,236,646
419,622,489
115,751,517
-
115,751,517
2019
£'000
14,420
397
-
-
2018
£'000
14,404
-
15
1
14,817
14,420
25.
Related party transactions
i.
ii.
iii.
iv.
On 8 February 2019, £193,858 (including interest) of the £1.5 million Shareholder loan facility was converted in
to 19,385,843 ordinary shares of 1p each.
In order for the Company to lawfully allot the shares as described in iii and iv below, all the 419,622,489 shares
of 1p each were converted into 419,622,489 deferred shares of 0.99p each and 419,622,489 ordinary shares of
0.01p each on 7 June 2019. The deferred shares of 0.99p each carry limited voting rights.
On 7 June 2019, £585,932 (including interest) of the £1.5 million Shareholder loan facility was converted to
332,915,704 ordinary shares of 0.01p each; share premium was increased by £552,640.
On 7 June 2019, a number of shareholders, including Magic Investments S.A. (a tech investment holding
company) (“Magic”) and Shmuel Koch Holdings Limited (“SKH”) subscribed for, an aggregate of, 634,132,641
ordinary shares at 0.01p each, to raise £1.3 million (before expenses). Share premium was increased by
£1,204,852.
vi.
On 4 October 2019, a further 130,848,460 ordinary shares of 0.01p were issued to the market to raise £261,697;
share premium was increased by £210,527 net of share issue expenses.
22.
Other reserves
The Reverse acqusition reserve was created upon the application of reverse acqusition accounting relating to the purchase
of 7digital Group Inc, by UBC Media plc on 10 June 2014.
The Foreign exchange translation reserve of £184k profit (2018: £43k loss) relates to cumulative foreign exchange
differences on translation of foreign operations.
The Merger reserve relates to the difference between the nominal value of shares issued as part of an acquistion and the
fair value of the assets transferred.
The Shares to be issued includes £231k (2018: increase £89k) relating to the fair value at grant date of the share options
that can be exercised in future years and £8k (2018: £53k) for the fair value of the shares to be issued to Non-Executive
directors in lieu of salary as at December 2019 (see Directors’ Remuneration Report pages 23 to 24 and note 26).
23.
Operating lease arrangements
The only lease has been accounted for under IFRS 16 (see note 14). There are no short term operating leases.
24.
Defined contribution pension schemes
The Group operates defined contribution retirement benefit schemes for qualifying employees. The total cost charged to
income of £159k (2018: £511k) represents contributions payable to these schemes by the Group at rates specified in the
rules of the plans. As at 31 December 2019, contributions due in respect of the current reporting period of £41k had not
been paid over to the schemes (2018: £33k).
During the year, the Group paid £6.4k (2018: £9.6k) to MIDiA Research for music market research services, a company of
which Mark Foster was a director during 2019. At 31 December 2019, the Group owed £nil (2018: £6.4k).
During the year, the Group invoiced and recognised $228k of revenue to eMusic (a subsidiary of TriPlay Inc.), a group which
Tamir Koch was a director of during 2019. At 31 December 2019, the Group was owed £209k; £164k of this amount has
been provided for at the year end.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Group, is set out below in aggregate for
each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of
individual directors is provided in the audited part of the Directors’ Remuneration Report on pages 23 to 24.
7digital Group PLC Annual Report and Accounts 2019 64
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
21.
Share capital (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
v.
vi.
On 20 September 2019, 937,900,000 shares of 0.01p each were issued to the market to raise £1,875k (before
expenses); share premium was increased £1,780,504.
On 4 October 2019, a further 130,848,460 ordinary shares of 0.01p were issued to the market to raise £261,697;
share premium was increased by £210,527 net of share issue expenses.
22.
Other reserves
The Reverse acqusition reserve was created upon the application of reverse acqusition accounting relating to the purchase
of 7digital Group Inc, by UBC Media plc on 10 June 2014.
The Foreign exchange translation reserve of £184k profit (2018: £43k loss) relates to cumulative foreign exchange
differences on translation of foreign operations.
The Merger reserve relates to the difference between the nominal value of shares issued as part of an acquistion and the
fair value of the assets transferred.
The Shares to be issued includes £231k (2018: increase £89k) relating to the fair value at grant date of the share options
that can be exercised in future years and £8k (2018: £53k) for the fair value of the shares to be issued to Non-Executive
directors in lieu of salary as at December 2019 (see Directors’ Remuneration Report pages 23 to 24 and note 26).
23.
Operating lease arrangements
The only lease has been accounted for under IFRS 16 (see note 14). There are no short term operating leases.
24.
Defined contribution pension schemes
The Group operates defined contribution retirement benefit schemes for qualifying employees. The total cost charged to
income of £159k (2018: £511k) represents contributions payable to these schemes by the Group at rates specified in the
rules of the plans. As at 31 December 2019, contributions due in respect of the current reporting period of £41k had not
been paid over to the schemes (2018: £33k).
25.
Related party transactions
During the year, the Group paid £6.4k (2018: £9.6k) to MIDiA Research for music market research services, a company of
which Mark Foster was a director during 2019. At 31 December 2019, the Group owed £nil (2018: £6.4k).
During the year, the Group invoiced and recognised $228k of revenue to eMusic (a subsidiary of TriPlay Inc.), a group which
Tamir Koch was a director of during 2019. At 31 December 2019, the Group was owed £209k; £164k of this amount has
been provided for at the year end.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note.
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Group, is set out below in aggregate for
each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of
individual directors is provided in the audited part of the Directors’ Remuneration Report on pages 23 to 24.
7digital Group PLC Annual Report and Accounts 2019 65
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
25.
Related party transactions (continued)
26.
Share-based payments (continued)
Wages and salaries
Social security costs
Pension costs to defined contribution scheme
Share-based payments
26.
Share-based payments
2019
£'000
999
113
32
283
1,427
2018
£'000
704
101
24
-
829
30 members of staff hold options to subscribe for shares in the Company under the 7digital Group plc enterprise
management incentive scheme (approved by the Board on 10 June 2014). The Performance Share Plan is a “free” share
award with an effective exercise price of £nil. All awards are subject to an Earnings per Share (EPS) performance condition.
The performance period is three years. Further details of these conditions are set out in the Directors’ Report. Awards are
normally forfeited if the employee leaves the Group before the awards vest.
Outstanding at the beginning of the
period
Granted during the period
Forfeited during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
2019
Options
13,912,308
-
(5,016,140)
-
8,896,168
-
Weighted
average
exercise price
(pence)
-
-
-
-
-
-
2018
Options
5,428,899
11,500,000
(2,881,258)
(135,333)
13,912,308
-
Weighted
average
exercise price
(pence)
-
-
-
-
-
-
During the period, nil shares were exercised (2018: 135,333). There are 8,896,168 options outstanding at 31 December
2019 (2018: 13,912,308) of which nil (2018: nil) are exercisable. Their remaining weighted average contractual life is 604
days (2018: 1,224 days).
The fair value of the share options has been calculated using the Black‐Scholes model at the grant date. The key inputs into
the Black‐Scholes model are detailed below:
Share price at date of grant
Exercise price
Volatility
Option life
Risk-free interest rate
2018 Options
5.85p
0.00p
100%
3 yrs.
0.5%
At 31 December 2019 £61k (2018: £53k) was accrued for shares to be issued to non executive directors under the terms of
their service contracts and as disclosed within the Directors’ Report and Directors’ Remuneration.
Also included within these charges are equity settled share based payment charges of £nil (2018: £31k) reflecting share
awards to non‐executive directors during the year.
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
The total expense recognised for the year ending 31 December 2019 arising from equity‐settled share‐based payment
transactions amounted to £239k (2018 ‐ £173k) and the share‐based payment reserve as at 31 December 2019 amounted
to £407k (2018 ‐ £168k).
The issuance of shares relates to the shares issued to some non‐executive directors in lieu of their remuneration. Further
details can be found in the Directors’ Remuneration Report on pages 23 to 24.
27.
Post balance sheet events
On 21 February 2020, a short term loan of £500k was signed with CSS Alpha (BVI) Limited. The loan is repayable over 12
months in equal parts starting from 28 March 2020 with interest based on 1.5% of the outstanding balance. The loan is
guaranteed by one of the Directors.
On 12 August 2020, following the termination of the old lease (see note 14), a new lease agreement was signed with Labs
relating to a property in Camden, NW1. The initial period of the agreement is for 35 months starting from 1 July 2020,
with a total cost of £1.4m.
On 3 September 2020, 7digital annouced the placing of 266,666,667 new Ordinary Shares of 0.01p each, which raised £6m
at an issue price of 2.25 pence per share. The net proceeds of the fundraising will be used to meet the immediate working
capital requirements of the Group and support immediate and medium term commercial growth opportunities, in
particular within home fitness, artist monetisation, and social media.
On 16 September 2020 the Group received confirmation that the long term portion of £676K was forgiven by the French
authorities.
the undrawn portion.
On 28 September 2020, the Group secured a £1m overdraft facility with Investec for a period of 36 months guaranteed
by two of the Directors; this attracts 6% interest above Investec bank rate on the drawn portion of the facilty and 2% on
The rapid spread of the coronavirus and resulting COVID‐19 global pandemic has had a small impact on the Group, primarily
on cash‐in; management have taken action to mitigate and minimise the effect. The Group was already fully operational
from home as a result of existing infrastructure.
28.
Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to meet their financial obligations as they
arise while maximising the return to stakeholders. The capital structure of the Group consists of cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as
disclosed in notes 21 and 22. The Group has external liabilities by way of the debts owed on the purchase of Snowite SAS
in March 2016 and as disclosed in note 17. It does not have access to committed borrowing facilities, and is not subject to
externally imposed capital requirements.
7digital Group PLC Annual Report and Accounts 2019 66
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
26.
Share-based payments (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
The total expense recognised for the year ending 31 December 2019 arising from equity‐settled share‐based payment
transactions amounted to £239k (2018 ‐ £173k) and the share‐based payment reserve as at 31 December 2019 amounted
to £407k (2018 ‐ £168k).
The issuance of shares relates to the shares issued to some non‐executive directors in lieu of their remuneration. Further
details can be found in the Directors’ Remuneration Report on pages 23 to 24.
27.
Post balance sheet events
On 21 February 2020, a short term loan of £500k was signed with CSS Alpha (BVI) Limited. The loan is repayable over 12
months in equal parts starting from 28 March 2020 with interest based on 1.5% of the outstanding balance. The loan is
guaranteed by one of the Directors.
On 12 August 2020, following the termination of the old lease (see note 14), a new lease agreement was signed with Labs
relating to a property in Camden, NW1. The initial period of the agreement is for 35 months starting from 1 July 2020,
with a total cost of £1.4m.
On 3 September 2020, 7digital annouced the placing of 266,666,667 new Ordinary Shares of 0.01p each, which raised £6m
at an issue price of 2.25 pence per share. The net proceeds of the fundraising will be used to meet the immediate working
capital requirements of the Group and support immediate and medium term commercial growth opportunities, in
particular within home fitness, artist monetisation, and social media.
On 16 September 2020 the Group received confirmation that the long term portion of £676K was forgiven by the French
authorities.
On 28 September 2020, the Group secured a £1m overdraft facility with Investec for a period of 36 months guaranteed
by two of the Directors; this attracts 6% interest above Investec bank rate on the drawn portion of the facilty and 2% on
the undrawn portion.
The rapid spread of the coronavirus and resulting COVID‐19 global pandemic has had a small impact on the Group, primarily
on cash‐in; management have taken action to mitigate and minimise the effect. The Group was already fully operational
from home as a result of existing infrastructure.
28.
Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to meet their financial obligations as they
arise while maximising the return to stakeholders. The capital structure of the Group consists of cash and cash equivalents
and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as
disclosed in notes 21 and 22. The Group has external liabilities by way of the debts owed on the purchase of Snowite SAS
in March 2016 and as disclosed in note 17. It does not have access to committed borrowing facilities, and is not subject to
externally imposed capital requirements.
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
28.
Financial instruments (continued)
Categories of financial instruments
Financial assets at amortised cost
Cash and cash equivalents
Trade and other receivables
Financial liabilities at amortised cost
Trade and other payables
Borrowings (Convertible Loan Note)
Put options
2019
£'000
149
2,646
(7,004)
-
(123)
2018
£'000
452
6,388
(10,091)
(1,306)
(196)
Financial liabilities at fair value through profit and loss
Embedded derivative (see note 18)
-
(257)
Put Options
As part of the 2016 acquisition of Snowite, the Group agreed with three of the original institutional shareholders that if
they are unable to sell the 3,056,894 shares in 7digital Group they received in the public market, 7digital Group plc would
purchase 75% of their shares at a strike price of 8.75p over a 4‐year period starting from March 2016, 10% in year 1 and
then c.21.7% each year thereafter. As at 31 December 2019, the three institutional shareholders still retain all their shares
in 7digital Groupl plc. The value of the options at 31 December 2019 is £123k (2018: £196k). Adjustments to this provision
are taken directly to the Consolidated Income Statement within Administrative expenses. In 2019 this credit was £73k
(2018: £47k). The financial liability is included in note 18.
The carrying amounts of financial assets and financial liabilities not carried at FVTPL approximate their fair values.
Financial instruments measured at fair value
Level 3
2019
£'000
2018
£'000
Embedded derivative (see note 18)
-
(257)
The embedded derivative liabilty has been converted/forgiven during the year as described in note 18.
Financial and market risk management objectives
It is, and has been throughout the year under review, the Group’s policy not to use or trade in derivative financial
instruments. The Group’s financial instruments comprise its cash and cash equivalents and various items such as trade
debtors and trade creditors that arise directly from its operations. The main purpose of the financial assets and liabilities is
to provide finance for the Group’s operations in the year.
Currency risk management
The Group has exposure to foreign currency risk due to subsidiaries in France, Denmark and United States. The Group
manages the risk by holding cash in numerous currencies to avoid foreign exchange charges on payments and receipts.
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
28.
Financial instruments (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
The carrying value of the Group’s short‐term foreign currency denominated assets and liabilities are set out below
GBP BU's
USD BU's
DKK BU's
2019
2018
2017
2019
2018
2017
2019
2018
2017
Assets/(Liabilities)
GBP
USD
EUR
Other
Totals
‐
‐
‐
619,120
162,683
1,694,004
‐
‐
‐
‐
(538,151)
(55,583)
(41,484)
(5,686)
(511,810)
1,548,206
1,647,447
139
139
(98,672)
(6,361)
(440,127)
(130,135)
59,403
(41,444)
(63,473)
(103,783)
‐
‐
‐
‐
‐
(332,817)
1,580,754
3,400,854
(41,444)
(63,334)
(103,644)
(678,307)
(67,630)
‐
‐
‐
‐
‐
The majority of the Group’s financial assets are held in Sterling but movements in the exchange rate of the Euro and US
dollar against Sterling have an impact on both the result for the year and equity. Sensitivity to reasonably possible
movement in the Euro and US dollar exchange rates can be measured on the basis that all other variables remain constant.
The effect on profit and equity of strengthening or weakening of the Euro or US dollar in relation to Sterling by 10% would
result in a movement of +/‐ £47k (2018: £142k) in relation to the Euro and +/‐ £44k (2018: £44k) in relation to the US dollar.
Interest rate risk management and sensitivity
The Group’s policy is to ensure that it maximises the interest income on surplus cash. This involves placing cash in a mix of
fixed rate and floating rate short‐term deposits. There is no prescribed ratio of fixed to floating rate. Due to the current level
of cash and the current rates of interest the Group is not exposed to any significant interest rate risk.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with creditworthy counterparties, as a means of mitigating the risk
of financial loss from defaults. The Group only transacts with entities after assessing credit quality using independent rating
agencies and if not available, the Group uses other publicly available financial information and its own trading records to
rate its major customers. The Group’s exposure is continuously monitored and the aggregate value of transactions
concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits.
On going credit evaluation is performed on the financial condition of accounts receivable. The credit risk on liquid funds is
limited because the counterparties are banks with high credit‐rating assigned by international credit‐rating agencies. The
carrying amount of financial assets recorded in the financial statements, which is net impairment losses, represents the
Group’s maximum exposure to credit risk.
Liquidity risk management
The Group’s policy throughout the year has been to ensure continuity of funds. The Group manages liquidity risk by
maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities.
Liquidity and interest risk tables
interest.
All trade and other payables are non‐interest bearing and fall due within one month. The agreed term of repayment of the
loan relating to the purchase of Snowite SAS is over 8 years starting 7th April 2017, payable in equal instalments with no
7digital Group PLC Annual Report and Accounts 2019 68
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7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
28.
Financial instruments (continued)
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
The carrying value of the Group’s short‐term foreign currency denominated assets and liabilities are set out below
GBP BU's
USD BU's
DKK BU's
2019
2018
2017
2019
2018
2017
2019
2018
2017
Assets/(Liabilities)
GBP
USD
EUR
Other
Totals
‐
‐
‐
619,120
162,683
1,694,004
(511,810)
1,548,206
1,647,447
‐
‐
‐
‐
‐
‐
‐
139
139
(440,127)
(130,135)
59,403
(41,444)
(63,473)
(103,783)
(332,817)
1,580,754
3,400,854
(41,444)
(63,334)
(103,644)
‐
‐
‐
‐
‐
(538,151)
(55,583)
(41,484)
(5,686)
(98,672)
(6,361)
‐
‐
(678,307)
(67,630)
The majority of the Group’s financial assets are held in Sterling but movements in the exchange rate of the Euro and US
dollar against Sterling have an impact on both the result for the year and equity. Sensitivity to reasonably possible
movement in the Euro and US dollar exchange rates can be measured on the basis that all other variables remain constant.
The effect on profit and equity of strengthening or weakening of the Euro or US dollar in relation to Sterling by 10% would
result in a movement of +/‐ £47k (2018: £142k) in relation to the Euro and +/‐ £44k (2018: £44k) in relation to the US dollar.
Interest rate risk management and sensitivity
The Group’s policy is to ensure that it maximises the interest income on surplus cash. This involves placing cash in a mix of
fixed rate and floating rate short‐term deposits. There is no prescribed ratio of fixed to floating rate. Due to the current level
of cash and the current rates of interest the Group is not exposed to any significant interest rate risk.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with creditworthy counterparties, as a means of mitigating the risk
of financial loss from defaults. The Group only transacts with entities after assessing credit quality using independent rating
agencies and if not available, the Group uses other publicly available financial information and its own trading records to
rate its major customers. The Group’s exposure is continuously monitored and the aggregate value of transactions
concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits.
On going credit evaluation is performed on the financial condition of accounts receivable. The credit risk on liquid funds is
limited because the counterparties are banks with high credit‐rating assigned by international credit‐rating agencies. The
carrying amount of financial assets recorded in the financial statements, which is net impairment losses, represents the
Group’s maximum exposure to credit risk.
Liquidity risk management
The Group’s policy throughout the year has been to ensure continuity of funds. The Group manages liquidity risk by
maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities.
Liquidity and interest risk tables
All trade and other payables are non‐interest bearing and fall due within one month. The agreed term of repayment of the
loan relating to the purchase of Snowite SAS is over 8 years starting 7th April 2017, payable in equal instalments with no
interest.
7digital Group PLC Annual Report and Accounts 2019 69
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7digital Group plc
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
Year ended 31 December 2019
28.
Financial instruments (continued)
The following table sets out the contractual maturities (representing the undiscounted contractual cash‐flows) of financial
liabilities:
Within 12 months
Trade payables
Other payables
Lease liability
More than 12 months
Other payables
Lease liability
2019
£'000
3,101
325
472
3,898
2019
£’000
676
1,186
1,862
2018
£'000
4,990
222
-
5,212
2018
£’000
870
-
870
Fair value of financial instruments
The fair value of other non‐derivative financial assets and financial liabilities are determined in accordance with generally
accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions.
Cash at bank and short-term bank deposits
Cash is held within the following institutions:
Barclays Bank
HSBC Bank
Bank of West
CIC Bank
Others
29. Contingent liabiities
The group does not have any contingent liabilities.
2019
£’000
132
4
2
11
-
149
2018
£’000
324
36
7
23
71
461
2017
£’000
6,490
26
59
15
388
6,978
As permitted by section 408 of the Companies Act 2006 the Company has not prepared its own profit and loss account for the year.
7digital Group plc reported a loss for the financial year ended 31 December 2019 of £4,196k (2018: loss £21,608k).
This Company Statement of Financial Position and related notes were approved by the Board of Directors on 28 September 2020
7digital Group PLC Annual Report and Accounts 2019 70
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7digital Group plc
7digital Group plc
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2019
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2019
Notes
B
C
D
E
F
H
I
I
D
J
H
J
K
2019
£’000
-
39
-
1,321
1,360
248
-
1
249
(1,308)
-
-
-
-
-
(472)
(829)
(2,609)
(2,360)
(1,000)
(1,186)
(1,186)
(3,795)
(2,186)
14,817
12,043
407
(29,453)
(2,186)
2018
£’000
1,176
63
‐
1,000
2,239
1,987
252
19
2,258
(4,344)
(1,306)
(257)
(417)
‐
(517)
(6,841)
(4,583)
(2,344)
(197)
‐
(111)
(308)
(7,149)
(2,652)
14,420
8,294
168
(25,534)
(2,652)
Assets
Non-current assets
Intangibles
Tangibles
Right‐of‐use asset
Fixed asset investments
Current assets
Trade and other receivables
Contract assets
Cash at bank and in hand
Current liabilities
Trade and other payables
Loans and borrowings
Derivative liabilities
Contract liabilities
Lease liability
Provision for liabilities and charges
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Other payables
Lease liability
Provision for liabilities and charges
Total liabilities
Net liabilities
Capital and reserves
Called up share capital
Share premium account
Shares to be issued
Profit and loss account
Shareholders’ deficit
Result for the year
and were signed on its behalf by
Paul Langworthy, Director
7digital Group plc
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2019
7digital Group plc
7digital Group plc
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2019
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
For the year ended 31 December 2019
Assets
Non-current assets
Intangibles
Tangibles
Right‐of‐use asset
Fixed asset investments
Current assets
Trade and other receivables
Contract assets
Cash at bank and in hand
Current liabilities
Trade and other payables
Loans and borrowings
Derivative liabilities
Contract liabilities
Lease liability
Provision for liabilities and charges
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Other payables
Lease liability
Provision for liabilities and charges
Total liabilities
Net liabilities
Capital and reserves
Called up share capital
Share premium account
Shares to be issued
Profit and loss account
Shareholders’ deficit
Notes
B
C
D
E
F
H
I
I
D
J
H
J
K
2019
£’000
-
39
1,321
-
1,360
248
-
1
249
(1,308)
-
-
-
(472)
(829)
(2,609)
(2,360)
(1,000)
-
(1,186)
-
(1,186)
(3,795)
(2,186)
14,817
12,043
407
(29,453)
(2,186)
2018
£’000
1,176
63
‐
1,000
2,239
1,987
252
19
2,258
(4,344)
(1,306)
(257)
(417)
‐
(517)
(6,841)
(4,583)
(2,344)
(197)
‐
(111)
(308)
(7,149)
(2,652)
14,420
8,294
168
(25,534)
(2,652)
Result for the year
As permitted by section 408 of the Companies Act 2006 the Company has not prepared its own profit and loss account for the year.
7digital Group plc reported a loss for the financial year ended 31 December 2019 of £4,196k (2018: loss £21,608k).
This Company Statement of Financial Position and related notes were approved by the Board of Directors on 28 September 2020
and were signed on its behalf by
Paul Langworthy, Director
7digital Group PLC Annual Report and Accounts 2019 71
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7digital Group plc
7digital Group plc
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
For the years ended 31 December 2019 and 2018
For the years ended 31 December 2019 and 2018
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
For the year ended 31 December 2019
Statement of changes in Equity for the year ended 31 December 2019
A.
Principal accounting policies
Share
capital
£'000
Share
premium
account
£'000
Shares to
be issued
£’000
Profit
and Loss
account
£'000
Total
£'000
14,420
8,294
168
(25,534)
(2,652)
‐
-
‐
239
‐
239
407
(4,196)
(4,196)
(4,196)
(4,196)
‐
‐
277
277
4,146
239
277
4,662
(29,453)
(2,186)
At 1 January 2019
Comprehensive loss for the year
Loss for the year
Total comprehensive loss for the year
Contributions by and distributions to
owners
Shares issued
Share based payments
Capital contribution
Total contributions by and
distributions to owners
‐
-
397
‐
‐
397
‐
-
3,749
‐
‐
3,749
At 31 December 2019
14,817
12,043
7digital Group plc is a company incorporated in the United Kingdom (England and Wales) under the Companies Act 2006.
The parent company financial statements are presented as required by the Companies Act 2006. They have been prepared
in accordance with applicable law and accounting standards in the United Kingdom. The Company balance sheet and
related notes have been prepared under the historical cost convention and in accordance with Financial Reporting
Standards 100 Application of Financial Reporting Requirements (FRS100) and 101 Reduced Disclosures Framework. The
company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permittd
by FRS 101 Reduced disclosure framework:
•
•
•
•
•
•
•
•
•
•
•
the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based payment;
the requirements of IFRS 7 Financial Instruments: Disclosures;
the requirements of paragraphs 91 to 99 of IFRS 13 Fair value measurement;
the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative
information in respect of:
o
o
paragraph 79(a)(iv) of IAS1:
paragraph 118(e) of IAS 38 Intangible Assets
the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D and 111 of IAS 1
Presentation of financial statements;
the requirements of paragraphs 134 to 136 of IAS 1 Presenation of financial statements;
the requirements of IAS 7 Statement of Cashflows;
the requirements of paragraphs 30 and 31 of IAS 8 Accounting policies, changes in accounting estimates and
the requirement of paragraphs 17 and 18A of IAS24 Related party disclosures;
the requirements in IAS 24 Related party disclosures to disclose related party transactions entered into between
two or more members of a group; and
the requirements of paragraphs 134(d) to 134(f) and 135(c) to 135(e) of IAS 36 Impairment of assets.
These financial statements are separate financial statements.
Where required, equivalent disclosures are given in the Group’s consolidated financial statements in notes 1 to 29.
Foreign currency
Transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included
in profit and loss for the year.
Intangible assets
Intangible assets acquired as part of acquisition of a business are stated at fair value less accumulated amortisation and
any impairment losses are stated at cost less accumulated depreciation and impairment losses, if any.
Intangible assets (Bespoke applications) arising from the internal or external development phase of projects is recognised
if, and only if, all of the following have been demonstrated:
-
-
-
-
-
-
The technical feasibility of completing the intangible asset so that it will be available for use or sale;
The intention to complete the intangible asset and use or sell it;
The ability to use or sell the intangible asset;
How the intangible asset will generate probable future economic benefits;
The availability of adequate technical, financial, and other resources to complete the development and to use or sell
the intangible asset; and
The ability to measure reliably the expenditure attributable to the intangible asset during its development.
Statement of changes in Equity for the year ended 31 December 2018
errors:
Share
capital
£'000
14,404
‐
14,404
‐
-
16
‐
16
Share
premium
account
£'000
8,232
‐
8,232
‐
-
62
‐
62
At 1 January 2018
Comprehensive loss for the year
Prior year adjustments
Change in accounting policy – IFRS 9
Financial Instruments (see note G)
At 1 January 2018
Comprehensive loss for the year
Loss for the year
Total comprehensive loss for the
year
Contributions by and distributions to
owners
Shares issued
Share based payments
Total contributions by and
distributions to owners
At 31 December 2018
14,420
8,294
The notes from pages 73 to 81 form part of the financial statements.
Shares
to be
issued
£’000
26
‐
26
‐
-
‐
142
142
168
Profit
and Loss
account
£'000
(500)
(805)
(2,621)
(3,926)
(21,608)
(21,608)
‐
‐
-
Total
£'000
22,162
(805)
(2,621)
18,736
(21,608)
(21,608)
78
142
220
(25,534)
(2,652)
7digital Group PLC Annual Report and Accounts 2019 72
72
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019 73
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7digital Group plc
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
For the years ended 31 December 2019 and 2018
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
A.
Principal accounting policies
7digital Group plc is a company incorporated in the United Kingdom (England and Wales) under the Companies Act 2006.
The parent company financial statements are presented as required by the Companies Act 2006. They have been prepared
in accordance with applicable law and accounting standards in the United Kingdom. The Company balance sheet and
related notes have been prepared under the historical cost convention and in accordance with Financial Reporting
Standards 100 Application of Financial Reporting Requirements (FRS100) and 101 Reduced Disclosures Framework. The
company has taken advantage of the following disclosure exemptions in preparing these financial statements, as permittd
by FRS 101 Reduced disclosure framework:
•
•
•
•
•
•
•
•
•
•
•
the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based payment;
the requirements of IFRS 7 Financial Instruments: Disclosures;
the requirements of paragraphs 91 to 99 of IFRS 13 Fair value measurement;
the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative
information in respect of:
o
o
paragraph 79(a)(iv) of IAS1:
paragraph 118(e) of IAS 38 Intangible Assets
the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D and 111 of IAS 1
Presentation of financial statements;
the requirements of paragraphs 134 to 136 of IAS 1 Presenation of financial statements;
the requirements of IAS 7 Statement of Cashflows;
the requirements of paragraphs 30 and 31 of IAS 8 Accounting policies, changes in accounting estimates and
errors:
the requirement of paragraphs 17 and 18A of IAS24 Related party disclosures;
the requirements in IAS 24 Related party disclosures to disclose related party transactions entered into between
two or more members of a group; and
the requirements of paragraphs 134(d) to 134(f) and 135(c) to 135(e) of IAS 36 Impairment of assets.
These financial statements are separate financial statements.
Where required, equivalent disclosures are given in the Group’s consolidated financial statements in notes 1 to 29.
Foreign currency
Transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded at the rates of
exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items
that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included
in profit and loss for the year.
Intangible assets
Intangible assets acquired as part of acquisition of a business are stated at fair value less accumulated amortisation and
any impairment losses are stated at cost less accumulated depreciation and impairment losses, if any.
Intangible assets (Bespoke applications) arising from the internal or external development phase of projects is recognised
if, and only if, all of the following have been demonstrated:
-
-
-
-
-
-
The technical feasibility of completing the intangible asset so that it will be available for use or sale;
The intention to complete the intangible asset and use or sell it;
The ability to use or sell the intangible asset;
How the intangible asset will generate probable future economic benefits;
The availability of adequate technical, financial, and other resources to complete the development and to use or sell
the intangible asset; and
The ability to measure reliably the expenditure attributable to the intangible asset during its development.
7digital Group PLC Annual Report and Accounts 2019 73
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73
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7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
For the year ended 31 December 2019
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
For the year ended 31 December 2019
A.
Principal accounting policies (continued)
A.
Principal accounting policies (continued)
The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible
asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.
Internally and externally generated intangible assets are amortised over their useful economic lives on a straight‐line basis,
typically over 3 years.
Research expenditure is recognised as an expense in the period in which it is incurred.
Impairment of tangible and other intangible assets
The Company reviews, at least annually, the carrying amounts of its tangible and intangible assets compared to the
recoverable amounts to determine whether those assets have suffered an impairment loss. Where an impairment loss
subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but
so that the increased carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss had been recognised for the asset in prior years.
Cash and cash equivalent
Cash and cash equivalents comprise cash on hand and demand deposits and other short‐term, highly liquid investments
that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Fixed asset investments
Investments in subsidiaries are accounted for at cost less impairment in the Company’s financial statements.
Classification
Financial instruments are classified and accounted for according to the substance of the contractual arrangement, as
financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual
interest in the assets of the company after deducting all of its liabilities. Where shares are issued, any component that
creates a financial liability of the company is presented as a liability on the balance sheet. The corresponding dividends
relating to the liability component are charged as interest expenses in the profit and loss account.
Recognition and measurement
All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those
financial assets classified as at fair value through profit or loss, which are initially measured at fair value (which is
normally the transaction price excluding transaction costs), unless the arrangement constitutes a financing transaction.
If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present
value of the future payments discounted at a market rate of interest for a similar debt instrument.
Impairment
Assets, other than those measured at fair value, are assessed for indicators of impairment at each balance sheet date. If
there is objective evidence of impairment, an impairment loss is recognised in profit or loss.
Share-based payments
The Company issues equity settled share based payments to certain Directors and employees, which have included grants
of shares and options in the current year. The fair value determined at the grant date is expensed on a straight‐line basis
over the vesting period, based on the Group’s estimate of shares that will eventually vest. Fair value is measured by use of
an appropriate valuation model. The Black‐Scholes option pricing model has been used to value the share options plans.
Going concern
These financial statements have been prepared on the going concern basis. Please refer to the Directors Reports on pages
15 to 19 for further going concern commentary.
IFRS 9 "Financial Instruments"
IFRS 9 Financial Instruments replaces the existing guidance in IAS 39 Financial Instruments Recognition and Measurement
IFRS 9 Includes revised guidance on the classification and measurement of financial Instruments, including a new expected
loss model for calculating impairment on financial assets as is set out in the Group’s accounting policy on page number 44
Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward-
looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether
there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit
risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along
with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected
credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net basis are recognised.
to 46.
Leases
All leases are accounted for by recognising a right‐of‐use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a duration of 12 months or less.
IFRS 16 was adopted 1 January 2019 without restatement of comparative figures.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in the lease.
On initial recognition, the carrying value of the lease liability also includes:
• amounts expected to be payable under any residual value guarantee;
• the exercise price of any purchase option granted in favour of the group if it is reasonably certain to assess that option;
• any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination
and
option being exercised.
increased for:
leased asset.
Right‐of‐use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and
• lease payments made at or before commencement of the lease;
• initial direct costs incurred; and
• the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right‐of‐use assets are amortised on a straight‐line basis over the
remaining term of the lease. When the group revises its estimate of the term of any lease.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company accounting policies, which are described above, the directors are required to make
judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period which the estimate is revised if the revisions affect only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
7digital Group PLC Annual Report and Accounts 2019 74
74
7digital Group PLC Annual Report and Accounts 2019
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7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
A.
Principal accounting policies (continued)
IFRS 9 "Financial Instruments"
IFRS 9 Financial Instruments replaces the existing guidance in IAS 39 Financial Instruments Recognition and Measurement
IFRS 9 Includes revised guidance on the classification and measurement of financial Instruments, including a new expected
loss model for calculating impairment on financial assets as is set out in the Group’s accounting policy on page number 44
to 46.
Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward-
looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether
there has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit
risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along
with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected
credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net basis are recognised.
Leases
All leases are accounted for by recognising a right‐of‐use asset and a lease liability except for:
• Leases of low value assets; and
• Leases with a duration of 12 months or less.
IFRS 16 was adopted 1 January 2019 without restatement of comparative figures.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in the lease.
On initial recognition, the carrying value of the lease liability also includes:
• amounts expected to be payable under any residual value guarantee;
• the exercise price of any purchase option granted in favour of the group if it is reasonably certain to assess that option;
and
• any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination
option being exercised.
Right‐of‐use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and
increased for:
• lease payments made at or before commencement of the lease;
• initial direct costs incurred; and
• the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the
leased asset.
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right‐of‐use assets are amortised on a straight‐line basis over the
remaining term of the lease. When the group revises its estimate of the term of any lease.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company accounting policies, which are described above, the directors are required to make
judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period which the estimate is revised if the revisions affect only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
7digital Group PLC Annual Report and Accounts 2019 75
7digital Group PLC Annual Report and Accounts 2019
75
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7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
For the year ended 31 December 2019
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
For the year ended 31 December 2019
A.
Principal accounting policies (continued)
C. Tangibles
Investment in subsidiary is carried at cost under IAS 27 in the financials are to be tested for impairment at each reporting
date as per IAS 36. The impairment standard requires the management to estimate the recoverable amount of the asset
and compare it with the carrying value in the books to measure any impairment. For estimating the recoverable amount
of the “Investment in subsidiary” the management relies upon; the net asset position of the subsidiary as on the balance
sheet date, which brings the necessary assurance about the recoverability of the investment.
There are no critical judgements, apart form those involving estimates, that directors have made in the process of applying
the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial
statements.
Employees
The average number of employees throughout 2019 was 14 (2018: 22). Staff costs amounted to £1.8m (2018: £1.9m).
Information about the remuneration of directors is provided in the audited part of the Directors’ Remuneration Report on
pages 23 to 24 of the consolidated financial statements.
Cost
At 1 January 2019 and at 31 December 2019
B. Intangibles
Cost
At 1 January 2019
Disposals
At 31 December 2019
Amortisation
At 1 January 2019
Charge for year
Disposals
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
Bespoke
applications
£'000
2,086
(2,086)
-
910
228
(1,138)
-
-
1,176
1,833
On 29 May 2019 the Danish Platform, with a carrying value of £948k was sold to a Danish communications company, TDC
Group (see note 12) for £951k.
The Company leased a property that originally ran until April 2023. In February 2020, on agreement with the landlord the
lease was terminated, and the Company vacated the premises. The Company has adopted IFRS 16 on the date of application
and determined the value of the lease and the right to use asset based on the rental payments from the period 1 January
Computer
equipment
£'000
69
6
24
30
39
63
-
Land and
buildings
£’000
1,862
(126)
1,736
(415)
1,321
Land and
buildings
£’000
1,862
148
(352)
1,658
472
1,186
1,658
7digital Group PLC Annual Report and Accounts 2019 76
76
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019 77
The company terminated the existing lease contract in February 2020 and in August 2020, it signed a new lease for 3
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Depreciation
At 1 January 2019
Charge for year
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
D.
Leases
2019 to April 2023.
Right-of-use asset
Right-of-use asset
Less accruals (net)
As at 1 January 2019
Amortisation
At 31 December 2019
Lease liability
As at 1 January 2019
Interest expense
Lease payments
At 31 December 2019
Analysed:
Current
Non-current
Total
years (see note 27).
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
C. Tangibles
Cost
At 1 January 2019 and at 31 December 2019
Depreciation
At 1 January 2019
Charge for year
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
At 31 December 2017
D.
Leases
Computer
equipment
£'000
69
6
24
30
39
63
-
The Company leased a property that originally ran until April 2023. In February 2020, on agreement with the landlord the
lease was terminated, and the Company vacated the premises. The Company has adopted IFRS 16 on the date of application
and determined the value of the lease and the right to use asset based on the rental payments from the period 1 January
2019 to April 2023.
Right-of-use asset
Right-of-use asset
Less accruals (net)
As at 1 January 2019
Amortisation
At 31 December 2019
Lease liability
As at 1 January 2019
Interest expense
Lease payments
At 31 December 2019
Analysed:
Current
Non-current
Total
Land and
buildings
£’000
1,862
(126)
1,736
(415)
1,321
Land and
buildings
£’000
1,862
148
(352)
1,658
472
1,186
1,658
The company terminated the existing lease contract in February 2020 and in August 2020, it signed a new lease for 3
years (see note 27).
7digital Group PLC Annual Report and Accounts 2019 77
7digital Group PLC Annual Report and Accounts 2019
77
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7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
For the year ended 31 December 2019
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
For the year ended 31 December 2019
E.
Fixed asset investments
Cost
At 1 January 2019 and at 31 December 2019
Provision for impairment
At 1 January 2019
Impairment during the year
At 31 December 2019
Net book value at 31 December 2019
Net book value at 31 December 2018
Net book value at 31 December 2017
£’000
21,769
(20,769)
(1,000)
(21,769)
-
1,000
3,665
Related subsidiaries, joint ventures and associates
Ordinary shares
held at 31
December 2019
Principle activity
Country of
incorporation
Registered office
Subsidiaries
7digital Limited
7digital Creative Limited
7digital Trading Limited
7digital Group, Inc.
7digital, Inc
7digital SAS
Music streaming
and download
services
Radio production
HR Services2
Holding
company3
Music streaming
and download
services3
100%
100%
100%
100%
100%
100%
Non-trading
France
England and Wales
England and Wales
England and Wales
Delaware,
United States of America
***
***
***
369 Pine Street, Suite 103,
San Francisco, CA 94104 USA
Delaware,
United States of America
369 Pine Street, Suite 103,
San Francisco, CA 94104 USA
21 Rue Aristade Briand
Espace Aristide
92170 Vanves France
D-202, Polite Hermitage, Sec
18 Shivtej Nagar, Chinchwad
Pune MH 411019 India
7digital Wing India Private Limited
100%
Non-trading
India
Smooth Operations (Productions) Limited
Unique Interactive Limited
Oneword Radio Limited – dissolved 28 January 2020
UBC Interactive Limited – dissolved 28 January 2020
7digital ApS – dissolved 3 October 2019
SD Music Stores Limited ‐ dissolved 26 February 2019
7digital Projects Limited – dissolved 22 October 2019
100%
100%
100%1
100%1
Dormant
Dormant
Dormant
Dormant
England and Wales
England and Wales
England and Wales
England and Wales
***
***
***
***
1 indicates indirect investment of the company
2 ceased trading on 31 March 2020.
3 non trading from 1 January 2020, dissolved with its immediate holding company, 7digital Group, Inc, on 22 May 2020.
*** registered office is Lower Lock, Water Lane, London UK NW1 8JZ.
The directors subjected the carrying value of investments to an impairment test at the year end. The director’s assessment
indicated that the carrying value of the investments in subsidiaries should be fully impaired at 31 December 2019.
On 8 February 2019, £193,858 (including interest of £5,549) of the £1.5 million Shareholder loan facility was converted to
19,385,843 ordinary shares of 1p each.
7digital Group PLC Annual Report and Accounts 2019 78
78
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019 79
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The directors have reviewed the amounts owed by related parties and believe there are significant doubts as to the future
recoverability of these balances, and as such, a provision for doubtful debts (impairment loss) of £2.7m (2018: £21k) has
been raised in the Company statement of financial position.
F.
Debtors
Due within one year:
Trade Debtors
R&D credits receivable
Other debtors
Prepayments
Amounts owed by group undertakings
G.
Amounts owed by related parties
H.
Trade and other payables:
Other taxes and social security
Current Liabilities
Trade creditors
Other creditors
Accruals
Amounts owed to group undertakings
Non-Current Liabilities
Other payables
I.
Loans and borrowings
Current
Convertible debt
Embedded derivative
2019
£’000
139
109
-
-
-
248
2019
£’000
410
391
248
259
-
1,308
-
-
2019
£'000
-
-
-
2018
£’000
163
281
143
65
1,335
1,987
2018
£’000
2,273
175
14
1,700
186
4,348
197
197
2018
£'000
1,306
257
1,563
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
F.
Debtors
Due within one year:
Trade Debtors
R&D credits receivable
Other debtors
Prepayments
Amounts owed by group undertakings
G.
Amounts owed by related parties
2019
£’000
-
139
109
-
-
248
2018
£’000
163
281
143
65
1,335
1,987
The directors have reviewed the amounts owed by related parties and believe there are significant doubts as to the future
recoverability of these balances, and as such, a provision for doubtful debts (impairment loss) of £2.7m (2018: £21k) has
been raised in the Company statement of financial position.
H.
Trade and other payables:
Current Liabilities
Trade creditors
Other taxes and social security
Other creditors
Accruals
Amounts owed to group undertakings
Non-Current Liabilities
Other payables
I.
Loans and borrowings
Current
Convertible debt
Embedded derivative
2019
£’000
410
391
248
259
-
1,308
-
-
2019
£'000
-
-
-
2018
£’000
2,273
175
14
1,700
186
4,348
197
197
2018
£'000
1,306
257
1,563
On 8 February 2019, £193,858 (including interest of £5,549) of the £1.5 million Shareholder loan facility was converted to
19,385,843 ordinary shares of 1p each.
7digital Group PLC Annual Report and Accounts 2019 79
7digital Group PLC Annual Report and Accounts 2019
79
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7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
For the year ended 31 December 2019
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
I.
Loans and borrowings (continued)
k.
Share capital
On 4 January 2019, Juke GmbH, a wholly owned subsidiary of Media-Saturn-Holding GmbH, decided to discontinue their
music services and their contract with the Group. On 1 March 2019, a settlement was agreed on the termination of all
outstanding contracts and commitments relating to the Juke music service for an immediate payment by Juke of
€4.0m. Further, Juke agreed to forgive £250,000 of the principal amount of the convertible loan, the balance of the principal
amount of £500,000 was paid from the proceeds of the termination settlement and all associated interest payments
totalling £27,239 were forgiven. The total amount forgiven of £277k is accounted and disclosed as a capital contribution in
the statement of changes in equity.
On 7 June 2019, the remaining £585,932 (including interest £24,241) of the £1.5 million Shareholder loan facility was
converted to 332,915,704 ordinary shares of 0.01p each.
J.
Provision for liabilities and charges
Provision
for closure
of
businesses
(note a)
£'000
621
255
(42)
(280)
-
-
554
554
-
Other
provisions
£'000
Legal
provision
(note b)
£'000
7
-
-
-
-
40
47
47
-
-
-
-
-
228
-
228
228
-
Total
£'000
628
255
(42)
(280)
228
40
829
829
-
At 1 January 2019
Provision for closure of Danish operations
Reduction in partial guarantee of subsidiary loan
Release of provision for closure of French operations
Litigation provision
Other
At 31 December 2019
Of which is: current
Of which is: non-current
Note a
On 4 October 2019, the Danish entity was liquidated by the local authorities; a provision has been made of £255k for
possible associated outstanding liabilities.
In 2018 a provision was made in the standalone books of the parent company, as the parent company has guaranteed all
the half yearly repayments of a loan in the French entry Snowite SAS up to 30 April 2020. During the year the guarantee
provision was reduced by £42k representing the amounts paid against the loan in 2019 by the French entity. At the year
end, the parent company still guaranteed €288k/£245k of future payments.
In 2018 a provision of £288k relating to the closing of operations in Snowite SAS was made; during 2019 £280k of this
provision has been utilised.
Note b
During 2018 a civil action was brought by a former US customer against the parent company for failure to deliver services
specified in their Term Sheet. No contract was ever put in place with this customer. The breach of contract claim is for: i)
consequential damages for loss of future profits in an amount to be determined at trial; ii) compensatory damages including
but not limited to the contract amount of USD200k; iii) punitive damages in an amount to be determined by a jury; (iv)
attorney’s fees, costs, and expenses; and (v) pre-and post-judgment interest. 7digital’s legal team made a motion to dismiss
the claims, however in the event that the claims are upheld, estimate that damages would be in the region of
USD300k/£228k.
Allotted, called up and fully paid:
2,455,419,294 ordinary shares of 0.01p each (2018: nil)
419,622,489 deferred shares of 0.99p each (2018: nil)
Nil ordinary shares of 1p each (2018: 400,236,646)
115,751,517 deferred shares of 9p each (2018: 115,751,517)
2019
£’000
245
4,154
-
10,418
2018
£’000
-
-
4,002
10,418
i.
On 8 February 2019, £193,858 (including interest) of the £1.5 million Shareholder loan facility was converted in
to 19,385,843 ordinary shares of 1p each.
ii.
In order for the Company to lawfully allot the shares as described in iii and iv below, all the 419,622,489 shares
of 1p each were converted into 419,622,489 deferred shares of 0.99p each and 419,622,489 ordinary shares of
0.01p each on 7 June 2019. The deferred shares of 0.99p each carry limited voting rights.
iii.
On 7 June 2019, £585,932 (including interest) of the £1.5 million Shareholder loan facility was converted to
332,915,704 ordinary shares of 0.01p each; share premium was increased by £552,640.
iv.
On 7 June 2019, a number of shareholders, including Magic Investments S.A. (a tech investment holding
company) (“Magic”) and Shmuel Koch Holdings Limited (“SKH”) subscribed for, an aggregate of, 634,132,641
ordinary shares at 0.01p each, to raise £1.3 million (before expenses). Share premium was increased by
£1,204,852.
v.
On 20 September 2019, 937,900,000 shares of 0.01p each were issued to the market to raise £1,875k (before
expenses); share premium was increased £1,780,504.
vi.
On 4 October 2019, a further 130,848,460 ordinary shares of 0.01p were issued to the market to raise £261,697;
hare premium was increased by £210,527.
l.
Post balance sheet events
Refer to the Group‘s post balance sheet events in note 27 on page 67.
7digital Group PLC Annual Report and Accounts 2019 80
80
7digital Group PLC Annual Report and Accounts 2019
7digital Group PLC Annual Report and Accounts 2019 81
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7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
7digital Group plc
7digital Group plc
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2019
k.
Share capital
Allotted, called up and fully paid:
2,455,419,294 ordinary shares of 0.01p each (2018: nil)
419,622,489 deferred shares of 0.99p each (2018: nil)
Nil ordinary shares of 1p each (2018: 400,236,646)
115,751,517 deferred shares of 9p each (2018: 115,751,517)
2019
£’000
245
4,154
-
10,418
2018
£’000
-
-
4,002
10,418
i.
ii.
iii.
iv.
v.
vi.
On 8 February 2019, £193,858 (including interest) of the £1.5 million Shareholder loan facility was converted in
to 19,385,843 ordinary shares of 1p each.
In order for the Company to lawfully allot the shares as described in iii and iv below, all the 419,622,489 shares
of 1p each were converted into 419,622,489 deferred shares of 0.99p each and 419,622,489 ordinary shares of
0.01p each on 7 June 2019. The deferred shares of 0.99p each carry limited voting rights.
On 7 June 2019, £585,932 (including interest) of the £1.5 million Shareholder loan facility was converted to
332,915,704 ordinary shares of 0.01p each; share premium was increased by £552,640.
On 7 June 2019, a number of shareholders, including Magic Investments S.A. (a tech investment holding
company) (“Magic”) and Shmuel Koch Holdings Limited (“SKH”) subscribed for, an aggregate of, 634,132,641
ordinary shares at 0.01p each, to raise £1.3 million (before expenses). Share premium was increased by
£1,204,852.
On 20 September 2019, 937,900,000 shares of 0.01p each were issued to the market to raise £1,875k (before
expenses); share premium was increased £1,780,504.
On 4 October 2019, a further 130,848,460 ordinary shares of 0.01p were issued to the market to raise £261,697;
hare premium was increased by £210,527.
l.
Post balance sheet events
Refer to the Group‘s post balance sheet events in note 27 on page 67.
7digital Group PLC Annual Report and Accounts 2019 81
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81
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7digital Group plc
7digital Group plc
GENERAL INFORMATION AND ADVISORS
GENERAL INFORMATION AND ADVISORS
For the year ended 31 December 2019
For the years ended 31 December 2019
7digital Group plc
NOTES
Registered office
Lower Lock
2nd Floor
9-12 Water Lane
London
NW1 8JZ
Country of Incorporation
England and Wales
Registered number
03958483
Nominated adviser and broker
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
Solicitors
Charles Russell Speechlys LLP
5 Fleet Place
London
EC4M 7RD
Principal bankers
Barclays Bank plc
United Kingdom House
180 Oxford Street
London
W1D 1EA
Registrars
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
82
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7digital Group plc
GENERAL INFORMATION AND ADVISORS
For the year ended 31 December 2019
7digital Group plc
NOTES
7digital Group PLC Annual Report and Accounts 2019
83
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7digital Group plc
NOTES
84
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7digital Group plc
Lower Lock
Water Lane
London
NW1 8JZ
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