Cornwall's 105 to 107 Itchy FM - Ofcom Licensing

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(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. 21
Details the sources of finance that will be used to fund the licence, under the following headings: Source Detail Share capital £750,000 advanced by the two shareholder companies Loan stock Investor funded loanstock facility of £100,000 Leasing / HP facilities Aside from our property lease, we propose no direct leasing liabilities. There is provision for contract hire on staff vehicles and a Total Broadcast Contract with NTL for transmission equipment. All other equipment will be purchased. Full details of the above can be found in our confidential financial appendix. Bank overdraft No overdraft required is forecast within the first three years of trading, although if it were required, it is likely that Barclays Media Centre would be the provider. Grants and donations None foreseen Other N/A Market Capitalisation The capitalisation of IMD Radio Cornwall Ltd will be threefold. Recognising Ofcom’s statutory requirement to licence operators with an ability to maintain the license, we are confident we can illustrate that despite being a relatively young company, we have a solid investment base and therefore an ability to ensure the successful launch and development of the Cornwall County license. IMD Radio Cornwall Ltd IMD Radio Ltd Northern Light Ltd 75% 25% £562.5k £187.5k Our primary source of funding for the market capitalisation will consist of IMD Radio’s shareholders advancing funds proportionate to their equity stakes. Bank and accountants letters to confirm their ability are available on request. All of the shareholders are one hundred percent committed to the success and capitalisation of the station. In addition, we have taken the supplemental step of identifying two alternative sources of immediate funding should the station require (either as part of the initial capitalisation or in the event of any [unlikely] commercial underperformance or if business development capital is required to exploit adjacent market opportunities within Cornwall). Firstly, one of IMD Group’s lead investors has offered a promissory note to underwrite the station should it be required, and secondly, through IMD Group’s relationship with the Barclays Media Centre, we are confident that bank funding could be made available as a short term solution if shareholder equity routes were exhausted. Barclays Media Centre have banked IMD since inception and know the management and its shareholders well, and are familiar with the radio sector and experienced in arranging radio finance deals based on the value of the licence as well as the station’s trading performance. With this sensible mix of scaleable overheads and multiple revenue streams targeted by a strong commercial team, we are confident that IMD Radio Cornwall will become a profitable station with excellent growth prospects within its first three years on-air. IMD Group and Northern Light Ltd both have the resources and commitment to ensure the station is given the support it needs to flourish commercially. This commitment is a continuation of the support already demonstrated in the IMD Group management team’s ability to launch, turnaround, build and 22
Page 2 and 3: GENERAL INFORMATION Application for
Page 4 and 5: Rolf Munding Non-Executive Chairman
Page 6 and 7: Martin Dallaghan Current directorsh
Page 8 and 9: o Christopher Weston - A serial hig
Page 10 and 11: Market Opportunity BBC Radio 1 cons
Page 12 and 13: usiness being awarded a Shell Livew
Page 14 and 15: The seasonal uplift in listener vol
Page 16 and 17: This arsenal of advertiser-aligned
Page 18 and 19: only through this genuine investmen
Page 20 and 21: Station’s link with Investor stra
Page 24 and 25: sustain small scale youth media and
Page 26 and 27: Telegraph, Nuts Magazine (IPC) and
Page 28 and 29: Audience Projections Itchy FM predi
Page 30 and 31: Total Hours 546,000 100% Based on t
Page 32 and 33: might incur to achieve such high le
Page 34 and 35: o Newquay: surf / skate, clubbing,
Page 36 and 37: We would also support all station a
Page 38 and 39: A large part of Itchy FM’s likely
Page 40 and 41: Staff structure IMD Radio Cornwall
Page 42 and 43: In addition, IMD Group’s local sa
Page 44 and 45: Director of Radio, Zenith Optimedia
Page 46 and 47: SECTION 105(B) AND (C): CATERING FO
Page 48 and 49: 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 F
Page 50 and 51: spoken word content will provide ed
Page 52 and 53: (b) Proposed format Licence Outline
Page 54 and 55: NOP Study - November 2004 Edison Me
Page 56 and 57: Interest in New Radio Station: When
Page 58 and 59: Radio listeners in Cornwall are wel
Page 60 and 61: Research Conclusions This format cl
Page 62 and 63: collated a number of the most perti
Page 64 and 65: Local meetings Summary of some of t

Cornwall's 105 to 107 Itchy FM - Ofcom Licensing

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