companies

EPIC: OMPP
Mid-price: 2.05p
Spread: 1.8p –2.3p
Total no. of shares: 91,371,339
Market cap: £1.87 million
12 month range: 0.75p –2.25p
Website: onemeidapublishing.com
Sector: Media

Background

Business to business music and video rights provider One Media Publishing Group joined Plus in September 2006. Since listing the group has successfully expanded its rights’ library through a steady stream of catalogue acquisitions. It now has in excess of 70,000 tracks in its chosen niche, the booming ‘nostalgia’ market. Its portfolio includes tracks from artists as diverse as Lucianno Pavarotti and Snoop Doggy Dog, to Lulu and the Sex Pistols.

Key to the group’s strategy is to monetise its intellectual property in the fast-growing digital download arena. One Media is also expanding its ‘synchronization’ operation which involves finding appropriate tracks to be used in television and radio advertising, or for mobile phone ring tones. The firm sells its content through a number of leading digital retail stores, including ITunes, Amazon, Spotify, Verizon and Emusic. In addition, the group continues to work with the traditional music market licensing its tracks to record labels worldwide.

One Media Publishing was formed by Michael Infante and his fellow directors to exploit a music market that is amidst great change. Industry specialist Infante spotted that the seismic shift from physical to digital music has created an opportunity to build a significant business.

Financials & Current Trading

In the six months to 30th April 2010, boosted by contributions from a number of new catalogues, revenues grew by 69% to £580,949 – almost three-quarters of the sales made in the whole of the last financial year. The company delivered its first substantial pre-tax profit for a first half, it being up from £5,667 to £104,556. Earnings for the half were 0.09p, higher than the 0.07p posted in the 2009 financial year as the firm enjoyed a £25,300 tax credit.

Cash at the period end stood at £153,927, down from £210,177 six months earlier as One Media continued to invest in expanding its portfolio. We note that the company’s retained deficit stood at just £607 at the period end, which means that if profit growth continues at the current rate, and should it wish to, a dividend will be able to be paid.

Since the period end the company has signed an extension to its music licensing distribution agreement with distributor, The Orchard, and, more recently, added another catalogue of songs to its portfolio. For an initial $25,000 the company purchased the rights, on a royalty sharing basis, for the worldwide distribution of over 6,000 tracks of `country’, `blues’ and `mid-American’ rock music performed by over 250 various artists, for a term of twenty five years. Artists include Bo Diddley, George Benson and Steely Dan.

The company was upbeat on the outlook, flagging that the digital download market continues to grow worldwide. Interestingly, it commented that it is looking into other avenues of content investment, including music video and other digital media. It also said that it would look into the growing video gaming sector.

Management

Michael Infante – Chief Executive Officer – Infante was the co-founding director of the AIM listed company, Air Music & Media Group, in 1995. Michael was head of marketing and recording projects for Tring International Group between 1992 and 1995, gaining significant experience in all aspects of rights management and in directing and recording a number of classical albums. Prior to that he was sales and marketing director of Creamery Fare, a subsidiary of Hazlewood Foods.

Nigel Smethers – Finance Director – Smethers, a Cambridge graduate, qualified with leading accountants PriceWaterhouse in 1974. Before joining the One Media board, Nigel spent five years as joint venture manager with Whitbread Retail and for the last 18 years he has been working a portfolio of SME companies in both the quoted and unquoted sector.

Scott Cohen – Non-executive Director – Cohen is co-founder of The Orchard, the world’s leading digital music distributor, which is listed on Nasdaq. Scott’s music career started in the late eighties in independent and major label artist management. In addition to his responsibilities at The Orchard, he manages Danish indie rock sensation, The Raveonettes.

Investment Recommendation

Assuming that the company’s operational gearing continues to kick in, along with rising sales, the full year to October should see an excellent performance. Assuming that revenues for the year hit £1.1 million (a reasonable assumption given the rate of growth) then we see One Media making post tax profits of at least £200,000. For a rapidly growing company currently capitalised at £1.87 million that means the shares look good value. Buy.

*One Media Publishing is a corporate client of Rivington Street Holdings, the ultimate owner of this website. Worship Street Investments, which is managed by a subsidiary of Rivington Street Holdings, owns shares in One Media Publishing.