Aeorema Comm. Regulatory News (AEO)

Aeorema Communications plc / Index: AIM / Epic: AEO / Sector: Media

14 October 2016

Aeorema Communications plc ('Aeorema' or 'the Company')

Final Results

Notice of AGM

Aeorema Communications plc, the AIM-traded live events agency, announces its results for the year ended 30 June 2016.

Overview

· Profits before tax from continuing operations of £340,165 (2015: £383,216)

· Revenues of £4,583,050 (2015: £4,934,560)

· Cash at bank and in hand of £1,427,723 (2015: £1,558,453)

· Recommend final dividend payment of 2p (2015: 3p), which is in addition to the 3p special dividend paid in March 2016

Chairman's Statement

I am proud of Aeorema's ability to adapt to change positively and to continue to generate profits, sustain a strong cash position and deliver a dividend in what continues to be a highly challenging market. This has been achieved by differentiating ourselves as a specialty live events company that attracts quality businesses through the development of innovative corporate communication solutions in the UK and internationally. Over the last year, we have worked with a number of blue-chip corporations and were pleased to welcome the Mail Online to our client list.

Whilst the first half was slow, revenues improved as the year progressed resulting in Aeorema having another profitable year, albeit slightly down on the previous year. The results for the year show a profit before taxation from continuing operations of £340,165 (2015: £383,216) on revenue of £4,583,050 (2015: £4,934,560). We remain cash positive with cash at bank and in hand of £1,427,723 (2015: £1,558,453).

The Board is proposing a final dividend of 2 pence per share (2015: 3 pence per share) to be paid to shareholders on the register on 4 November 2016. The ex-dividend date will be on 3 November 2016. Subject to the proposed dividend being approved by the shareholders at the Company's Annual General Meeting, it will be paid on 25 November 2016. This dividend is in addition to the 3p special dividend paid in March 2016.

The trading environment in the event sector remains challenging, in part caused by the uncertainties of Brexit and its destabilising effects. However, we anticipate that whilst global customers may at first rein in activities, in the longer term Brexit will create new opportunities as those very same organisations look to the UK, including companies like Aeorema, for cost-effective, unique, cutting edge solutions that this country is renowned for. I am not saying that it will be a smooth ride, indeed the next six months will be rocky, but we are confident that our long-term strategy and team which delivers creative live events, incorporating screen content and video, will ultimately see Aeorema prosper.

I would like to thank our team for their commitment and efforts during the year as well as our shareholders for their continued support.

M Hale

Chairman

13 October 2016

For further information visit www.aeorema.com or contact:

Gary Fitzpatrick Aeorema Communications plc Tel: 020 7291 0444

Marc Milmo/Catherine Leftley Cantor Fitzgerald Europe Tel: 020 7894 7000

Isabel de Salis/Elisabeth Cowell St Brides Partners Tel: 020 7236 1177

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2016

There were no other comprehensive income items.

Statement of Financial Position

As at 30 June 2016

Consolidated Statement of Changes in Equity

For the year ended 30 June 2016

Company Statement of Changes in Equity

For the year ended 30 June 2016

Statement of Cash Flows

For the year ended 30 June 2016

Notes to the consolidated financial statements

For the year ended 30 June 2016

1 Accounting policies

Aeorema Communications plc is a public limited company incorporated in the United Kingdom. The Company is domiciled in the United Kingdom and its principal place of business is Moray House, 23/31 Great Titchfield Street, London W1W 7PA. The Company's Ordinary Shares are traded on the AIM Market.

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

Going concern

The Group's business activities, together with the factors likely to affect its future development and performance are set out in the review of business contained in the Chairman's Statement. The Group's financial statements show details of its financial position including, in note 25, details of its financial instruments and exposure to risk.

After reviewing the Group's budget for the next financial year, other medium term plans and considering the risks outlined in note 25, the Directors, at the time of approving the financial statements, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and have therefore used the going concern basis in preparing the financial statements.

Basis of Preparation

The Group's financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The following new standards, amendments to standards and interpretations, applied for the first time from 1 July 2015. Their adoption has not had a material impact on the financial statements:

· IAS 19 (Amended) 'Defined Benefit Plans: Employee Contributions', effective 1 February 2015.

· Annual improvements to IFRSs 2011-2013 Cycle, effective 1 January 2015.

· Annual improvements to IFRSs 2010-2012 Cycle - amendments to IFRS 8, IAS 16, IAS 24 and IAS 38, effective 1 February 2015.

Adopted IFRSs not yet applied

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 July 2015 and have not been adopted early by the Group:

· IFRS 9 'Financial Instruments', effective 1 January 2018.

· IFRS 15 'Revenue for Contracts with Customers', effective 1 January 2018.

· IFRS 16 'Leases', effective 1 January 2019

· IAS 1 (Amended), 'Disclosure Initiative', effective 1 January 2016.

· IAS 7 (Amended), 'Statement of Cash Flows', effective 1 January 2017

· IAS 27 (Amended), 'Equity Method in Separate Financial Statements', effective 1 January 2016.

· IAS 16 and IAS 38 (Amended), 'Clarification of Acceptable Methods of Depreciation and Amortisation' effective 1 January 2016.

· IFRS 11 (Amended), 'Accounting for Acquisitions of Interests in Joint Operations', effective 1 January 2016.

· Annual Improvements to IFRSs 2012 - 2014 Cycle, effective 1 January 2016.

Management does not currently anticipate that the application of these standards, where applicable, will have an impact on the financial statements, except for the requirement of additional disclosures.

Basis of consolidation

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 30 June 2016. Subsidiaries are all entities (including structured entities) over which the group has control. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

Intra-group transactions, balances and unrealised gains and losses on transactions between group companies are eliminated.

The merger reserve is used where more than 90% of the shares in a subsidiary are acquired and the consideration includes the issue of new shares by the Company, thereby attracting merger relief under the Companies Act 2006.

Revenue

Revenue represents amounts (excluding value added tax) derived from the provision of services to third party customers in the course of the Group's ordinary activities. Revenue is measured at the fair value of consideration received taking into account any trade discounts and volume rebates. Revenue for all business segments is recognised when the Group has earned the right to receive consideration for its services.

Intangible assets - goodwill

All business combinations are accounted for by applying the acquisition method. Goodwill acquired represents the excess of the fair value of the consideration and associated costs over the fair value of the identifiable net assets acquired.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. At the date of acquisition, the goodwill is allocated to cash generating units, usually at business segment level or statutory company level as the case may be, for the purpose of impairment testing and is tested at least annually for impairment. On subsequent disposal or termination of a business acquired, the profit or loss on termination is calculated after charging the carrying value of any related goodwill.

Property, plant and equipment

Property, plant and equipment is stated in the financial statements at cost less accumulated depreciation and any impairment value. Depreciation is provided to write off the cost less estimated residual value of property, plant and equipment over its expected useful life (which is reviewed at least at each financial year end), as follows:

Any gain or loss arising on the derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Statement of Comprehensive Income in the year that the asset is derecognised.

Fully depreciated assets still in use are retained in the financial statements.

Impairment

The carrying amounts of the Group's assets are reviewed at each period end to determine whether there is any indication of impairment. If any such indication exists, the assets' recoverable amount is estimated. For goodwill and intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each annual period end date and whenever there is an indication of impairment.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the Statement of Comprehensive Income in those expense categories consistent with the function of the impaired asset.

Operating leases

Rentals under operating leases are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease.

Investments

Fixed asset investments are stated at cost less provision for diminution in value.

Trade and other receivables

Trade and other receivables are stated initially at fair value and subsequently measured at amortised cost less any provision for impairment.

Trade and other payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost.

Cash and cash equivalents

Cash comprises, for the purpose of the Statement of Cash Flows, of cash in hand and deposits payable on demand. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. Cash equivalents normally have a date of maturity of 3 months or less from the acquisition date.

Finance income

Financial income consists of interest receivable on funds invested. It is recognised in the Statement of Comprehensive Income as it accrues.

Taxation

Income tax on the profit or loss for the periods presented comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; the differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets and liabilities are not discounted.

Pension costs

The Group does not operate a pension scheme for its employees. It does, however, make contributions to the private pension arrangements of certain employees. These arrangements are of the money purchase type and the amount charged to the Statement of Comprehensive Income represents the contributions payable by the Group for the period.

Financial instruments

The Group does not enter into derivative transactions and does not trade in financial instruments. Financial assets and liabilities are recognised on the Statement of Financial Position when the Group becomes a party to the contractual provision of the instrument.

Equity

An equity instrument is a contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. The Group's equity instruments comprise 'share capital' in the Statement of Financial Position.

Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the end of the reporting period. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. All differences are taken to the Statement of Comprehensive Income.

Share-based awards

The Group issues equity settled 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 is estimated using option pricing models and is dependent on factors such as the exercise price, expected volatility, option price and risk free interest rate. The fair value is then amortised through the Statement of Comprehensive Income on a straight-line basis over the vesting period. Expected volatility is determined based on the historical share price volatility for the Company. Further information is given in note 22 to the financial statements.

Significant judgements and estimates

The preparation of the Group's financial statements in conforming with IFRS required management to make judgements, estimates and assumptions that effect the application of policies and reported amounts in the financial statements. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances. Information about such judgements and estimation is contained in the accounting policies and / or notes to the financial statements and the key areas are summarised below:

a) The impairment review of goodwill is based on the estimation of future cash flows and discount rates in order to calculate the present value of the cash flows.

b) An allowance for uncollectable trade receivables is estimated based on a combination of ageing analysis and any specific, known troubled customer accounts.

c) An allowance for dilapidations is estimated based on a total value of works to restore the property to its original condition at the end of the lease.

2 Revenue and segment information

The Company uses several factors in identifying and analysing reportable segments, including the basis of organisation, such as differences in products and geographical areas. The Board of Directors, being the Chief Operating Decision Makers, have determined that for the period ending 30 June 2016 there is only a single reportable segment.

All revenue represents sales to external customers. Two customers (2015: three) are defined as major customers by revenue, contributing more than 10% of the Group revenue.

The geographical analysis of revenue from continuing operations by geographical location of customer is as follows:

All non-current assets are based in the UK.

3 Operating profit

4 Finance income

5 Taxation

The Group has estimated losses of £375,762 (2015: £375,762) available to carry forward against future trading profits. These losses are in Aeorema Communications plc which is not currently making taxable profits as all trading is undertaken by its subsidiary Aeorema Limited, therefore no deferred tax asset has been recognised.

6 Deferred taxation

The deferred tax asset is expected to be utilised given the continued profitability and future trading prospects.

7 Profit attributable to members of the parent company

As permitted by section 408 of the Companies Act 2006, the parent Company's Statement of Comprehensive Income has not been included in these financial statements. The retained profit for the financial year of the holding company was £821,663 (2015: £310,444).

8 Earnings per ordinary share

Basic earnings per share are calculated by dividing the profit or loss attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated by dividing the profit or loss attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would have been issued on the conversion of all dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used and dilutive earnings per share computations:

9 Intangible fixed assets

Goodwill arose for the Group on consolidation of its subsidiary company, Aeorema Limited.

Impairment - Aeorema Limited

Goodwill has been tested for impairment based on its future value in use. Future value has been calculated on a discounted cash flow basis using the 2016-17 budgeted figures as approved by the Board of Directors extended for a period to 5 years and discounted at a rate of 10%. It has been assumed that future growth will be between 1.5% and 2%. Using these assumptions, which are based upon past experience, there was no impairment in the year.

Management has assessed the sensitivity of the recoverable amounts in the key assumptions to be as follows: a five percentage increase in the discount rate would reduce the recoverable amount by £166,569 and a one percentage fall in future growth would reduce the recoverable amount by £329,746. However, in both cases there would still be no indication of impairment of goodwill.

10 Property, plant and equipment

11 Non-current assets - Investments

Holdings of more than 20%

The Company holds more than 20% of the share capital of the following companies:

12 Trade and other receivables

All trade and other receivables are expected to be recovered within 12 months of the end of the reporting period. The fair value of trade and other receivables is the same as the carrying values shown above.

At the year end, trade receivables of £36,232 (2015: £284,944) were past due but not impaired. These relate to a number of customers for whom there is no significant change in credit quality and the amounts are still considered recoverable. The ageing of these trade receivables is as follows:

13 Cash and cash equivalents

14 Trade and other payables

All trade and other payables are expected to be settled within 12 months of the end of the reporting period. The fair value of trade and other payables is the same as the carrying values shown above.

15 Share capital

See note 22 for details of share options outstanding.16 Share Premium

Share premium represents the value of shares issued in excess of their list price.

17 Merger reserve

In accordance with section 612 of the Companies Act 2006, the premium on ordinary shares issued in relation to acquisitions is recorded as a merger reserve. The reserve is not distributable.

18 Other reserve

On 16 June 2014 104,000 share options were exercised and fully paid for at 18.75p each. The shares were allotted on 2 July 2014. For the earnings per share note these shares are treated as issued on the exercise date. The reserve was fully transferred out by 30 June 2015. The reserve is not distributable.

19 Financial commitments

Total future minimum lease payments under non-cancellable operating lease rentals are payable as follows:

20 Directors' emoluments

The remuneration of Directors of the Company is set out below.

The share options held by directors who served during the year are summarised below:

Fees for S Garbutta and S Haffner are charged by Harris & Trotter LLP, a firm in which they are members. See note 23.

Some directors were awarded a bonus in the year. S Quah was awarded a bonus of £25,000 (2015: £30,000) and P Litten was awarded a bonus of £17,000 (2015: £20,000).

21 Employee information

The average monthly number of employees (including directors) employed by the Group during the year was:

The aggregate payroll costs of these employees charged in the Statement of Comprehensive Income was as follows:

22 Share-based payments

The Group operates an EMI share option scheme for key employees. Options are granted to key employees at an exercise price equal to the market price of the Company's shares at the date of grant. Options are exercisable from the third anniversary of the date of grant and lapse if they remain unexercised at the tenth anniversary or upon cessation of employment. The following option arrangements exist over the Company's shares:

Details of the number of share options and the weighted average exercise price outstanding during the year are as follows:

The exercise price of options outstanding at the year end was £0.165 (2015: £0.165) and their weighted average contractual life was 6.8 years (2015: 7.8 years).

Equity-settled share-based payments are measured at fair value at the date of grant. The fair value as determined at the grant date of equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the Group's estimate of shares that will eventually vest. The estimated fair value of the options is measured using an option pricing model. The inputs into the model are as follows:

The expected volatility is determined by calculating the historical volatility of the company's share price over the last three years. The risk free rate is the official Bank of England base rate.

The Group recognised the following charges in the Statement of Comprehensive Income in respect of its share-based payment plans:

23 Related party transactions

The Group has a related party relationship with its subsidiaries and its key management personnel (including directors). Details of transactions between the Company and its subsidiaries are as follows:

The compensation of key management (including directors) of the Group is as follows:

Harris and Trotter LLP is a firm in which S Haffner and S Garbutta are members. The amounts charged to the Group for professional services is as follows:

At the year end, the group had an outstanding trade payable balance to Harris and Trotter LLP of £6,600 (2015: £nil).

The company received dividends during the year of £900,000 (2015: £400,000) from its subsidiary Aeorema Limited. The company transferred a VAT receivable of £14,810 (2015: £6,759) to Aeorema Limited due to being part of a common VAT group.

Aeorema Limited transferred a net amount of expenses to Aeorema Communications plc during the year of £7,317 (2015: £36,624).

During the year, Aeorema Limited made a net transfer of cash of £443,030 (2015: £400,025) to Aeorema Communications plc

24 Cash flows

25 Financial instruments

Financial instruments recognised in the consolidated statement of financial position

All financial instruments are recognised initially at their fair value and subsequently measured at amortised cost.

The Group is exposed to risks that arise from its use of financial instruments. There have been no significant changes in the Group's exposure to financial instrument risk, its objectives, policies and processes for managing those from previous periods. The principal financial instruments used by the Group, from which financial instrument risk arises, are trade receivables, cash and cash equivalents and trade and other payables.

Credit risk

Credit risk arises principally from the Group's trade receivables. It is the risk that the counterparty fails to discharge its obligation in respect of the instrument. The maximum exposure to credit risk at 30 June 2016 was £1,038,669 (2015: £1,055,898). Trade receivables are managed by policies concerning the credit offered to customers and the regular monitoring of amounts outstanding for both time and credit limits. At the year end, the credit quality of trade receivables is considered to be satisfactory.

Liquidity risk

Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to meet its liabilities when they fall due. The Group monitors cash flow on a regular basis. At the year end, the Group has sufficient liquid resources to meets its obligations of £1,406,626 (2015: £1,463,504).

Market risk

Market risk arises from the Group's use of interest bearing financial instruments. It is the risk that the fair value of future cash flows of a financial instrument will fluctuate. At the year end, the cash and cash equivalents of the Group was £1,427,723 (2015: £1,558,453). The Group ensures that its cash deposits earn interest at a reasonable rate.

Capital risk

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern while maximising the return to stakeholders. The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in the Group Statement of Changes in Equity. At the year end, total equity was £1,626,922 (2015: £1,884,040).

26 Pension costs defined contribution

The Group makes pre-defined contributions to employees' personal pension plans. Contributions payable by the Group for the year were £59,575 (2015: £92,258). At the end of the reporting period £12,880 (2015: £30,000) of contributions were due in respect of the period. The amounts were paid subsequent to the end of the reporting period.

27 Dividends

On the 27 November 2015 a final dividend of 3 pence per share (total dividend £271,515) was paid to holders of fully paid ordinary shares.

In respect of the current year, the directors propose that a final dividend of 2 pence per share be paid to shareholders on 25 November 2016. The dividends are subject to approval by shareholders at the Annual General Meeting and have not been included as liabilities in these consolidated financial statements. The proposed dividends are payable to all shareholders on the Register of Members on 4 November 2016. The total estimated dividend to be paid is £181,010. The payment of this dividend will not have any tax consequences for the Group.

28 Contingent Liability

Company

The company is a member of a group VAT registration with all other companies in the Aeorema Communications group and, under the terms of the registration, is jointly and severally liable for the VAT payable by all members of the group. At 30 June 2016 the company had no potential liability under the terms of the registration.

29 Control

There is no overall controlling party.

Notice of annual general meeting

The Annual General Meeting of Aeorema Communications plc will be held at Moray House, 23-31 Great Titchfield Street, London W1W 7PA on 14th November 2016 at 10.00 a.m. A formal notice of AGM along with the Annual Report and Accounts for the year ended 30 June 2016 will be sent to shareholders and will be available on the Company's website www.aeorema.com in due course.