TIDMR4E
RNS Number : 8228X
Reach4Entertainment Enterprises PLC
02 May 2019
2 May 2019
reach4entertainment enterprises plc
("r4e" or "the Company" or "the Group")
Final audited results for the year ended 31 December 2018
reach4entertainment enterprises plc (AIM: R4E), the
entertainment marketing communications group, announces its results
for the year ended 31 December 2018 (the "period").
2018 financial highlights:
-- Revenues of GBP77.7 million (2017: GBP80.2 million)
-- Net revenue* GBP31.8 million (2017: GBP6.8 million)
-- Gross Profit margin of 25.0% (2017: 25.1%)
-- Gross Profit on Net Revenues* of 61.2% (2017: 54.7%)
-- Adjusted EBITDA** of GBP1.4 million (2017: GBP1.0 million)
-- Operating Profit of GBP0.1 million (2017: GBP2.4 million loss)
-- Loss before tax of GBP0.2 million (2017: GBP2.7 million loss)
-- Adjusted profit before tax*** GBP0.7 million (2017: GBP0.2 million)
-- Reported loss after tax of GBP0.2 million (2017: GBP1.9 million loss)
*Net revenues being revenues net of media costs
** Adjusted EBITDA (Earnings before Interest, Tax, Depreciation
and Amortisation) is before exceptional items, goodwill impairment
and share based payment charges.
***Adjusted Profit before Tax is before exceptional items,
amortisation and impairment of goodwill and intangibles and share
based payments charges
2018 operational highlights:
-- Strategic overhaul of core operations has led to an
improvement in performance and profitability
-- Successfully launched a series of new ventures including Wake
the Bear, a strategy led marketing communications agency, and Story
House, the theatre and live entertainment PR agency
-- Dewynters has grown its revenues and underlying margins,
benefiting from restructuring that took place at the end of 2017,
an improved sales mix and strong trading the second half of the
year
-- SpotCo's new management team, achieved cost savings leading
to improved margins and absolute levels of profitability
-- Story House broke even during its first five months of
operation, ahead of schedule, whilst Wake the Bear made good early
progress in attracting marquee clients
2019 Q1 highlights:
-- Acquisition of 50% interest in Buzz 16 Productions, an
independent production company led by ex-Sky producer Scott Melvin
and media personality Gary Neville, providing diversification
opportunity into sport marketing
-- Acquisition of Sold Out, an independent full-service
advertising agency for the concert and live entertainment space
with turnover of GBP30 million, unlocking significant opportunities
to cross-sell services across the Group
-- Successfully raised gross proceeds of GBP3 million in placing
to fund acquisition of Sold Out
-- Strong revenue growth at SpotCo following highly successful
series of new business wins in H2 2018, with new clients in the
quarter including Tootsie, Magic Mike, Beetlejuice and Almost
Famous
-- Subsequent to year end, additional projects won at Dewynters
including Joseph and the Amazing Technicolour Dreamcoat, BIG, White
Christmas and The Light in the Piazza
-- Media Trading Agreements signed and extended between Miroma and r4e subsidiaries
-- First project underway where Sold Out and Dewynters have
collaboratively serviced clients with their respective
capabilities
Chairman of r4e, Lord Michael Grade, said: "It has been a
pivotal year for the Group, in which the new management team, led
by Marc Boyan, strategically overhauled the Company's core
operations. I am delighted to report that the turnaround has
significantly improved how the Group's agencies are operating,
which is reflected in the increase in profitability.
"Whilst operational changes to the core business have been
instrumental in returning the business to profitability, the launch
of new agencies, alongside the recent acquisitions involving Sold
Out and Buzz 16 Productions, are broadening the Group's offering in
line with the strategy to diversify its service capabilities beyond
stage and theatre."
31 December 2018 Full Report and Accounts
The Company will shortly post its report and accounts for the
year ended 31 December 2018 to shareholders, along with notice of
the annual general meeting, 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.
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
For information, please contact:
reach4entertainment enterprises Phone: +44 (0)20 7968 1655
plc
Marc Boyan, CEO
Paul Summers, COO
Yellow Jersey PR Phone: +44 (0)7747 788 221 / +44 (0)7544
275882
Charles Goodwin Email: r4e@yellowjerseypr.com
Harriet Jackson
Annabel Atkins
Grant Thornton, NOMAD Phone: +44 (0)20 7383 5100
Philip Secrett
Jamie Barklem
Seamus Fricker
Dowgate Capital, Broker Phone: +44 (0)20 3903 7715
James Serjeant
David Poutney
Chairman's Review
Introduction
After a change in management and raising GBP5.5 million in Q4
2017 to strengthen the balance sheet, the Board immediately set
about addressing the structures and processes within r4e's core
theatre businesses in order to improve performance and
profitability. I am pleased to report that excellent progress was
made throughout 2018 in this regard, putting r4e in a much stronger
position, both operationally and financially. At the same time,
Marc Boyan and his team have been heavily active in developing new
commercial opportunities, with strategic investments made to
acquire complimentary capabilities, launch new ventures and attract
new talent.
Financials
During 2018 management focused on reducing overheads and
aligning the agencies, resulting in a 14.0% reduction in
administration costs and offsetting the decline in revenues to
GBP77.7 million (2017: GBP80.2 million) and net revenues to GBP31.8
million (2017: GBP36.8 million). Improved processes drove better
client servicing and operational efficiencies, with adjusted
earnings for 2018 increasing by 45% to GBP1.42 million (2017:
GBP0.98 million) and operating profit improving by GBP2.50 million
to GBP0.1 million (2017: GBP2.39 million loss). Gross margin
remained steady at 25.0% (2017: 25.1%).
New strategy
With a new senior team installed at SpotCo, the business has
made major improvements to its client servicing and new business
development, all of which has led to better margins and new
contract wins. Dewynters has also taken major strides to control
overheads and improve margins as well as winning mandates for the
launch of the permanent Body Worlds exhibit in Central London,
Goodwood Festival, plus Waitress, Dear Evan Hanson and & Juliet
in the West End.
The strategy to broaden the Group's service offering and client
base led to a series of exciting events during the year with the
launch of Wake the Bear, a strategy led marketing communications
agency and the launch of Story House, a theatre and live
entertainment PR agency, amongst others. These new agencies have
been quick to build their client rosters and the Board has been
pleased with early progress.
The momentum has continued into the start of 2019 with the
acquisition of the arts and entertainment advertising agency, Sold
Out, with the Group successfully raising GBP3 million as part of
the acquisition process. The highly regarded London-based agency
has a prized client base that includes Live Nation, AEG Presents,
S.J.M Concerts and Cirque Du Soleil, making it an excellent fit for
the Group as it seeks to broaden its client base beyond just
theatre.
During the first quarter r4e also acquired a 50% stake in sports
content creator, Buzz 16 Productions, which was founded by former
Manchester United player and respected broadcaster, Gary Neville,
and former Sky Sports Premier League producer, Scott Melvin. This
is another very exciting move for the Group, which takes us into a
new segment and sees us working with a high-profile team of
individuals within sports media.
The Group has evolved during the year to become more aligned and
much more commercial. Combining this with the new agencies launched
and the recent acquisitions, the Board is assured the correct path
is being taken and is confident about delivering on its targets for
2019.
Board and Employees
Early in the year, Claire Hungate left the Board and as such the
process was undertaken to appoint a new Non- Executive Director. In
April 2018, the Company was pleased to announce the appointment of
Sir David Michels as its Deputy Chairman. Given David's extensive
blue-chip company board experience his appointment adds greatly to
the skills on the Board.
I would also like to thank our employees across all the agencies
for all the hard work and dedication during what has been a busy
year for the Group and wish them every success for 2019.
Lord Michael Grade
Non-Executive Chairman
CEO Statement
Introduction
When I first joined as CEO in late 2017, it was immediately
clear that the Group had huge potential given the level of talent
across the individual agencies and the market leading position held
within the theatre sector. However, the business had suffered from
a lack of focus on driving profitability and a cohesive approach
both within and across our agencies to unlock new commercial
opportunities, which had historically inhibited the Group's
potential to develop and grow.
During 2018, we set about addressing these key issues alongside
our agencies' management teams and I am delighted with the progress
achieved to put the Group on a much stronger footing through the
implementation of a thorough cost structure review as well as
rebuilding senior teams across the Group where necessary. The
turnaround has had the desired effect on our financials, with an
improvement in performance and profitability.
Whilst major improvements have been made to the Group's
profitability, we have also been executing our strategy to
diversify into the wider live entertainments space, with brand and
marketing communications agency, Wake the Bear and live
entertainment PR agency, Story House both launched during the
summer months.
2019 has got off to an excellent start with the completion of
two transactions that broaden our offering and sector exposure. In
January the Group acquired a 50% stake in Buzz 16 Productions,
which sees us step into sports orientated content and working with
a very talented team that includes Gary Neville and Scott Melvin,
who have enormous experience in this field. At the end of March, we
completed the acquisition of advertising agency Sold Out, which has
a stellar cast of clients across the live entertainment sector
which is exactly in line with our strategy.
London
I am pleased with the results we have achieved at our London
based agencies. Dewynters has continued to build its leading
position in live entertainment marketing by growing and developing
its use of digital and data driven marketing activities. The
business had a strong second half, which made a significant impact
on profit compared with the previous year. I am delighted to report
that Dewynters' revenue is up 8.0% to GBP28.3 million (2017:
GBP26.2 million), adjusted EBITDA is up 175% to GBP2.3 million
(2017: GBP0.8 million) and operating profit was up 432% GBP1.2
million (2017: GBP0.4 million).
Our second core London-based agency, Newman Displays, which
produces large scale outdoor signage, front of house displays and
installations, continued to service major West End theatre
productions, leading film companies, cinemas and major global
events. The Company generated revenues of GBP3.6 million (2017:
GBP4 million) and adjusted EBITDA of GBP0.16 million (2017: GBP0.33
million). This fall reflects 15 West End shows having long standing
residences meaning new front of house installations in these
theatres are not required. The Company still continues to dominate
the theatre installation market.
Our objective to develop a pipeline of new business
opportunities was realised through the launch of Wake the Bear, a
strategy led marketing communications agency, and Story House, a
public relations agency focused on the live entertainments
industry.
Wake the Bear, which was launched in the first half of 2018 by
two former executives from WPP, works with new and established
businesses with a focus on growth. Wake the Bear won several client
mandates during its first 6 months of operations and its
performance met initial expectations. Story House, which launched
in August 2018, came to market with a number of leading West End,
UK, and world-touring clients on its roster, including 42nd Street,
Strictly Ballroom, True West, Benidorm, and Walking with Dinosaurs,
and as a result was already generating profits by 31 December 2018.
Collectively, Wake the Bear and Story House generated revenue of
GBP0.37 million (2017: GBPNil) having only begun operating in the
second half of the year.
New York
As previously reported in the 2017, SpotCo was impacted by the
downturn in Broadway ticket sales during 2017 and the loss of
several clients. Following a strategic review of the business, a
new senior team was promoted, who have implemented new systems and
processes to significantly reduce costs whilst also improving
client servicing and winning new mandates, with data now at the
heart of decision making and marketing strategy. SpotCo's adjusted
earnings rose by 30% to GBP0.58 million in 2018, with the agency
generating an operating profit of GBP0.1 million after making a
GBP1.5 million loss in 2017.
With the business on a much surer footing, major shows worked on
by SpotCo during the year included Book of Mormon, Kinky Boots,
Lincoln Center Theatre and Mean Girls. The agency also begun
working on King Kong, Pretty Woman and To Kill A Mockingbird during
the second half of the year and revenues are expected to continue
into 2019, given the shows are open ended.
Hamburg and Amsterdam
Dewynters in Hamburg, set up by the previous management team,
has had a new Managing Director appointed on 1 January 2019, and
the business model will be reviewed and possibly restructured under
his management. The team continue to service their clients
successfully with over GBP1 million in turnover in the year (2017:
GBP1.4 million). Dewynters Amsterdam, launched in April 2018, is
still in its infancy with GBP0.3 million turnover in the year
(2017: GBPNil).
Outlook
A successful GBP3 million placing post period end has enabled
the company to buy Sold Out, a full serviced advertising agency
with turnover of GBP30 million. This transaction has already
unlocked significant cross selling opportunities. Furthermore, the
joint venture with Buzz 16 Production was created expanding r4e's
offering into sport and opens up multiple new revenue streams.
The Group's momentum following leadership changes has continued
in 2018, notably in the second half of the year. This positive
progress has continued into 2019 and the Board is confident of
delivering expectations.
Marc Boyan
Chief Executive Officer
Group Strategic Report Extract
Principle Activities
The principal activities of the Group during the year were to
provide creative, advertising, marketing and other services to the
theatrical, film and live entertainment industries including media
strategy and buying, marketing and sales promotions, signage and
publishing.
Review of Performance and Future Developments
Year ended 31 December 2018
Other London Head Group
Dewynters Newmans London Total SpotCo Europe Office Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 28,334 3,630 420 32,384 43,960 1,389 - 77,733
Adjusted EBITDA* 2,288 242 (155) 2,375 578 (727) (808) 1,418
Share based
charges (34) (11) - (45) (53) - (386) (484)
--------- -------- --------- --------- -------- -------- --------- ---------
EBITDA
pre-exceptional 2,254 231 (155) 2,330 525 (727) (1,194) 934
Exceptional items (134) - - (134) (86) - (10) (230)
Depreciation &
amortisation (195) (60) - (255) (334) (7) (4) (600)
--------- -------- --------- --------- -------- -------- --------- ---------
Operating
profit/(loss) 1,925 171 (155) 1,941 105 (734) (1,208) 104
Year ended 31 December 2017
London Head Group
Dewynters Newmans Jampot Total SpotCo Europe Office Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 26,153 4,099 65 30,317 48,508 1,386 - 80,211
Adjusted EBITDA* 788 331 (107) 1,012 446 (52) (430) 976
Share based
charges (80) (3) - (83) 40 (40) (151) (234)
--------- -------- -------- --------- -------- -------- --------- ----------
EBITDA
pre-exceptional
and goodwill
impairment 708 328 (107) 929 486 (92) (581) 742
Exceptional items (157) - - (157) (78) - (727) (962)
Impairment of
goodwill - - - - (1,533) - - (1,533)
Depreciation &
amortisation (189) (71) - (260) (373) (5) (3) (641)
--------- -------- -------- --------- -------- -------- --------- ----------
Operating
profit/(loss) 362 257 (107) 512 (1,498) (97) (1,311) (2,394)
*Adjusted EBITDA is before exceptional items, goodwill
impairment and share based payment charges. This is a measure used
by r4e's provider of finance, PNC, to monitor covenant compliance,
as well as by the Board as a proxy for cash profit.
Revenue & Performance
Under IFRS 15 (Revenue from contracts with customers) the
Company recognises revenue on the basis that we act as principal,
however, management also perform their internal analysis of
performance on revenues net of media costs. A comparative of
billings & revenue for the year as performed by management is
as follows:
2018 2017
GBP'000 GBP'000
Revenue 77,733 80,211
Third party costs (45,907) (43,405)
Net revenue 31,826 36,806
Cost of sales (12,335) (16,660)
-------- --------
Gross profit 19,491 20,146
Gross profit reduced slightly by 3% to GBP19.49 million (2017:
GBP20.15 million) despite a decline of 13.5% in net revenues. Gross
profit margin on a net revenue basis has increased by 6.5
percentage points from 54.7% to 61.2% reflecting the Group's focus
on higher margin business. Management also include the analysis of
net margin in their KPI's as discussed below.
For the year ended 31 December 2018 the Group has seen an
improving trend following the restructuring taken at the end of
2017 and subsequent cost savings and growth initiatives.
Operating profit/(loss) improved as a result of a reduction of
exceptional administrative expenses from GBP1.0 million in 2017 to
GBP0.2 million in 2018 as the final stages of staff restructuring
came through in the year and the absence of an impairment charge
compared to GBP1.5 million written off in the prior year in
relation to the carrying value of SpotCo's goodwill and intangible
assets;
Debt Financing
The amount owing to debt provider PNC increased slightly during
the year, to GBP3.5 million (2017: GBP2.5 million), which was a
result of timings on drawdowns of the facility. As at December 2018
revenues were GBP1.6 million up on 2017 against which year end
drawdowns took place. There has been no breach of covenants during
the year.
In March 2019, as part of the approval process for the
acquisition of Sold Out and the Buzz 16 joint venture, the Company
agreed to an amendment of the facility which included an increase
on the borrowing rates of 0.5% per annum.
The initial 3-year term of the facility expired on 3rd December
2018, and the facility has automatically continued in place
indefinitely on a rolling basis. Either party can give at least six
months' notice to end the agreement. The Group believes that the
relationship with PNC is good, that they remain supportive of the
Company, and that they appear likely to want to continue the
arrangement after the end of the initial term.
Market
The Group's market is the provision of marketing and media
services to ticketed live events. Historically, it has focused upon
the entertainment sector, and specifically theatre. The Group's
subsidiaries, Dewynters in London and SpotCo in New York, are
market leaders in their respective theatrelands. As a result, the
Group is diversifying into new territories, and beyond theatre.
This is evidenced by the start-up companies Wake the Bear Limited
and Story House PR Limited. In addition new ventures subsequent to
year end (see subsequent events note 15), Buzz 16 and Sold Out,
show this diversification strategy into both other live
entertainment markets and sport.
London
The London segment comprises Dewynters, Newmans, Jampot, and,
since they started trading in September, Wake the Bear and Story
House. During the year the London operations generated adjusted
EBITDA, before exceptional items, of GBP2.3 million compared to the
year ended 31 December 2017 of GBP0.9 million. Operating profit of
GBP1.9 million was also up on the prior year (2017: GBP0.5
million). This result was mostly generated by Dewynters, which had
a very strong year. Wake the Bear and Story House, incurring
start-up costs, generated an operating loss of GBP0.1 million and
break even respectively. Jampot contributed an operating loss to
this result, of GBP0.06 million (2017: a loss of GBP0.1 million).
The Company is being wound down as its services are now core
competences within the Group's other operating entities, so it is
no longer required as a separate profit centre.
Dewynters, after a challenging year in 2017, faired better in
2018 with revenues increasing by GBP2.2 million (8.3%). Gross
profit margin on revenues increased to 29.8% (2017: 26.9%), and
gross profit margin on net revenues also rose significantly to
68.4% (2017: 46.4%). In addition, a real drive to reduce overheads
meant that adjusted EBITDA before exceptional items increased by
GBP1.5 million. After, the non-cash affecting LTIP employee share
options charge of GBP0.03 million to employee costs (2017: GBP0.1
million), and exceptional items down to GBP0.13 million finishing
the restructuring initiative started in 2018 (2017: GBP0.16m), plus
depreciation and amortisation, operating profit was up GBP1.53
million, at GBP1.93 million (2017: GBP0.4 million).Newmans had a
quieter year in 2018 with a reduction in revenue of GBP0.5 million,
12.6%, to GBP3.6 million. Contributing to the lower revenue was the
Odeon cinema in Leicester Square closing for refurbishment plus Vue
cinema installing a digital screen. In addition 15 West End shows
have long standing shows in situ new front of house installations
are not required, and the majority were installed by Newmans.
Savings have been clawed back from personnel and administrative
cost to try and counteract the profit reduction (and more work is
to come on this in 2019). Despite the reduction in revenue Gross
Profit remains consistant at 37% and operating profit has remained
steady at GBP0.2 million (2017: GBP0.3 million).
Wake the Bear and Story House performed above expectations in
their first 4 months of trading and although not contributing
profitably to 2018, they are expected to do well in 2019.
New York
Following on from an extremely tough 2017, SpotCo's revenue
contribution to the group decreased in 2018 by GBP4.5 million
(9.3%) to GBP44.0 million (2017: GBP48.5 million). In US Dollars,
SpotCo's 2018 revenue was $58.5 million, a $4.4 million (7.0%)
decrease on 2017's $62.9 million. The weighted average exchange
rate between the US Dollar and British Pound in 2017 for SpotCo's
revenues was 1.33, compared with 2017's average of 1.30
exaggerating the revenue reduction further. As reported in the 2017
report, SpotCo felt the effects of new competition and lack of
large new shows opening, however under the new management team of
Shelby Ladd and Stephen Santore, a number of pitches have been won
and SpotCo will see the effects of this in 2019 and 2020, returning
to form.
Gross margin on revenue fell by 1.9% (gross margin on net
revenue also fell by 4.33% to 63.9%) given the revenue mix being
more weighted to media buying services, however, a real drive on
reducing personnel and overhead costs meant Adjusted EBITDA
increased by GBP0.13 million. Due to a GBP1.5 million impairment
within the Group of the Goodwill in SpotCo in the prior year
(nothing in 2018), operating profit at GBP0.1 million was GBP1.6
million above 2017 (a GBP1.50 million loss).
Other Performance Highlights
Long Term Incentive Plan (LTIP)
The Board recognises the importance of retaining and
incentivising employees, and has continued to operate the r4e plc
Long Term Incentive Plan, set up in 2016, which allows the Company
to make grants of share options of up to 20 per cent of the issued
share capital. Included within employee costs and therefore within
EBITDA before exceptional items, in 2018, is GBP0.5 million of
costs related to the valuation of the LTIP options granted to
employees in the year (2017: GBP0.2 million). There is no cash
effect of the valuation, with the costs being recognised within
personnel costs in the Statement of Comprehensive Income and the
creation of an option reserve on the Statement of Financial
Position. 4.5 million options were exercised in 2018 (2017: 19.4
million) and 12.98 million were forfeit (2017: 17.8 million).
Finance Costs
Finance costs for the year amount to GBP0.3 million (2017:
GBP0.3 million), and primarily comprise interest and fees on PNC
debt of GBP0.25 million (2017: GBP0.2.8 million). The moderate
reduction in the cost is attributable to lower levels of borrowings
over the course of the year.
Tax
A tax credit of GBP1,000 has been recognised in the year (2017:
GBP0.8 million credit) as an adjustment to prior periods netted off
against credits in SpotCo. Group relief - mainly from r4e, but also
Wake the Bear and Jampot - has enabled the Group to extinguish the
liability due from Dewynters and reduce Newman's tax charge to
GBP0.01 million, whilst no tax is due in the USA on SpotCo profits
again this year (2017: GBPNil).
Cash Flow
Cash outflow from operating activities in the year was GBP2.0
million (2017: GBP1.8 million inflow) as a result of working
capital movements. Trade receivables are significantly higher at 31
December 2018 which is simply a result of revenue being much higher
in November and December 2018 than during the same period in the
prior year. As part of its investing activities, property plant and
equipment expenditure was GBP0.1 million (2017: GBP0.1
million).
Financing activity cash flow has significant movements as a
result of the PNC asset based lending facility. As cash is drawn
down to fund working capital, proceeds from the facility totalled
GBP79.49 million, and repayments to the lender through the facility
totalled GBP78.48 million (2017: GBP83.72 million and GBP84.4
million respectively). Proceeds from the issues of share capital
arising upon exercise of share options totalled GBP0.05 million
(2017: GBP5.5 million - including GBP0.2 million arising upon the
exercise of share options - after related expense), Interest and
fees paid out on debt totalled GBP0.25 million (2017: GBP0.29
million), reduced because of lower debt levels.
As explained in the prior year accounts, the cash position is
not expected to increase over the short term as drawdowns from the
PNC facility are charged a higher interest than unutilised
borrowings. Therefore, cash for working capital purposes is only
drawn down as required for payments rather than being retained on
hand for any length of time.
Position at 31 December 2018
As at 31 December 2018, the Group balance sheet has strengthened
by GBP0.2 million with a net asset position of GBP9.4 million
(2017: GBP9.2 million), caused primarily by a better performance in
the year. After excluding share based payment charges (as these net
off in the income statement against the share options reserve)
profit after tax is GBP0.3 million. Plus the exercise of employee
share options resulted in share issue income (net of costs) of
GBP0.05 million.
Non-current assets are lower by GBP0.2 million at GBP10.8
million (2017: GBP11.1 million), as a result of depreciation and
amortisation offset by additions of GBP0.7 million and the effects
of foreign exchange rates on the value of intangibles (goodwill and
brands) in SpotCo.
Current assets have increased by GBP3.6 million, from GBP18.4
million at 31 December 2017 to GBP22.0 million. That is as a result
of trade and other receivables being higher by GBP5.1 million - as
a result of timing with higher revenues at year end - offset by
cash being lower by GBP1.5 million.
Trade and other payables have also increased year-on-year, by
12.4%, or GBP2.2 million, at GBP18.0 million. This reflects the
increased levels of work in November and December 2018. Current
borrowings have also increased slightly from GBP2.4 million to
GBP3.6 million, as the asset based lending liability has increased,
caused by higher levels of drawdown in parallel with higher trading
levels. This can be due to timing as cash is drawn down and repaid
on a constant rolling basis.
Net current assets have improved by GBP0.2 million, from GBP0.2
million to GBP0.4 million, primarily to the increase in trade and
other receivables.
Non-current liabilities have been reduced by GBP0.2 million,
from GBP2.0 million to GBP1.8 million. This is a result of the
repayment of the liability owed to David Stoller (previous CEO) in
relation to pay in lieu of notice and compensation for loss of
office, and related payroll tax obligations.
In equity, there's been an increases of GBP0.02 million increase
to share capital and GBP0.02 million to share premium, from the
exercise of employee share options. GBP0.5 million was charged to
the share option reserve in connection with the value of r4e plc
LTIP options granted to employees. These were offset GBP0.2 million
by the loss for the year. (Share options exercised during 2018
resulted in the release of GBP0.03 million from share option
reserve to retained earnings.)
CONSOLIDATED INCOME STATEMENT FOR YEARED 31 December 2018
2018 2017
Note GBP'000 GBP'000
Continuing operations
Revenue 77,733 80,211
Cost of sales 4 (58,242) (60,066)
-------- --------
GROSS PROFIT 19,491 20,145
Administrative expenses 4 (19,387) (22,539)
-------------------------------------------------------- ---- -------- --------
Adjusted EBITDA* 1,418 976
Share based payment charges (484) (234)
-------- --------
EBITDA before exceptional items and goodwill impairment 934 742
Exceptional administrative expenses 2 (230) (962)
Impairment of goodwill 7 - (1,533)
Depreciation (426) (452)
Amortisation of intangible assets 7 (174) (189)
-------------------------------------------------------- ---- -------- --------
OPERATING PROFIT/(LOSS) 104 (2,394)
Finance income 14 -
Finance costs 3 (279) (295)
-------- --------
LOSS BEFORE TAXATION (161) (2,689)
Taxation 5 1 824
-------- --------
LOSS FOR THE YEAR (160) (1,865)
======== ========
The loss is attributable to:
Non-controlling interests (121) -
Equity holders of the company (39) (1,865)
-------- --------
(160) (1,865)
======== ========
Basic and diluted loss per share (pence)
Basic loss per share 6 (0.02) (0.30)
Diluted loss per share 6 (0.02) (0.30)
======== ========
* Adjusted EBITDA is before exceptional items, goodwill
impairment and share based payment charges.
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2018
2018 2017
GBP'000 GBP'000
LOSS FOR THE YEAR (160) (1,865)
-------- --------
Other comprehensive income:
Items that will not be reclassified to profit and loss:
Currency translation differences (174) (33)
-------- --------
Other comprehensive income for the year, net of tax (174) (33)
-------- --------
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (334) (1,898)
-------- --------
Total comprehensive loss for the year attributable to:
Non-controlling interests (121) -
Equity holders of the parent (213) (1,898)
(334) (1,898)
======== ========
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 2018
2018 2017
Note GBP'000 GBP'000
NON-CURRENT ASSETS
Goodwill and intangible assets 7 8,737 8,635
Property, plant and equipment 1,956 2,230
Deferred tax asset 160 187
-------- --------
10,853 11,052
-------- --------
CURRENT ASSETS
Inventories 126 139
Trade and other receivables 16,057 10,981
Other current assets 582 549
Cash and cash equivalents 5,223 6,758
-------- --------
21,988 18,427
-------- --------
TOTAL ASSETS 32,841 29,479
======== ========
CURRENT LIABILITIES
Trade and other payables (18,007) (15,773)
Borrowings 8 (3,575) (2,446)
-------- --------
(21,582) (18,219)
-------- --------
NET CURRENT ASSET 406 208
-------- --------
NON-CURRENT LIABILITIES
Deferred taxation (861) (785)
Other payables 9 (977) (1,194)
Borrowings 8 - (56)
-------- --------
(1,838) (2,035)
-------- --------
TOTAL LIABILITIES (23,420) (20,254)
-------- --------
NET ASSETS 9,421 9,225
======== ========
EQUITY
Called up share capital 10 5,028 5,005
Share premium 10 20,275 20,252
Deferred shares 1,498 1,498
Retained earnings (18,248) (18,154)
Own shares held 10 (259) (259)
Other reserves 1,166 883
Attributable to equity holders of the parent 9,460 9,225
Non-controlling interests (39) -
-------- --------
TOTAL EQUITY 9,421 9,225
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31
DECEMBER 2018
Own Attributable
Share Share Deferred Shares Retained Other to equity Non-controlling Total
capital premium shares held earnings Reserves holders of interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 the parent GBP'000 GBP'000
ATTRIBUTABLE TO
EQUITY HOLDERS
OF THE PARENT
At 31 December
2016 3,074 16,645 1,498 (259) (16,480) 873 5,351 - 5,351
Loss for the year - - - - (1,865) - (1,865) - (1,865)
Other
comprehensive
income, net of
tax:
Currency
translation
differences - - - - - (33) (33) - (33)
------- ------- -------- ------- -------- -------- ------------ --------------- -------
Total
comprehensive
income for the
year - - - - (1,865) (33) (1,898) - (1,898)
Transactions with
owners in their
capacity
as owners:
Shares issued 1,931 3,607 - - - - 5,538 - 5,538
Share based
payment charges - - - - - 234 234 - 234
Share options
exercised - - - - 191 (191) - - -
------- ------- -------- ------- -------- -------- ------------ --------------- -------
Total transactions
with owners in
their capacity as
owners: 1,931 3,607 - - 191 43 5,772 - 5,562
------- ------- -------- ------- -------- -------- ------------ --------------- -------
At 31 December
2017 5,005 20,252 1,498 (259) (18,154) 883 9,225 - 9,225
======= ======= ======== ======= ======== ======== ============ =============== =======
Loss for the year - - - - (121) - (121) (39) (160)
Other
comprehensive
income, net of
tax:
Currency
translation
differences - - - - - (174) (174) - (174)
------- ------- -------- ------- -------- -------- ------------ --------------- -------
Total
comprehensive
income for the
year - - - - (121) (174) (295) (39) (334)
Transactions with
owners in their
capacity
as owners:
Shares issued, net
of costs 23 23 - - - - 46 - 46
Share based
payment charges - - - - - 484 484 - 484
Share options
exercised/lapsed - - - - 27 (27) - - -
------- ------- -------- ------- -------- -------- ------------ --------------- -------
Total transactions
with owners in
their capacity as
owners: 23 23 - - 27 457 530 - 530
======= ======= ======== ======== ============ =============== =======
At 31 December
2018 5,028 20,275 1,498 (259) (18,248) 1,166 9,460 (39) 9,421
======= ======= ======== ======= ======== ======== ============ =============== =======
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2018
2018 2017
Note GBP'000 GBP'000
Cash (used in)/generated from operating activities 12 (2,044) 1,797
Income taxes paid (18) (44)
-------- --------
Net cash (used in)/generated from operating activities (2,062) 1,753
-------- --------
Investing activities
Purchases of property, plant and equipment (71) (115)
Net cash used in investing activities (71) (115)
-------- --------
Financing activities
Net proceeds from the issue of share capital 46 5,538
Finance income 14 -
Proceeds from asset based lending 79,492 83,722
Repayment of asset based lending (78,484) (85,114)
Repayment of term loan - (788)
Repayments of obligations under finance leases (19) (65)
Interest and fees paid on borrowings (251) (295)
-------- --------
Net cash generated from financing activities 798 2,998
-------- --------
Net (decrease)/increase in cash and cash equivalents (1,335) 4,636
Cash and cash equivalents at the beginning of the year 6,758 2,097
Effect of foreign exchange rate changes (200) 25
-------- --------
Cash and cash equivalents at the end of the year 5,223 6,758
======== ========
reconciliation of net debt
2017 Cash flows Non-cash GBP'000 2018
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 6,758 (1,335) (200) 5,223
Borrowings (2,502) (940) (133) (3,575)
-------- ---------- ---------------- --------
Net cash/(debt) 4,256 (2,275) (333) 1,648
======== ========== ================ ========
BASIS OF PRESENTATION
The financial information in this announcement does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. The figures for the year ended 31 December 2018
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.
Reach4entertainment enterprises plc is a public limited company
incorporated and domiciled in England and Wales under the Companies
Act 2006. The address of its principal place of business and
registered office is Wellington House, 125 Strand, London WC2R 0AP
and the Company's registered number is 2725009. The principal
activities of the Group are the provision of creative, advertising,
marketing and other services to the theatrical, film and live
entertainment industries including media strategy and buying,
marketing and sales promotions, signage and publishing.
The preliminary financial information does not constitute full
accounts within the meaning of section 434 of the Companies Act
2006 but is derived from accounts for the years ended 31 December
2018 and 31 December 2017, both of which are audited. The
preliminary announcement is prepared on the same basis as set out
in the statutory accounts for the year ended 31 December 2018.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRS), as adopted by the European Union (EU), this
announcement does not in itself contain sufficient information to
comply with IFRSs.
The statutory accounts for the year ended 31 December 2018 will
be delivered to the Registrar of Companies. Statutory accounts for
the year ended 31 December 2017 have been filed with the Registrar
of Companies. The auditor's reports for the years ended 31 December
2018 and 31 December 2017 were unqualified, did not include a
reference to any matter to which the auditor drew attention by way
of emphasis and did not contain any statement under section 498(2)
or (3) of the Companies Act 2006.
A copy of this preliminary statement will be available to
download on the Group's website www.r4e.com.
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. The indefinite-life nature of goodwill is
considered appropriate given the longevity of agencies in the
theatre world - for example Dewynters has been in existence for
about a century now. 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 (CGUs). If the recoverable
amount of the CGU 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.
REVENUE RECOGNITION
Revenue for media comprises commission and fees earned during
the year in respect of amounts billed, whether for marketing or
advertising services or for the sale of physical merchandise.
Direct costs include fees paid to external suppliers where they are
retained to perform part or all of a specific project for a client
and the resulting expenditure is directly attributable to the
revenue earned. The Group recognises that it acts as principal not
agent due to its control of services before transfer to the client
and therefore revenue is recognised at gross amount billed.
Revenue and profit for events is recognised when the event takes
place. Where revenue is conditional on the occurrence of future
events, that revenue is not recognised until that event occurs.
Revenue is net of VAT and other sales-related taxes.
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 - the combination
of equity and debt funding - 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 Group Strategic Report above and in
Borrowings note 8. The covenants were met for the key full-year
measure, and until the date of the release of these accounts.
NOTES TO THE FINAL RESULTS ANNOUCEMENT FOR THE YEARING 31
DECEMBER 2018
Index of Notes
1. Business and Geographical Segments
2. Exceptional Administrative Items
3. Finance Costs
4. Expenses by Nature and Auditor's Remuneration
5. Taxation
6. Earnings Per Share
7. Goodwill and Intangible Assets
8. Borrowings
9. Other Non-Current Payables
10. Share Capital
11. Shared-Based Payments
12. Cash Generated from Operations
13. Related Party Disclosures
14. Transactions with Directors
15. Subsequent Events
1. BUSINESS AND GEOGRPAHICAL SEGMENTS
For management purposes, the Group is currently organised into
four operating segments - New York operations, London operations,
European operations and Head Office. These divisions are the basis
on which the Group reports its segment information to the chief
operating decision maker.
Principal continuing activities are as follows:
New York (NY) - data-driven marketing, design, advertising,
promotions, digital media services, and publishing.
London - data-driven marketing, design, advertising, promotions,
digital media services, publishing, signage and fascia
displays.
Europe (Hamburg in prior year but inclusive of Holland in 2018)
- data-driven marketing strategy and planning, media planning,
design, event production, PR, CRM and data consulting.
Head Office - corporate strategy, finance and administration
services for the Group.
Segment information for continuing operations of the Group for
the year ended 31 December 2018 is presented below:
NY London European
operations operations operations Head Office Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Provision of services 43,960 31,255 1,389 - 76,605
Sale of goods - 1,129 - - 1,128
=========== =========== =========== =========== ========
Revenue
(all external customers) 43,960 32,384 1,389 - 77,733
=========== =========== =========== =========== ========
Adjusted EBITDA 578 2,375 (727) (808) 1,418
Share based
payment charges (53) (45) - (386) (484)
----------- ----------- ----------- ----------- --------
EBITDA before
exceptional items 525 2,330 (727) (1,194) 934
Exceptional administrative (86) (134) - (10) (230)
Depreciation (221) (194) (7) (4) (426)
Amortisation (113) (61) - - (174)
----------- ----------- ----------- ----------- --------
Operating profit/(loss) 105 1,941 (734) (1,208) 104
Finance income - - - 14 14
Finance costs (190) (85) - (4) (279)
----------- ----------- ----------- ----------- --------
(Loss)/profit before tax (85) 1,856 (734) (1,198) (161)
Tax credit/(charge) 104 (1,893) - 1,790 1
----------- ----------- ----------- ----------- --------
Profit/(loss) after tax 19 (37) (734) 592 (160)
=========== =========== =========== =========== ========
1. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)
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
operations operations Head Office Group
GBP'000 GBP'000 European operations GBP'000 GBP'000 GBP'000
Capital additions:
Property, plant and
equipment 8 55 4 4 71
=========== =========== =========================== =========== ========
Balance sheet:
Segment assets
Non-current assets 5,946 4,847 18 42 10,853
Current assets 9,382 9,019 476 3,111 21,988
----------- ----------- --------------------------- ----------- --------
Total segment assets 15,328 13,866 494 3,153 32,841
=========== =========== =========================== =========== ========
Liabilities:
Total segment liabilities (13,872) (8,184) (152) (1,212) (23,420)
=========== =========== =========================== =========== ========
Segment information for continuing operations of the Group for
the year ended 31 December 2017 is presented below.
NY London European
operations operations operations Head Office Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sale of services 48,508 30,317 1,386 - 80,211
=========== =========== =========== =========== ========
Adjusted EBITDA 446 1,012 (52) (430) 976
Shared based payment credit/(charges) 40 (83) (40) (151) (234)
----------- ----------- ----------- ----------- --------
EBITDA before exceptional items and goodwill
impairment 486 929 (92) (581) 742
Exceptional administrative (78) (157) - (727) (962)
Impairment of goodwill (1,533) - - - (1,533)
Depreciation (245) (199) (5) (3) (452)
Amortisation (128) (61) - - (189)
----------- ----------- ----------- ----------- --------
Operating profit/(loss) (1,498) 512 (97) (1,311) (2,394)
Finance costs (212) (42) (2) (39) (295)
----------- ----------- ----------- ----------- --------
Profit/(loss) before tax (1,710) 470 (99) (1,350) (2,689)
Tax (charge)/credit 912 (31) - (57) 824
----------- ----------- ----------- ----------- --------
Profit/(loss) after tax (798) 439 (99) (1,407) (1,865)
=========== =========== =========== =========== ========
1. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)
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 European Head Office
operations operations operations operations Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Capital additions:
Property, plant and
equipment - 90 25 - 115
=========== =========== =========== =========== ========
Balance sheet:
Segment assets
Non-current assets 5,914 5,096 21 21 11,052
Current assets 5,106 7,028 649 5,644 18,427
----------- ----------- ----------- ----------- --------
Total segment assets 11,020 12,124 670 5,665 29,479
=========== =========== =========== =========== ========
Liabilities:
Total segment liabilities (9,921) (7,822) (868) (1,643) (20,254)
=========== =========== =========== =========== ========
Segment assets for 2017 comparatives have been adjusted to
reflect the allocation of goodwill and intangibles to the related
segments.
2. EXCEPTIONAL ADMINISTRATIVE ITEMS
2018 2017
GBP'000 GBP'000
Employee contract termination-related costs 230 814
Costs relating to reorganisation of the Board - 104
Costs expensed to Income Statement re share
issues - 44
Exceptional administrative expenses 230 962
======== ========
Employee Contract Termination-Related Costs
The employee contract termination-related costs of GBP0.23
million (2017: GBP0.81 million) relate to employees of Dewynters,
SpotCo, and Head Office, and are considered exceptional due to the
level of redundancy, PILON, and compensation for loss of office
required as a result of company performance.
Costs Relating to Reorganisation of Board (2017 only)
In order to ensure governance compliance when reorganising the
Board, exceptional legal and other costs were incurred in 2017.
2. EXCEPTIONAL ADMINISTRATIVE ITEMS (continued)
Costs Expensed to Income Statement Re Share Issues (2017
only)
Other costs of GBP0.15m directly associated with the equity
placing of December 2017, raising GBP5.5 million (gross proceeds),
were charged against the share premium account, making a total of
GBP0.2m of costs re share issues.
3. finance costs
2018 2017
GBP'000 GBP'000
Finance lease interest 19 20
Interest on PNC debt 160 170
Fees on PNC debt 86 108
Amortisation of PNC debt issue costs 5 -
Foreign exchange loss/(gain) on finance
items 9 (3)
-------- --------
279 295
======== ========
4. expenses by nature and auditor's remuneration
2018 2017
GBP'000 GBP'000
Media, marketing and promotional services 57,417 60,066
Staff costs 14,186 14,646
Share based payment costs (note 11) 484 234
Depreciation, amortisation and impairment 600 2,174
Exceptional administrative items (note 2) 230 962
General office expenses 1,734 1,596
Operating lease payments:
Land and buildings 1,339 1,460
Plant and machinery 135 62
Professional costs 982 636
Travelling 389 498
Other 133 271
-------- --------
Total cost of sales and administrative expenses 77,629 82,605
======== ========
4. expenses by nature and auditor's remuneration (continued)
During the year the Group obtained the following services from
the Company's auditor and its associates:
2018 2017
GBP'000 GBP'000
Audit fees
- statutory audit of the parent and consolidated
accounts 39 63
Fees payable to the company's auditor and
its associates for other services:
- the audit of the company's subsidiaries,
pursuant to legislation 69 55
- audit related services 10 15
118 133
======== ========
5. taxation
2018 2017
GBP'000 GBP'000
Current tax:
UK corporation tax 13 -
Adjustments in respect of prior periods 96 -
Overseas tax credit on losses of the year (104) (22)
-------- --------
Total current tax charge/(credit) 5 (22)
-------- --------
Deferred tax:
Origination and reversal of timing differences 18 (234)
Adjustments in respect of prior periods (24) -
Deferred tax rate change - (568)
-------- --------
Total deferred tax credit (6) (802)
-------- --------
Tax credit on loss of ordinary activities (1) (824)
======== ========
5. TAXATION (continued)
Factors affecting the tax charge for the year:
2018 2017
GBP'000 GBP'000
The tax assessed for the year differs from
the effective average
rate of corporation tax in the UK of 19.00%
(2017: 19.25%).
The differences are explained below:
Loss on ordinary activities before tax (161) (2,689)
-------- --------
Loss on ordinary activities multiplied by
effective average
rate of corporation tax in the UK of 19.00%
(2017: 19.25%) (31) (518)
Effects of:
Fixed asset differences 14 20
Expenses not deductible for tax purposes 54 393
Other tax adjustments, reliefs and transfers (111) (135)
Adjustment in respect of prior periods 96 -
Adjustment in respect of prior periods (deferred
tax) (24) -
Timing differences not recognised in the computation 20 128
Impact of changes in foreign tax rates for
deferred tax (7) (568)
FX difference on opening gross timing differences - 32
Deferred tax not previously recognised (12) (176)
-------- --------
Total tax credit for the year (1) (824)
======== ========
A deferred tax asset of approximately GBP1.04 million (2017:
GBP1.05 million) has not been recognised due to uncertainty over
future profitability. At 31 December 2018, the Group had trade
losses carried forward of GBP2.9 million (2017: GBP3.0 million),
available for offset against future profits in the UK, as well as
non-trade loan relationship deficit of GBP3.2 million (2017: GBP3.2
million) and capital losses of GBP4.7 million (2017: GBP4.7
million).
Taxation is calculated at the rates prevailing in the respective
jurisdictions. The standard tax rates in each jurisdiction are 21%
in the United States (2017: 21%) and 19% in the United Kingdom
(2017: 19%).
6. EARNINGS PER SHARE
The calculations of earnings per share are based on the
following profits and number of shares:
Profit attributable to equity holders of 2018 2017
the company GBP'000 GBP'000
For basic and diluted profit per share
Loss for financial year (160) (1,865)
============= ===========
Number of shares Number Number
Weighted average number of ordinary shares
for the
purposes of basic and diluted earnings per
share* 1,004,709,678 627,060,836
Potentially dilutive effect of share options 181,178,710 97,573,736
============= ===========
6. EARNINGS PER SHARE (continued)
Loss per share 2018 2017
pence pence
Basic loss per share (0.02) (0.30)
Diluted loss per share (0.02) (0.30)
====== ======
* The loss attributable to ordinary shareholders and weighted
average number of ordinary shares for the purposes of calculating
the diluted loss per share are the same as those used for basic
loss per ordinary share. This is because the exercise of share
options and other benefits would have the effect of reducing loss
per share and is therefore not dilutive under the terms of IAS 33,
Earnings Per Share.
7. goodwill and intangible assets
Brands Customer relationships Purchased goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
1 January 2017 4,670 2,607 14,996 22,273
Foreign exchange differences (213) - (531) (744)
-------- ---------------------- ------------------ --------
31 December 2017 4,457 2,607 14,465 21,529
Foreign exchange differences 140 - 347 487
-------- ---------------------- ------------------ --------
31 December 2018 4,597 2,607 14,812 22,016
-------- ---------------------- ------------------ --------
Amortisation and impairment
1 January 2017 1,704 1,992 7,631 11,327
Charged in the year 128 61 - 189
Impairment charge - - 1,533 1,533
Foreign exchange differences (155) - - (155)
-------- ---------------------- ------------------ --------
31 December 2017 1,677 2,053 9,164 12,894
Charged in the year 113 61 - 174
Foreign exchange differences 114 - 97 211
-------- ---------------------- ------------------ --------
31 December 2018 1,904 2,114 9,261 13,279
-------- ---------------------- ------------------ --------
Net book value
31 December 2018 2,693 493 5,551 8,737
======== ====================== ================== ========
31 December 2017 2,780 554 5,301 8,635
======== ====================== ================== ========
31 December 2016 2,966 615 7,365 10,946
======== ====================== ================== ========
Goodwill relates to the anticipated profitability and future
operating synergies arising on the acquisition of subsidiaries.
Brands relate to the expected future benefit associated with the
subsidiaries' well-known names in the market, as arising on
acquisition.
7. GOODWILL AND INTANGIBLE ASSETS (continued)
Customer relationships represent the probable value over time of
clients obtained by way of acquisition.
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:
2018 2017
GBP'000 GBP'000
Dewynters Group (Dewynters, Newmans) 1,351 1,351
SpotCo 4,200 3,950
-------- --------
Total goodwill 5,551 5,301
======== ========
An impairment of GBP1.53 million in the prior year was related
to the carrying value of SpotCo's goodwill. After a disappointing
year in 2017 and with recovery looking like it may take longer than
previously anticipated, management reviewed and cautiously revised
the key assumptions for the value-in-use calculations of SpotCo, in
particular pulling back from revenue growth rate for 2019 onwards
from 1.5% to 1.0%, which - on the back of the softened outlook for
2018 - resulted in the impairment. Management have continued to
monitor the trading outlook and, although recovery looks to be
strong in 2019, key revenue growth assumptions have been maintained
at a prudent 1.0% as historically SpotCo's performance has been
cyclical and a lower growth rate assumption will highlight any
upcoming risk should performance start to decline.
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 2019 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 in the tables.
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 2019
operational forecasts, 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 a
combination of general industry market growth - occasionally flexed
if necessary for specific CGU circumstances - and so the rate
generally 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 CGU.
7. GOODWILL AND INTANGIBLE ASSETS (continued)
The table for Dewynters Group, below, also 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 as set out, would result
in a removal of the headroom in the value-in-use calculations in
2018.
The key assumptions used in 2018, for the value-in-use
calculations and the change required to remove the headroom - along
with whether the Board considers that to be a reasonable change -
are as follows:
Dewynters Group Value-in-use Headroom Reasonable
assumption removal* change?
----------------------------- ------------ --------- ----------
Revenue growth - year 1 7.47% (15.5%) No
Revenue growth per annum
- years 2-5 1.5% (6.1%) No
Employee costs growth - year
1 9.1% 28.7% No
Overhead costs growth - year
1 11.6% 72.4% No
Discount rate 15.5% 264.9% No
Capitalisation rate 15.5% (334.7%) No
EBITDA reduction - year 1 (12.3%) (497.0%) No
* The percentage by which the assumption needs to
increase/(decline) to cause risk of impairment
As well as reflecting the key assumptions for the value-in-use
calculations, the table for SpotCo, below, also shows the potential
level of adverse change in revenue or costs that the Board
considers to be possible in the future, along with the impairment
that would arise were that change to occur:
Value-in-use Headroom Reasonable
SpotCo assumption removal change?
----------------------------- ------------ -------- ----------
Revenue growth - year 1 13.08 (4.8%) Yes
Revenue growth per annum -
years 2-5 1.0% (1.75%) Yes
Employee costs growth - year
1 (10.5%) 7.0% No
Overhead costs reduction -
year 1 5.7% 27.5% No
Discount rate 15.5% 79.5% No
Capitalisation rate 15.5% (229.7%) No
EBITDA growth - year 1 80.2% (281.0%) No
Brands and customer relationships all arise on acquisition;
there are no internally-generated intangible assets. The brand
allocated to the Dewynters CGU totalling GBP2.3 million (2017:
GBP2.3 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
GBP0.4 million (2017: GBP0.5 million) is being amortised over 15
years and has 6 years remaining.
Intangible customer relationships are attributable to Dewynters
only. The useful economic life for customer relationships within
Dewynters is 20 years of which 9 are remaining as at 31 December
2018. It has a carrying value of GBP0.5 million (2017: GBP0.6
million). 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
2018 2017
GBP'000 GBP'000
Current:
Asset based lending facility 3,518 2,372
Finance leases 57 74
-------- --------
3,575 2,446
======== ========
Non-current:
Finance leases - 56
-------- --------
- 56
======== ========
2018 2017
GBP'000 GBP'000
Analysis of borrowings:
On demand or within one year
Asset based lending facility 3,518 2,372
Finance leases 57 74
-------- --------
3,575 2,446
======== ========
In the second to fifth years inclusive
Finance leases - 56
-------- --------
- 56
-------- --------
Amounts due for settlement 3,582 2,502
Less amounts due within one year (3,582) (2,446)
-------- --------
Amounts due for settlement after one year - 56
======== ========
Analysis of borrowings by currency:
Sterling US Dollar Total
GBP'000 GBP'000 GBP'000
31 December 2018
Asset based lending facility 304 3,214 3,518
Finance leases 57 - 57
-------- --------- --------
361 3,214 3,575
======== ========= ========
Sterling US Dollar Total
GBP'000 GBP'000 GBP'000
31 December 2017
Asset based lending facility 190 2,182 2,372
Finance leases 130 - 130
-------- --------- --------
320 2,182 2,502
======== ========= ========
8. BORROWINGS (continued)
Asset based lending facility - summary:
31 December 31 December
2017 2017
GBP'000 GBP'000
Drawn down 3,518 2,372
Available for drawdown but undrawn 2,196 1,264
Not available for draw down 3,190 4,864
----------- -----------
8,904 8,500
=========== ===========
Asset Based Lending
SpotCo, Dewynters and Newmans all 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 than they would otherwise be, since
cash drawdown incurs a higher rate of interest and 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 in Sterling, or
for amounts in Euro or US Dollars 2.25% over the rate published by
the central bank or relevant monetary authority. Borrowing facility
amounts not utilised incur interest payable at a fixed 0.5%. 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 Company did not breach any covenants in 2018. As announced
in October 2017 the Company breached its quarterly monitoring
covenant in the third quarter of 2017. The breach was due to the
covenant being determined on a 3-month rolling basis which is
therefore sensitive to seasonality fluctuations in EBITDA. As
announced in March 2018, the Company received formal agreement from
PNC to waive its rights in connection with the breach. As announced
in February 2018, the Company stayed within its key overall
full-year monitoring covenant for 2017.
The initial 3-year term of the facility expired on 3rd December
2018, and the facility continues indefinitely on a rolling basis
unless either party gives at least six months' notice. In March
2019, as part of the approval process for the acquisition of Agency
Press Limited (Trading as 'Sold Out') and the Buzz 16 Productions
Limited joint venture, the Company agreed to an amendment of the
facility which included an increase on the borrowing rates of 0.5%.
We believe that the relationship with PNC is good, that they remain
supportive of the Company, and that they appear likely to want to
continue the arrangement after the end of the initial term. The
Directors are confident the Group remains a going concern.
9. other non-current payables
Landlord Reimbursement Accrual
Amounts in non-current other payables of GBP0.52 million (2017:
GBP0.56 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 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) 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
(2017: GBP0.06 million). Amounts in current liabilities relating to
the reimbursement total GBP0.07 million (2017: GBP0.06
million).
2018 2017
GBP'000 GBP'000
Within one year 71 60
-------- --------
Between two and five years 272 296
More than five years 248 260
-------- --------
520 556
-------- --------
Rent Holiday Accrual
Other amounts in non-current other payables of GBP0.46 million
(31 December 2017: GBP0.46 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.
2018 2017
GBP'000 GBP'000
Within one year 127 133
-------- --------
Between two and five years 450 393
More than five years 7 69
-------- --------
457 462
-------- --------
9. OTHER NON-CURRENT PAYABLES (continued)
Separation Payments
Other amounts in non-current other payables in the prior year of
GBP0.18 million relate to remaining payments owed to David Stoller
in relation to pay in lieu of notice and compensation for loss of
office, and related payroll tax obligations. The remaining payment
of GBP0.16 million will be made in 2018.
2018 2017
GBP'000 GBP'000
Within one year 164 352
-------- --------
Between two and five years - 176
-------- --------
Summary
Total non-current payables 977 1,194
======== ========
10. share capital
2018 2017
Authorised, allotted, issued and fully paid: GBP'000 GBP'000
1,005,597,052 ordinary shares at 0.5 pence
each
(2017: 1,001,079,415 ordinary shares of 0.5
pence each) 5,028 5,005
======== ========
Authorised, allotted, issued and Number Nominal Share Premium
fully paid: of shares Value GBP'000
No. GBP'000
Date Detail
Balance brought
01 Jan 2017 forward 614,992,671 3,074 16,645
07 Dec 2017 Options exercised 19,420,076 98 98
20 Dec 2017 Shares issued 366,666,668 1,833 3,509
------------- -------- -------------
Balance carried
31 Dec 2017 forward 1,001,079,415 5,005 20,252
18 Jan 2018 Options exercised 3,054,110 15 15
06 March 2018 Options exercised 768,322 4 4
28 June 2018 Options exercised 695,205 4 4
------------- -------- -------------
Balance carried
31 Dec 2019 forward 1,005,097,052 5,028 20,275
============= ======== =============
10. share capital (continued)
Employee Benefit Trust
2018 2018 2017 2017
Shares GBP'000 Shares GBP'000
Cost
At the beginning and end of the year 259,000 259 259,000 259
======= ======== ======= ========
Date Event Shares Price Detail
Share Options Exercise of share options
07 Dec 2017 Exercise 19,420,076 1.0p by David Stoller
On fund raise resulting
in share premium of GBP3.67m.
Costs of issue totalled
GBP0.20m, of which GBP0.04m
20 Dec 2017 Fund Raise 366,666,668 1.5p was expensed in the P&L
Exercise of employee share
options by 'Good Leaver'
as part of the r4e plc
Share Options 2016 Long term Incentive
18 Jan 2018 Exercise 3,054,110 1.0p Plan
Exercise of employee share
options by 'Good Leaver'
as part of the r4e plc
Share Options 2016 Long term Incentive
06 Mar 2018 Exercise 768,322 1.0p Plan
Exercise of employee share
options by 'Good Leaver'
as part of the r4e plc
Share Options 2016 Long term Incentive
28 Jun 2018 Exercise 695,205 1.0p Plan
During 2007 and 2008 the company funded an employee benefit
trust to purchase its own shares to meet the Group's expected
obligations under an employee share scheme. As at 31 December 2018
the market value of own shares held in trust was GBP2,461 (2017:
GBP5,569).
During the year the mid-price of the Company's shares traded
between 0.95 pence and 2.2 pence (2017: 1.12 pence and 2.25 pence).
At 31 December 2017 the share price was 0.98 pence (2017: 2.15
pence).
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 1.0p - 2.0p 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.
11. SHARE-BASED PAYMENTS (continued)
In addition, Options held by David Stoller and certain other
former or current 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:
One third of the Option shall become exercisable on meeting a
share price target of GBP0.035 per share
(a) A further one third of the Option shall become exercisable
on meeting a share price target of GBP0.045 per share; and
The remaining one third of the Option shall become exercisable
on meeting a share price target of GBP0.055 per share
In addition, Options held by Marc Boyan 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
i) a share price target of GBP0.025 per share and/or ii) an
increase in Adjusted EBITDA of GBP1,000,000 over the Company's
Adjusted EBITDA* for the 2017 financial year
A further one third of the Option shall become exercisable on
meeting i) a share price target of GBP0.035 per share and/or ii) an
increase in Adjusted EBITDA of GBP2,000,000 over the Company's
Adjusted EBITDA* for the 2017 financial year; and
The remaining one third of the Option shall become exercisable
on meeting i) a share price target of GBP0.045 per share and/or ii)
an increase in Adjusted EBITDA of GBP3,000,000 over the Company's
Adjusted EBITDA* for the 2017 financial year
*Adjusted EBITDA is before exceptional items and share based
payment charges, measured using consistent Generally Accepted
Accounting Policies.
However, subject to the Board's discretion, the Option holders
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
11. SHARE-BASED PAYMENTS (continued)
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 ('Eligible Ees'),
at - and had not lapsed or been exercised by - 31 December
2018:
Date of Number of Shares First Expiry Exercise
Granted to Option Exercisable* Date Price
Eligible Ees 04 Mar 2016 4,329,924 01 Oct 2017 04 Mar 2022 1.00 pence
Linzi Allen 04 Mar 2016 4,750,000 04 Mar 2019 04 Mar 2022 1.00 pence
Eligible Ees 04 Mar 2016 10,500,000 04 Mar 2019 04 Mar 2022 1.00 pence
Eligible Ees 21 Mar 2016 9,500,000 21 Mar 2019 21 Mar 2022 1.00 pence
Eligible Ees 02 Jun 2016 10,800,000 02 Jun 2019 02 Jun 2022 1.00 pence
Eligible Ees (good leaver) 01 Mar 2017 521,804 31 Jan 2019 01 May 2019 2.00 pence
Eligible Ees 13 Sep 2017 2,000,000 13 Sep 2020 13 Sep 2023 1.40 pence
Marc Boyan 20 Dec 2017 124,635,959 20 Dec 2020 20 Dec 2023 1.50 pence
*or on share price target where applicable
Movement in number of options in the year:
2018 2017
No. Options No. Options
Outstanding brought forward at 1 January 184,533,520 93,100,000
Granted during the year - 128,635,959
Exercised during the year (4,517,637) (19,420,076)
Forfeited during the year (12,978,196) (17,782,363)
------------ ------------
Outstanding carried forward at 31 December 167,037,687 184,533,520
============ ============
Options granted in 2017 were granted only on the dates, in the
volumes, and at the exercise prices as shown in the above table.
4,851,728 options were exercisable at 31 December 2018 (2017:
8,147,561).
The share options outstanding as at 31 December 2018 had a
weighted average remaining contractual life of 4.56 years (2017:
5.48 years). The weighted average share price of exercised options
at the date of exercise was 1.0p (2017: 1.80p).
No options were granted during the period. The weighted average
fair value of options granted during 2017 was 1.03p.
11. SHARE-BASED PAYMENTS (continued)
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 1.00-2.00 pence, as applicable
Share price at valuation date 0.98 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 GBP0.48 million (31 December 2017: GBP0.23
million).
12. cash generated from operations
2018 2017
GBP'000 GBP'000
Reconciliation of net cash flows from operating
activities
Loss before taxation (161) (2,689)
Adjustments:
Finance costs 280 295
Finance income (15) -
Depreciation 426 452
Amortisation of intangibles 174 189
Impairment of goodwill - 1,533
Share based payment charges 484 234
-------- --------
Operating cash flows before movements in
working capital 1,188 14
Decrease in inventories 13 -
(Increase)/decrease in trade and other receivables (5,138) 2,654
Increase/(decrease) in trade and other payables 2,109 (783)
Decrease in other non-current liabilities (216) (88)
Cash (used in)/generated from operating
activities (2,044) 1,797
======== ========
13. RELATED PARTY DISCLOSURES
During the year ended 31 December 2018, transactions with Key
Management Personnel are in relation to Directors and other senior
executive staff of the Group and are presented in the Directors
Remuneration and other tables on page 20 in the audited financial
statements.
As announced on 12 February 2018, a media buying agreement was
set up between Dewynters and SpotCo with Miroma International
Limited and Miroma Outcomes LLC respectively. Miroma are companies
wholly owned by Miroma Holdings Limited, a company of which Marc
Boyan, the CEO of r4e, is a director and the controlling
shareholder. During 2018 Dewynters had income from Miroma companies
totalling GBP728,810 (2017 GBPnil) and purchased GBP7,363,810 of
services (2017 GBPNil). SpotCo had income totalling $187,827 (2017
$nil) and purchased $3,623,747 of services (2017 $nil).
13. RELATED PARTY DISCLOSURES (continued)
As at 31 December 2018 Dewynters had amounts totalling
GBP478,578 due from Miroma companies, and SpotCo had amounts
totalling $1,281,450 owing to Miroma companies.
Lord Grade (non-executive Director of r4e) is currently a
director of Gate Ventures plc, which was a substantial shareholder
in r4e until February 2018. He is also a co-founder of The
GradeLinnit Company Ltd ("GradeLinnit"). During 2017, Dewynters had
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 launched at the Theatre Royal Drury Lane in the first half of
2017. The fees payable to Dewynters under the agreement were on the
Company's normal commercial terms and amounted to GBPnil (2017:
GBP1,516,384). The balance owed to Dewynters at 31 December 2018
was GBPnil (2017: GBPnil).
14. TRANSACTIONS WITH DIRECTORS
During the year ended December 2018, the Group procured
consultancy services totalling GBP0.03 million (2017: GBP0.03
million) from Springtime Consultants Ltd., a company owned by
Marcus Yeoman, a non-executive director of the Board. No balance
was outstanding at 31 December 2018 (2017: GBPnil).
15. SUBSEQUENT EVENTS
Acquisition of stake in Buzz 16 Productions
On 30 January 2019 the Company signed an agreement to acquire
50% of the issued share capital of Buzz 16 Productions Limited
("Buzz 16"). The total consideration for the shareholding will be
satisfied through r4e's existing cash resources and the Board
expects the acquisition to be earnings accretive in 2019. Buzz 16,
which was founded in 2016, creates both short and long form sports
orientated content and is co-owned by shareholders including former
Manchester United player and respected broadcaster, Gary Neville,
along with former Sky Sports Premier League producer, Scott Melvin.
This acquisition will bring together Buzz 16's strong in-house
production capabilities and impressive network of both emerging and
established sporting talent with r4e's multi-disciplinary approach
to media and marketing services. With nearly 30 years of experience
in entertainment marketing, r4e will work with Buzz16 to expand its
commercial offerings to sporting talent, clubs, brands and media
houses, through optimised strategies across traditional and digital
communications, experiential, partnerships and sponsorship.
Grant of Employee Options
On 8 March 2019, the Company announced it had Granted 11,829,924
options to its employees from its 2016 Long Term Incentive Plan.
4,329,924 of these options were granted to r4e plc CEO and Director
Marc Boyan. The options were granted with the same performance
conditions as previously disclosed in note 11 'Share Based
Payments'.
15. SUBSEQUENT EVENTS (continued)
Acquisition of Agency Press Limited (trading as 'Sold Out')
On 21 March 2019, the Company announced the successful
completion the acquisition of Sold Out, a full-service advertising
agency, specialising in arts and entertainment. London-based
integrated agency Sold Out, has specialised in arts and
entertainment advertising for over 25 years. During this period it
has established a strong reputation in its field and built a
portfolio of high profile clients, which includes S.J.M. Concerts,
AEG Presents, Live Nation and Cirque Du Soleil. Its services
include campaign development, media planning and buying, events,
partnerships, design and creative, broadcast and digital media
production; all of which will bolster r4e's group offering. The
consideration for the Acquisition comprises an initial
consideration of GBP3.94 million payable in cash and GBP250,000
payable in 20,833,333 Ordinary Shares and additional deferred cash
consideration based on the financial performance of Sold Out during
the period commencing on 1 June 2017 to 31 December 2021, excluding
working capital adjustments. The aggregate of the Initial
Consideration and the Deferred Consideration is to be capped at
GBP10 million. The net proceeds of the Placing are to be used to
finance the Initial Consideration. With the consent of r4e's
existing debt provider, the Initial
Consideration was funded in part by way of a GBP500,000 loan
provided by In The Loop Limited, a company of which Marc Boyan, the
CEO of r4e, is the ultimate beneficial owner. The loan bears
interest at 5%. accruing over a period of 5 years. The debt is
unsecured and is to be subordinated to the Company's existing
facility.
As at the date of these accounts it is impracticable to give
further detail around the fair value of net assets acquired, or any
goodwill or intangibles attributed to the acquisition, as the
subsidiary has not yet provided the Company with initial
acquisition date accounts given that the legally agreed deadline
for provision has not yet passed.
Placing completed on 19 March 2019
Consideration for the acquisition of Sold Out as outlined above,
was funded in part by the placing of 250,000,000 new Ordinary
shares at 1.2 pence per share. The issue raised gross proceeds of
GBP3 million. Following the issue of the Placing shares, the
Company's total issued share capital consisted of 1,255,597,052
Ordinary Shares.
Notes to Editors
reach4entertainment enterprises plc ("r4e") operates a
collection of theatrical, film and live entertainment marketing,
PR, advertising and display agencies, across the world. The Company
uses its extensive experience in the live entertainments space to
create value through investing in innovative and established
agencies that provide communications services to a range of clients
involved with theatre, film, concerts and more.
For further information on r4e you are invited to visit the
Company's website at www.r4e.com.
Spot and Company of Manhattan, INC.
A global leading full-service arts and live entertainment
advertising and marketing agency. In an ever-changing media
landscape, it stays ahead of the curve with a mix of bold
positioning through interactive, broadcast, environmental and print
campaigns.
https://www.spotnyc.com
Dewynters Limited
A leading independent arts, events and live entertainment
marketing specialist. The agency's work in theatre, museums,
attractions, sport and music is seen right across the globe.
http://www.dewynters.com
Newman Displays Limited
The UK's leading large-scale outdoor signage, front of house,
marquee display and installation company. Clients include major
West End theatre productions, leading film companies, cinemas and
major global events.
http://www.newman-displays.com
Wake the Bear Limited
A marketing communications agency that supports businesses to
invent, reposition and regenerate their brands in order to grow.
The agency carries out brand strategy, communications planning and
end-to-end activation.
http://wakethebear.co.uk
Story House PR Limited
A new public relations agency for the theatre and live
entertainment industries, operating in the UK and internationally.
The agency crafts engaging campaigns for audiences, driven by
strategy: the right channel, at the right time, with the right
message. Fully integrating PR with paid media and social, ensuring
all elements of a campaign are working together, Story House
collaborates with its clients to ensure its work is dedicated to
realising their ambitions.
www.storyhousepr.co.uk
Buzz 16 Productions
Buzz 16 is an independent production company, which creates both
short and long form sports orientated content. The Company was
co-founded by former Manchester United player and respected
broadcaster, Gary Neville, along with former Sky Sports Premier
League producer, Scott Melvin.
https://buzz16.uk
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR CKDDPKBKBQPK
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