PEL.L Regulatory News (PEL)

PARAGON ENTERTAINMENT LIMITED

Unaudited interim results for the six months ended 30 June 2018

Paragon Entertainment Limited (AIM: PEL), the AIM-listed attractions design, production and fit-out business ("Paragon" or "the Group"), is pleased to announce its unaudited interim results for the six months ended 30 June 2018.

Highlights

- Revenue £4.0m (2017: £8.0m), a 50% reduction on 2017

- EBITDA fell to a loss of £1.9m (2017: profit of £0.6m)

- Successful completion of projects including SAASCC and Sabic

- Net debt of £1.02m as at 30 June 2018 (2017: £0.54m)

Financial Summary

Mark Taylor, Chairman, commented:

"Paragon had previously advised that it had experienced a very poor six months to June 2018. Our order book indicates that we have started to recover after the industry-wide downturn in the latter part of 2017 and management is committed to making a substantial recovery in the second half of the year."

Notes to Editors:

Paragon Entertainment Limited (AIM: PEL) is an award-winning provider of attraction services from initial design production and consulting through to the fit out and installation of themed attractions, heritage exhibits, museums, aquariums and water parks, inter alia.

Paragon Entertainment is the holding company for Paragon Creative Limited

The Group listed on AIM in 2011.

Further information can be found at: http://www.paragonent.com/

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014. 

REPORT OF THE CHIEF EXECUTIVE OFFICER

Strategic review

During the first half of 2018 we have continued to focus the business on our unique core skill set; specialist 'design & build' of attraction projects, while developing and investing in our partnership, relationships and product-based business. The focus of this strategy is to diversify the business from one-off bespoke, tendered projects into smaller, more repeatable products. This process has taken longer than we first anticipated but in H2 2018 has gained solid traction with the rollout of Dig It! Our original thought process revolved around owner operators taking spaces and utilising our design and build together with aligned third party brands. However, we are now utilising our own brand to create faster routes to market. The success of our product development now focuses on the alignment of a mall owner, an operator, and Paragon. This simplification has improved our sales efficiency significantly.

Our strategic aim is still to consistently target 50% of our business being delivered from partnership relationships and product-based business by 2020, which we are on target to achieve.

Market review

The first half of 2018 has proven to be very difficult indeed. A delay in product roll out following a major brand partner walking away from a development contract meant the cancellation of two UK product-based attractions. This coupled with a general downturn in the UK market and uncertainty in the Middle East led to many projects being delayed significantly. The delay in closing out a large project resulted in an unexpected negative margin in 2018.

Our order book has recovered, however, and is now strong, despite our poor first half performance and we aim to reduce these losses in the second half of 2018. Products is back on target to deliver a strong performance and recent project wins have meant we are expected to be at full capacity until Q2 2019.

Internal review

Our investment in infrastructure stalled in 2018 due to significant changes in our finance team. We believe that the issues we faced are now behind us. We have appointed a new finance director and will reinvigorate our investment in IT to support the finance function.

We have also reduced costs across the business through a series of measures including:

· Redundancy programmes

· Pay reductions for senior management and directors

· Restructuring in all areas of the business

· Cancellation of the PEIL LTIP scheme for directors

Management update

The first half of 2018 has seen our turnover fall by 50% to £4.0m (H1 2017: £8.0m). This has resulted in an EBITDA loss of £1.9m (H1 2017: £0.6m).

The second half of 2018 will be focused on driving down costs through increased manufacturing efficiency and the significant uptake in product sales.

Our record order book includes eight Dig It! attractions to be delivered by mid-2019 with an average value of £0.8m each.

Financial Performance

As at 30 June 2018, the Group had net debt of £1.0m. The Group already has confirmation from HSBC that it will extend and increase our available banking facility to £1.2m (2017: £0.8m) until July 2019.

Management also continues to work with HSBC to secure further working capital funding for export projects from UK Trade Export Finance (UKEF).

Board guidance for 2018

The Board wishes to advise shareholders that it is now forecasting turnover for the year ending 31 December 2018 of £13.0m, a loss before tax of £0.85m and an EBITDA loss of £0.62m. The Board looks forward to providing updates and further guidance to shareholders as the second half of the financial year develops.

John Dobson

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2018

Earnings per share attributable to the equity holders of the Company during the year (expressed in pence per share)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2018

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2017

Notes to the Condensed Set of Financial Statements

1. General information

Paragon Entertainment Limited is a limited company incorporated in the Cayman Islands, company registration number MC-234241, and domiciled in the UK. The address of its registered office is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The company has its primary listing on the Alternative Investment Market (AIM) on the London Stock Exchange. The company is registered with Companies House in the United Kingdom as a UK Establishment of an overseas company, company number FC030890.

The condensed consolidated interim financial information, including the financial information for the year ended 31 December 2017 set out in this interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The information for the period ended 30 June 2018 is derived from the unaudited non-statutory accounts for that financial period.

The non-statutory accounts for the year ended 31 December 2017 were approved on 29 June 2018 and shall be delivered to the Registrar of Companies. The Auditor's report on those accounts was unqualified but did draw attention to an emphasis of matter: as noted in the Chairman's Report, the losses incurred in the first half of 2018 have been significant and they have had an impact on the short-term cash flow of the company.

This condensed consolidated interim financial information is unaudited and was approved for issue by the Board on 21 August 2018.

Basis of preparation

The condensed consolidated interim financial information for the period ended 30 June 2018 has been prepared in accordance with applicable accounting standards.

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the period ended 31 December 2017 which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

Going concern

The financial information is prepared on a going concern basis and, based on the current level of sales and workshop activity, the directors are confident that the forecasts are achievable, and the Group will operate within the banking facilities. The bank has renewed and extended the facilities to the Group for another year beyond the date on which this report was signed.

2. Accounting policies

The principal accounting policies of the Group are consistent with those set out in the Group's 2017 Annual Report and Accounts.

A number of new and amended standards have become effective since the beginning of the previous financial year. None of the new standards and amendments are expected to materially affect the Group.

3. Segmental analysis

Management currently identifies the Group as having two operating segments "Design & Build and "Products" These operating segments are monitored by the Group.

Performance is measured based on EBITDA (as stated before share-based payments and exceptional items) as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

The information provided to the Board comprises the Statement of comprehensive income for each segment, the Statement of financial position and the Statement of cash flows and other financial and non-financial information used to manage the business on a consolidated basis.

Segment revenues comprise revenues made to external customers. Segment information for the reporting periods is as follows:

Six months to 30 June 2018

Six months to 30 June 2017

4. Earnings per share

Earnings per share have been calculated by dividing the profit or loss attributable to shareholders by the weighted average number of ordinary shares in issue during the six-month period/year.

The calculations of basic and diluted loss per share are:

Weighted average number of ordinary shares in issue:

There are 5.8 million employee EMI options that vary in number and have been excluded in the calculation of diluted EPS. The total number of options and overview of the schemes is provided in note 11 of the published Annual Report and Accounts for the year ended 31 December 2017.

Earnings per share:

Normalised earnings per share

Normalised earnings per share has been calculated by dividing the profit or loss attributable to shareholders before amortisation, impairment of goodwill, share based payment charges and exceptional items by the weighted average number of ordinary shares in issue during the period. The numbers used in calculating the normalised basic earnings per share are reconciled below:

5. Cash and cash equivalents

Cash and cash equivalents in the statement of financial position comprise the following:

Cash and cash equivalents include the following for the purposes of the statement of cash flows:

6. Borrowings

7. Cash (used in)/generated by operations