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Final Results

2 May 2019 07:00

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 £77.7 million (2017: £80.2 million)

· Net revenue* £31.8 million (2017: £6.8 million)

· Gross Profit margin of 25.0% (2017: 25.1%)

· Gross Profit on Net Revenues* of 61.2% (2017: 54.7%)

· Adjusted EBITDA** of £1.4 million (2017: £1.0 million)

· Operating Profit of £0.1 million (2017: £2.4 million loss)

· Loss before tax of £0.2 million (2017: £2.7 million loss)

· Adjusted profit before tax*** £0.7 million (2017: £0.2 million)

· Reported loss after tax of £0.2 million (2017: £1.9 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 £30 million, unlocking significant opportunities to cross-sell services across the Group

· Successfully raised gross proceeds of £3 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 plc

Marc Boyan, CEO

Paul Summers, COO

Phone: +44 (0)20 7968 1655

 

 

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 £5.5 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 £77.7 million (2017: £80.2 million) and net revenues to £31.8 million (2017: £36.8 million). Improved processes drove better client servicing and operational efficiencies, with adjusted earnings for 2018 increasing by 45% to £1.42 million (2017: £0.98 million) and operating profit improving by £2.50 million to £0.1 million (2017: £2.39 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 £3 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 £28.3 million (2017: £26.2 million), adjusted EBITDA is up 175% to £2.3 million (2017: £0.8 million) and operating profit was up 432% £1.2 million (2017: £0.4 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 £3.6 million (2017: £4 million) and adjusted EBITDA of £0.16 million (2017: £0.33 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 £0.37 million (2017: £Nil) 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 £0.58 million in 2018, with the agency generating an operating profit of £0.1 million after making a £1.5 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 £1 million in turnover in the year (2017: £1.4 million). Dewynters Amsterdam, launched in April 2018, is still in its infancy with £0.3 million turnover in the year (2017: £Nil).

 

Outlook

 

A successful £3 million placing post period end has enabled the company to buy Sold Out, a full serviced advertising agency with turnover of £30 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

 

 

Dewynters£'000

 

Newmans£'000

 

Other London£'000

 

London Total£'000

 

SpotCo£'000

 

Europe£'000

 

Head Office£'000

 

Group Total£'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

 

 

Dewynters£'000

 

Newmans£'000

 

Jampot£'000

 

London Total£'000

 

SpotCo£'000

 

Europe£'000

 

Head Office£'000

 

Group Total£'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£'000

 

2017£'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 £19.49 million (2017: £20.15 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 £1.0 million in 2017 to £0.2 million in 2018 as the final stages of staff restructuring came through in the year and the absence of an impairment charge compared to £1.5 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 £3.5 million (2017: £2.5 million), which was a result of timings on drawdowns of the facility. As at December 2018 revenues were £1.6 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 £2.3 million compared to the year ended 31 December 2017 of £0.9 million. Operating profit of £1.9 million was also up on the prior year (2017: £0.5 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 £0.1 million and break even respectively. Jampot contributed an operating loss to this result, of £0.06 million (2017: a loss of £0.1 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 £2.2 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 £1.5 million. After, the non-cash affecting LTIP employee share options charge of £0.03 million to employee costs (2017: £0.1 million), and exceptional items down to £0.13 million finishing the restructuring initiative started in 2018 (2017: £0.16m), plus depreciation and amortisation, operating profit was up £1.53 million, at £1.93 million (2017: £0.4 million).Newmans had a quieter year in 2018 with a reduction in revenue of £0.5 million, 12.6%, to £3.6 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 £0.2 million (2017: £0.3 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 £4.5 million (9.3%) to £44.0 million (2017: £48.5 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 £0.13 million. Due to a £1.5 million impairment within the Group of the Goodwill in SpotCo in the prior year (nothing in 2018), operating profit at £0.1 million was £1.6 million above 2017 (a £1.50 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 £0.5 million of costs related to the valuation of the LTIP options granted to employees in the year (2017: £0.2 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 £0.3 million (2017: £0.3 million), and primarily comprise interest and fees on PNC debt of £0.25 million (2017: £0.2.8 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 £1,000 has been recognised in the year (2017: £0.8 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 £0.01 million, whilst no tax is due in the USA on SpotCo profits again this year (2017: £Nil).

Cash Flow

Cash outflow from operating activities in the year was £2.0 million (2017: £1.8 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 £0.1 million (2017: £0.1 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 £79.49 million, and repayments to the lender through the facility totalled £78.48 million (2017: £83.72 million and £84.4 million respectively). Proceeds from the issues of share capital arising upon exercise of share options totalled £0.05 million (2017: £5.5 million - including £0.2 million arising upon the exercise of share options - after related expense), Interest and fees paid out on debt totalled £0.25 million (2017: £0.29 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 £0.2 million with a net asset position of £9.4 million (2017: £9.2 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 £0.3 million. Plus the exercise of employee share options resulted in share issue income (net of costs) of £0.05 million.

Non-current assets are lower by £0.2 million at £10.8 million (2017: £11.1 million), as a result of depreciation and amortisation offset by additions of £0.7 million and the effects of foreign exchange rates on the value of intangibles (goodwill and brands) in SpotCo.

Current assets have increased by £3.6 million, from £18.4 million at 31 December 2017 to £22.0 million. That is as a result of trade and other receivables being higher by £5.1 million - as a result of timing with higher revenues at year end - offset by cash being lower by £1.5 million.

Trade and other payables have also increased year-on-year, by 12.4%, or £2.2 million, at £18.0 million. This reflects the increased levels of work in November and December 2018. Current borrowings have also increased slightly from £2.4 million to £3.6 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 £0.2 million, from £0.2 million to £0.4 million, primarily to the increase in trade and other receivables.

Non-current liabilities have been reduced by £0.2 million, from £2.0 million to £1.8 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 £0.02 million increase to share capital and £0.02 million to share premium, from the exercise of employee share options. £0.5 million was charged to the share option reserve in connection with the value of r4e plc LTIP options granted to employees. These were offset £0.2 million by the loss for the year. (Share options exercised during 2018 resulted in the release of £0.03 million from share option reserve to retained earnings.)

CONSOLIDATED INCOME STATEMENT FOR YEAR ENDED 31 December 2018

 

 

Note

 

2018£'000

 

2017£'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 YEAR ENDED 31 DECEMBER 2018

 

 

2018£'000

 

2017£'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

 

Note

 

2018£'000

 

2017£'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 YEAR ENDED 31 DECEMBER 2018

 

 

Share

capital

£'000

 

Share

premium

£'000

 

Deferred shares

£'000

 

Own Shares held

£'000

 

Retained

earnings

£'000

 

Other Reserves

£'000

 

Attributable to equity holders of the parent

 

Non-controlling interests

£'000

 

 

Total

equity

£'000

ATTRIBUTABLE TO EQUITY HOLDERSOF 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 capacityas 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 YEAR ENDED 31 DECEMBER 2018

 

Note

 

2018£'000

 

2017£'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

£'000

 

Cash flows

£'000

 

Non-cash £'000

 

2018

£'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 YEAR ENDING 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

operations

£'000

 

London

operations

£'000

 

European

operations

£'000

 

Head Office

£'000

 

Group

£'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 basedpayment charges

(53)

 

(45)

 

-

 

(386)

 

(484)

EBITDA beforeexceptional 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

operations

£'000

 

London

operations

£'000

 

European operations £'000

 

Head Office

£'000

 

Group

£'000

Capital additions:

 

 

 

 

 

 

 

 

 

Property, plant andequipment

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

operations

£'000

 

London

operations

£'000

 

European

operations

£'000

 

Head Office

£'000

 

Group

£'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

operations

£'000

 

London

operations

£'000

 

European

operations

£'000

 

Head Officeoperations

£'000

 

Group

£'000

Capital additions:

 

 

 

 

 

 

 

 

 

Property, plant andequipment

-

 

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£'000

 

2017£'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 £0.23 million (2017: £0.81 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 £0.15m directly associated with the equity placing of December 2017, raising £5.5 million (gross proceeds), were charged against the share premium account, making a total of £0.2m of costs re share issues.

3. finance costs

 

2018£'000

 

2017£'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£'000

 

2017£'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£'000

 

2017£'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£'000

 

2017£'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£'000

 

2017£'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 averagerate 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 £1.04 million (2017: £1.05 million) has not been recognised due to uncertainty over future profitability. At 31 December 2018, the Group had trade losses carried forward of £2.9 million (2017: £3.0 million), available for offset against future profits in the UK, as well as non-trade loan relationship deficit of £3.2 million (2017: £3.2 million) and capital losses of £4.7 million (2017: £4.7 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 the company

2018£'000

 

2017£'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 thepurposes 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

pence

 

2017

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

£'000

 

Customer relationships

£'000

 

Purchased goodwill

£'000

 

Total

£'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£'000

 

2017£'000

Dewynters Group (Dewynters, Newmans)

1,351

 

1,351

SpotCo

4,200

 

3,950

Total goodwill

5,551

 

5,301

An impairment of £1.53 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-useassumption

Headroomremoval*

Reasonable 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:

SpotCo

Value-in-useassumption

Headroomremoval

Reasonable 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 £2.3 million (2017: £2.3 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 £0.4 million (2017: £0.5 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 £0.5 million (2017: £0.6 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£'000

 

2017£'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£'000

 

2017£'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

£'000

 

US Dollar

£'000

 

Total

£'000

31 December 2018

 

 

 

 

 

Asset based lending facility

304

 

3,214

 

3,518

Finance leases

57

 

-

 

57

 

361

 

3,214

 

3,575

 

 

Sterling

£'000

 

US Dollar

£'000

 

Total

£'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 2017

£'000

 

31 December 2017

£'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 £0.52 million (2017: £0.56 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. £0.84 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. £0.07 million was unwound during the year (2017: £0.06 million). Amounts in current liabilities relating to the reimbursement total £0.07 million (2017: £0.06 million).

 

2018£'000

 

2017£'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 £0.46 million (31 December 2017: £0.46 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£'000

 

2017£'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 £0.18 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 £0.16 million will be made in 2018.

 

2018£'000

 

2017£'000

Within one year

164

 

352

Between two and five years

-

 

176

Summary

 

 

 

Total non-current payables

977

 

1,194

 

10. share capital

Authorised, allotted, issued and fully paid:

2018£'000

 

2017£'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 fully paid:

Numberof sharesNo.

 

Nominal Value£'000

 

Share Premium£'000

Date

Detail

 

 

 

 

 

01 Jan 2017

Balance brought 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

31 Dec 2017

Balance carried 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

31 Dec 2019

Balance carried forward

1,005,097,052

 

5,028

 

20,275

10. share capital (continued)

Employee Benefit Trust

 

2018Shares

 

2018£'000

 

2017Shares

 

2017£'000

Cost

 

 

 

 

 

 

 

At the beginning and end of the year

259,000

 

259

 

259,000

 

259

 

Date

Event

Shares

Price

Detail

07 Dec 2017

Share Options Exercise

19,420,076

1.0p

Exercise of share options by David Stoller

20 Dec 2017

Fund Raise

366,666,668

1.5p

On fund raise resulting in share premium of £3.67m. Costs of issue totalled £0.20m, of which £0.04m was expensed in the P&L

18 Jan 2018

Share Options Exercise

3,054,110

1.0p

Exercise of employee share options by 'Good Leaver' as part of the r4e plc 2016 Long term Incentive Plan

06 Mar 2018

Share Options Exercise

768,322

1.0p

Exercise of employee share options by 'Good Leaver' as part of the r4e plc 2016 Long term Incentive Plan

28 Jun 2018

Share Options Exercise

695,205

1.0p

Exercise of employee share options by 'Good Leaver' as part of the r4e plc 2016 Long term Incentive 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 £2,461 (2017: £5,569).

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 £0.035 per share

(a) A further one third of the Option shall become exercisable on meeting a share price target of £0.045 per share; and

The remaining one third of the Option shall become exercisable on meeting a share price target of £0.055 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 £0.025 per share and/or ii) an increase in Adjusted EBITDA of £1,000,000 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 £0.035 per share and/or ii) an increase in Adjusted EBITDA of £2,000,000 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 £0.045 per share and/or ii) an increase in Adjusted EBITDA of £3,000,000 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:

Granted to

Date ofOption

Number of Shares

FirstExercisable*

ExpiryDate

ExercisePrice

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:

 

2018No. Options

 

2017No. 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 £0.48 million (31 December 2017: £0.23 million).

12. cash generated from operations

 

2018£'000

 

2017£'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 £728,810 (2017 £nil) and purchased £7,363,810 of services (2017 £Nil). 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 £478,578 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 £nil (2017: £1,516,384). The balance owed to Dewynters at 31 December 2018 was £nil (2017: £nil).

14. TRANSACTIONS WITH DIRECTORS

During the year ended December 2018, the Group procured consultancy services totalling £0.03 million (2017: £0.03 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: £nil).

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 £3.94 million payable in cash and £250,000 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 £10 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 £500,000 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 £3 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
Date   Source Headline
2nd Sep 20206:31 pmRNSHolding(s) in Company
27th Aug 20205:30 pmRNSReach4entertainment Enterprises
25th Aug 202011:04 amRNSHolding(s) in Company
21st Aug 20204:54 pmRNSResult of GM and cancellation from AIM
20th Aug 20207:42 amRNSClaim
18th Aug 20207:00 amRNSDirector shareholding
14th Aug 20207:00 amRNSDirector shareholding
13th Aug 20208:38 amRNSHolding(s) in Company
10th Aug 20205:30 pmRNSHolding(s) in Company
10th Aug 202011:01 amRNSHolding(s) in Company
10th Aug 202011:00 amRNSHolding(s) in Company
7th Aug 20203:03 pmRNSDirector/PDMR Dealing
7th Aug 20209:23 amRNSDirector shareholding - Replacement
7th Aug 20207:00 amRNSDirector shareholding
6th Aug 20205:30 pmRNSHolding(s) in Company
6th Aug 20207:00 amRNSHolding(s) in Company
4th Aug 20207:00 amRNSProposed cancellation of AIM admission
4th Aug 20207:00 amRNSTotal Voting Rights
21st Jul 20204:44 pmRNSResult of GM
3rd Jul 20207:00 amRNSTotal Voting Rights
1st Jul 20209:06 amRNSAIM Rule 17 and Schedule 2(g) update
30th Jun 20202:49 pmRNSResult of AGM
30th Jun 20207:00 amRNSNotice of GM
29th Jun 20207:00 amRNSFinal Results
5th Jun 202010:17 amRNSNotice of AGM
4th Jun 20207:00 amRNSTotal Voting Rights
7th May 20207:00 amRNSCOVID-19 Update
4th May 20207:00 amRNSTotal Voting Rights
3rd Apr 20207:00 amRNSTotal Voting Rights
20th Mar 20207:00 amRNSCovid-19 (Coronavirus) update statement
4th Mar 20207:00 amRNSBlock Listing Six Monthly Return
4th Mar 20207:00 amRNSTotal Voting Rights
18th Feb 20207:00 amRNSYear-end trading update
4th Feb 20207:00 amRNSTotal Voting Rights
3rd Jan 20207:00 amRNSTotal Voting Rights
4th Dec 20197:00 amRNSTotal Voting Rights
4th Nov 20197:00 amRNSTotal Voting Rights
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30th Sep 20197:00 amRNSInterim Results
4th Sep 20197:00 amRNSTotal voting rights
2nd Aug 20197:00 amRNSTotal Voting Rights
30th Jul 201911:55 amRNSCapital Reduction Update
16th Jul 20194:01 pmRNSCapital Reduction Update
11th Jul 20191:43 pmRNSHolding(s) in Company
9th Jul 20194:34 pmRNSHolding(s) in Company
4th Jul 20197:00 amRNSTotal Voting Rights
28th Jun 201911:24 amRNSResult of AGM
7th Jun 20197:00 amRNSCorporate Update re. Dewynters Germany
4th Jun 20197:00 amRNSTotal voting rights
3rd Jun 20197:00 amRNSAnnual Report, AGM and Proposed Capital Reduction

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