TIDMR4E
RNS Number : 3269D
Reach4Entertainment Enterprises PLC
26 April 2017
26 April 2017
reach4entertainment enterprises plc ("r4e", the "Company"' or
the "Group")
Final results for the year ended 31 December 2016
r4e, the transatlantic media and entertainment company, today
announces its results for the year ended 31 December 2016.
Highlights
2016 2015 Change
Revenue GBP96.6m GBP85.9m 12.5%
Gross Profit GBP22.8m GBP20.2m 12.9%
EBITDA before GBP1.5m GBP1.8m -16.7%
exceptional items
Adjusted EBITDA* GBP1.9m GBP1.8m 5.6%
Operating profit GBP0.85m GBP5.19m -84%
Profit before
tax (including
exceptional items) GBP0.5m GBP4.5m -89%
Profit before
tax (excluding
exceptional items
and share based
payments) GBP0.9m GBP0.6m 50%
*Adjusted EBITDA (Earnings before Interest, Tax, Depreciation
and Amortisation) is before exceptional items and share based
payment charges
-- Represented some of the best known theatre shows and won new
shows to be launched in 2017/2018 including Bat out of Hell, 42(nd)
Street, Waitress, Mean Girls and Pretty Woman
-- Launched a new agency in Hamburg Germany, such that r4e now
operates in the world's three largest commercial centres for
theatre - London, New York and Hamburg.
-- Appointed James Charrington to lead Dewynters and acquired
his data driven marketing and analysis business Jampot Consulting
Ltd
-- Appointed Jim Edwards to lead SpotCo
-- Expanded the Board with the appointment of Lord Michael
Grade, Claire Hungate and Charlie Lycett as non-executive
Directors
-- Implemented the r4e plc Long Term Incentive Plan (LTIP) to
incentivise and rewards key members of staff. Adding back these
non-cash affecting costs of GBP0.35 million, the Group has a core
trading EBITDA of GBP1.9 million
-- Successfully raised GBP2 million (gross proceeds) from an
equity placing in October 2016, to support the Company's
data-driven marketing and analytics initiative, geographic
expansion and the reorganisation of key aspects of the business
Commenting on the results, David Stoller, Executive Chairman,
said, "2016 was a good year for r4e building upon the financial
transformation achieved in the prior year. In addition to a
positive trading performance which saw revenues increase by 12.5%,
we set out our strategy for growth and have made significant
headway towards executing it, recruiting a superb leadership team
across the company, expanding our presence geographically into
Germany, so that we are now operate in the three largest live
entertainment centres in the world, London, New York and Hamburg,
and launching our data driven marketing and analytics business
through Jampot, which we believe will be a key driver of our future
success.
31 December 2016 Full Report and Accounts
The Company will shortly post its report and accounts for the
year ended 31 December 2016 to shareholders, along with notice of
the annual general meeting to be held at 11.30am on 27 June 2017,
and both documents will soon be available on its website,
www.r4e.com. The annual general meeting will be held at the offices
of the Company at Wellington House, 125 Strand, London, WC2R
0AP.
Enquiries:
reach4entertainment
David Stoller, Executive Chairman +44 (0) 20 7968 1655
Novella Communications - Financial PR
Tim Robertson +44 (0) 207 6303843
Toby Andrews +44 (0) 207 6303848
Allenby Capital Ltd - AIM Nominated Adviser and Broker
Jeremy Porter/ James Reeve +44 (0) 20 3328 5656
EXECUTIVE CHAIRMAN'S STATEMENT
A Clear Strategy for Long-Term Growth
In 2016, r4e delivered a good trading performance slightly ahead
of the previous year and set out a clear strategy for the future
long-term growth of the business, centred around three key
areas:
- Geographic expansion;
- Launching a new data-driven marketing and analytics division; and
- Re-organisation and integration of key business groups.
Good progress was made against all three objectives alongside a
significant strengthening of the senior management team. In March
2016, the Company announced the appointment of James Charrington as
the new CEO for Dewynters as well as the acquisition of data and
marketing analytics business Jampot Consulting. In August 2016, the
Company appointed Jim Edwards as the new CEO for Spotco, and in
September 2016 the Company announced the creation of a Dewynters
agency in Hamburg under Michael Hildebrandt, expanding the business
geographically and adding another highly experienced individual to
the team.
To support the Company's strategic objectives, an equity placing
was completed raising GBP2.0 million gross proceeds (GBP1.9 million
net) in October 2016. Charlie Lycett joined the Board of Directors
as a Non-Executive in May 2016 and since the year end, the Company
has welcomed Lord Michael Grade and Claire Hungate (currently head
of Warner Bros UK) as Non-Executive Directors.
The combination of the above changes together with a
re-organisation of the London office will significantly strengthen
the business and provide the platform for long-term growth.
Positive Trading Performance
Group revenue increased by 12.5% to GBP96.6 million (2015:
GBP85.9 million), boosted by positive currency translation. On a
constant currency basis, revenues increased by 3.8%.
Underlying profitability for r4e (Adjusted EBITDA*) was slightly
ahead at GBP1.9 million (2015: GBP1.84 million), driven by a strong
performance from SpotCo and a much improved performance from
Newmans. The gross profit margin was consistent at 23.6% (2014:
23.5%).
Profit before tax decreased to GBP0.50 million (2015: GBP4.54
million). Excluding exceptional items and share based payment
charges, profit before tax has increased by 350% to GBP0.85 million
(2015: loss of GBP0.34 million).
Earnings per share from total operations for the year is 0.02p
(2015: 4.01p).
Subsequent to the substantial debt refinancing in December 2015,
2016 saw the first full year with the new debt provider PNC
Business Credit ('PNC'). Over the course of the year, total
borrowings have reduced further by GBP1.70 million to GBP5.03
million (31 December 2015: GBP6.74 million).
* Adjusted EBITDA is EBITDA before exceptional items and share
based payment charges
New York, London and now Hamburg
In opening Dewynters Germany in September, r4e has taken a major
step towards building a leading global agency. Adding Hamburg to
its market-leading presence in London and New York, r4e now has a
presence in the three largest commercial theatre markets in the
world. This, combined with a commitment, avidly shared by each of
these agencies, to utilise Jampot's new data-driven marketing and
analytics capabilities (which can and will be increasingly applied
to the broader categories of live entertainment, in addition to
commercial theatre), and the highly collaborative approach adopted
by the new leadership teams, will drive the Company's future
growth. r4e is re-inventing itself, with a clear global vision and
strategy.
New York
SpotCo delivered a good performance in 2016, driven by an
especially strong first six months of the year. Ahead of the
prestigious Tony awards in June 2016, SpotCo's clients required
significant support from the company. This investment assisted the
result of every Tony award being won by a SpotCo client. Boosted by
this high level of activity plus a beneficial currency translation,
revenues for the period increased by 19% on the previous year to
GBP65.2 million (2015: GBP54.6 million) with Adjusted EBITDA
increasing by 25% to GBP1.5 million (2015: 1.2 million), and
operating profit increasing by 16.22% to GBP1.0 million (2015:
GBP0.86 million). SpotCo has a very strong track record, and
expects to maintain its market leading position under the
leadership of Jim Edwards. The company has a growing focus on
utilising the strengths of the Group, including its growing data
and analytics capabilities. Another area of growth is winning new
clients who have theatre presented outside of New York but whom
have the potential to subsequently transfer to Broadway.
London
Under new CEO James Charrington, Dewynters has been
re-organised, establishing a new structure that will support its
long-term strategy, featuring a more streamlined service delivery
and a determined cultivation of a wider live entertainment client
base, all supported by a substantial commitment to data and
analytics. As a result, 2016 was a year of transition for Dewynters
which was reflected in the financial performance of the division
with revenues flat at GBP27.5 million (2015: GBP27.5 million),
however focus on overhead control resulted in an increased Adjusted
EBITDA at GBP0.98 million (2015: GBP0.85 million). Operating profit
has also increased by GBP1.13 million to GBP0.69 million (2015:
loss of GBP0.44 million) due to the prior year impairment of
goodwill. Dewynters is now well placed to improve on this
performance in 2017.
Newmans enjoyed significant success in 2016, growing its
revenues by 19% to GBP3.9 million (2015: GBP3.5 million) and
generating EBITDA of GBP0.22 million (2015: GBP0.16 million).
Management decisions in 2015 to switch from outsourcing to
investing in in-house printing and cutting machinery has made an
immediate and positive impact on the profitability of the division.
Newmans also benefited from an increase in theatre signage,
including the Harry Potter play and an increase in film premier
work generally. Operating profit has remained consistent with prior
year at GBP0.14 million (2015: GBP0.14 million) due to the new PNC
debt costs which have impacted 2016. The division remains committed
to providing an increasing level of digital services and is well
placed going into 2017.
Hamburg
Launched in September 2016, Dewynters Germany is still in its
infancy but is already seeing signs of strong future performance
under the leadership of Michael Hildebrandt, who has worked in
Hamburg, the capital of the German entertainment market, for the
past 17 years and is an established industry figure. Michael's
leadership and market knowledge, combined with the skills and
capabilities that this division is able to draw upon from the wider
Group, particularly from Dewynters in London, provides a strong
platform for growth, focussing particularly on two key service
models:
- Strategic and commercial support for brands in the entertainment and leisure industry:
- Event creation for major brands looking for
entertainment-driven solutions to marketing challenges.
During 2016, r4e invested in establishing this division and 2017
will be another year of investment.
Forward Momentum
The progress we have made in the last 18 months has
re-invigorated the business with change occurring at nearly every
level. In 2015, we transformed the financial base of the Company
and in 2016 we have transformed the senior team and operational
structure and set out our strategic plan for the future, featuring
geographic expansion (evidenced by our launch into Germany),
customer expansion (following and participating in the
globalisation of live entertainment), and a powerful push to
develop and provide our customers with industry-leading digital,
data-driven marketing and analytics (led by the launch of Jampot).
Our performance for 2017 has to date been in line with our
expectations and we are enthusiastic about the growth prospects
that our new initiatives will bring. Although these initiatives
will inevitably increase the costs previously anticipated for 2017
(which did not factor for the costs of initiatives yet to launch),
we expect them to provide a real benefit to the profitability of
the group in future years.
David Stoller
Executive Chairman
REVIEW OF PERFORMANCE BY COMPANY
Year ended 31 December 2016
New Dewynters
London York GmbH Head Group
Dewynters Newmans Jampot Total SpotCo DAI Total Office Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 27,536 3,909 - 31,445 65,153 - 65,153 8 - 96,606
EBITDA before
exceptional
items 876 216 (45) 1,047 1,383 (11) 1,372 (124) (743) 1,552
Adjusted
EBITDA* 983 216 (45) 1,154 1,507 (11) 1,496 (124) (624) 1,902
Operating
(loss)/profit 694 139 (45) 788 996 (3) 993 (124) (803) 854
Year ended 31 December 2015
New
London York Head Group
Dewynters Newmans Total SpotCo DAI Total Office Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 27,496 3,512 31,008 54,610 231 54,841 - 85,849
Adjusted
EBITDA* 846 161 1,007 1,218 10 1,228 (392) 1,843
Exceptional
admin
items (138) (6) (144) - - - 5,020 4,876
Operating
(loss)/profit (432) 130 (302) 863 10 873 4,621 5,192
CONSOLIDATED INCOME STATEMENT FOR THE YEARED 31 DECEMBER
2016
2016 2015
Note GBP'000 GBP'000
Continuing operations
Revenue 1 96,606 85,849
Cost of sales 4 (73,779) (65,684)
GROSS PROFIT 22,827 20,165
Administrative expenses 4 (21,973) (14,973)
EBITDA before exceptional items 1,552 1,843
Exceptional administrative expenses 2 - (1,149)
Exceptional administrative income 2 - 6,025
Impairment of goodwill 7 (55) (965)
Depreciation (447) (370)
Amortisation of intangible assets 7 (196) (192)
OPERATING PROFIT 854 5,192
Finance income - 61
Finance costs 3 (355) (714)
-------- --------
PROFIT BEFORE TAXATION 499 4,539
Taxation 5 (409) (273)
PROFIT FOR THE YEAR 90 4,266
The profit is attributable to
the equity holders of the parent
Basic and diluted earnings per
share (p)
Basic earnings per share 6 0.02 4.01
Diluted earnings per share 6 0.02 4.01
======== ========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31
DECEMBER 2016
2016 2015
GBP'000 GBP'000
PROFIT FOR THE YEAR 90 4,266
-------- --------
Other comprehensive income:
Items that will not be reclassified
to profit and loss:
Currency translation differences 89 147
Other comprehensive income for
the year, net of tax 89 147
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR ATTRIBUTABLE TO THE
EQUITY HOLDERS OF THE PARENT 179 4,413
Items in the statement above are disclosed net of tax. The
income tax relating to each component of other comprehensive income
is disclosed in note 5.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER
2016
2016 2015
Note GBP'000 GBP'000
NON-CURRENT ASSETS
Goodwill and intangible assets 7 10,946 9,985
Property, plant and equipment 2,720 2,359
Deferred tax asset 167 145
13,833 12,489
CURRENT ASSETS
Inventories 139 152
Trade and other receivables 14,263 12,906
Other current assets 601 498
Cash and cash equivalents 2,097 1,160
17,100 14,716
TOTAL ASSETS 30,933 27,205
======== ========
CURRENT LIABILITIES
Trade and other payables (17,582) (14,709)
Borrowings 8 (4,489) (6,002)
(22,071) (20,711)
NET CURRENT LIABILITIES (4,971) (5,995)
NON-CURRENT LIABILITIES
Deferred taxation (1,733) (1,470)
Other payables 9 (1,241) (1,478)
Borrowings 8 (537) (739)
(3,511) (3,687)
-------- --------
TOTAL LIABILITIES (25,582) (24,398)
NET ASSETS 5,351 2,807
EQUITY
Called up share capital 10 3,074 2,374
Share premium 16,645 15,329
Deferred shares 1,498 1,498
Capital redemption reserve 15 15
Share option reserve 11 349 -
Warrant reserve 311 311
Retained earnings (16,480) (16,570)
Own shares held (259) (259)
Foreign exchange reserve 198 109
TOTAL EQUITY ATTRIBUTABLE TO
EQUITY HOLDERS OF THE PARENT 5,351 2,807
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER
2016
Capital Share Own Foreign Total
Share Share Deferred Redemption Option Warrant Retained Shares Exchange Equity
capital premium shares reserve reserve reserve earnings held reserve GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ATTRIBUTABLE TO
EQUITY
HOLDERS OF THE
PARENT
At 31 December
2014 1,872 13,501 - 15 - - (20,836) (259) (38) (5,745)
Profit for the
year - - - - - - 4,266 - - 4,266
Other
comprehensive
income,
net of tax:
Currency
translation
differences - - - - - - - - 147 147
-------- -------- --------- ----------- -------- -------- --------- -------- ------------- --------
Total
comprehensive
income
for the year 1,872 13,501 15 - (16,570) (259) 109 (1,332)
Transactions
with owners
in their
capacity as
owners: shares
issued 2,000 1,828 - - - - - - -
Share
re-organisation (1,498) - 1,498 - - - - - -
Issue of - - - -
warrants - - 311 - -
At 31 December
2015 2,374 15,329 1,498 15 - 311 (16,570) (259) 109 2,807
Profit for the
year - - - - - - 90 - - 90
Other
comprehensive
income,
net of tax:
Currency
translation
differences - - - - - - - - 89 89
Total
comprehensive
income
for the year 2,374 15,329 1,498 15 - 311 (16,480) (259) 198 2,986
Transactions
with owners
in their
capacity as
owners: shares
issued 700 1,316 - - - - - - - 2016
Share based
payments
charge - - - - 349 - - - - 349
At 31 December
2016 3,074 16,645 1,498 15 349 311 (16,480) (259) 198 5,351
======== ======== ========= =========== ======== ======== ========= ======== ============= ========
CONSOLIDATED STATEMENT OF CASH FLOWS AS AT 31 DECEMBER 2016
2016 2015
Note GBP'000 GBP'000
Cash generated from/(used
in) operating activities 12 3,196 (642)
Income taxes paid (436) (213)
Net cash generated from/(used
in) operating activities 2,760 (855)
Investing activities
Purchases of property, plant
and equipment (356) (193)
Proceeds from disposal of
property, plant and equipment (133) -
Payment of deferred consideration - (661)
Dividends received from associated
undertaking - 60
Net cash used in investing
activities (489) (794)
Financing activities
Net proceeds from the issue
of share capital 10 1,909 3,828
Proceeds from asset based
lending 8 108,684 6,690
Repayments of asset based
lending 8 (111,396) (9,630)
Repayment of term loan 8 (287) -
Repayments of obligations
under finance leases (13) -
Interest paid (338) (604)
Net cash (used in)/generated
from financing activities (1,441) 284
Net increase/(decrease) in
cash and cash equivalents 921 (1,365)
Cash and cash equivalents
at the beginning of the year 1,160 2,446
Effect of foreign exchange
rate changes 107 79
Cash and cash equivalents
at the end of the year 2,097 1,160
BASIS OF PRESENTATION
The above financial information in this announcement does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. The above figures for the year ended 31
December 2016 are an abridged version of the Company's accounts
which have been reported on by the Company's auditor but have not
been dispatched to the shareholders or filed with the Registrar of
Companies. These accounts received an audit report which was
unqualified and did not include a statement under section 498(2) or
section 498(3) of the Companies Act 2006. The audit report included
a reference to matters to which the auditors drew attention by way
of emphasis without qualifying their report in relation to going
concern, as follows:
Emphasis of matter
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of disclosures in the
accounting policies on page 32-33 of the annual report and accounts
concerning the group and company's ability to continue as a going
concern following a breach of loan covenants that occurred during
2016 and breaches that are forecast to occur in 2017. These events
or conditions indicate the existence of a material uncertainty that
may cast significant doubt about the group's or company's ability
to continue as a going concern. The financial statements do not
include the adjustments that would result if the group or company
was unable to continue as a going concern.
GOING CONCERN
As at 31 December 2016, the Group had net assets of GBP5.35
million (31 December 2015: net assets GBP2.81 million) and made an
operating profit in the year then ended of GBP0.85 million (year
ended 31 December 2015: loss of GBP5.19 million).
During 2015, the Group obtained a new three year secured asset
based debt facility of GBP9.5 million with PNC Business Credit
Services Ltd being made up of a GBP1 million term loan and a
revolving credit facility of up to GBP8.5 million based on
qualifying accounts receivable. As at 31 December 2016 the debt
owed to PNC totalled GBP4.83 million (2015: GBP6.68 million), a
reduction of GBP1.85 million.
The term loan held with PNC is a 3 year facility against which
monthly capital repayments commenced from March 2016. The debt will
be fully paid down by October 2018. The asset based lending
facility is a revolving credit line based upon qualifying accounts
receivable. This means current debt is constantly being paid down
and new debt being drawn. The facility will therefore fluctuate but
will be no more than GBP8.5 million at any point. A set of
financial covenants are in place with PNC in relation to this debt
and are measured monthly. One of these covenants was breached for 3
months from August to October 2016 due to seasonal fluctuations in
revenue. PNC provided a waiver for these breaches and an amendment
to the covenant terms was agreed in 2017 to help mitigate the
impact of seasonality. At the latest measurement date prior to
these accounts being released, the covenants had been met, however,
trading in 2016 was unusually weighted towards the first half of
the year and 2017 is expected to return to the typical trading
pattern of a stronger second half of the year. This means that, on
a 12 month rolling basis the Group may once again be affected by
seasonality issues in the covenant measurement. The Company and PNC
are monitoring the position carefully, remain in close
correspondence, and are working towards a solution.
The directors of the Company understand that PNC remains
supportive of r4e, but that PNC cannot provide a waiver of a
potential future breach as of the date of these accounts.
Given the significant reduction in the debt levels of the group
since the re-financing in 2015, plus the improvement to the balance
sheet position, the Directors believe that the going concern basis
is appropriate and the Group has adequate resources to continuing
trading for the foreseeable future. Regarding the aforementioned
PNC covenants, the Directors are confident that although breaches
are possible later in 2017, these would only be temporary as a
result of seasonal fluctuations and not due to the performance of
the Group as a whole and are working with PNC to come to an
agreement.
SIGNIFICANT ACCOUNTING POLICIES
GOODWILL
Goodwill is reviewed for impairment at least annually and any
impairment will be recognised in the income statement and is not
subsequently reversed. As such it is stated at cost less provision
for impairment in value. On disposal of a subsidiary, the
attributable amount of goodwill is included in the determination of
the profit or loss on disposal.
IMPAIRMENT OF ASSETS (INTANGIBLE AND PROPERTY, PLANT AND
EQUIPMENT)
Goodwill is not subject to amortisation but is tested annually
or whenever there is an indication that the asset may be impaired.
For the purpose of impairment testing, assets are grouped at the
lowest levels for which they have separately identifiable cash
flows, known as cash generating units. If the recoverable amount of
the cash-generating unit is less than the carrying amount of the
unit, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other
assets of the unit pro-rata on the basis of the carrying amount of
each asset in the unit. Impairment losses recognised for goodwill
are not reversed in a subsequent period.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
At each balance sheet date, the Group reviews the carrying
amounts of its property, plant and equipment and intangible assets
with finite useful lives to determine whether there is any
indication that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent, if any, of the
impairment loss. Where it is not possible to estimate the
recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset
belongs. If the recoverable amount of an asset or cash-generating
unit is estimated to be less than its carrying amount, the carrying
amount of the asset or cash-generating unit is reduced to its
recoverable amount. An impairment loss is recognised immediately in
the income statement. Where an impairment loss subsequently
reverses the carrying amount of the asset or cash-generating unit
is increased to the revised estimate of its recoverable amount, not
to exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset or cash-generating
unit in prior years. A reversal of an impairment loss is recognised
immediately in the income statement.
EXCEPTIONAL ITEMS
Exceptional items represent income or expenses, which based on
their materiality, frequency or non-operating nature, have been
separately disclosed to facilitate the assessment of the Group's
underlying operating profitability.
SHARE BASED PAYMENTS
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value (excluding the effect of non market-based vesting conditions)
at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the Group's
estimate of the shares that will eventually vest and adjusted for
the effect of non market-based vesting conditions.
Fair value is measured using a Black-Scholes valuation model for
vanilla options and a binomial model for more complex options. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
CAPITAL RISK MANAGEMENT
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. In order to adjust the capital structure, the
Group may issue new shares or sell assets to reduce debt.
As part of the Capital Risk Management process the Group
acknowledges the need to monitor, and meet in full, covenants held
over the revolving asset based facility with PNC. More details on
the bank debt are in the borrowings note 8. Although breached from
August to October 2016, the covenants have been met in full since
November 2016 until the date of the release of these accounts.
NOTES
1. BUSINESS AND GEOGRAPHICAL SEGMENTS
Business segments
For management purposes, the Group is currently organised into
four operating segments - New York operations, London operations
and Head Office. These divisions are the basis on which the Group
reports its segment information.
Principal continuing activities are as follows:
New York (NY) - marketing, design, advertising, promotions,
digital media services, and publishing.
Germany - marketing strategy and planning, media planning,
design, event production, PR, CRM and data consulting.
London - marketing, design, advertising, promotions, digital
media services, publishing, signage and fascia displays.
Head Office - finance and administration services for the
Group.
Segment information for continuing operations of the Group for
the year ended 31 December 2016 is presented below.
NY London Germany Head
operations operations operations Office Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Sale of goods - 1,168 - - 1,168
Provision of services 65,153 30,277 8 - 95,438
Revenue (all external
customers) 65,153 31,445 8 - 96,606
EBITDA before exceptional
items 1,372 1,047 (124) (743) 1,552
Impairment of Goodwill - - - (55) (55)
Depreciation (244) (198) - (5) (447)
Amortisation (135) (61) - - (196)
Operating profit/(loss) 993 788 (124) (803) 854
Finance costs (260) (95) - - (355)
Profit/(loss) before
tax 733 693 (124) (803) 499
Tax (charge)/credit (338) (971) - 900 (409)
Profit/(loss) after
tax 395 (278) (124) 97 90
============ ============ ============ ========= =========
Management fees charged at an arm's-length basis between
reportable segments are reflected in the figures above on the basis
that this is a true reflection of the operating costs of each
segment.
NY London Germany
operations operations operations Head Office Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Capital additions:
Property, plant and equipment 42 502 1 - 545
============ ============ ============ ============ =========
Balance sheet:
Segment assets
Non-current assets 8,559 5,248 1 25 13,833
Current assets 9,831 6,268 127 874 17,100
------------ ------------ ------------ ------------ ---------
Total segment assets 18,390 11,516 128 899 30,933
============ ============ ============ ============ =========
Liabilities:
Total segment liabilities (16,806) (7,060) (42) (1,674) (25,582)
Segment information for continuing operations of the Group for
the year ended 31 December 2015 is presented below.
NY London Head
operations operations Office Group
GBP'000 GBP'000 GBP'000 GBP'000
Revenue
Sale of goods 231 1,749 - 1,980
Provision of services 54,610 29,259 - 83,869
Revenue (all external
customers) 54,841 31,008 - 85,849
Adjusted EBITDA* 1,228 1,007 (392) 1,843
Exceptional administrative
expense - (299) (850) (1,149)
)
Exceptional administrative
income - 155 5,870 6,025
Impairment of
Goodwill - (965) - (965)
Depreciation (224) (139) (7) (370)
Amortisation (131) (61) - (192)
Operating profit/(loss) 873 (302) 4,621 5,192
Finance income 1 60 - 61
Finance costs (32) (28) (654) (714)
Profit/(loss)
before tax 842 (270) 3,967 4,539
Tax (charge)/credit (250) (393) 370 (273)
Profit/(loss)
after tax 592 (663) 4,337 4,226
============ ============ ========= =========
Head
NY London Office
operations operations operations Group
GBP'000 GBP'000 GBP'000 GBP'000
Capital additions:
Property, plant and equipment 104 88 1 193
============ ============ ============ =========
Balance sheet:
Segment assets
Non-current assets 7,408 5,056 25 12,489
Current assets 8,842 5,450 424 14,716
------------ ------------ ------------ ---------
16,250 10,506 449 27,205
Total segment assets
============ ============ ============ =========
Liabilities
Total segment liabilities (15,177) (7,376) (1,845) (24,398)
2. EXCEPTIONAL ADMINISTRATIVE ITEMS
2016 2015
GBP'000 GBP'000
Office move costs - (14)
Employee contract termination
related costs - (13)
Costs relating to debt restructure - (539)
Costs of merchandise division
sale - (272)
Issue of warrants to AIB - (311)
Exceptional administrative
expenses - (1,149)
Landlord and Tenants Act - -
reimbursement
Income from transfer of merchandise
division - 155
Gain on deferred consideration
write off - 715
Gain on debt write off - 5,155
Exceptional administrative
income - 6,025
Office move and Landlord reimbursement
Newmans premises and Dewynters warehouse, which are on the same
site in London, were given notice by the Landlord to vacate by
December 2014 in order that the land could be developed. Subsequent
to the commencement of the search process for new premises, the
current Landlord agreed to a new lease on the premises due to the
planned development being put on hold. Exceptional expenses of
GBP0.01 million in prior year 2015 relate to the search for new
premises plus negotiation for the new leases with the current
landlord.
Employee contract termination costs
Exceptional expenses of GBP0.01 million in prior year 2015
relate to Dewynters employee contract termination costs in prior
year which are considered exceptional due to the level of
redundancy required as a result of company performance.
Deferred consideration on the acquisition of SpotCo
Deferred consideration payments were made as scheduled during
2015 leaving a further remaining balance at the end of October 2015
of USD $1.0 million (GBP0.65 million) which the Company had the
option to pay by the issue of new ordinary shares in the Company.
It was agreed during the year that the vendor would waive the final
liability of $1 million which resulted in exceptional income of
GBP0.72 million including interest.
Gain on debt write off
The debt restructure which took place in prior year December
2015 paid AIB Group GBP9 million of the debt outstanding at that
date of GBP14.16 million. The remaining balance of GBP5.16 million
was written off resulting in an exceptional gain to the Income
Statement. The process of negotiating the debt restructure included
service from legal professionals, consultants, brokers, advisors
etc. Fees in relation to the restructure totalled GBP0.53
million.
Issue of warrants to AIB
As part of the refinancing deal with AIB in 2015, the Company
granted 24,994,462 Warrants to AIB Joint Ventures, a subsidiary of
AIB.
3. FINANCE COSTS
2016 2015
GBP'000 GBP'000
Finance lease interest 13 1
Interest on AIB bank loans - 482
Interest on new debt 200 15
Fees on new debt 137 37
Amortisation of arrangement
fees for bank loan - 66
Unwinding of discounting
on deferred consideration
(note 9) - 91
Foreign exchange loss on
trade 5 3
Foreign exchange loss on
deferred consideration (note
9) - 19
355 714
4. EXPENSES BY NATURE
2016 2015
GBP'000 GBP'000
Media, marketing and promotional
services 73,071 65,029
Staff costs 14,990 12,854
Share based payment costs
(note 11) 349
Depreciation, amortisation
and impairment 699 1,526
Exceptional administrative
income (note 2) - (4,876)
General office expenses 2,975 2,996
Operating lease payments:
Land and buildings 1,339 1,378
Plant and machinery 160 142
Professional costs 1,373 1,004
Travelling 547 534
Other 249 70
Total cost of sales and administrative
expenses 95,752 80,657
1.
5. TAXATION
2016 2015
GBP'000 GBP'000
Current tax:
(6) -
Overseas tax on profits/(losses)
of the year 338 251
Total current tax charge 332 251
Deferred tax:
Origination and reversal of
timing differences 69 82
Deferred tax rate change 8 17
Deferred tax - adjustment in
respect of previous periods - (77)
Total deferred tax 77 22
Tax charge on loss of ordinary
activities 409 273
Factors affecting the tax charge for the year:
2016 2015
GBP'000 GBP'000
The tax assessed for the year
differs from the effective
average rate of corporation
tax in the UK of 20.00% (2015:
20.25%). The differences are
explained below:
Profit on ordinary activities
before tax 499 4,539
Profit on ordinary activities
multiplied by effective average
rate of corporation tax in
the UK of 20.00% (2015: 20.25%) 100 919
Effects of:
Fixed asset differences 30 13
Expenses not deductible for
tax purposes - 342
Income not subject to tax (439) (1,182)
Other tax adjustments, reliefs
and transfers (30) (144)
Temporary difference on overseas (7) -
tax
Difference in tax rates on
overseas earnings 173 185
Timing differences not recognised
in the computation 132 131
Change in corporation tax
rates - 123
Adjustments to brought forward
values - (13)
Adjustment in respect of previous
periods (6) (59)
Deferred tax not recognised 460 (42)
Total tax charge for the year 409 273
A deferred tax asset of approximately GBP1.25 million (2015:
GBP0.96 million) has not been recognised due to uncertainty over
future profitability. At 31 December 2016, the Group had losses
carried forward of GBP7.4 million (2015: GBP5.3 million), available
for offset against future profits in the UK. Taxation is calculated
at the rates prevailing in the respective jurisdictions. The
standard tax rates in each jurisdiction are 40% in the United
States (2015: 40%) and 20% in the United Kingdom (2015: 20%).
6. EARNINGS PER SHARE
The calculations of earnings per share are based on the
following profits and number of shares:
Profits attributable to equity holders of the company
2016 2015
GBP'000 GBP'000
For basic and diluted profit per share
Profit for financial year 90 4,266
Number Number
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share 500,208,593 106,416,614
Dilutive effect of share options 483,688 -
------------ ------------
Weighted average number of ordinary shares for the purposes of diluted earnings per
share 500,692,281 106,416,614
Earnings per share (pence)
after tax
Basic earnings per share 0.02 4.01
Diluted earnings per share 0.02 4.01
7. GOODWILL AND INTANGIBLE ASSETS
Brands Customer relationships Purchased goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
1 January 2015 4,163 2,607 13,671 20,441
Foreign exchange differences 98 - 244 342
-------- ---------------------- ------------------ --------
31 December 2015 4,261 2,607 13,915 20,783
-------- ---------------------- ------------------ --------
Additions - - 55 55
Foreign exchange differences 409 - 1,026 1,435
-------- ---------------------- ------------------ --------
31 December 2016 4,670 2,607 14,996 22,273
-------- ---------------------- ------------------ --------
Amortisation
1 January 2015 1,098 1,870 6,611 9,579
Charged in the year 131 61 - 192
Impairment charge - - 965 965
Foreign exchange differences 62 - - 62
31 December 2015 1,291 1,931 7,576 10,798
-------- ---------------------- ------------------ --------
Charged in the year 135 61 - 196
Impairment charge - - 55 55
Foreign exchange differences 278 - - 278
31 December 2016 1,704 1,992 7,631 11,327
-------- ---------------------- ------------------ --------
Net book value
31 December 2016 2,966 615 7,365 10,946
======== ====================== ================== ========
31 December 2015 2,970 676 6,339 9,985
======== ====================== ================== ========
Goodwill relates to the anticipated profitability and future
operating synergies arising on the acquisition of subsidiaries.
All amortisation and impairment charges have been recognised as
administrative expenses in the income statement.
Impairment tests for goodwill
Goodwill is allocated to the Group's cash generating units
(CGUs) identified according to the operations as grouped upon
acquisition. An operating level summary of the goodwill allocation
is presented below:
2016 2015
GBP'000 GBP'000
----------------------------- ---------- ----------
Dewynters Group (Dewynters,
Newmans, DAI) 1,351 1,351
SpotCo 6,014 4,988
Total Goodwill 7,365 6,339
An impairment of GBP0.55 million in the year is related to the
purchase of Jampot Consulting Ltd (2015: GBP0.97 million related to
Dewynters Group - see note below). On 4 March 2016 it was announced
that James Charrington had been appointed as CEO of Dewynters. In
2014, Mr Charrington had set up Jampot Consulting Limited
("Jampot") an arts marketing consultancy, working with, amongst
others, the National Theatre and Sonia Friedman on ticketing and
marketing strategies. On 21 March 2016, the Company acquired 100%
of Jampot for consideration totalling GBP55,000 by the issue on 29
March 2016 of 3,666,666 ordinary shares in r4e at 1.5p per share.
The Board of r4e believed the IP in digital marketing that Jampot
held will be beneficial to the Group and add to its service
offering. As this benefit is related to the group as a whole and
future revenues could not be specifically allocated to the acquired
company, the goodwill in Jampot was written off as reflected in the
half year 30 June 2016 report. Subsequent to the write off
management have decided to operate the Group's new data marketing
analytics business through Jampot.
An impairment charge of GBP0.97 million was incurred in the
prior year ended 31 December 2015 on the Dewynters Group (inclusive
of Dewynters, Newman and DAI). The merchandise division of
Dewynters was transferred during 2015 and as a result the royalties
from merchandise sales in the USA were no longer collected by DAI
and so the company was dissolved in December 2016. The Company
allocated to DAI a portion of the goodwill in the Dewynters Group,
which arose on its acquisition in 2006, based on its proportion of
the EBITDA of the Dewynters Group at the time of the acquisition.
This resulted in an impairment of GBP0.97 million recognised in the
2015 accounts. As at 31 December 2016 the recoverable amount of the
Dewynters Group is GBP7.96 million. No class of asset other than
goodwill was deemed impaired.
The recoverable amount of CGUs has been determined based on
value-in-use calculations which cover a period of 5 years plus a
terminal value. These calculations use pre-tax cash flow
projections based on financial budgets for the year ended 31
December 2017 as approved by management and cash flows beyond the
one-year period are extrapolated using straight line growth rates
stated below. Prudent assumptions have been used in the
value-in-use calculations as detailed below.
The key assumptions used for the value-in-use calculations in
2016 are as follows:
Dewynters
Group SpotCo
----------------------------------- --------- -------
Revenue (fall) - 1 year (8.6)% (11.4)%
Revenue growth per annum - years
2-5 1.5% 1.5%
Cost growth - employee costs
from year 1 (2.2)% (9.2)%
Cost growth per annum - employee
costs from years 2-3 1.5% 2.0%
Cost growth per annum - employee
costs years 4-5 1% 1.5%
Cost growth - overhead costs
from year 1 (16.4)% (7.0)%
Cost growth - overhead costs
from years 2-5 1% 1.5%
Discount rate 12% 12%
Capitalisation rate 17.5% 17.5%
Management have determined budgeted gross margin, revenue growth
and costs based on past performance and expectations of the market
development for each CGU. The discount rates are pre-tax and
reflect management's assessment of the risks relating to each CGU.
In line with the conservative approach adopted in valuing the CGUs,
the discount rate applied in the value-in-use calculations has been
adjusted to reflect long term rates.
Initial growth rates in year 1 are taken from the CGU's 2017
operational budgets, and so in some cases can show a difference to
the straight line growth rates applied to subsequent years. Growth
after year 1 has been determined on the basis of general industry
market growth and so the rate reduces and remains consistent. The
growth rates used are considered by management to be in line with
general trends in which each CGU operates and deemed by management
to be a reasonable expectation for the media CGU.
The following table reflects the level of movements required in
revenue or costs which could result in a potential impairment per
the value in use calculation. A further percentage (fall)/increase,
of the magnitude indicated in the table below, in any one of the
key assumptions set out above would result in a removal of the
headroom in the value-in-use calculations in 2015:
Dewynters Reasonable Change? SpotCo Reasonable* Change?
Group
-------------------------------------------------------- --------- ------------------ ------ -------------------
Revenue (fall)- year 1 only (43.0)% No (7.0)% Yes
Revenue (fall) - year 1 with onwards effect (6.0)% Yes (1.0)% Yes
Cost growth - employee costs in year 1 only 68.6% No 10.0% No
Cost growth per annum - employee costs from years 2-3 3.1% No 0.5% Yes
Cost growth - overhead costs in year 1 only 220.0% No 40.0% No
Cost growth - overhead costs from year 2-5 9.5% No 2.0% Yes
Discount rate increase 16.0% No 2.5% No
Capitalisation rate increase 110.5% No 4.5% No
* Reasonable change is when the Board considers the change to be
possible in the future
Brands and customer relationships all arise on acquisition;
there are no internally generated intangible assets. The brand
allocated to the Dewynters CGU totalling GBP2.26 million (2015:
GBP2.26 million) is determined to have an indefinite life. It is
subject to an annual impairment review using the same assumptions
as for goodwill. The brand value allocated to SpotCo CGU totalling
GBP0.70 million (2015: also GBP0.70 million due to gain in FX
rates) is being amortised over 15 years and has 8 years
remaining.
Intangible customer relationships are attributable to Dewynters
only. The useful economic life for customer relationships within
Dewynters is 20 years of which 11 are remaining as at 31 December
2016. It has a carrying value of GBP0.61 million and GBP0.06
million was charged to amortisation in the year. Where there are
any indications of impairment within these businesses the Group
carries out impairment reviews on brands and customer relationships
using the same assumptions as for goodwill.
8. BORROWINGS
2016 2015
GBP'000 GBP'000
Current:
Term debt 378 314
Asset based lending facility 4,037 5,665
Finance leases 74 23
4,489 6,002
Non-current:
Term debt 410 697
Finance leases 127 42
--------- ---------
537 739
Analysis of borrowings:
On demand or within one year
Term debt 378 314
Asset based lending facility 4,037 5,665
Finance leases 74 23
4,489 6,002
In the second to fifth years inclusive
Term debt 410 697
Finance leases 127 42
537 739
Amounts due for settlement 5,026 6,741
Less amounts due within one year (4,489) (6,002)
Amounts due for settlement after one year 537 739
Analysis of borrowings by currency:
Sterling USD Total
GBP'000 GBP'000 GBP'000
31 December 2016
Asset based lending
facility 960 3,077 4,037
Term debt 240 548 788
Finance leases 201 - 201
1,401 3,625 5,026
Sterling USD Total
GBP'000 GBP'000 GBP'000
31 December 2015
Bank loans 731 4,934 5,665
Deferred consideration 350 661 1,011
65 - 65
1,146 5,595 6,741
Term debt
The term debt with PNC (GBP0.79 million) totalled GBP1 million
when drawn down on 4 December 2015 (GBP1.01 million at 31 December
2015 due to foreign exchange) and was split between SpotCo and
Dewynters based on expected future cash flows of the Companies. The
debt has interest payable at 4% over Barclays Bank plc. base rate
(Dewynters) and the rate published by the central bank or monetary
authority of the relevant territory (SpotCo). Repayments are in
equal monthly instalments and began in March 2016. The debt will be
fully repaid by October 2018.
The non-current element of the term debt is due to be paid in
2018. As at 31 December 2016 this could be reflected as current due
to the breach of covenants in the year, however, as at year end PNC
informed the Company that it would continue to be supportive and
subsequently, in 2017, it provided a waiver. Therefore the debt has
been reflected in non-current liabilities.
Asset based lending
All 3 trading companies, SpotCo, Dewynters and Newmans, hold
asset based lending facilities with PNC. Borrowing is determined by
qualifying accounts receivable. The nature of the facility means
that the balance will fluctuate from month to month and as the debt
is paid down, new debt will arise to finance working capital,
therefore the facility has been reflected as a current liability as
it will be constantly revolving. Another effect of the facility is
that cash balances across the group will be lower as cash drawdown
incurs a higher rate of interest therefore cash will only be drawn
down as required rather than being held on hand.
The facility with PNC has interest payable at 2.25% over
Barclays Bank plc. base rate for amounts borrowed. Borrowings not
utilised have interest payable at 0.25%. On top of a fixed and
floating charge over its assets, the Group has given PNC an
unlimited guarantee in respect of these borrowings. The Group has a
set of financial covenants with PNC in relation to the loan which
are measured monthly. These were breached in August to October
2016, but were met in full both before and after these months and
were also met in full as at 31 December 2016. The covenants were
also met in full at each subsequent month to year end until the
latest measurement date prior to these accounts being 31 March2017.
Forecasts for 2017 currently reflect possible breaches in the fixed
charge cover financial covenant due to the 12 month rolling
measurement picking up the unusually weak second half of 2016 and,
in a return to normal trading patterns, a weaker first half of
2017. However, given current negotiations with PNC and that the
current forecast for the full year 2017 EBITDA is in line with
expectations, the Directors are confident the Group remains a going
concern - see Going Concern explanation above for further
details.
9. OTHER NON CURRENT PAYABLES
Landlord reimbursement accrual
Amounts in non-current other payables of GBP0.61 million (2015:
GBP0.63 million) relate to the re-imbursement of leasehold
improvement costs from SpotCo's landlord at the New York office. As
with many US leases SpotCo, as tenant, had to undertake a programme
of complete refurbishment of the property. Some of the expenses,
related to the provision of basic utilities and services, were then
refunded by the landlord. GBP0.84 million ($1.25 million USD) was
received in cash from the Landlord in 2013. In line with SIC
Interpretation 15 this reimbursement has been recognised as a
liability and is being unwound to the income statement over the
period of the lease, reducing rental costs. GBP0.07 million was
unwound during the year (2015: GBP0.06 million). Amounts in current
liabilities relating to the reimbursement total GBP0.07 million
(2015: GBP0.06 million).
2016 2015
GBP'000 GBP'000
Within one year 74 61
--------- ---------
Between two and five years 296 244
More than five years 315 384
611 628
========= =========
Rent holiday accrual
Other amounts in non-current other payables of GBP0.63 million
(31 December 2015: GBP0.85 million) relate to an accrual for rental
payments built up during a period of 'rent holiday' as provided for
in the new leases for Dewynters and SpotCo's Offices. In line with
SIC Interpretation 15 the accrual will be released to the income
statement over the term of the lease thus reducing rent costs.
2016 2015
GBP'000 GBP'000
Within one year 133 144
--------- ---------
Between two and five years 393 577
More than five years 237 273
--------- ---------
630 850
Total non-current payables 1,241 1,478
========= =========
10. SHARE CAPITAL
2016 2015
GBP'000 GBP'000
Authorised, allotted, issued and fully paid:
614,992,671 ordinary shares at 0.5 pence each (2015: 474,894,792 ordinary shares of 0.5 pence
each) 3,074 2,374
Authorised, allotted, issued and fully paid: Nominal Value Number of shares
GBP'000 No.
Date Detail
1 January 2016 Balance brought forward 2,374 474,894,792
12 February 2016 Shares issued 5 1,000,000
29 March 2016 Shares issued 18 3,666,666
1 November 2016 Shares issued 667 133,333,334
21 December 2016 Shares issued 10 2,097,879
31 December 2016 Balance carried forward 3,074 614,992,671
12 February 2016 Fees payable
1,000,000 share at 1.0p were issued in satisfaction of fees
payable in connection with the placing completed in December
2015.
29 March 2016 Jampot Acquisition
3,666,666 shares at 1.5p were issued for the acquisition of
Jampot on 29(th) March 2016 resulting in share premium of GBP0.04
million.
1 November 2016 Fund Raise
133,333,334 shares at 1.5p were issued on the fund raise in
November 2016 resulting in share premium of GBP1.33 million. Costs
of issue totalled GBP0.091 million.
21 December 2016 Dewynters GmbH CEO
2,097,879 shares at 2.0p were issued to the CEO of Dewynters
GmbH, in accordance with the terms of his service agreement, as
part of his remuneration package.
11. SHARE BASED PAYMENTS
Equity-settled share option plan
Under the Group plan, share options are granted at the average
price of the Company's shares at the grant date. The employee is
entitled to the exercise the options at 1p per share as to 50 per
cent on the third anniversary of the date of grant and as to 50 per
cent on the fourth anniversary of the date of grant. In addition,
Options held by David Stoller and certain other senior employees
and management may be exercised earlier if the Board determines
that any exercise condition as set out below has been met:
Should the Company's mid-market closing share price meet or
exceed the following targets for five trading days (which may be
non-consecutive) within a period of 30 consecutive calendar days
prior to the third anniversary of the date of grant, the Option
shall be exercisable as follows:
(a) One third of the Option shall become exercisable on meeting
a share price target of GBP0.035 per share;
(b) A further one third of the Option shall become exercisable
on meeting a share price target of GBP0.045 per share; and
(c) The remaining one third of the Option shall become
exercisable on meeting a share price target of GBP0.055 per
share.
However, subject to the Board's discretion, the Option holder
shall be required to retain the shares received on exercise of an
Option on the Share Price Targets having been met until the earlier
of:
i) Twelve months following the date the Option is exercised;
or
ii) The third anniversary from the date of grant has passed.
If options remain unexercised after a period of 6 years from the
date of grant, the options expire. Furthermore, options are
forfeited if the employee leaves the Group as a "bad leaver" before
they become entitled to exercise the share option.
The following options to subscribe for the Company's shares have
been granted to directors and eligible employees and had not lapsed
at 31 December 2016:
Granted to Date of Option Number of Shares First exercisable Expiry date Exercise Price
David Stoller 4 March 2016 23,750,000 4 March 2019 or on 4 March 2022 1.00 pence
share price target
Eligible Employees 4 March 2016 25,450,000 4 March 2019 or on 4 March 2022 1.00 pence
share price target
where applicable
Eligible Employees 21 March 2016 9,500,000 21 March 2019 or on 21 March 2022 1.00 pence
share price target
Eligible Employees 2 June 2016 24,900,000 2 June 2019 or on 2 June 2022 1.00 pence
share price target
where applicable
Eligible Employees 27 September 2016 7,800,000 27 September 2019 or 29 Sept 2022 1.00 pence
on share price target
Eligible Employees 20 December 2016 9,500,000 20 December 2019 or 29 Dec 2022 2.00 pence
on share price target
Movement in number of options in the period: 31 December
2016
No. Options
Outstanding at 1 January 2016 -
Granted during the period 100,900,000
Forfeited during the period (7,800,000)
-------------
Outstanding at 31 December 2016 93,100,000
All options granted to 27 September have an exercise price of
GBP0.01, 9,500,000 granted on 20 December 2016 have an exercise
price of GBP0.02. No options were exercised or expired during the
period. No options were exercisable at 31 December 2016.
The share options outstanding as at 31 December 2016 had a
weighted average remaining contractual life of 5.36years.
The weighted average fair value of options granted during the
period was 0.0119p.
The fair value of equity-settled share options granted is
estimated as at the date of grant using a binomial model, taking
account of the terms and conditions upon which the options were
granted.
The key assumptions used to determine the fair value are as
follows:
Exercise price 0.01 pence
Share price at valuation date 0.01825 pence
Expected life 6 years
Volatility 100%-40%
Risk free interest rate From 0.24% - 1.5%
Exit rate of employees 5%
During the year the Group recognised total share-based payment
expenses of GBP0.35 million (31 December 2015: Nil).
12. CASH GENERATED FROM OPERATIONS
2016 2015
GBP'000 GBP'000
Reconciliation of net cash
flows from operating activities
Profit before taxation 499 4,539
Adjustments:
Finance costs 355 714
Finance income - (61)
Depreciation 447 369
Amortisation of intangibles 196 192
Impairment of goodwill 55 965
Exceptional debt write offs - (6,018)
Share based payment charges 349 -
Operating cash flows before
movements in working capital 1,901 700
Decrease in inventories 13 249
(Increase) in trade and other
receivables (1,357) (666)
Increase/(Decrease) in trade
and other payables 2,639 (925)
Cash generated from/(used
in) operating activities 3,196 (642)
13. BUSINESS COMBINATIONS
On 21st March 2016 the Group acquired 100% of the share capital
of Jampot Consulting Ltd, an arts marketing consultancy working on
ticketing and marketing strategies, and obtained control of the
company. The Board of r4e believes the IP in digital marketing that
Jampot can bring will be beneficial to the Group and add to its
service offering. In the period ending 31 December 2016 the company
has been developing tools in ticketing data analysis, yield
maximisation and dynamic pricing. The acquired business contributed
no revenues, an EBITDA loss of GBP0.045 million and net loss before
tax of GBP0.045 million, to the Group for the period from 21 March
2016 to 31 December 2016.
The fair value of the total consideration transferred was
GBP0.055 million, this consideration was in the form of 3,666,666
ordinary shares in r4e at 1.5p per share.
The assets and liabilities as of 21 March 2016 arising from the
acquisition were minimal with assets of GBP0.01 million and
liabilities of GBP0.01 million resulting in nil net asset value.
All assets acquired were deemed to be at fair value. The
consideration of GBP0.055 million was therefore goodwill which was
written off to the income statement and was not deductible for tax
purposes.
If the acquisition had occurred on 1 January 2016, Jampot would
have contributed revenue of GBP0.005 million and loss before tax of
GBP0.043 million to the group in the year.
14. RELATED PARTY DISCLOSURES
During the year ended 31 December 2016, transactions with Key
Management Personnel are in relation to Directors of the Group and
are presented in Directors Remuneration tables on page 19 and note
6 to the audited financial statements.
Dividend income received in the year ended 31 December 2016 was
Nil. In 2015 GBP0.06 million was from the associate undertaking
Theatrenow Limited, in which Dewynters had a 29.91% shareholding
until the company was dissolved in September 2016.
Lord Grade (non-executive Director of r4e) is currently a
director of Gate Ventures plc, a substantial shareholder in r4e. He
is also a co-founder of The GradeLinnit Company Ltd
("GradeLinnit"). Dewynters has an existing agreement in place with
GL 42nd Street Limited, a subsidiary company of Gradelinnit, for
the provision of marketing and media services for the West End
production of 42nd Street, which is due to launch at the Theatre
Royal Drury Lane in the first half of 2017. The fees payable to
Dewynters under the agreement are on the Company's normal
commercial terms and not expected to be material to the Company's
annual revenue.
15. TRANSACTIONS WITH DIRECTORS
At 31 December 2016, David Stoller owed the Group GBP268 (2015:
GBP35,982).
During the year ended December 2016, the Group procured
consultancy services totalling GBP0.05 million (2015: GBP0.19
million) from Glen House Capital Strategies Ltd., a company owned
by Richard Ingham who was a non-executive director of the Board up
until his resignation on 11 May 2016. No balance was outstanding at
31 December 2016 (2015: GBP0.12 million).
During the year ended December 2015, the Group procured
consultancy services totalling GBP0.03 million (2015: GBP0.03
million) from Springtime Consultants Ltd., a company owned by
Marcus Yeoman, a non-executive director of the Board during the
period. No balance was outstanding at 31 December 2016 (2015:
GBP0.02 million).
16. SUBSEQUENT EVENTS
On 24 January 2017, 3 new members were appointed to the Board of
Directors:
Lord Michael Grade - Non Executive
Claire Hungate - Non Executive
Linzi Allen - Executive (Group Finance Director)
On 31(st) March 2017 PNC entered into an Amendment, Consent and
Waiver agreement with the Group. The waiver covered the Groups
beach of covenant in August, September and October of 2016 and was
effective from January 2017. The monthly financial covenants were
also amended to be measured each month end on a rolling 12 month
basis from January 2017 onwards.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKPDPOBKDAQB
(END) Dow Jones Newswires
April 26, 2017 02:00 ET (06:00 GMT)
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