Company Profile

YooMedia plc is one of the fastest growing interactive entertainment companies in the UK.
Since 1997 we have been developing and launching leading B2C consumer brands in the gaming and community sectors. We also work in a B2B capacity with leading brand owners, agencies, content developers and broadcasters to design and develop their interactive content strategies.

Led by Executive Chairman Dr. Michael Sinclair and Group Managing Director Neil MacDonald, YooMedia has assembled a highly experienced management team that possesses a unique blend of skills and experience in the areas of Digital TV, Internet and mobile phone services and technology.

With main office locations in London, Exeter and Maidstone, YooMedia manages core assets including:

Over 30 office locations throughout the UK alone

State-of-the-art studio, production and post-production facilities at our Wapping location.

UK broadcast return path & bandwidth owner

Fully fledged UK Bookmaker License

Database with over 350K UK singles

SMS Engine access with international reach

Fully staffed 50 seat Customer Contact Centre in Maidstone, Kent

YooMedia Dating & Chat - Our dating subsidiary company manages the oldest and largest UK-owned dating brands including Dateline, Club Sirius and Avenues. YooMedia Dating has over 20 office locations throughout the UK and also manages YooChat, our world-leading interactive chat service found on UK digital cable on the Telewest platform (platform extensions planned for 2005).

YooMedia Gambling & Games - Combining the brands of Avago and Channel 425 (in partnership with William Hill) YooMedia is on the leading-edge of interactive fixed odds, casino and poker gambling services for digital TV, the web and 3G mobile phones. Our gaming business also manages YooPlay, the only interactive just for fun games channel found on all four Digital TV platforms in the United Kingdom.

YooMedia Enhanced Solutions (YES) - YES works with brand owners, agencies, content owners and broadcasters to clarify the options, define the strategies and deliver the interactive content that enhances consumer and audience experiences. YES customers include the BBC, Nestle, Celador, William Hill, Channel 4, ZipTV, The Cartoon Network and HR Owen.

Big issue is gaming division.

Using EVO March estimate, current EBITDA is -0.15p so the FY EBITDA for gaming is a -1.8m, assuming no change.

EVO forecast 2.05m EBITDA FY 2005. As Malkie suggests this is aggressive, but remember organic growth is planned very soon, so targets may well be reached. It may be possible, as in September EBITDA was -0.40m for gaming, now it's -0.15p, estimate. Gaming EBITDA trend is turning positve very soon.

However, if gaming EBITDA can reach just FY2005 EBITDA 0.8M, perhaps more realistic, then this can be offset by a 10% outperform in Solutions, see above post.

Also the Solutions 10% outperform hope is VERY realistic, as the current rate in March for Solutions was EBITDA 0.28P * 12 = 3.36p for year with no growth rate. We have that now, no questions asked!

We know current Solutions growth rate is 300%+ so even though that may well slow, we have an excellent chance of reaching Solutions EBITDA of 6.2m. Solutions growth could slow dramtically and we still arrive at EBITDA 6.2m.

So Solutions could easily cancel out an underperforming Gaming division.

Place my head on the chopping block and I say Gaming 0.8m EBITDA and Solutions 6.2m EBITDA leaving Yoomedia 0.25m EBITDA better off, for these two divisions.

Therefore the 2005 EPS of 0.8p and the 2006 EPS of 2p is still on course.

If Gaming + Dating perform as EVO predict and Solutions perform as I predict, then it's Whoosh!!!

Of course, if Gaming, Dating and Solutions all outperform, then the effect on bottom line EPS will be tremendous and we can all retire!

In September 04, Solutions revenue was 0.58m

In March, estimate 1.18m

EVO FY 2005, forecast Solutions revenue, 15.33m

Multiply the March estimate by 12 and you arrive at 14.16m.

On page 8, EVO state annualised revenue growth from Solutions is >300%. Margins are 100%

Why are EVO assuming a month on month, revenue increase for Solutions of less than 1%. They state on page 8, annualised Solutions revenue growth is >300%

I don't understand?? Please help?

Have you seen the incredible impact on Solutions EBITDA, if the revenue for 2005 is 20m and not the 15.33m EVO predict. Imagine the impact on EBITDA, if the Solutions revenue was 23m.

Gross margins are 100%

Would the fixed costs go up accordingly.

EVO have kept the fixed costs the same for FY2005, on an annualised basis compared with March, even though they forecast an amount of revenue growth.

Why is the Solutions revenue growth estimate so low, when the annualised growth rate is >300%, stated on page 8.

Am I correct in assuming this division is the most important, with 100% margins.

I am now assuming the current EPS forecasts for this year will be smaashed, if Solutions can bring home FY revenue of 20m+

The fixed costs could go up with the extra business, but not enough to stop run away EPS, due to 100% margin.

Feedback please.

Does the gull agree with that lot.

Just had some fun on the calculator.

If Solutions revenue was 20m (33% outperform) and Gaming and Dating revenues meet expectaions, then EPS this year would be 1.8p.

So on a reasonable PE of 30 the SP would be 54p by year end.

iPublic

I'm not quarreling with your figures and projections. However, the Evolution target sp is just 20p. If you then look at their commentary, it does seem a cautious view. They point out (copyright acknowledged) that they are highly operationally geared with c 80% of incremental growth dropping to the bottom line - this comment presumably applies to solutions and products such as gaming and chat, rathr than gambling, at elast if they are including gross gambling as revenue, rather than the 11% margin. The question is at what stage will the 2006 projections be reflected in the sp, I wonder how Evolution would answer that question. It says something about the market that it cannot look beyond this year's trading. I could make the same comment about SEO (sp could be 1) and ASC (down on a short-term blip in 70% growth trend). So much of the market now seems to be short term with 34%, I believe, in derivatives which will mostly be short-term positions - at least this would appear to be the case with AIM and small-cap shares, if not the BPs BTs and HSBCs of this world.

Tring to be objective for holders and bb visitors, I would say: follow Evolution forecast of 20p for short-term but take iPublic seriusly as an investor for a one or two year period. By this time next year with, lets say, 2005 in the bag at eps of 0.8p, then 2006 figure of 2.0p will be in the price. YOO might deserve a premium pe of 30 or 35 in line with Sky, but even if that hasn't worked through and pe is still ony 20, then the sp should be around 40p. This is cautious, in my view, and my conclusion is to hold my current exposure to 200K shares but not increase at the moment. Could the sp move ahead more quickly? yes, if (i) Evolution imrove their price projection; (ii) quarterly figures show them moving ahead of schedule; (iii) positive comment leads to a status review and brings in more institutional investment; (iv) we get one or two juicy acquisitions. So, best to buy an average to somewhat overweight stake and tuck them away. Downside risk must now be minimal.

Eric

EWROBSON

Not entirely true

EVO have a target price of 20p. PE 25 * 2005 EPS of 0.8 = 20p

EVO have published a 2006 EPS of 2p. Therefore the IMPLIED target price is 50p, using EVO's own PE assumption of 25.

The target of 50p is IMPLIED simply by stating 2006 EPS of 2p and using EVO's own assumption of a PE 25 for 2005.

Why have EVO neglected to venture beyond 9 months for YOO, when they are perfectly happy to waffle on about 2007 and 2008 with SEO. I'm not having a go at SEO, who are a great company.

EVO have their own agenda at the moment and while it may work for a while, yoo can't run forever.

Good post by the way.

I'm quite happy to sit here and wait 18 months for my mininum 40p. Suits me! 18 months will soon fly buy.

Trigger

edited . 2005 ok

Guidance notes section 2 Going Concern may have the answer to the reason they neglected to go further than 9 months.

Gull

Yes, fair point, yet it irritates me, when I see EVO making projections for SEO for 2007 and 2008, which is much further out than 2006. SEO have yet to 'bring home the bacon' either, so what's the difference?

Indeed SEO are on 2006 PE 21 NOW and YOO are on 2006 PE 8 NOW.

EVO ramp SEO but not YOO.

If EVO would employ me as analyst, I'm sure I could construct a 54p 2005 target price, using Solutions as the driver.

I understand. I have not looked at SEO, even after being tipped on it at 4.5p due to funds, day job, etc. But could this not be a joint decision by the Directors & EVO based on possible uncertainties that I am not fully aware of excl. the risks in the note? If all is as we know I think a good re-rating after half year results seems imminent & that in the bigger picture is not to far off. IMHO after the latest note & figures I will certainly be adding at theses prices as funds become available.

Yes, caution prevails, yet as I have demonstrated on the other BB, if Solutions revenue exceeds by 30% and EVO have underestimated (at first glance it appears they have) then if other divisions are in line, the price WILL be above 50p by December.

Plenty to look forward to and discuss. One thing is certain, the level of activity and interest for genuine investors, can only increase as the year progresses. We can see the rewards on paper and now wait for mangagement to deliver and execute business plan. Yoomedia are ahead of the game so far, since the merger.

Gull

In answer to your question on the other BB.

No, the charts remain. I like the charts copied as they are. The 6 month chart will look amazing, when the SP breaks 20, indicating new range. Then you will change your opinion. The charts stay.

I've made a decision, not to clutter up the thread with to much news, links, but I will consider adding when appropriate news, links are available. All will be considered in good time.

OK

Yoomedia Soulutions.

Core division - By far the biggest independent interactive solutions provider for digital television.

Soultions made a PROFIT in March, including depreciation, assuming the share of the 2.5m annual depreciation figure is one third. Obviously the actual share of the depreciation figure will not be exactly one third, but a good representation.

Revenue for March was estimated 1.18m and Fixed costs 0.90m. Gross margins are 100%, with no variable costs for this division. We must assume the share of the Central costs is 70k, one third of the total company figure.

The FY 2005 estimate for revenue is 15.33m. No variable costs, with 100% Gross Margin with the annual central costs remaining the same. SIGNIFICANTLY, broker estimates fixed costs remain the same, annualised 10.6m, while projecting a nine month, annualised growth rate over March revenue, of 8.5%.

Take the March revenue figure of 1.18m * 12 months and the number is 14.16m. The FY revenue estimate for Solutions is 15.33. This is a nine month growth rate of 8.5%. Page 8 of the reseerch document states Solutions revenue in Sept 04 was 0.58m and revenue for March 05 was 1.18m. This represents a 6 month growth rate for Solutions of over 100%.

The broker expects this dramatic growth to slow to 8.5% over the next 9 months. I don't understand or accept Solutions growth will slow to such an extent. I require an explanation and I urge you all to ask some searching questions. Nissi Beach, a qualified account, feels broker has taken a ultra cautious view. I do not doubt this for one moment.

I have previously demonstrated how the bottom line EPS for Solutions, dramatically increases, if the full year revenue is 20m and not 15.33m. I will explain why shortly. Such an outperformance, represents a 31% excess, over the broker FY estimate. Considering Solutions revenue grew over 100% for the previous 6 months, it is not unreasonable to hope revenue grows 39.5%, on an annualised basis for the next nine months.

Broker forecast for Solutions FY profit, after deducting 830k for depreciation (one third of annual bill) and 890k for Central costs (one third of annual bill) is 3m.

This is the clever part! If FY Solutions revenue is 20m (already demonstrated this is not unreasonable) then bottom line 2005 profit for this one division jumps to 7.68m. This large increase of 4.68m profit over market expectations, represents a >150% beating of the broker FY profit estimate of 3m.

So how is this possible. Why does a 31% increase in revenue over the next 9 months, over the broker estimate of 8.5% mature into >150% beating of market expectations for this division? 3m to 7.68m, all for a extra 31% increase in revenue.

Key points are:

Gross margin 100%.

Fixed costs remaining the same.

Depreciation and Central Costs remain the same.

I'm assuming Fixed costs would remain at 10.6m, even if revenue outperformed by 31%. In March the estimated Fixed costs for Solutions was 0.9m. Broker has forecast FY Fixed costs to be 10.6m. 0.9m * 12 = 10.6. Now remember broker has estimated 8.5% revenue growth for Solutions for the remaining 9 months of the year, yet the Fixed costs have NOT gone up accordingly. This indicates spare capacity. Therefore, I am also assuming Fixed costs remain at 10.6m, while revenues grows 31%, over broker estimate.

Crucially, the capacity must exist to support a 31% extra increase in revenue growth, otherwise Fixed costs will increase. An increase in Fixed costs, due to the need to expand capacity will not prevent a beating of the 3m profit figure. The result will be a lower number than the 7.68m profit, but STILL higher than the 3m.

Broker has demonstrated the Fixed costs will not increase, while revenue growth increases 8.5% over 9 months. So let's hope capacity will allow an extra 31% 9 months growth rate for revenue, allowing the Fixed costs to remain the same.

Yes, capacity limitations, may restrict Soultions growth, much beyond the brokers estimates. However, the management will be well aware of the 100% Gross Margins and the impact on bottom line profit. Therefore, capacity will be increased if required.

Fixed costs will not change within current capacity, even if revenue grows. In March Solutions was profitable, even after depreciation. Therefore, EVERY single piece of business it wins from this date forward, effectively dives straight into shareholders wallets! 100% Gross Margin, no variable costs, Fixed Costs, Central Costs, Depreciation already covered. Of course, in the real world, business gained in March could occasionally, be a one off, clients leave for pastures new (assuming they can find a suitable alternative), so perhaps not 100% of the March business can be banked on to repeat for the remainder of the year.

The principle remains. For the remainder of the year, all new business and revenue is PROFIT, pure GOLD!

If revenue for Soultions did hit 20m FY 2005, resulting in a 7.68m FY profit for the division, it matters not how Dating and Gaming perform. Here is the safety net for long term investors. If 20M was reached and management decided to close Gaming and Dating completely, ignoring the one off exceptional costs, written into the accounts (huge but a once only kitchen sink job) Yoomedia shares would STILL be worth over 42p.

Solutions revenue 20m. Profit 7.68m * CONSERVATIVE PE of 25 = 42p.

Don't even begin to speculate on the value of your shares, with a profitable Dating and Gaming division. We need to remain calm for the remainder of the year.

Is there a limit to the number of channels, the Sky platform will support? Apparently not! I've asked this question on specialist digital television forums.

I'm wondering if in say two years, all brand owners will demand a low maintenance, television channel, in the same way that, major businesses have websites. Obviously, not all business will have their own channels, due to the huge expense, but are we about to see a new trend?

I can forsee two years in the future, where a limited number of big brand names, like Tesco's as an example, will have thier own channel on Sky.

Benefits would be advertising, publicity and a home shopping ordering service, through the television. Imagine the publicity to Tesco's. On adverts and in-store "now find us on Sky, Channel 879"

Although the channel may not be economically viable in an accounting sense, the owner, say Tesco's, may be prepared to accept the loss, as the overall benefits in terms of reputation would minimise any loss to such a huge firm, which when set against thier billions profits, is a drop in the ocean.

I believe a tremendous opportunity exists for a company able to provide this service, specifically Yoomedia!

Tesco accept the loss, for the greater good of the business and Yoomedia recieved a fixed annual fee, for building and maintaining the portal.

Over several years, Yoomedia may end up with dozens of these portals, channels, earning fixed fees for the development, and maintenance, with the client involved, happy to soak up the expenses, for the greater good of thier business.

The above example, is only ONE way, the Solutions division may expand rapidly over the next two years. I do not believe Solutions revenue growth will slow to below 10%.

Is there any reason why this can't be a new trend?

A reply by Malkie. Full credit for content to Malkie.

interesting speculation re Tesco and the like Trig, But I dont see this potential development as a loss-making concept.
It would, presumably be categorised as advertising and promotions and I would have thought from this point of view it would actually be revenue enhancing.

Look at TV travelshop....get down to Tesco's Now for x,y,z.....lifestyle, recipes & Cooking progs, combined with targeted advertising and interactive home shopping.
No Trig, definitely not loss making....quiet the opposite....and no more than 2 years away as a realistic offering to go hand in hand with broadbandTV.....

now stay calm!

Malc

The channel could play a constant stream of adverts and trailers for Tesco. with limited other content. Tesco pay for this, so the content is Tesco's responsibilty.

At the top of the screen, viewers would be invited to press the red button, to enter the interactive, shopping and information portal.

Yoomedia receive a fixed fee, to maintain channel and portal.

Malkie, excellent points. The growth possibiltys in this one area, gives me a headache! Whether Tesco's ran the channel at a loss or profit, depends on the investment they are prepared to make in content. Yoomedia recieve a fixed fee, our costs + profit margin. Imagine 100 of such channels, portals!!!

2007 Solutions revenue, 45m! I won't annoy you by projecting EPS and SP. Lol!

If the capacity constraints are a problem, Yoomeda will make any the required investment. The EPS implications are obvious!

The question is not will it happen, but when? Viavision already manage, operate, 5 television channels and this appears to be the path, the Solutions division is taking. The only limit to future Solutions earnings is capacity.

Now do certain posters get it? Project the solutions business, two years into the future and the EPS explodes. Sky MUST give space on the EPG to anyone who wants it, with apparently a MASSIVE amount of spare capacity. How many investors, really understand this part of Yoomedia, bearing in mind Gross margin of 100%. Does the analyst unnderstand the potential? Has he thought about it? Do fund managers understand?

iPubic, will the EVO note be posted on the Money AM newsboard?

Chad

http://www.evbgresearch.com/