Cornwall's 105 to 107 Itchy FM - Ofcom Licensing

(e) FUNDING
The business will be capitalised at £750,000 in working capital and shareholder funded loan stock of a
further £100,000. This capital enables pre-operative expenditures including engaging key personnel as
necessary well ahead of launch. The business plan ensures the company will remain cash positive with
the support and expertise of established media and private investors. Such is their support and
commitment that a shareholders agreement will be put in place to prevent premature sale of shares in
the company. In addition to this market capitalisation and loan stock, the shareholders have all
expressed a further commitment to provide additional capital, should this be required, to support the
station’s successful transition from analogue to digital, in due course.
Investors are confident that Itchy FM’s strong brand, supported by IMD’s marketing skills and resources
are in line with the multi-channel environment. The cross-media brand approach will assist the station’s
transition from analogue to digital and multi-format broadcast.
Investor profile
IMD Group
An early stage, high growth youth media and marketing company, backed by private investors including
Tim Schoonmaker. IMD raised seed investment in the form of private equity in 2004, and is preparing
for an IPO onto AIM in summer 2005. IMD’s investors and management have expressed their intent to
support the growth of the business including its radio arm. It is IMD’s intention to capitalise the station
with shareholder equity, IMD has also arranged contingent funding in the form of lead investor
promissory notes, and held discussions with its bank (Barclays Media Centre) about offering the station
support if required. IMD’s ownership of the station is such that development capital for additional
business growth could be achieved through introducing a radio partner in due course, to further develop
the Cornwall station including full roll-out of the digital strategy for Itchy FM. IMD Group has ambitious
plans in UK youth media and marketing including growing in ILR, both as a consolidator and through
being active in youth-potential licence applications, and we have access to seven figure contingent
investment to achieve our goals in radio.
Northern Light Ltd
A UK group holding company with interests in a diverse range of sectors (property development, drinks
trade, TV production, fashion and other interests), its principal shareholder has demonstrated Northern
Light’s ability and commitment to support its investment in the station.
Sensitivity analysis of sales performance
We have undertaken sensitivity analysis to identify the impact of any failure to meet local revenue
targets. If local airtime sales were 10% or even 20% below that identified in the business model, IMD
Radio Cornwall would have sufficient reserves from its initial capitalisation and shareholder loan facility
to not require an overdraft during its first three years trading. In all other quarters during the first three
years the company would remain cash positive. This strong position is as a result of three key
assumptions detailed within the business plan; carefully planned, scaleable overheads, wide range of
commercial activity and strong market capitalisation by committed shareholders from launch. Our wide
ranging commercial research, emphasis on commercial management and experience at running small
profitable media and radio businesses has given us confidence in our prudent revenue figures
forecasts, and our business strategy enables the business to grow steadily without having problems
due to under resourced, and even allows for (excessive) local airtime underperformance over a three
year period, which we believe to be highly unlikely based on our thorough client briefings.
Furthermore, we anticipate that national brand activity will be a likely source of substantial high margin,
additional revenue as brands seek cut-thru activity to engage with a ready audience in a purely leisure
environment. Due to the ‘big ticket’ nature of these sales, we are confident that just slight overperformance
in this area will create substantial non-forecast income for the station, accelerating IMD
Radio Cornwall’s achievement of profitability.
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