08/06/2007
Every now and then one comes across a company with enormous, if unquantifiable, potential. One such company is online retailer EBTM. Via its ‘Everything But The Music’ website and related co-branded sites, it sells everything the dedicated fan of rock/metal/indie/emo/cult music requires to look the part. Whether it’s the latest Goth-inspired item from My Chemical Romance (You can have any colour, sir, provided it’s black) or a Ben Sherman parka for parading on the Lambretta, the EBTM website has it all. Launched less than two years ago, the site generated sales of £350,000 in the six-week Christmas trading period, and appears to be going from strength to strength.
EBTM came to the market through a reverse takeover in March last year. Among its founders is Quentin Griffiths, who played a big role in boosting another online retailer, ASOS, to stock market stardom. The latest figures – for the period to end-October last year – showed a loss of £294,000. But the second half will see that figure shrink. In April this year, ebtm.com received 241,000 unique visitors and is close to operational profit on a month-by-month basis.
The company as a whole is now certainly in profit – courtesy of its latest deal. EBTM is buying a wholesale and online retailer of clothing and accessories, called Lowlife. It is also buying the Atticus clothing brand, which Lowlife was marketing under a royalty agreement and is prominent on the EBTM website. Lowlife made a profit of £646,000 before tax last year. It will almost certainly contribute more by the time the Atticus brand has been bought.
EBTM has done a number of partnership deals to co-brand webstores with prominent names in the music publishing industry. The most recent was with Kerrang!, the UK’s leading weekly rock magazine – as I’m sure all readers of this newsletter are aware, or rather ‘aware!’. A similar deal exists with Metal Hammer, which is a monthly publication.
The Lowlife acquisition was largely financed by a placing, which roughly doubled the company’s market capitalisation. There are now 247.8 million shares in issue. At 5.63p a time (spread 5.25p-6p), that puts a value of £14 million on EBTM. For a business with a current profits run rate of perhaps £750,000, that may seem pricey. But I suspect we will be looking back in a couple of years’ time and wondering why the shares were ever this cheap. Buy and lock away.
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