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7digital – a “global leader” with Universal Music contract wins? Hmmm…

By Steve Moore | Tuesday 25 September 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Previously writing on self-styled “global leader in B2B digital music solutions” 7digital Group (7DIG) last month, I questioned Triller contract win, ramptastic? Now “Universal Music Group Contract Wins”

... “pleased to announce it has entered into agreements with Universal Music Group to provide partner services across three of UMG's separate digital music products. The global agreements each cover a multi-year term and will contribute to 7digital revenues in 2018 and beyond”. “Universal Music”, “global agreements”, “multi-year term” and ‘contributing from 2018’ all sound impressive, but what do they mean in financial reality?

“Simon Cole, CEO of 7digital, commented: ‘We are delighted to be announcing agreements with the world leader in music-based entertainment, Universal Music Group, since each contract focuses on UMG initiatives that enable deeper engagement between artists and their fans, and leverage a range of revenue streams within digital music.’” Yep, “world leader”, “range of revenue streams”, “digital music”. What about actual financials though?

Er… that’s it for the announcement! Half-year results though are due this week – after the shares were suspended for all of July and half of August as, for the 2017 results, “in the course of the audit, certain deficiencies in our preparation were brought to the attention of the board”.

That eventual results announcement argued “we have put a difficult situation behind us in the publication of these results” and “7digital has a strong pipeline and is enjoying increasing momentum, and the board remains committed to being profitable at PBT level during the second half of 2018”. However, it also included “believe we are in a very healthy position to continue our growth, as reflected in the figures” - the figures having showed significant cash burn and a narrow working capital position though.

As such, I await results with interest while currently continuing to avoid the shares. Indeed, following also CyanConnode earlier, AIM-listed companies which claim ‘global’/‘world’ leader an automatic bargepole / sell?

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